At 12:36 PM 10/21/99 -0400, John Clark wrote:
> Robin Hanson <firstname.lastname@example.org> Wrote:
> >The analysis at:
> > http://www.econ.yale.edu/~shiller/peratio.html
> > offers good reasons to suspect that US stocks will
> > do very poorly over the next ten years.
>They offer reasons stocks will do very poorly over the next
>10 years but I wouldn't call them very good reasons. Perhaps I'm
>prejudice but I don't think "technical analysis" is any better than
>reading tea leaves in predicting the future.
I have to agree with John (and I continue to be 100% invested in stocks). I also see most technical analysis as little better than astrology. While I do not go along with the authors of "Dow 36,000", who argue that the Dow deserves to be at that level *now*, I do expect a continuing rise in stock prices over the next decade, barring bad policy errors (such as a big rise in protectionism, rising tax rates, etc.).
A much better book, IMO, is "Dow 100,000" by Charles W. Kadlec. He uses economic analysis rather than technical analysis to make a case for Dow 100,000 over the next 20 years --- a quite historically average gain of 11.1% per year. Kadlec gives an excellent review of the economic, demographic, and policy factors likely to keep the stock market rising, despite short term set-backs. I find his case well argued and plausible. I also feel confident that I can do better than 11.1% per year by carefully picking well-managed companies in rapidly growing areas of technologies that have a special edge, and by using back-tested stock-picking screens (mechanical investing strategies). So far, my confidence is being backed by performance (I'm up over 42% so far this year).
Robin, would you care to make a Julian Simon/Paul Ehrlich style bet on stock prices ten years from now? (The difficulty will be in agreeing on an index to use.)