Some Interesting Observations: Long Term Stock Market Thoughts

By Lawrence G. McMillan

What is interesting to one person may not necessarily be interesting to another.  For example, I find it interesting that Joe Girardi finally had the guts to pinch-hit A-Rod, thus paving the way for Raul Ibanez to become an instant hero.  Others couldn’t care less.  So, the topics I’m going to discuss in this article are ones that I find interesting; I have no idea if everyone will or not. 

The first observation comes from thoughts that were expressed at the 50th annual Contrary Opinion Forum, held last week in Vergennes, Vermont.  Not too many seminars can boast 50 consecutive years of existence, but this is one of them.  

The next observation has to do with the sudden change in investor sentiment that I am suddenly seeing in the last week or so.

Long-Term Stock Market Thoughts

One chart that appeared in  three different presentations at the Contrary Opinion Forum (COF) was a long-term, lognormal chart of the stock market.  While there are different ways that one might model the stock market back past 1900, most of the interesting data occurs from there forward.  Standard & Poors Corporation has apparently modeled what the index would have been, taking it all the way back to 1789.  The graph is available on Wikipedia (just search for S&P 500).

I have made some modifications to the basic graph to show the same features that were shown on the charts at COF.  That chart is shown in Figure 1.  The point of the chart is that the market races forward (green, upward trending lines), and then consolidates for an extended period of time (surrounded by red rectangles on the chart)...

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