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Will the Lost Decade Turn into a Lost Generation for Stocks?


We've all heard about the Lost Decade for stocks --the 10-year period ending in 2010 that saw no gain for the broad U.S. stock market. While statistically that's not supposed to happen, some market watchers contend the decline is normal, predicted, and not over.

"It generally takes three events to really make us negative about something to wipe us out," says John Mauldin, founder of Millennium Wave Investments and author of The Little Book of Bull's Eye Investing."So far we've had two" he adds, referring to the peak-trough-peak-trough cycles of 2000, 2003, 2007, and most recently the lows of 2009.

As he sees it, the 12-year old secular bear market that started with the tech bubble burst in 2000 probably still has about 5 years and another recession left in it. If he's right, come 2018, the generational wash out will be complete and a new era of gains will get underway.

Before you point to the 100-plus percent pop from the March 2009 lows as the start of a new secular or long term bull market, Mauldin says moves like that within a broader bear market "are not unusual" and points out that "never in history have we gone halfway down then gone back up again."

For him, the hallmark of a secular bear is all about going sideways for a long period of time as earnings grow and valuations collapse. It's understandable if that recipe sounds familiar since it's exactly what's happening now.

The good news is, if Mauldin is right, an equally ong uptrend is nearing fast. In fact, the 63-year old Texan says he's counting on one more secular bull market in his lifetime.

"We're just not there yet. Patience," he advises.

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