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July 3, 2008
Speculation in Oil
This is the big debate because there is no reliable measure as to the amount/influence of speculation until it is purged. On the New York Mercantile Exchange, 71% of oil contracts are now held by speculators (up from 30%). Loopholes to avoid position limits and lax regulatory requirements have also raised congressional concern. The increasing popularity and proliferation of commodity index funds ($13 billion to $260 billion) is a pattern usually associated with excessive speculation, but an argument can be made that after the commodities have been purchased to form the funds the effect is neutral.
Robert Drach, June 27 Market Update
Projected Market Returns
Suffice it to say that the decline has improved prospective long-term returns, but the most likely 10-year return for the S&P 500 (standard method) is still only in the range of 3-6% (with -0.5% and 8.5% as the extreme bounds except in the event of a 2000-type bubble or a 1974-type trough).
On the bright side, the dismal 2.85% annual total return of the S&P 500 over the past decade has actually exceeded the return of roughly 0% that we projected a decade ago, so maybe we'll get equally lucky over the coming decade. My preference would be a standard, run-of-the-mill bear market of about 30% from last year's highs, which would give us a good chance at long-term returns closer to 9% annually.
John Hussman, June 30 Weekly Market Comment |
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