This week's letter is from my good friend Ed Easterling of Crestmont Research in Dallas. Ed helped co-author a couple of Chapters in my book "Bull's Eye Investing" and that inspired him to write his own book. Ed's must read book, in my opinion, is called "Unexpected Returns: Understanding Secular Stock Market Cycles."
In this article Ed lays out why boomers will not see the average market returns of the past in their future. The "Buy and Hold" crowd will point to Ibbotson studies on long term returns and Markowitz's Modern Portfolio Theory as reasons to invest, but Ed explains how these two things can be used to mislead investors and that is why it is this week's Outside the Box.
John Mauldin, Editor
Outside the Box
Waiting For Average
The long-term average return from the stock market is 10.4%. As the earliest baby boomers are now beginning to retire, they will be relying upon their investments for income. The latest boomers have two more decades to compound their savings into a retirement payload. At 10%, boomers young and old--so to speak--have a good chance of a secure retirement. Yet, from 2005, what length of time is needed…