2014, Fourth Quarter Report

“The Good Times Are Over”
Let’s Make A Deal
As the new year began, one of the financial media’s most frequently quoted talking heads – bond investor Bill Gross – opined that, due to the dampening effects of zero interest rates, and their cumulative negative effects on asset returns as supply of productive assets is so easily financed, “at some future Ides of March or May or November 2015, asset returns in many categories may turn negative…The time for risk taking has passed.”

On the other hand, as Barron’s pointed out a week later (Jan 12, 2015 issue), data compiled by Wharton Professor Jeremy Siegel suggests 5 year average returns which fall into the negative are exceedingly rare, with the worst such period having encompassed the Great Depression, and virtually no 15 year periods having shown a loss. The persistence of such five year returns is remarkably invariant to yearly economic growth, with median five year equity returns averaging 9.5% since 1871.

One of the things which is so frustrating about such conflicting data and opinions is that, often, on the surface, both propositions seem quite plausible.  To read the entire report: The Investment House Quarterly Q4 14