No. of Recommendations: 9
I haven't read the Dow 36,000 book, nor the book they base it on Stocks for the Long Run, but count me among the skeptical.

While it's obvious that over various periods of time in the past, stocks have been the superior investment as measured by total return, that does not mean they will be superior going forward. With the earnings yield on the S&P 500 in the mid 3% range and bonds yielding in the 6% range, the historic norms have been reversed. For any statistical study to have validity, a similar time in history would need to be studied. To my knowledge no such period exists.

Reminds me of the story of an optimistic hiker...

Picture a person setting out on a long hike from Omaha to the foothills of the Rocky Mountains in Colorado. Our hiker has been walking steadily for a couple of weeks, covering roughly 500 miles. Over that distance his elevation has changed from about 1,000 feet above sea level in Omaha to about 5,000 feet above sea level as he reaches the foothills of the Rockies.

Our intrepid hiker likes the beautiful scenery before him and continues his trek. He begins a much steeper ascent climbing to over 8,000 feet in just a few hours. "Now this is progress", he thinks. He presses on. He climbs to 11,000 feet over the next several hours and decides to rest for the night.

That evening our hiker pauses to reflect on his journey. From his perspective, each step has lead him ever higher. It has been that way for his entire trip. Sure there have been some valleys along the way, but he always managed to climb out the other side. As long as he continued westward, he always gained in elevation. In fact in just the last day alone he's managed to climb 6,000 feet. His journey simply must continue ever higher as long as he stays the course. It seems to him like a sure thing. It's always worked in the past. Surely it will always work in the future.

He rises the next morning eager to go onward and upward.

"At the rate I'm going now, I'm sure to hit 36,000 feet by the day after tomorrow at the latest," he says as he heads up the face of Long's Peak.

Best,
CM

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