A 100-year bear market?

[farmerEd]

Sure hope he is wrong..if true it would kill a lot of ER plans.

http://cbs.marketwatch.com/news/story.asp?guid={22FAA4CB-5C51-4009-B53F-8CC626BD269D}&siteid=mktw

 

[unclemick]

Myopia? Possibly - I do recall over the last 30 years - the Brits/Commonwealth types I worked with were much more prone to International, hard asset/commodity/other currency and general -'agile, mobile and hostile' deployment of capital than us 'trusting colonials' - even though England was the second best over the last 100 years - periodic mini dark ages via taxes/inflation/currency devaluation/bear markets did occur.

And as a last resort - you can vote with your feet.

 

[Cut-Throat]

Well, I certainly would'nt put my money where his mouth is!

Every decade there is one of those crackpots with similar dire predictions. Remember Ravi Batra of the 80's?

Also remember that this guy is selling newsletters and books and major headlines like this are great advertising.

Save this article and take it out in 10-15 years for a good laugh

 

[Michael]

From what I remember, Prechter tends to look at historical charts, and tries to draw conclusions from the shape and patterns of the lines.

 

[Nords]

What's a bear market?

So, is this modern Nostradamus predicting that the markets will drop 15-20% every year for the next 100, or is he predicting a single dip with flat markets from then on?

Either way, if his prediction is correct, how will he make any money during the next 99 years?

 

[unclemick]

So does Angus Maddison - a guy
Bernstein has been prone to refer to for data. He analyizes the world and writes obsure tomes for OEDC and other interested parties.

BTY - those of us addicted to watching the markets, are aware valuations are generally high, interest low and the pickings are chewy. Even commodity and real estate choices - have a 'the horse is out of the barn' aspect to them.

 

[cute fuzzy bunny]

It seems to me that almost everything is a little overpriced and once you factor in taxes, inflation and risk...are almost returning nothing.

Too many people with too much money chasing too few opportunities.

I hear on one hand that stuff like commodities is the new exciting place to be, and a lot of good case studies and analysis to support that. That seems kinda scary to me. On the other hand, I hear so many people are flocking into commodities funds that they're all over priced already.

2000-2002 wasnt enough. We need either a good hard burn or a long sideways period to get the majority of know-nothing speculators to take their money and go home.

On the original point, a 100 year bear market is extremely improbable unless its coinciding with the end of our civilization. If thats the case, our investment performance is hardly a concern.

 

[Bob_Smith]

I'm with Cut-Throat on this one. Furthermore, the article states this:

"Prechter's message never wavered: Recently he told me: 'One thing I've repeated consistently is that the great bear market will take the DJIA at least below 1,000 and likely to below 400. Precedents for this severe a decline are the English stock prices in 1720-1722 and American stock prices in 1929-1932'."

Haven't most of us already factored '29-'32 into our plans?

 

[wabmester]

I'm curious what it would take to convert some of you to bears. Is there any fundamental insight about the stock market or forward-looking sign that would make you question your beliefs about stocks for the long run?

Now, somebody tell me if this analogy is bogus. You're a mountain climber. You love to climb Mt Rainier. Scientists tell you that thermal sensors indicate magma rising to the surface. They can't tell you when something will happen or what the magnitude of the event might be, but they tell you that odds are good that something bad will happen soon. Do you:

a) get off the mountain

b) say "This thing is solid rock! It hasn't blown in 400 years!" and continue climbing

c) run to the nearest ranger station, whip out your camera, and try to get a good picture of the erruption before you get covered with lava

d) convince ***** that it's OK to climb today

 

[Cut-Throat]

Now, somebody tell me if this analogy is bogus.

It's Bogus.

 

[wabmester]

Milk... Nose... Yech.

 

[cute fuzzy bunny]

I would continue climbing, but keep my magma proof folding kayak AND my folding mountain bike handy.

If I see ANYTHING red, and that includes carrot-top, I'm outta there.

Now y'all be careful...I am in fact drinking a glass of milk AS WE SPEAK with my lunch...

 

[Bob_Smith]

I'm curious what it would take to convert some of you to bears.    Is there any fundamental insight about the stock market or forward-looking sign that would make you question your beliefs about stocks for the long run?

I'm not a bull, I'm an agnostic. My stock allocation is only about 30%-40%. I don't exclude the possibility of a 1929 type crash, but I'm not banking on it either. And if we do have a collapse, I'll reconsider my overall allocation and probably be a buyer. I expect businesses to continue to be profitable and welcome lower prices.

 

[wabmester]

Bob_Smith, you and I are both the guy with the camera. We're willing to risk a little lava burn, but we want a piece of the rock.

I occasionally ask myself if it's even worth the thrill seeking, but in the meantime, I keep an eye out for steam and ash.

And I hedge my bets with my newest invention, the biyak. I mean kaycycle. Well, you know what I mean

 

[JAX]

yikes! just passing by..attracted by the topic but the last few alllegories confuse the heck out of me. I'm probably one of those people who has a large percentage of cash on the sideline since I was buying into the bond impact by rising rate factor and high equity valuation (please don't bother doing the market timing thing, I know it).

My questions are given that the Dow just breached 10,000 at 9,894.45
1. Do you have a benchmark/indicator (Dow, S&P, NASDAQ) or others that would guide you to adjust your porfolio accordingly?
2. As retirees (I'm ER), do you rely most on a) dividends b) equity appreciation c) bond income d) others?

 

[wabmester]

Confused about lava and biyaks and kaycycles?   Ah, that brings back memories of my naive youth....

There's nothing magic about the number 10,000 last I checked.   To think so would mean that only price matters, and earnings are nonsense.   When in fact, both price and earnings are nonsense.

Look to economic indicators, friend.   For the Dow is just a proxy for GDP, and all signs point to the GDP going up, up, up for the next couple of years.    And then maybe going down, down, down for the 50 years hence!

 

[cute fuzzy bunny]

Are we sincerely supposed to listen to someone riding a bicylak?

 

[haha]

Are we sincerely supposed to listen to someone riding a bicylak?

This joking I believe is itself indicative of trouble brewing. The dominant posters, for better or worse, feel that all questions have been answered. So if anyone raises a question outside of that box, he is either attacked (as in you know who) or it is joked away.

This doesn't prove anything other than that there is on the part of some an extreme attachment to a possibly truncated picture of future possibilities.

Cognitive scientists have shown that the major conditions for bad decisions are looking at partial evidence, taking a stand, and then seeking confirmation rather than seeking conflicting evidence.

I think it is easy to understand why one might do that. After all, this whole ER thing might begin to look a bit shaky if we didn't keep fairly tight boundaries on what we allow might happen.

Speaking personally, and having no desire to convert anyone, every time I read a thread like this I become happier that I am largely in cash, energy, foreign denominated assets and some gold. Not because of Prechter, who is probably nuts, but because of the fundamental and valuation background, and the psychology of some fairly substantial investors, as is illustrated by the dynamic of this board.

Consider reading Irving Janis 40 year old book, "Groupthink". Our little laboratory right here at Capn-Bill illustrates many of the same tendencies that affected the planners of The Bay of Pigs Invasion. ( BOP is the main historical event discussed in Janis' book.)

Whatever happens, I hope each and evey one of us succeeds and is happy with our paths.

Mikey

 

[Cut-Throat]

Speaking personally, and having no desire to convert anyone, every time I read a thread like this I become happier that I am largely in cash, energy, foreign denominated assets and some gold. Not because of Prechter, who is probably nuts, but because of the fundamental and valuation background, and the psychology of some fairly substantial investors, as is illustrated by the dynamic of this board.

Throughout the entire Bull market of 1982-2000, I recall folks that were glad that they were not in the stock Market. Especially the day after the 1987 crash, where they were all telling everyone 'That they told them so'. All of this pessimism makes me glad that I continue to stay the course and and continue to bet that the sun will come up tomorrow.

If you are not a market timer, you can just go fishing like me and unclemick

 

[wabmester]

Mikey, your point of view is compelling on many levels, and wrong on many more

First, the joking is only a sign than this board is populated by chronic class clowns. Sometimes a cigar is just a cigar.

Second, the one whose name cannot be spoken is a case of the messenger being disliked in spite of the message. The message is no more or less bogus than the rest of the stuff that is spouted around here every day.

Finally, I for one really enjoy hearing differing viewpoints, although I admit growing a little weary when they become dogmatic.

I can't recall hearing you express your POV other than to say "stocks are pricey," which ignores all of the changes that have happened to the market since 1980-something that could rationally sustain a higher mean P/E going forward. I'd love to hear your view of the world and how you rationalize it given the market's behavior of the last 20 years or so. My mind is waaay open.

 

[Bob_Smith]

Bob_Smith, you and I are both the guy with the camera. We're willing to risk a little lava burn, but we want a piece of the rock. I occasionally ask myself if it's even worth the thrill seeking, but in the meantime, I keep an eye out for steam and ash.

I know what you mean. If I was forced to bet on it, I'd put my money on Bogle's prediction for the next decade. But knowing I don't have a clue has kept me out of serious trouble so far. Unfortunately, I don't have the ability to see steam and ash. I wish I did.

 

[Bob_Smith]

Speaking personally, and having no desire to convert anyone, every time I read a thread like this I become happier that I am largely in cash, energy, foreign denominated assets and some gold. Not because of Prechter, who is probably nuts, but because of the fundamental and valuation background, and the psychology of some fairly substantial investors, as is illustrated by the dynamic of this board.

Mikey, I always enjoy your posts. Can you expand on this? What is the psychology/dynamic you're seeing in this thread that concerns you? I'm seeing opinions that are all over the map, but most seem to be the sincere points of view of bright people who simply see things differently. I don't see what you're getting at.

 

[wabmester]

Unfortunately, I don't have the ability to see steam and ash. I wish I did.

It's getting hard to miss. Here's some now:

 

[haha]

Finally, I for one really enjoy hearing differing viewpoints, although I admit growing a little weary when they become dogmatic.

I can't recall hearing you express your POV other than to say "stocks are pricey," ...<snip> My mind is waaay open.

Well, I don't expect anyone to remember my posts, but I also don't think I would enjoy repeating them. Mostly I cite well known academic and quasi-academic studies that are compelling enough for me. I feel that broker talk is meaningless.

As to your point about all the changes that have taken place during the upward revaluation of stocks over the past 22 years, it is my belief that if indeed there have been any meaningful positive changes, they have been more than offset by the very increases in price that we are talking about.

Again, I feel that it is to be expected that various autonomous individuals will have differing viewpoints. Mr. Cutthroat, whom I respect greatly, is comforted by my bearishness. I am comforted by his bullishness, and by what appears to be to be simple denial and rejection of hard evidence on the part of many others.

Although I do not believe that success or failure over any period less than 10 years and probably longer can be attributed to valuation based strategies, it is nonetheless true that my invested assets have increased roughly 80% since Feb, 1999. This is with no additions from earnings (there were none), and after normal living expenses, purchase of a new car, a new roof, and about $5000 worth of dental work. This is not a fabulous return, but considering the environment, it isn't bad either.

Mostly I enjoy posting in and around the area of social psychology because I have a degree in that field and I read extensively in academic social and cognitive psychology. Posting helps me to articulate and refine what I believe to be true about investing.

On contentious and values laden threads like this one I enjoy articulating my position for my own benefit. I don't think my POV will likely change until and if PE10 or Peak PE or other similar measure becomes more to my liking. I have no idea would change the opinions of the bulls. Possibly a falling market? Hope it falls slowly

Someday soon, I may try posting a bullish analysis, just to see how it looks to me and others. I would be interested to see what arguments I could come up with. It is certainly possible that there are good long term bullish arguments. I don't think so, but there may be.

I will state flatly that I believe it would be absolute folly to expect the next 20 years to be anything like the last 20. Were the last 20 anything like the previous 20?

Mikey

 

[haha]

Throughout the entire Bull market of 1982-2000, I recall folks that were glad that they were not in the stock Market. Especially the day after the 1987 crash, where they were all telling everyone 'That they told them so'. All of this pessimism makes me glad that I continue to stay the course and and continue to bet that the sun will come up tomorrow.

If you are not a market timer, you can just go fishing like me and unclemick

Thanks for your comments, Cut-Throat.

Several points-

Those folks you met during the bull market who were out of stocks were not me. I was in stocks, though not exclusively, and not really in the more speculative areas of the late 90s. It would have been nice to grab some of those huge gains, but it just wasn't consistent with my discipline.

Leading up to the '87 crash I had sold some stock, because I was nervous. But I didn't sell nearly enough. I lost a fair amount of money that day. But by Tuesday or so I had added back all the cash I raised, and took on some margin. I think there is a season for everything, or almost everything.

Regarding the sun, I too expect it to come up. I must confess that I fail to see the significance of this observation.

I too like fishing, but I also like investing actively. And besides, I believe you are quite a bit richer than I. You may be able to lose a fair amount of money and not be threatened in your current lifestyle. Not true of me. Although I could cut back, as others have said, I really would just prefer to not lose the money in the first place.

I have an asymmetrical utility function. Large losses would harm my well being quite a bit more than large gains would help it. Add to this the fact that I don't think there will be any large long term gains from this level, and my correct course is clear.

Mikey