Goldman, that gold standard of wise advice, issued a new report today arguing that equities are the epic buy of a “generation”. This is no surprise from the Muppet masters, as they have been pumping and dumping on an unsuspecting public every year since the firm went public in 1999. Stocks throughout have had negative returns relative to bonds as shown in this chart.
Even with very solid returns in bonds over the past decade, those following the conventional wisdom on prudent, conservative, portfolio management with a 50-50 balanced, passive approach have managed to make negative returns since at least 2000 courtesy of their stock exposure. This next summary of returns on a balanced portfolio to the end of 2011 (before fees) speaks for itself.
Those who had higher stock exposure and those adding significant contributions near market peaks like the late 90’s or 2005-2007, 2010, 2011 are likely much further into negative returns over this period.
One of these days boy, being über bullish on stocks will be an excellent call, but history assures us it will not start, when like today, stock valuations remain near historic highs, dividend yields are at historic lows, Central banks have prolapsed financial stability gobbling up bad assets while bankers are still calling the shots in keeping toxic waste hidden from the honesty of market pricing.
Goldman and other risk-sellers argue that since central banks have forced down interest rates near the zero bond, pathetically low stock yields are an exciting booby prize in a field of ugly options. A breath mint reward recommended for risking loss of limb. Self-preservation demands that we not bite this bait so that sell-side fishermen may eat. History promises that truly attractive offers will come to those who wait.