Happy New Year!

I enter 2009 as enthusiastic as I've ever been about future returns.

That's not a forecast for returns this year. I don't know what returns the market will generate over the next week, month or year, and anyone who tells you they do know is lying.

What I do know is that stock prices are as low as they've been relative to fundamental business values since the early to mid 1980's.

Does that mean the stock market won't go lower? No.

If the stock market bottoms where it did in the 1970's, it would be 33% lower than it was at year end.

If the market bottoms where it did in the early 1950's, it would be 40% lower than it was at year end.

If the market bottoms where it did during the early 1930's--at its worst during the Great Depression--it would have to go down another 60% or more.

Those aren't forecasts, that's just a report of how bad things could get based on historical information.

But, as Mark Twain said, history doesn't repeat, but it sure does rhyme. No one knows what precisely will happen, even if they get lucky and their prediction turns out to be right.

All a prudent investor can do is invest based on the facts, and the facts say that stocks are cheap. If they get cheaper, then even better bargains will be had. If they get dearer, investors will see their portfolio values climb.

Based on fundamentals, it's reasonable to expect the S&P 500 to be up 10% - 15%, annualized, over the next 5 years. That's unlikely to be a smooth path upward, but it's a very likely outcome.

Even better, carefully selected stocks are likely to do much better than that.

And, that's why I'm as optimistic as I've ever been in my 13 years of investing.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.