Money Can't Resist Stocks

An interesting chart from Birinyi Associate's Ticker Sense blog. It shows the 10-year rolling returns of the S&P 500 (chart below). The grey areas are the periods when the market's 10-year return has turned negative. While the chart shows that any buy-and-hold investor who got into the market 10 years ago is experiencing a negative return, a look at broader history shows that these periods are merely anomalies when compared to the natural tendency of stocks to go up.

In theory, this can be explained by the fact that there are finite number of shares of stock out there, while the amount of money that can be available to invest in stocks can be infinite. What more with the massive and concerted amount of money printing being implemented by governments around the world! The average 10-year return going forward for periods when past 10-year returns were negative is 163%, while the minimum return was 78%. Thus, the question posed by the blog to you is: "Where will you be 10 years from now?"

Comments

[untrusting ...:]

Who cares where it is going to be in ten years, except maybe Warren Buffett? The average holding period of stocks has dropped from something like 5+years several decades ago, to about 7 months in the current market.

The stock market has become a gambling casino today. You might have gotten lucky with the 9-month run-up in the markets so far, but it can turn just as fast on you and crash like a falling rock at any time. This has purely been a liquidity driven rally fighting credit contraction and credit contraction seems to be gaining the upper hand now (even though liquidity has had the upper hand for the past 9 months). The velocity of money keeps falling because of the credit contraction and that is bad news for the bulls, especially at the levels the markets have run-up to now.

Oct 20 05:52 PM