Your Future Looks Quite Bright to Me...

If your personal stock market experience began twenty years ago (assuming you're the diversify, buy and hold type), you lived through four notable declines; '94, '98, '00-'03 and '08 (the latter two being [historically] extreme) - and yet you have cause to feel pretty okay about your venture... The Dow (I use the Dow because it's the media's benchmark) sat at 3,379 on May 21, 1992... Last Friday it closed at 12,369... A near quadrupling over twenty years ain't that bad - all things considered...

But if your foray into stocks wasn't until late spring 2002, you've suffered the worst of the tech-burst and all of the Great Recession - in the span of a single decade... Thus you're not nearly as inspired by the market as the bloke who got in ten years earlier... The Dow, on May 21, 2002, closed at 10,106... A mere 20% gain isn't at all what you had in mind all those years ago...

Let's go back forty years and play this out a decade at a time - (around) means I had to take the number from a graph:

2002-2012: 10,106 - 12,369
1992-2002: 3,379 - 10,106
1982-1992: (around) 870 - 3,379
1972-1982: (around) 925 - (around) 870

(Consider this a snapshot... A thorough analysis [an utter waste of time that is] would include all thirty decades ['73-'83, '74-'84, '75-'85, and so on, with the last being '02-'12])

As you can see, the market was a nice place to spend a decade if you began in '92 or '82... But no picnic had you started in '72 or '02... And while 2 decade experiences have tended to validate equity investing(look at '72-'92, '82-'02 (meteoric) and '92-'12), 20 years is a friggin long time, particularly if you began in '72 (abysmal first 10 years) or '02 (uninspiring first 10 years)...

So what does all this mean for you? Unless your last name is McFly and you drive a DeLorean, absolutely nothing... Hindsight (regardless of what the "expert" or the historian might have us believe) tells us to never rely on hindsight... I.e., while pros [like yours truly] are notorious for using charts to keep their clients engaged, at the end of the day we have to get back to the future, and literally (well, let's say virtually) forget about the past...

Not that there aren't any heedable lessons from the markets of old, but those worth heeding (like never buy a tech stock that's never made a dime, or real estate when everyone you know has three adjustable-rate home equity loans) simply don't come from price charts...

The future will have little to do with yesteryear, and everything to do with the [global] state of entrepreneurship... And when we look beyond the present failure of the policies of those who lead 15% of the world's people - and look to where the other 85% live (emerging countries); to their demographics, to their needs for infrastructure and technology (Caterpillar and GM are #1 in their respective industries in China - Apple can't keep up with iPhone demand in Asia - 82% of Intel's earnings come from emerging markets - India is taking over as Facebook's #1 country), to their growing thirst for the things only capitalism can quench - well, let's just say I'm now covered with goosebumps...

In other words: "Your future looks quite bright to me"