You would never guess it from all the pessimism you hear around the dinner table or the office, but stocks are on their strongest run in more than a generation. The Standard & Poor's 500 Index ($INX) has climbed about 80% since March 2009 -- the largest and fastest gain since at least 1960, according to the folks at Lowry Research. Smaller, riskier stocks are up more than 112%.
The S&P 500 ended 1998 at 1,229.23. The S&P 500 now trades at 1,186.68. Stocks are definitely on their strongest run in more than a generation. It's been nearly 12 years. Just look at that -3.5% performance! There's just no stopping this prosperity.
I turned bearish in August 2004. I've actually missed out on a 7% rise in the index. That's roughly 1% per year. Color me stupid! If only I wouldn't have been so cowardly just think of the money I could have almost made.
You know what else has done well? Inflation. Although inflation has been fairly tame it does tend to sneak up on us. Prices in general are up 32.4% since December 1998. I guess that partly explains why my garbage bag hoard has outperformed the S&P 500. Well, that and the fact that garbage bags are made of petroleum products.
Either the public is correct in avoiding stocks, or the professionals are onto something big. And history comes down clearly on Wall Street's side.
My thoughts exactly! It isn't like history shows that the public has to bail out these smart professionals as they make their risky bets. No sir.
The average investor has a terrible record of predicting stock market movement. Studies by academics and practitioners all come to a similar conclusion: Retail investors are horrible market timers, frequently buying into an overpriced market and selling into an oversold one.
Fortunately, columnists are the best market timers of all. How else can you explain the premise that we are missing out on the market that has climbed about 80% since March 2009? I mean really. That's the premise of the article. Right? We're missing out. We're being stupid. If we've been patiently waiting on the sidelines (permanently in my case) then now is the best time to jump back in. Buy high? Sell higher?
To be sure, stocks look vulnerable to a short-term pullback. But it will be a buying opportunity. The fact is, the huge 80% rally out of the March 2009 low is fully justified by the fundamentals and the long-term outlook. So while there is plenty to worry about in the global economy, it's becoming increasingly clear that the rally is far from finished.
Fully justified by the fundamentals? Of course it is! As long as we continue to "Greece" the wheels of this economy with a TRILLION extra dollars per year of debt, then what could possibly go wrong? Um, I mean, well, in addition to what's already gone wrong anyway. Let's ignore the previous two stock market bubbles and the housing market collapse. It is different this time.
Source Data:
Yahoo: S&P 500 Historical Prices
St. Louis Fed: CPI-U
St. Louis Fed: Federal Government Debt: Total Public Debt
They have a talent for identifying opportunities to lose money, don't they?
ReplyDeleteSpeaking of 'Greece'ing the wheels...
ReplyDelete"ATHENS, Greece – Hundreds of youths rioted in Athens on Saturday, throwing Molotov cocktails and stones at police who responded with tear gas at a May Day rally against austerity measures being enacted by the cash-strapped government to secure foreign loans to stave off bankruptcy."
http://tinyurl.com/32c23ax
Instead of being at the shopping mall producing green sharts, er, I mean shoots, those wacky Greece 'youths' were limbering up their pitching arms.
Thank goodness that can never happen here in the good ole U S of A.
Who Struck John,
ReplyDeleteThey have a talent for identifying opportunities to lose money, don't they?
Here's what this same author identified several weeks ago.
Why inflation would be good for us
There's another way, but it involves a question we may not want to ask: Could high inflation be good for us?
It might be just what we need, according to one line of thinking on Wall Street and in Washington these days. But it means inviting something that's been economic enemy No. 1 over the past 30 years.
As a saver, I'm pretty sure that would help me lose money.
watchtower,
ReplyDeleteThank goodness that can never happen here in the good ole U S of A.
No kidding! Just think what would happen if Americans started writing anti-prosperity blogs. Things could spiral out of control. D'oh!
Hey Mark, I stumbled upon this today and immediately thought of you. Bucket wheel video
ReplyDeleteAlso, the thing I don't quite understand (OK, maybe I do, but hear me out) is why the Greek "youths" are rioting. Shouldn't it be the 55 y.o. retiree's? Their the ones at risk of losing their retirement. The "youths" are pretty much screwed no matter what. Most were too young to riot back when it could have made a difference.
AllanF,
ReplyDeleteThe "youths" are pretty much screwed no matter what.
Your link seems broken but it did inspire me to find this.
Bucket Wheel Excavators
We would need more than 40,000 people with shovels to replace the excavator and to make the same amount of material each day as the excavator does.
I would say that the youths with shovels are especially screwed.
As a side note, so much for "shovel ready" jobs saving our long-term economy.
Yep, that was the video I was trying to link. Is it just me or did the guy seem a little creepy when he said that line. A bit too impressed with himself or something. I was waiting for him so follow up with, "... and the resulting excess thus allows us to double our Solyent Green ration for the next 27 months until the surplus is worked off."
ReplyDeleteAllanF,
ReplyDeleteIs it just me or did the guy seem a little creepy when he said that line.
It was not just you!
Further, you've planted an image in my mind that will no doubt stick with me for the rest of the month, lol.
It's people!
Um, I mean it's people being replaced by machinery.