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(9/23/17)
This week there was a post in the Wall Street Journal stating
Warren Buffet had said the Dow would reach 1,000,000 by 100 years. I'm not
making this up as the link to the statement is shown below.
https://blogs.wsj.com/moneybeat/2017/09/20/warren-buffett-says-the-dow-is-going-over-million/
Keep in mind, the S&P 500 is roughly 10% of the Dow's value,
so that would yield a target of 100,000 in the S&P 500 based on Buffet's
statement. As I have shown in the past the long term trend of the S&P,
in terms of Real Dollars, has been upward as shown below. However,
it hasn't always moved upward in a straight line with several major corrections
along the way (points A to B).
For the S&P to reach the 100,000 level by 2117, it would
basically have to go almost straight upward (purple line) for the next 100 years
and remain above the top of its upward channel (red line) as well. Based
on what has occurred the previous 200 years, in which the S&P 500 has rarely
stayed above the top of its upward channel, this doesn't appear to be
realistic. A more realistic price target for the S&P might be around
the 15000 level (point C) based on historical trends.
Finally the current market environment reminds me of Japan's
Nikkei Index which went straight up like a rocket in the 1980's (points A to
B). Once it peaked in 1989 it went through a long correction and still
remains almost 50% below it's all time high 28 years later.
Keep in mind many things can change both economically and politically in the
span of 100 years, so Buffet's claim that the Dow will be over 1,000,000 a
century from now is certainly wishful thinking at this point. Of course he
will not be around, nor any of us for that matter, when 2117 arrives unless a
miracle medical breakthrough occurs which allows us to live to 200 years or
more.
Amateur Investors
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