Sep

2

An article by El-Erian believes that you fail to realize that there is always an unrequited and unanticipated reason for a market move. The question you are asking is incapable of falsifiying as it is descriptive and retrospective rather than predictive. One wonders if you are still suffering from the new normal disease. An acquaintance with the triumphal trip of Dimson, Marsh, Staunton would convince you that the 500,000 fold rise since 1899 in the index was not due to unusual anomalies related to expectations but was due to the return on capital of 15% and compounding. Such a compounding is particualry alluring during times when the earnings price ratio and the return on capital are so much greater than the long term interest rate as would be consistent with theory and the Fed M.O.


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