Since last Friday's post I've been doing a lot of thinking about the last ten years and wondering if there's any logic which might help us look forward to the next ten years. Most of my gang are either retired or hope to retire in the next ten years. Timing may be a critical factor.
I can't get it out of my head that the next ten years are unlikely to be any better than the last ten. Why would they be? News spreads instantaneously. No more waiting for the morning paper. The markets react negatively to everything from earthquakes and floods to oil spills and acts of terrorism and positively to increases in commodity prices and excellent earnings reports. At the end of the day, I have come to believe that there are more negative influences than positive ones.
The TSX was driven to an all time high of 14,984 on May 16, 2008 as it rode on the back of the price oil. I doubt that we'll ever see $147 oil again. It wasn't worth it then and it won't be worth it in the future. I believe the difference now is that regulators will never allow the price to be manipulated to this level again.
Imagine where you'd be today if you had cashed in on July 8, 2007. That five year rally compounds to 201.56%. Yup, better than a double in five years! Back to the beginning of the ten year period, $100.00 invested July 8, 2000 would have been $110.23 at the end of the ten years, July 8, 2010. Yup, ten years... 10%. Ugly!
I can't get it out of my head that the next ten years are unlikely to be any better than the last ten. Why would they be? News spreads instantaneously. No more waiting for the morning paper. The markets react negatively to everything from earthquakes and floods to oil spills and acts of terrorism and positively to increases in commodity prices and excellent earnings reports. At the end of the day, I have come to believe that there are more negative influences than positive ones.
The TSX was driven to an all time high of 14,984 on May 16, 2008 as it rode on the back of the price oil. I doubt that we'll ever see $147 oil again. It wasn't worth it then and it won't be worth it in the future. I believe the difference now is that regulators will never allow the price to be manipulated to this level again.
Imagine where you'd be today if you had cashed in on July 8, 2007. That five year rally compounds to 201.56%. Yup, better than a double in five years! Back to the beginning of the ten year period, $100.00 invested July 8, 2000 would have been $110.23 at the end of the ten years, July 8, 2010. Yup, ten years... 10%. Ugly!
Just over one year ago I wrote A Brief History of Volatility. If I had to guess, I'd guess that we're in for more of the same. I believe that those who stay in for the next ten years will have a ride like they've never imagined. There will be periods of tremendous gains. You know, the times when greed rules and we hang in there believing that it'll keep on rolling. There will be huge down cycles when fear takes hold. In these times some will cash out to stop the bleeding, some will hang in hoping upon hope for the next extended rally, which may never come.
What are your plans? Are you intent on hanging in there and riding it out no matter what? Do you have any reason to believe that the next ten years will look more like the eighties or nineties? Do you have an exit strategy to move toward guarantees when (if) the markets reach a predetermined level? Are you talking to finance guy or does he no longer return your calls? Do you have a plan at all?
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