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No. of Recommendations: 2
tjberk wrote <<what does one man's opinion (WEB) have to do with the pricing of anything>>. I agree that one should not accept opinions on authority, but rather on reasoning. I found his arguments convincing

was written in November of 1999, and

was written in December of 2001. Both articles are well worth reading IMHO.

In his 1999 article he pointed that the Dow Jones averages were essentially flat between 1964 and 1981, and it soared from 1981 to 1998. One major factor was that interest rates went from 4% to 15% in the first period and dropped to around 6% in 1999. In the 2001 article he assumes GDP to grow at 5% (includes inflation) and return will be 7% (perhaps because of 2% dividends). He assumes there will be no help from interest rates or from undervaluations of equities. His two articles were very persuasive to me, and even if he has a 50% chance of being correct it seems better to be conservative.

I'm inclined to think that the REITs will outperform the general stock indices over the next 10 years and will do so with less volatility. I'm inclined to think that the recent movement of money into REITs reflects the beginning of an appreciation of the advantages of REITs. I'm also going to have to rethink what an efficient market is. I just can't ignore the main argument for efficient markets, namely that most money managers do not beat the averages over a long period of time.



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