Ack! Contrarian Overload

When I was a teenager “Alternative Rock” was just coming on the scene. In the early days, Alternative Rock was just that- the alternative to the music that was consumed by the masses. But then people decided that Alternative Rock was cooler than Pop Rock and suddenly there was a movement en masse out of pop and into alternative. The result was that the term “alternative” became increasingly ironic because it was, in fact, simply the new pop marching under a different label. Rebellion, as they say, is best done through conformity.

The reason I bring this up is because I’m starting to feel that way regarding investing and the mainstream media. A couple of years ago economic contrarians where the lepers of the financial media. Everyone seemed to know that the stock market was the place to be, as Dr. Jeremy Siegel wrote, for the Long Run. After all, the Federal Reserve was firmly in control of the economy, and they would never let a prolonged market downturn occur. 

People aren’t saying that anymore. Last week the New York Times ran a story saying that the ten year period ending last month was the worst for stock market returns in the history of the S&P. As the story said, if you factored in Consumer Price Inflation, the S&P returned a negative 40.4% over that ten year period. Now media pundits are lining up to say that the economic troubles we are in are going to get worse still. A friend of mine just forwarded me an article saying that, if the stock market were to return to historical bear market averages for price-to-earnings, that the S&P would soon see levels of around 500 or so- a decline of another 40%. Continue reading Ack! Contrarian Overload