Bet Against Goldman in 2013

Focus: ETFs

Nicholas Vardy Image Nicholas Vardy Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

Every year at this time, market pundits venture their predictions for the coming year. Among the more anticipated ones, is from investment bank Goldman Sachs, writes Nicholas Vardy of The Global Guru.

If there is a common thread through Goldman Sachs' top trades for 2013, it's that risk is "back on." If Goldman Sachs is right, we all should have a pretty good 2013.

The operative word here, though, is "if." Looking at them today, Goldman's forecasts look reasonable. But perhaps that is their biggest weakness, aside from the fact that Goldman's predictions are often embarrassingly wrong.

Consider Goldman's top trades for 2012. Here are the top four:

  1. Short European high-yield credit.

  2. Short German government debt.

  3. Go long euro/Swiss franc (EUR/CHF).

  4. Go long Canadian equities (S&P TSX) versus Japanese equities (Nikkei).

Aside from being fairly obscure trades targeted at sophisticated institutional investors, the real trouble with these predictions is that they essentially were just plain wrong. In fact, if you did nothing else than follow Goldman Sachs' recommendations for 2012, you would have made less money than your average hedge fund. And hedge funds already are having a lousy 2012, thank you very much.

With that caveat, below are Goldman Sachs' top seven predictions for 2013, with two twists.

First, where I can, I've tried to recommend how, if at all, you can play them in your own personal portfolio.

Second, I've also tried to highlight how you can bet precisely the opposite way—as that may actually offer you more profitable results.