Over the past 100+ years, broad US stock indexes seem to regress over time to about 16. This probably implies some logical risk-adjusted yield on earnings and earnings growth.

As a result, 20-year index returns can be somewhat predicted by the index P/E ratio today. You can prove this yourself by regressing the data at Robert Schiller’s faculty Web page (Yale.edu).

When you buy below PE=16, your 20-year return is much better than when you buy above that level.

In the past month, for the first time since 1996, index PE is well below 16. This argues it is time to begin averaging into an index fund, a little each month.

No way to tell WHEN a turnaround will come. Maybe years. This merely argues that the ODDS of a good long-term return are much better right now than they were a few months ago.

Now he is saying move to cash? Smart guy. Why are we even talking about him? Clearly, any idiot can now have a column in the NYT. Hell, Ben Stein is in there!

The work of the Plunge Protection Team (Paulson, et al) never stops. Like the 7 dwarfs -off to work we go -illegally manipulating the stock market the last few years.

Everyone who invested the last bunch of years who have had their funds automatically invested for retirement paid higher than free market prices for their stock investments.

When are we gonna’ see a perp walk for these guys?

The link was perfect! Thank you.

To River who asks:

“Why would anyone except a gambler even consider being in stocks now?”

And therein lies the problem: The vast majority of people who consider themselves to be “investors” are kidding themselves. The 1-2% that are not gamblers are NOT, in fact, “investors”—these few are simply “The House”.

Watch ESPN prior to a big football weekend as Chris Berman and Hank Goldberg tout their picks….and then watch CNBC or read just about every other blog that’s out there—there’s no difference—it’s all gambling.

Let’s cut the bullshit.

It would be so much healthier, if CNBC, NYT, and the blogs just framed the whole exercise as a gambling narrative. I think people would make more asute decisions. Before plunking down some hard earned cash on a Cramer Call…or a blogger call….an otherwise industrious, responsible person might say to himself, “Let’s pause for a moment here, Tiger. If this doesn’t work, how am I going to feel knowing I just GAMBLED a month’s salary with this ‘Lock of the Week’ play? I’m going to feel like a degenerate moron, that’s how I’ll feel.” And with this modicum of self-awareness, this person might make more temperate decisions.

But that’s not how it goes down does it? Instead, it’s more like, “Well, these are ‘calculated risks’. I am making ‘informed decisions’. I am an investor! This one just didn’t work out, that’s all.”

And I’m not saying that people shouldn’t put their money into the markets. If there’s some kind of edge, go for it. Just keep in mind if your “portfolio” is down…if your “returns are off”…you just gambled it away. The next time you are making an “investment”, you are simply making a bet.

If, in addition to the loss of wealth, people also had the attendant loss of esteem by admitting to themselves that they may have a gambling problem….a healthy feeback loop might ensue, where a person says, “Sure I can accept the loss of some money. What I cannot accept, though, is that I am a gambler who is losing his money via the stock market instead of at the craps table or in a Vegas sportsbook.”

As I see the current situation the stock market is so contorted that making a profit on equities is a simple matter of luck…and a bit of bad luck will leave one out some money.

When the Fed and Treasury get into bed with Wall St, its time to look at cash, precious metals, or other commodities. The only people that will make money in the current stock market are lucky day traders that guess right or insiders. Lots of sheep will be sheared, of course, because there remains a pool of greater fools. At some point they will run out of money.

The old saying goes…The market can remain irrational longer than one can remain solvent. In the present case irrationality has nothing to do with it…It is plain and simply rigged. One has a better chance on the crap tables in Vegas where the rules are not changed after each roll of the dice.