Shilling - and I by proxy - take a timing granularity of a year, and look for the big trends, and he at least has been more right than wrong. Making 40% beats hell out of losing 40%.
Nouriel Roubini also called for S&P to bottom at 600, but his prediction was based off of a 10x multiple on $60 earnings. I think he raised his prediction since then, but I'm not sure. Plenty of other smart folks are calling for higher, and lower 2009 levels.
It's all good because it takes buyers and sellers to make a market, and risk premiums are much higher than in the past. At these levels and lower buying risky assets seems the much better bet than sticking with the "risk free".
Congratulations on your good fortune (and Shiller's and Roubini's as well). But in these matters it's nearly impossible to distinguish between luck and skill and I'd caution you against relying too much on any soothsayer who's shown recent success (and against patting yourself on the back too much as well). Bill Miller ran up a very impressive track record of beating the S&P 500 every year for 15 consecutive years (Shiller’s track record is considerably less impressive). It is only recently that Miller’s performance was shown to be the equivalent of flipping a coin and getting a long series of heads. With enough people flipping coins, someone hits the long-tail probability and claims the moniker of "genius", at least for a while. But over the past two years Mr. Miller's performance has been so horrendous he's given back more than all the excess returns he'd accumulated over his storied career. There is no art or science in determining when the luck of the current investment "genius" will run out.
With respect to your 40% returns, again congratulations are in order. But one doesn't have to have done this for very long to remember a long line of folks who were boasting more impressive returns investing in technology stocks, followed by residential real estate, and finally in commodities. As it eventually turned out, in each of those cases people would have been better served by a broadly diversified portfolio. Now those same folks are bragging about their long treasury bond investments. All I can say is “good luck”.
But one obvious difference between then and now is that the prior investment vehicles had no identifiable top. The upside was theoretically unlimited. So buying NASDAQ 5,000 still carried the illusion of potential untold riches to follow. Not so with treasuries. Currently 30 yr, cash-pay treasuries, can only appreciate another 60% before 30 year rates hit zero. On the other hand, if all the money the Fed is printing results in a return of inflation an 80% or more decline is entirely possible.
In fact, if 30 year treasury yields back up to the entirely reasonable yield of just 6.5% the long bond currently priced at $140 declines 48% to $73. Meanwhile S&P 600 is only a 32% decline from Friday’s close. I'd say the risk return strongly favors the S&P over long treasuries.
Sure, timing the market day by day is impossible, but large trends aren't too hard to see.
You mean like the large trend of inflation that could follow the largest increase in the supply of USD in history?
but I've already sold my bonds and am trying to figure out how/when to put it back into a regular portfolio.
