Friday, August 26, 2011

The Federal Reserve Bank of San Francisco's own economists forecast a bear market in stocks for at least another decade, bottoming out in 2021.
The model-generated path for real stock prices implied by demographic trends is quite bearish. Real stock prices follow a downward trend until 2021, cumulatively declining about 13% relative to 2010. The subsequent recovery is quite slow. Indeed, real stock prices are not expected to return to their 2010 level until 2027. On the brighter side, as the M/O ratio rebounds in 2025, we should expect a strong stock price recovery. By 2030, our calculations suggest that the real value of equities will be about 20% higher than in 2010.
 What's next?  Will the progressives now label the Fed itself financial terrorists?

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