Stock Market -- Long Term

1) The stock market has experienced an extraordinary period over the past 16 years. There was
the classic price bubble of 1996 - 2002 and then another or "echo bubble" from 2003 - 2009.
Both markets saw very powerful cyclical earnings performance and elevated price / earnings
ratios and both ended with very large earnings declines, especially when one looks at net
per share as originally reported and to include all the writeoffs and one time charges.

2) In my view, the SP 500 remains in a long term bull market dating back to the end of WW2,
when the focus of buying stocks largely to reflect earnings and dividend growth first took hold.
We have not reached the end of this epoch yet.

3) I have attached the Yahoo! long term SP 500 with log scale. SP 500 Chart To form a band,
I would anchor the low part of the channel with 1950 and 1980 as thr bases, and for the top of
channel, I suggest drawing a trend line up from highs recorded over the late 1950s and 1960s.
The bubbles of the past 15 years exceeded the top of the upper band of the channel and the
bottom in 2009 came in about 10% over the bottom of the channel. Time will tell of course,
but the Mar. 2009 low could be a very substantial one.

4) What is interesting to me about the chart now is that the SP 500 is starting to inch up to the
top end of the channel which stands at around 1700 for 2013. The index stands at 12.6% below
the top of the channel, and wouldn't you know it, SP 500 net per share stands very close to the
top of the 1950 - 2013 channel for earnings. Viewed over the very long term, price and net
per share performance now stand in decent balance. There seems to me there is no good
reason not to look for the SP 500 to go on to new all time highs as long as the current economic
expansion stays intact.

5) The price chart also suggests to me that if it is true that grand bull markets have three clear
uplegs, then the final leg up for the "invest for growth" era could be underway. But, do not jump
too far ahead of the story. Even though the 400 industrial companies composite within the SP
500 is on to new high ground as is the NYSE A/D line, we ain't there yet for the lagging 500.