From: Max More (max@maxmore.com)
Date: Thu Oct 21 1999 - 13:43:42 MDT
At 12:36 PM 10/21/99 -0400, John Clark wrote:
> Robin Hanson <rhanson@gmu.edu> 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.)
Max
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