Worth a read.
investorshub.com
On several points I disagree with Wood. Some are just semantic. As I pointed out in Drei D,
Message 18554768
there are three significant market inflection points in the generational cycle - Delusion, Despair and Disgust. For a variety of reasons, I include the period from Disgust to Delusion as the Secular Bull period, and the period from Delusion to Disgust as the Secular Bear period. Wood, for his own reasons, takes the period from Despair to Disgust, and places that in the Secular Bull period. While I believe there are good reasons for not dividing market history his way, in the final analysis it's a semantic argument a not a big deal. He, also fails to correct his historical data for the effects of inflation. This is more serious. For example his '42 date for the end of the Secular Bear that began in '29 is in error, because of his failure to use inflation adjusted data.
Nevertheless, his attempt to analyze the generational cycles in terms of the shorter four year cycle is both valiant and fruitful. I find it interesting to compare his work with my own. His best guess of when the P/E compression low will occur Ranges from ’06 to ’10, with ’08 being a good possibility. My own demographic work says ‘07/’08 is the likely Despair point, because of reduced Boomer spending. For a value of the Despair point, Wood uses the H&S on the S&P to get an estimated S&P 315, which he then equates to a Dow value of 3000. Using the channels of the Two Century Dow chart, I get a value of DOW 2900 in ’08 – quit comparable. I should mention that my value is an inflation adjusted value, and I expect inflation to be rampant by ’08.
His expectations for ’03 are particularly interesting. We both believe that Oct ’02 was not an IT (one year) low. We both believe that there will be two lows in ’03. We both believe that ’03 will see the beginning of an IT Cyclical Bull. Wood believes the second low in the fall of ’03 will be the lower low. Currently, I believe the earlier ’03 low will be lower, but I’m in no way wedded to the idea. It is interesting that from a very differing analysis, we reach such similar conclusions.
Of course that doesn’t mean the conclusions are accurate.
lurqer |
