Get in Position for the Next Mega-Bull Market

If you feel disappointed or even angry about the way your investments have
performed in the past decade, welcome to the club. Millions of investors are
upset at the poor returns that stocks, in particular, have delivered since 2000.
The popping of the Internet bubble, followed by the real estate and credit
collapse, has left deep scars on many portfolios. In recent weeks, the panic
over Europe's sovereign-debt problems has again torn open old wounds. I'm
not here to sugarcoat the challenges ahead. However, I encourage you to keep
investing, prudently and conservatively because, in due time, another mega-bull
market like that of 1982 through 2000 will take hold, sweeping stock prices much
higher. You'll want to be in the game, not on the sidelines, when the ref's
whistle sounds for the kickoff. What will trigger the next mega-bull? We can
already see a number of pieces falling into place: U.S. businesses have
dramatically streamlined operations in the past couple of years, setting the
stage for an extended run of good profitability. Consumers have paid down tons
of debt, although some work remains to be done here. Banks have made significant
progress in rebuilding their depleted capital. Sooner or later, a growing
population will draw down the excess inventory of housing. If the Chinese, under
pressure from the rest of the world, continue to let their currency drift
upward, America's battered manufacturing sector might even enjoy something of
a renaissance. The only major player that hasn't begun to clean up its
financial act is, of course, the federal government. During the next two or
three congressional election cycles, we're likely to witness a pitched battle
over government spending. Once the entitlements issue is settled, the nation
will have removed the last barrier to a new era of growth and prosperity.
Here's my forecast: Assuming average earnings growth and average P/E ratios,
with four recessions of average to greater-than-average severity along the way,
I figure that the S&P 500 index could trade at 3,919 by 2030. That's the
equivalent of more than 37,000 on the Dow Jones Industrial Average! More Rivers
to Cross As hopeful as those prospects may seem, we've got a few more rivers
to cross before we arrive in the Promised Land. Most immediately, 2012 will
bring several complicating developments: Europe is likely to slip into recession
as a result of the ongoing sovereign-debt crisis. China's growth engine is
downshifting. Our own tortoise-slow growth leaves us vulnerable to an external
shock. America is headed into a presidential campaign with none of the leading
candidates committed to a serious program of fiscal reform. The next wave of
sovereign-debt panic may well land on our shores. In 2012, a record 3.6 million
Americans will turn 65, the traditional retirement age. On balance, these people
will be sellers of stock, putting downward pressure on share prices.