I am not a cyclist (I get too interested in what I’m reading or watching on TV, and before you know it, I’ve dismounted), but it’s worth pointing out that — in the great sweep of things — my investing life has now basically consisted of two 15- or 16-year chunks. There was 1966 through 1982, when the Dow first pierced the 1000 mark (intraday) in 1966, and 16 years later, when it was at 777 in August of 1982 — for a net 16-year gain (not counting dividends, which were a lot higher back then) of minus 22%. And there was 1982 to this past summer, when the Dow rose from 777 to 8300, roughly plus 1000%.

One is almost tempted to think in terms of ebb and flow. Or to observe that this second, vastly preferable 16 years were double what you might normally expect of the market, more or less, simply making up for the prior 16. Like a long string of mostly heads after a long string of mostly tails.

Perhaps not an entirely inapt analogy, since the next 16 coin tosses are mathematically certain to be unaffected by the previous 16. (If I have flipped an astonishing 16 heads in a row, and I’m really “due” to flip tails, I will nonetheless be no more likely to flip tails on the 17th toss than heads.) And yet we are not just flipping coins here, and having now done our catch-up, it’s unlikely to me we will have another 16 years of double-barreled performance.

If things keep soaring, as they might, we’d be headed for trouble. Bubbles burst. Look what’s happened to Japan since 1990. If we plod along at what to some, spoiled by the last 16 years, will seem a very tepid pace, that would be swell. And if we get spooked, or some unfavorable things happen (inflation, labor strife, political unrest, Quayle in ’00 — the double-zero president), it could get ugly.

I don’t know where we’re headed, other than, very generally, over the long-term, UP. But I think these last 16 years have been extraordinary in part because they were catching up. The disinflationary 16 following the inflationary 16, is largely what it amounts to. A period of gradually falling long-term interest rates after a period of rising ones.

Happily, interest rates have room to fall further. Sadly, from the point of view of a turbo-charged stock market, not that much further.


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