A Whole Lot of Nothing

A couple of years ago, when the markets went to hell, I offered to help my parents with their retirement planning. I was working in finance at the time, and it seemed like a sensible division of labor for me to help out this way.

Since I’m taking this responsibility on, at the least I need to measure if I’m doing right by my family. So every year, in January, I try to look back over the previous year and see how I did and how the market did.

The one thing that jumped out at me was that the market did shockingly little. In it 2011 seemed like a lot happened. It looked like Greece was going to default. Then it didn’t look like it. Then it did again. The US economy looked like it was going to tank. Then it didn’t. But it still might. But in the end, it was basically just a lot of noise. The news channels have to put something on.

On the last day of 2010, the S&P 500 closed at 1,257.64. On the last day of 2011, it closed at 1,257.60. the market ended 2011 down 0.003%. I read somewhere that the market actually moved that little in the 40’s but I haven’t been able to confirm: it seems like this was the smallest move ever.

The most meaningful thing I can say about 2011 is that the people who looked really smart in 2007 and 2008, almost to a man, had awful years. On average, hedge funds were down 5%.

After a year like this, I think back about all the effort that goes into predicting the market. There are whole channels devoted to what the market will do. And nothing happens. It boggles my mind just how much nothing there is.