Here's The Big Picture's take:
Click to enlarge
GMO 7-Year Asset Class Real Return Forecasts: 2007
Have a look at the charts above and below. They are from James Montier’s GMO Quarterly Letter, July 2013, titled The Purgatory of Low Returns; you can download the full PDF here (registration may be req’d).Bringing to mind some thoughts on patience:
(Note to Josh: This quarter, Ben Inker and Montier filled in for the big dog in the quarterly letter. Even Grantham misses a letter deadline sometimes! )
The chart above is forward 7 year asset class return expectations from 2007. The chart below shows the same forward 7 year asset class return expectations from 2013.
Notice where the potential best returns are: For long term and patient investors, the opportunities for the best return on investment are places that may be somewhat uncomfortable today: Emerging Markets, which have been shellacked and are widely reviled following that collapse; International large and small cap, which means in no small measure Europe. And lastly....MORE
...Secular bear markets are characterized first by the initial decline and then by P/E multiple contraction.
During the last secular bear, 1966-1982, the cyclical bear of '73-'74 had a S&P 500 trailing four quarters P/E of 6.97 for the quarter ending 9/30/74 while the '80-'82 cyclical had a P/E low of 6.68 for the quarter ended 3/31/80.
One of my favorite Warren Buffett quotes:
December 31, 1964: DJIA 874.12
December 31, 1981: DJIA 875.00
From "Meet Warren Buffett, High Frequency Trader (BRK.B; INTC; WFC)"“Now I’m known as a long-term investor and a patient guy, but that is not my idea of a big move.”That’s a secular bear market.