AC: I expect double digit returns because I think corporate profits will come back strongly this year and in 2003 and I think that the baby boomers will be net buyers of stocks for six or seven more years, keeping P/Es high - irrationally high by historical standards. The economic significance of the baby boom generation - my generation - should not be underestimated. This is not a value judgement of any kind, it's a function of raw numbers. The baby boom generation is a huge demographic force. I expect to see single digit P/Es again, but not until this particular demographic pig has passed through the python.
I felt this way in '00, and used this demographic reasoning as my excuse to stay in the market. Until the 1Q "correction" shocked the bejebers out of me and I unhooked the mind control device. And started to think for myself.
This is "conventional" wisdom. Centered around the mean age of the boomers.
But the retirement of boomers will not be a singular event, instead it is being spread out over decades. There is poop from that partially digested pig emerging as we speak. Sure, it will begin to emerge in greater volume as time passes, veritably squirting out by 2010. But that doesn't mean it's not coming out now. The oldest of the boomers are retiring now!
Also, when I look around at equity valuations, I sense that there are more promises booked than can be kept. It really doesn't matter to me if I get quadruple digit returns over the next few years only to see them wiped out a few-point-one years from now. Versus not having them to begin with.
Your point about solvency and betting against the market is a good one. But refusing to bet with the market is not the same as betting against it.
Indeed, there are many on this thread following Edison's maxim "All things come to he who hustles while he waits". Self included. With our money in very conservative bunker-like "stores of value". Even zero is preferrable to minus 50%.
After 1Q 2000, I no longer trust my ability to exit before the rush. And I know that the market is valued on a "last one out loses" basis. Indeed, it appears to me that if an exodus starts, only the first ones out will win. And I have already won. So why would I risk going in for a few points when I risk being caught at the back of a very long line, my pockets emptied and my future comfort in jeopardy?
Seems to me you are saying "it's going to go up for a while before it goes down"... I guess I'm not comfortable in the length of that "while".
Food for thought.
John |
