OT: but pertinent to investing going forward.>>
Nightmare on Wall Street:
This Secular Bear Has Only Just Begun
By Ed Easterling of Crestmont Research
July 2, 2012
advisorperspectives.com
THE FUTURE: DECADES
If history is a guide, the inflation rate will at some point trend away from the present price stability. The result will be a significant declining trend in P/E. If this occurs over a few years, the market losses will be dramatic.
More likely, it will take a decade or longer. That will enable the underlying economy and baseline earnings to grow, thereby offsetting the decline in P/E. As we have seen from history, that means another decade or longer of near-zero returns. When the adverse inflation-rate trend reaches its nadir, we will mark the end of this secular bear and the start of the next secular bull. As the economy or the Fed reverses the adverse inflation-rate trend back toward price stability, P/E will trough at its lows and begin the long climb that drives secular bull markets.
These processes take many years. Be careful not to let hope for the next secular bull mask the reality of the current secular bear. Many more years of vigilant investing will be required for portfolio success. As Robert Frost so aptly wrote: "The woods are lovely, dark, and deep, / But I have promises to keep, / And miles to go before I sleep, / And miles to go before I sleep." |
