Thoughts from the Frontline

Risk Premiums Get Scary

By John Mauldin

May 3, 2002

Investor Expectations
Risk Premiums Get Scary
Predicting a 50% Drop?
“Hopeful” Outcomes
Dollar Merry-Go-Round
Muddle Through Still On Track

What a week. A whirlwind tour through Southern California visiting clients has left me quite tired, but driving through ridiculous freeway traffic has given me a lot of thinking time. I needed it, as I have been meditating in the implications of a very important new article in the AIMR Financial Analysts Journal. It is a lengthy and devastating analysis of what investors should expect by way of returns in the stock market over the next decade or so. I will do my best to give you the highlights.

Plus, there has been a lot of data which has serious implications for my prediction of a Muddle Through Economy. I have been mulling over where to start, and I think we will begin with the AIMR article by Bob Arnot and Peter Bernstein. AIMR is a very mainstream organization of analysts and economists and NOT prone to bearish sentiment. The fact that this article is in this journal is significant.

(Bernstien…

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