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Winning the Loser's Game, 6th edition: Timeless Strategies for Successful Investing, 6th Edition by Charles Ellis

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CHAPTER 16PREDICTING THE MARKET—ROUGHLY

INVESTORS NATURALLY WANT TO KNOW THE MOST PROBABLE investment outlook for the years ahead. (Understanding the outlook for the next days or weeks is easy. As J. P. Morgan famously said, “It will fluctuate.”) Long-term investors understand from experience the remarkable discipline of the bell curve of economic behavior and the central tendency of the major forces in the economy and the stock market to move toward “normal.” One good way to be realistic about future returns is to assume that the future range of price/earnings multiples and profits will be within their historical upper and lower limits and will appear with increasing frequency at values closer and closer to the mean.

While the economy is extraordinarily ...

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