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Replies to post #69941 on Abet Chichi2 (Chichi2)
DiscoverGold
09/25/16 12:57 PM
#69999 RE: DiscoverGold #69941
Unfortunately, like the tech bubble and the housing bubble before it, this gleeful romp into the land of “this time it’s different” is likely to collapse in a smoldering pile of ruins. The reason is that the very things that have created this glorious rear-view landscape have been obtained by ripping prosperity from the future. By following a dogma that treats debt-financed consumption and financial speculation as a substitute for actual economic growth, policymakers have encouraged obscene valuations, extreme debt burdens, and speculative malinvestment; front-loading market returns to the point where there is little but risk on the financial horizon for the coming 10-12 years (though there will undoubtedly be excellent opportunities much sooner, at points where substantial retreats in valuations are joined by early improvements in market action). We currently estimate S&P 500 nominal total returns averaging just 1.4% annually over the coming 12-year period. The higher investors have driven market valuations, the lower prospective future returns have become. What looks beautiful in the rear-view mirror has been torn from the abyss that lies ahead in the windshield.