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What does this mean? Excellent chance the S&P will advance over the next 12 months. Average chance that it will return 28% or twice normal.

I'm not a statistician or an oddsmaker but my gut tells me that looking at the past in this manner is not a valid predictor for today's situation. But then it also keeps telling me to go to McDonald's when my head is saying "Go to Subway - be like Jarod".

In any case, it seems like trend analysis to me, an activity that, almost by definition assumes that there is no meaning behind the market other than price movements. For someone who thinks (or tries to anyway) that price movement, particularly short-term price movement is the secondary consideration to the underlying business, this type of information can lead one to adopt a dangerously sanguine assessment of their own correctness while setting them up for the wham-o punch.

Someone else made a similar point on another board and I believe I countered with the argument that, were the market a game of poker, I would bet those odds, because the chances of you winning with a full house are the same now as they were in 1950 - the deck never changes, so the odds never change. However the market is an entirely different story - there's a heck of a lot more than 52 variables, and they're constantly changing.

All that said, I am prepared (expecting really, now) to see the S&P jump 40% in a year (with me at the station watching it recede to the horizon). I have no idea whether your prediction will turn out to be right. I just don't think it's a good premise to base an investment on.

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