Super-long Term Analysis: Dow Stripped Bare - How Long Can This Keep Going On?
Back To The Future or Forward to the Past: What the Past can tell us about the future...
People talking about stretched valuations need to start stretching their own imaginations a little by looking back into
the past for a guide to the future. Working on the simple principle that basic human nature has never changed and that
investors still feel fear and greed in exactly the same way investors experienced those same emotions 100 and 200 and
2000 years ago, we can see that in the past 110 years from 1907 the Dow goes through 4 prolonged 14 to 20 year periods
of sideways movement - followed by 3 explosive moves upward lasting a minimum of 8 years, then 16 years steadily
upwards and the 3rd golden-age lasting for 18 years. The minimum return over those periods was 610% and the
maximum 1500% in the last great bull campaign up to the last day of 1999.
So if you think this is crazy now, you just haven't really lived yet, that's all! If we's been living in 1925/6 we'd be saying
exactly the same things then as now...'Wooo, this index is up 3 times from the low at 64, it's ridiculous.' Kind of like now.
The Dow went on to double again, up over 6 times from that point before collapsing again. So 666 x 6 = 3996 on S and P
and 6 times the Dow low at 6349 = 38,094.
These are minimum upside targets. We could go up 15 times from the lows
FYI: 666x15 = 9990 for S&P . For the Dow the number is 95,235.
These are the facts of the matter. What you do with them is up to you.
Strangely the commodity cycle works the other way - more on that next week.