San Diego Housing Bubble News and Analysis

Here is the article where I saw the quote:

http://tinyurl.com/bullshill

Assuming of course the economy doesn't implode in the next 2 years.

Actually, Shiller predicted the housing led-slowdown and economic implosion, but still says this.

Yep, this makes sense. It mirrors what Jeremy Grantham has been saying recently.

If you start with a 3% dividend yield, normalize earnings and get 5% annualized earnings growth with a normalized P/E of 14-15, you wake up with an 8% annualized return on stocks over the next decade. This compares to the 10-Year Treasury yield of 4%. 400 bps of equity risk premium is as good as we've seen in 20 years.

I agree that stocks will head lower at some point, but if you're looking out long term, the risk-return trade-off for stocks versus bonds is pretty good right now. That's just the math speaking.

10 years is a long time to have one of the biggest investments one ever makes just sit there or go down. Then throw in that it "will probably" have risen...
I think Someone got to Shiller and told him to "cool it with the reality stuff".

I think Someone got to Shiller and told him to "cool it with the reality stuff".

"Summing it up, the market as a whole is priced for good long-term returns, but it could end up priced for great returns down the road. Meanwhile, certain sectors within the market are priced for great returns already."

Rich Toscano
http://www.pcasd.com/us_stock_market_now...

I think Rich got the memo too, peterb.

Yes, unfortunately, Rich is not immune. The last two investing reports on "gold and gold stocks" as well as the "US stock market is now priced for good returns" are a little off target, IMO. Gold had broken-down 6 months ago and will continue to break down for a while yet. The US stock market may enjoy this reaction cycle, but it wont last more than a few months before all the overwhelming bad news smashes it to new lows. The best and safest place to be right now is in the US$. This will probably be true for another 6 or more months. Check with Marc Faber and Bob Hoye for a historical perspective on where we're at and headed. 2009 is going to be one for the record books and I dont mean that in a good way.

peterb, you seem to be focused on 3-6 month trends.

Shiller tends to focus on decadal time scales.

Hey, I was just joking peterb.Rich sounds reasonable, with good arguments and fair caveats.

Time will tell. But everything I'm observing and the analysis I find most accurate tells me to stay mostly in US$. It's a trend that has legs as the planet unwinds from the biggest credit bubble burst in it's history. I honestly think that gold could get to $600 and the S&P to 600 by mid-2009.
Unemployment in CA is at 7.7%, 6.1% in the USA. A lot more mortgage defaults are headed towards us. Lay-off announcements are dominating PR releases. Credit card defaults are looking to break records as well. I dont see any positive news on the horizon. I'd wait for a sign or two of a reversal before going long on anything right now. But that's just me. I'm convervative.

I'm somewhere in between Shiller and peterb.

Not about to go long yet, but I think we'll manage to get through this. Widespread difficulties in the months ahead, lots of pitfalls that could send us into a deep funk. OTH, if we reinvent the energy industry, cheap and renewable, I think the economy comes roaring back.

I don't disagree completely with peterb either. If one has been out of the market I think this is a great time to start dollar-cost-averaging back in over the next 1-2 years to get back to whatever portion of your retirement (long-term money) portfolio you plan to have in stocks for the next 10-20 years.

Still, a hefty cash allocation (for me it's 40%) is important for stability and to play a little defense.
Also, if you want to use the money within the next 5 years or less (e.g. to buy a home, start a business, etc) I would not put it in stocks.

Maybe it will be good timing to get serious about college funds for those of us with young children?

Just look at the volitility of the market lately. This is not my idea of stability. Dip a toe back into the market after it's shown a couple months of solid behavior. And even then, just a taste. And in another month, if it's behaving, get some more....etc... at least this way, you're not over exposed if it crashes. The odds of a lot more bad news coming in 2009 is about 90%, IMO. So be careful out there. The US$ is a great place to be right now despite how it may feel.