I have two trading partners, each with different specialties and contributing areas of focus. There is a good amount of internal back-and-forth, hashing stuff out etc, so the we stuff comes naturally.
+1 IMHO, gold is an asset that hedges tail risk (note its option-like characteristics, such as negative cost of carry). It's like being long a very wide strangle, which, in small quantities, isn't a bad thing. However, to load the boat full of this sort of extreme optionality is a bit bananas. Just my Z$2c.
Not sure what this has to do with my post. You either accept that there are ways to estimate investment returns, or you think it is impossible and thus don't attempt to invest. If there are ways to estimate investment returns, then they can by definition be used. Guessing the price fluctuations of the stock market for the next 12 months is not investing, it is speculating. Whilst important for traders and speculators, price fluctuations have little effect on investment returns if they are temporary and do not persist for as long as the lifetime of the investment. Many investments do not even have price quotes, after all. The return is driven by cash yield, and the appreciation (or depreciation) of assets owned on the balance sheet, not by what someone is prepared to pay for it next week. Stock price changes are speculative returns. Internal cash-flow and balance sheet asset appreciation/depreciation are investment returns. In the long run, price changes converge to investment returns. In the short-run, price changes reflect market sentiment. You are confusing attempts to estimate investment returns, with attempts to guess the near-term path of security prices. They really don't have much to do with each other.
Best method is wait for them to go into a bear market, then start buying long-dated out-the-money puts.
Let's back up; I said "I'd like somebody to show me some data proving that the difference between the 10-year bond yield and the SPX dividend yield has historically been a good predictor of stock market returns." You then appeared to interpret this as a claim that "treasuries at 0.1% a year are just as good an investment as blue chip stocks at 20%." Of course they aren't; but neither is simply observing the difference in yield sufficient to decide what, if anything, you want to buy with your hard-earned cash. If you want an illustration of why, I'll go back and pull some "stocks are cheap" articles from 2000 and 2007 employing similar 'reasoning' to that used by Goldman in its recent call. Any division between investing and speculating is always artificial; in practice the lines are blurred. Even a 'real-economy' business investment requires, at a bare minimum, making predictions about the future path of input costs and consumer demand patterns. I'm quite comfortable with seamlessly blending the two when I see fit - and quite convinced that those who refuse to do so under any circumstances, and refuse to admit the artificiality of this belief, are missing a piece of the puzzle.
This is an article from April 2, 2007 titled "Cheapest Stocks in Two Decades Signal Bull Market": http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIEj7C7IEUeI BlackRock Inc., Fisher Investments Inc. and Schroders Plc, which manage about $1.4 trillion, say stocks are inexpensive relative to bonds. Profit of companies in the Standard & Poor's 500 Index, the benchmark for American equity, is growing faster than shares, and represents a yield of 6.53 percent compared with 4.65 percent for 10-year U.S. Treasury notes. The gap -- the widest since 1986, according to data compiled by Bloomberg -- is encouraging investors because earnings forecasts indicate the U.S. will keep growing, while bond yields show confidence that inflation will stay in check.... ... ``The valuation disparity is big enough that you want to make that relative bet,'' said Robert Doll, who oversees $1.1 trillion as chief investment officer at BlackRock in Plainsboro, New Jersey. ``Our view is `stay invested' because the bull market is not over, because the economic cycle is not over.'' So you see, it's worthless crap. Double whammy since that "6.53%" appears to have been based on forward operating earnings estimates.
As far as I know the Fed model(Comparing stocks yields to USTs bonds) has been shown to fail to predict stock returns even for the longer term. I believe Hussman has some articles on that
BlackRock, Fisher, Schroeder's ... you're confusing serious research with a press release from a gaggle of massive long-only stock managers. I find it insulting you would use such and expect anyone with any sophistication not to laugh out loud.