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Ghost of 29
RE: Down goes the Dow...but when?
Maserati,
I know you aren't trying to be a dick.

First of all, predicting anything in economics with any kind of certainty is darn near impossible. There are so many variables. In dynamics, for instance, it is easy to predict the future if there are a few forces involved. Add too many forces, and it is near impossible. And so it is in economics. There is also the variable of people's perception of what is going to happen, so that further compounds the problem. If enough people think the market if going to go up, then it probably will, since that means more money will keep flowing into the market.

Why hasn't the bubble burst in the past few years? The simplistic reason is that money keeps moving into the market, because people perceive the market to give a favorable return. One reason I can give is, where else can anyone get a return that exceeds inflation? Rates of more secure investments have been kept depressed by monetary policy, which in turn has contributed to hyper-inflated PE ratios. Another reason, I would guess (and it is a guess), is that a growing number of young investors are following the Jack Bogle/ Warren Buffet plan of just putting money consistently into an S&O indexed fund. I believe this is sound advice. A young person will experience a half dozen or so crashes in their career, but that doesn't really matter. Being in it for the long haul, and not worrying, is a way to earn a decent rate of return.

We can however rule out certain things in economics, however. If you look at the overall valuation of the stock market, I would bet my milk money that the market will not return 10%, year after year, for the next 10 years. There are too many things that have to go right for that to happen. The only choice is for the market to be consistently overvalued to 10 years. That is probably not going to happen. markets always correct at some point.

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