Reader Bill e-mailed a feature story in MarketWatch called “Get set for lower long-term stock returns” featuring quotes from Paul McCulley, who is the managing director at PIMCO, the bond guru firm.
He said that “stock returns will be lower for the next 25 years than they were in the last quarter century and investors must adjust their expectations to lower returns.”
His conclusion is sobering for many in that “the stock market’s long-term erosion will force consumers to make one of three unpleasant financial choices: work longer, save more of their current income or reduce expectations for their retirement lifestyle.”
Aaah! I feel so much better about the future after reading that. Yes, this is what you will find in the media on a regular basis: Unadulterated garbage. I can’t stand people sitting in ivory towers and dispensing opinions as if they were omnipotent.
And that’s the beef I have with this kind of forecasting or predicting. It is nothing but a wild guess on Paul’s part, but it sure will rattle the nerves of many investors who hang on to any stupid and negative story that’s written in the press. And it is front page news every time.
Think about this for a moment. It’s impossible to be reasonably accurate in guessing what the Dow might do next week, next month or even by the end of this year. But over the next 25 years? Come on.
However, I think there is a way that we can test Paul’s forecasting abilities. Let’s call him up and have him predict the exact balance of his personal checking account for December 31, 2007. Or the balance of his retirement account by December 31, 2008. If he can do that accurately, then I might believe that he indeed possesses some super natural powers of looking into the future.
It’s ridiculous, of course, he can’t. And so is looking 25 years into the future.