06/29/13 What If

You all know I'm a contrarian by nature, and not only when it comes to stock market sentiment. I'm also a fan of Yogi Berra, who had an uncanny instinct for spotting the contradictions and paradoxes embedded in the human mind. Let's begin with one of his best quotes> 'It's tough to make predictions, especially about the future.' If the stock market is comprised of human beings acting on contradictory and paradoxical thoughts/impulses, then several 'what if' scenarios seem plausible: (a) March 2009 will become (in retrospect, of course) the next 1982! No one believes we're in the first quarter of another 18-year bull market. That's the kind of long-term zoom-out-to-the-forest 'wall of worry' we need for a repeat 18-year rally in our lifetime. It's not unreasonable at all. We've had two major crashes since 1999, and the Nasdaq isn't even close to its 2000 stomping grounds. (b) The SPX ends 2013 around 1800. Sure, mean reversion makes that unlikely. But which mean are we referring to? The SPX is up +18% in the past twelve months, but it's up only +26% since January 2011 (2011 was a losing year, remember?), and up just +8% since January 2000. Hey, it has plenty of room to run! (c) History repeats/rhymes, and I've always thought another Roaring Twenties made sense. Another 7-10 years, and we will have either reflated the debts incurred in the first ten years of the century, or absorbed those losses via the hard choices many municipalities and foreign economies are making now. By the early- to mid-Twenties, we should all be sitting on a pile of cash that, were we able to remain fully invested through the fits and starts of the typical bull, will allow us to retire in style.