Looking back on 2011, real GDP grew to about 1.75% and the Dow finished the year at 12,218, well off its high for the year of 12,928.  

If you want to know the truth, I was predicting a higher number for both GDP as well as the Dow in 2011.

Well, this isn't the first time I missed a forecast, and it won't be the last. And the good news is that our optimism at VisionQuest actually paid off.

Back in September, when the stock market had corrected by about 16% and conventional wisdom had completely bought into the idea of a double-dip recession, we held to our convictions. We advised our clients to hold the line and maintain the strategy we were executing and it worked. The economy avoided recession and accelerated, while the stock market had one of its best October's ever. 

So here we go again. For 2012, I am going to forecast 3% real GDP growth and an 18% rise in broad stock market prices. I know WOW, right. 

I expect the Dow Jones Industrial Average to rise to around 14,500, with the S&P 500 targeted for around 1475.

All the reasons for my optimism are still in place. The Fed is accommodative. Government spending has peaked and is declining as a share of GDP, and the most important driver of growth - technology and productivity is robust and relevant.

I do not believe de-leveraging is holding back the economy. The private sector is still paying down debt, but doing so more slowly than before. As a result, purchasing power can grow faster than income, not slower.

I do not worry about consumer confidence. I do not subscribe to the view that the U.S. is on the cusp of a collapse in the dollar and hyper-inflation. And we don't believe that there is a fundamental weakness in the economy.

The story isn't complicated. When government tilts toward re-distribution, the growth rate of potential GDP slows down which in turn hurts job creation. Big government always hurts economic performance. I should have more fully accounted for this in my optimism last year.

Some certainly can ask me: Then how can you forecast 3% growth in 2012? The answer is relatively simple:

1.       The Fed is even more accommodative today than it was last year.

2.       Government spending will be basically flat in 2012 for the third consecutive year.

3.       Technology continues to advance.  

That's enough reason for me to maintain my optimism for the year ahead. Let's try it again in 2012 so I'll stay optimistic.