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« Weighing the Week Ahead: Will the Average Investor Take the Plunge? | Main | January Employment Report Preview »

January 29, 2013


Tim in Albion

"by the time the average person saves a "decent sized investable account" (age 40+), they will be using it with in 20 years (retirement 60+)."

This is just silly. Investment begins when you start saving, and does not end until you stop needing money - long after retirement.

annie mishu

A very good blog post, I have book marked this internet site so ideally I’ll
see much more on this subject in the foreseeable future!
Thanks & Regards :


Miles, great comment until you mentioned Keynes. You see, it is those who interpret Keynes who are wrong, not Keynes himself. It's a shame that so many have supposedly debunked Keynes when all they have debunked is his wayward followers. Most of what you hear from a guy like Krugman is right, but he can't convince you because he is also wrong.... and you can prove he is wrong. Unfortunately even misguided keynesians like Krugman are still far, far closer to the truth than other "mainstream" economics like monetarism. The guys who get it right these days call themselves "monetary realists" because their contribution is recognizing what the various economic schools of today have simply made up vs. how things actually work. For instance, most economists simply remove the banking sector as too messy for their models. Not messy vs. accurate - you choose :)


BTW, I forgot to add - you can reconstruct the total return chart and add a trendline at 6.57% annualized real rate of return which together with a long-term inflation of ~2.5% would represent 9% total return annualized. By my estimates, an S&P at ~1600 currently would lie on the median line. Needless to say, one could go above trend, at trend and below trend and hence has zero predictive value on future prospects.

Stock Prices


Stock Priceresult of these sales is a record revenue of $54.5 billion and a net quarterly profit of $13.1 billion, giving Apple a total of $137.1 billion in the bank. Last year’s quarterly profits were £13.06 billion, resulting in flat growth year-on-year, which may worry some investors and be the cause of the drop.


Here's one more chart you could add to that list. The 2000 high doesn't look as bad as on Scott Grannis' chart.

Miles Hoffman

If you extended Doug's chart to the right (to today) OR extended Scott's chart to the left (even to Doug's starting point), BOTH would support the author's intention:

1) Scott's chart (and article) and his view is that the market is fairly valued (inference=it can be bought). His chart infers a "buy and hold" and I think it is absolutely wrong.

2) Doug's chart (and related articles) is focused NOT on the top "trend line" chart but rather on the variance from the trend shown at the bottom. His point is that there are cycles in the market that you need to understand and this is the exactly right viewpoint IMHO.

Crestmont Research (and Ed Easterling) is the best source and is the subject of my blog article that I think will be listed (but here it is):

In short, BOTH charts shown cover LONG TIME PERIODS but the average person has, at most, only a 20 year investment horizon: by the time the average person saves a "decent sized investable account" (age 40+), they will be using it with in 20 years (retirement 60+). Thus they have a very short time period in which to invest (not Doug's 110 yr or even Scottt's 60 yrs).

Thus it is important to understand the "shorter-time" cycles in the stock market, which succintly, involves a cycle from single digit PEs to over 20x. We're closer to the peak of 20x, especially given record corporate profit margins, so be careful and shorter-term oriented.

This is where Doug's chart is critical (or Crestmont's data): The current market cycle is still, as far as I can tell, a SECULAR BEAR MARKET. As my blog points out (over 2 years ago and STILL applies), we're in a hell-of-a CYCLICAL BULL rally within the SECULAR BEAR (and a SECULAR BEAR "violently moves" down AND UP.

Keynes was absolutely wrong, but he got one thing right: "In the long run, we're all dead." (Save but) DON'T INVESTMENT for the long-term, it can kill you!

So for the average investor, NOW is a bad time to buy the market (unless they understand the shorter CYCLICAL bull and are NOT "BUY AND HOLDING").

Johan Lindén

Very good post!

Actually I'm studying data analysis now just to get these things better.

Tim in Albion

LOVE this. You explicate one of my pet peeves! (Not surprising, since I have so many; high probability you will chance upon one or more...)

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