I’m now four chapters through Bull’s Eye Investing by John Mauldin. I’ll post a full review once I’ve finished the book, but the basic message is that we are in a secular bear market1. What that means is that, despite the fact that in any given year the market could be up or down, over the next 7-15 years the market will post a loss overall. Mauldin asserts that broad investments in the stock market over the next 10 years should expect returns of 0% (if we’re lucky).

Ouch.

To back up his claims, Mauldin points to the fact that stock market earnings (in the form of P/E ratios) are at historically high levels. The average P/E in the stock market right now is around 25; the historic average P/E is about 14.6. Even after the “market corrections” of 2001-2003, we’re still in bubble territory historically-speaking. Mauldin writes repeatedly throughout the book, “Earnings will come back to trend.” He states, “Faith is required to invest in this market… You have to believe that we are in a new economic era.”

I’ll wait until I review the book to state how I stand on the Mauldin’s predictions and whether or not we are in a “new economic era”. However, assuming the stock market (in general) is a bad investment right now gives us an opportunity to think about and discuss other investment options. What do you invest in during a bear market? Real estate, bonds, small-cap growth stocks (and other individual stocks that look to perform well), and art is a good start.

Over this week, I hope our team will provide some insight into these investment opportunities (and others) and maybe comment on the general health of stock market investing. Enjoy.

References:
[1] Wikipedia entry for “Secular Bear Market”.