We ended 2013 with a bang. As you can see from Dave Fry's SPY chart, the last hour was all window-dressing but we couldn't quite get to 1,850 on the S&P, closing at 1,848.36 for the year, up 29.1% in 12 months, which was a big 7.5% behind the small-cap leadership of the Russell, which finished the year officially at 1,1656,64, up 36.6% or an average of 3.05% each and every month of the year!
If we take just $100,000 and compound it at a rate of 3.05% per month for 10 years, we get $3.64 MILLION Dollars. 10 years later, it's $132.7M and 10 years after that, we have $4.8Bn so, if you want to be a multi-Billionaire in 30 years, just put $100K into the Russell and go fishing, I suppose.
That's what the Pundits and Financial Advisers are telling you when they say last year was "normal" or that we have a "new paradigm" and it's OK to chase performance, despite the fact that history has shown us, over and over and over again – that it's usually not. My very simple investing premise for 2014 is to buy the worst performer of 2013, which is gold, which fell 28.2% for the year. It seems to me that if everyone who has $100,000 today and sticks it into an index fund has $4Bn in 30 years, they might choose to buy something shiny for their spouse down the road.
As we noted on Tuesday, there are 373M people in the World with more than $100,000 today and they average, if you include the top 29M (the top 0.4%) they average $491,689 each so, by bullish market logic, they should have an average of $23.8Bn each in 30 years and that's $8.87 QUADRILLION or 40 times more money, just for the top 5%, than there is TOTAL in the World today.
So, if the markets are going to continue to go up, I humply submit that there MAY be just a little more inflation on scarce things that rich people like to buy. Stocks are one of those things, of course and art and, of course, GOLD! Between now and the time our 3D printers…
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