CM in MA

The Current Market Atmosphere: Easy Money Hard to Come by

Interesting article, but forming any opinion, thesis or course of action on "facts" such as "the median wage-earner is unable to afford the median priced home" is fraught with danger. I glanced at the study and am fairly certain it is using national medians. Well, we don't live in a median world. Wealth and earning power tends to cluster. Those earning at or below the national median wage in a high-wage area will likely find themselves consistently priced out of the local real estate market where most homes will tend to run above the median house price. Conversely, a person earning at or above the median wage in a low-wage area will be able to afford a home at the upper end of what is likely to be a below median priced housing market.

Facts and data only have meaning when put in context. And also remember that all studies have biases (yes, even at Harvard) and perhaps even hidden agendas.

Lost Decade for Stocks?

For some, it's potentially worse than the authors illustrate. If a person had the worst timing in the world, and invested in the S&P 500 at the start of year 2000, their annualized return (including dividends) to date would be 0.03%. Of course, this means that if the first 20 years of this century are going to revert to 8% return levels, then there's going to be a heck of a bull market sometime during the next decade. For those wondering, to get approximately 8% annualized during the period 2000-2020, the S&P would need to reach roughly 6600 by 2020. To get 8% annualized from 2002-2022, the S&P 500 would need to reach just 3725. As Warren Buffett has long noted, the price paid determines the rate of return.