Predicting the Past: Easy and Infallible
Media experts know the truth. They tell us so every day on CNBC and in newspaper articles. Typically, though, the wisdom they share is nothing more than telling people what has just finished happening. They then give what could be a plausible reason for what took place while predicting that the current trend will continue.
When did The Little Book of Sideways Markets come out? In late December of 2010, right after almost 11 years of churning market action.
That chart, dating back to 1900, certainly made the period since 1999 look flattish. That is only if you didn’t look carefully at author Vitaliy Katsenelson’s next exhibit. Those ‘sideways’ years covered four distinct bull and bear markets with huge percentage changes ranging from -49% to + 83%. The final tally for the chart ended in mid- 2010 due to the book’s completion date.
The summer and fall of 2010 proved to be a launching pad for a continuation of the major bull move that started on March 9, 2009. In just over 2.5 years since April 30, 2010 through May 17, 2013 the total return on the S&P 500 was another 41%.
If you’ve been invested and profiting, I would doubt you would call that a neutral market. Sitting in cash, earning almost nothing for that long of a period would have been counterproductive. It also would have been hazardous to your financial health.
In the words of the late, great journalist Paul Harvey….
Today’s market may be at a new all-time based on the S&P 500 and DJIA but it is far from expensive. This is especially true in a zero interest rate policy (ZIRP) environment.
Trying to ‘predict the market’ is a fruitless activity. Knowing what already took place tells you nothing about future returns. Evaluating individual companies and buying when they offer good value has been the best way to profit over time.
See my own value-based virtual portfolio here http://marketshadows.com/virtual-portfolios/virtual-portfolio/