Dick Sears writes a column each week on his GT Index which we have a link to on the right hand sidebar of our website, because of its consistent high quality. The current column is so good that we have re-produced it below as well as linking to it, despite it being our policy not to reproduce work published elsewhere. Dick Sears and I have known each other for so long and have so much respect for each other that it is often hard to tell our thoughts apart. Everything he writes could have and should have been written by me …

 Rational Exuberance

We continue to make good progress, with the GTI up 3.6% this week.

Of special note: ANAD up 16.0%, HITT up 24.98%, QCOM up 11.0%. ANAD is now up 46% for the year, which is only a month and a half old.

All of this fills me with exuberance, which my dictionary defines as joyful enthusiasm. Yes, that describes the feeling.

There are those who insist such exuberance is irrational. But why is it irrational for the market to go up? Maybe what's irrational is for the market to go down. Maybe the bears are suffering from Irrational Depression.

There seem to be plenty of reasons right now for the market to go up, to exhibit what I consider rational exuberance. Some big ones:

1. Internet traffic is zooming, thanks in part to online video, the latest killer app, which means a significant increase in business for the Telecosm, whose day seems finally to be at hand.

2. The global economy is exploding, as the spread of free-market capitalism creates prosperity in formerly have-not nations.

3. The stock market has good recent gains, but it still has a long way to go to make up for the losses it suffered in the Millennial Crash. Just look at the table at the bottom of this column.

There are always kill-joys out there to tell us that the market (or the sky) is falling. You'll usually find them among bitter old men (of any age), who resent youthful optimism, and among academics and journalists, who envy the high rewards that go to risk takers.

Sometimes these bears carry the day, as they did this past Monday. But in the end, optimism triumphs. Man continues his inexorable march from the Stone Age to the Space Age and beyond. The stock market returns its habitual 10 million % per century. Man overcomes all adversity.

One of these days the pessimists are going to have to abandon the market to the bulls and retreat to their caves. At least there they'll be protected from global warming, er, climate change. Damn it's cold here!



Here is a visual comparison of the S&P vs. S&P total return with a 10% curve thrown in.

Dick Sears comments:

Thank you all very much for helping me find the data for the S&P 500 T.

I'm astonished to discover that what the press has been reporting all these years doesn't include dividends. It's not as if the difference is insignificant. In 2006, the S&P was up 15.79% with and 13.62% without, a difference of more than 200 basis points.

Over the last five years, the difference is more marked (in relative terms), 6.19% per annum vs. 4.32%.

By excluding dividends, the press makes the stock market appear less successful than it is. I'd chalk that up to its anti-business bias if I hadn't discovered how difficult it is to get the return including dividends. S&P does provide it, but not in real time, and probably only once a day and many hours after the market has closed.

For myself, I think I will simply remove the S&P from my GTI website. It doesn't have much meaning for tech stocks anyway.


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