"The likely future return being lower is due to current overvaluation. Many knowledgeable people understand the connection between overvaluation and lower future returns. You're sort of hoping it all evens out in the wash, however as markets become more mature future returns will naturally lower over time."*************************Again, be careful when you assert things like these. Assertions are NOT facts, regardless of how widely they are believed. "Many knowledgable people" also suggested that gold would rule forever back in the 70s, that IBM would always be king of the world in the 80s, and that investors were idiots for buying anything other than tech in the late 90s. Guess what? They were wrong, despite the fact that many of them were respected and thought knowledgable. I understand the connection between overvaluation and lower future returns, but I don't see how this pertains to the US markets today. Valuation is in the eye of the beholder. If everyone agreed that the markets were overvalued, we'd all go short and the markets would plummet. Mysteriously, this has not happened in 2003. I'm not "sort of hoping it all evens out in the wash"; rather I am saying that I don't know what is going to happen in the future. Since I don't know what is going to happen, I use the historical data as a guide, since it is the best guide I have.Do yourself a favor, petey: don't talk down to people you are debating with. All it does is annoy your sparring partner and detracts from the otherwise reasonable debate.After all this back and forth, I'm very curious what you are investing in. Emerging markets equity? Real estate? Something else? Where do you find value? Personally, I haven't liked the valuations or lack of clarity in the US markets for a long time, so I have stuck to small caps that I can clearly understand and see where the "levers" in the business are. I also like low beta stocks and (until recently) REITs, although I think that the latter are overpriced now.
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