Time to Admit What Really Worked

 | Dec 30, 2011 | 9:48 AM EST
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Nothing's easier than sitting back and dreading 2012.

The steeplechase is mighty and nefarious. We have European problems galore, including hundreds of billions of dollars' worth of periphery auctions, that can't possibly be anything but harrowing. We have Iran threatening to blockade Hormuz and us threatening to blockade Iran, either of which could send oil through the roof. We have a fraught election year and government borrowings here that could ne nightmarish, too.

But then again, look what 2011 threw at us and the Dow still performed admirably. There was a nuclear meltdown of gigantic proportions that took Japan off line for months, raging inflation in China and India that caused relentless interest rate rises, a to-the-brink of a U.S. shutdown moment that, in part, caused our credit ratings downgrade, an almost doubling of oil and the default of Greece along with the dramatic interest-rate spiking of Italy and Spain.

That's a ton of unforeseen events. This year, by contrast, we see 'em. We know they are coming and we can plan for them. Yes, we all know that Europe's got a second-rate handling of the debt issue. But there's a huge difference this time around. You were an idiot if you DIDN'T buy the paper when it spiked. These had all been one-way markets. Every time you bought you got killed. All of a sudden you had a trade that could make your year. It is so outrageously positive and so not fitting of the thesis that people still don't get it. You had to buy short-term Italian paper! You had to buy short-term Spanish paper! Had you levered up, you blew away all comers. In fact, had you just had Corzine's playbook but with more money you might have been a hero.

No one wants to admit any of this. It doesn't fit the thesis. No one wants to possibly ever say anything that's positive or acknowledge anything that's any good about Europe. But it is time to accept that however jury-rigged the solution is, and you can put quotes around solution if you want, it's worked and worked big-time.

The reluctance to do that, of course, stems from some Puritanism. We know it is phony. We know the banks haven't taken their medicine. Maybe they will. But the simple fact is that something is working over there and we better acknowledge it. And those who bet with it, in their notes or in our stocks during the dark days, had real good years.

I think that in each instance of negativity in 2011 we will look back and realize how hard we bounced. Not tech. Not fins. Not cap goods. But EVERYTHING ELSE. Especially the allegedly-crowded dividend trade.

To me the story is pretty simple. Those who bought the Dow every time the headlines read poorly, those who bought the retailers every time the headlines read poorly, those who bought the drugs every time the headlines read poorly, those who bought the utes every time the headlines read poorly, those who bought the rails every time the headlines read poorly -- they all had great years.

It's just that no one wants to admit it. It's time to start admitting it, or at least recognizing it, because the same thing could happen again in 2012.

I bet it will.

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