So from 63 to 88 (25 years), the SPX quadrupled. From 88 to 2000 (12 years, or half that time), it sextupled. Assuming that the first was a more sustainable rate of growth, the SPX would have gone to 500 had it remained the same. Which would mean it's still overvalued by roughly 55%.
The first doubles every 12 years, the second sextuples.
If one were to make the case that one could find a sustainable rate of growth in the middle, say, a quadrupling every 12 years, we'd only need to drop about 14% more.
But logic indicates that a quadruple is unsustainable because once you quadruple the quadruple, you start running into that exponential growth curve pretty rapidly.
In 92 and 96, we can see the growth ratcheted up. I think we must return to one of those levels, to find a norm that can be maintained.
What some may miss is that a correction to either will end daytrading as we know it. There will be daytrading, but it'll be ruled by the best DDers, and the more patient, eking out less at a slower rate. |
