This is something I've touched about in the past on the blog - how anyone investing in general indexes since Jan 1, 2000 is underwater. One thing I definitely agree with Jim Cramer on is there "is always a bull market" somewhere, so you can always make money on something, but it takes a lot of hard work, thinking, and interest in the markets. For the great many who live normal lives and investing is simply something they do through most large cap mutual funds (many of which are simply S&P 500 clones disguised to rake in large fees) in their regular accounts or 401ks, it's been a tough decade. And that's not adjusted for inflation in which real returns are clearly negative. Last, that's in dollar terms; the story has been a disaster for foreign investors who have had to put up with the dollar decimation to boot (on top of inflation adjusted real returns). So while the stock market does well over "long periods" of times, I'd consider a decade to be a serious amount of time - and this has been a bad decade. Unless you had the stomach (following huge losses in 2001/2002) or simply had good timing to start following the stock market in 2003, there has simply been no easy way to make money using traditional indexes. And NASDAQ investors? Still down in a big way.

This is why the Pollyanish "everything will be fine" in the long run attitude about the US continues to worry me. Stocks were not necessarily overpriced a decade ago - but we created a bubble - and the aftershocks of said bubble still reverberate all these years later. And without that bubble (spike) in 99/00 where have we gone? If stock prices are a reflection of the underlying health of the economy (through corporations)? And going forward what are the catalysts to get out of this funk? That's the bigger question for me at this point - almost everything in the US is based on a financial or consumerism model. And the financials are now going through a NASDAQ type correction that frankly, I believe will be very similar to the tech bubble - yes there will be large spikes off of oversold bottoms but risk aversion should stick around at least for another 2-4 years and almost all these financials goosed earnings by taking outsized risks and then leveraging to a massive degree. That era is now gone (until a new round of suckers is born in 5-6 years), and some parts of their revenue stream will disappear. (Mar 20: Citigroup Warns: the "Great Unwind" Has Begun) So those that assume that "after the correction" financials will just go right back to where they were in 2005-2006, I'd point to a very similar situation as the tech stocks earlier in the decade - unsustained valuations caused by irrational behavior and easy credit; and the stocks are still nowhere near where they "were". While we are going back to the easy credit era (one new bubble solves an old seems to be the logic), the risk aversion will take quite a while to work through. So that leaves consumerism as the remaining driver. I guess we can continue spending individually again until we go blue in the face - but again, access to credit is not going to be quite so easy so even people who want to do this will have a harder time AND I belive the lessons learned (the hard way) by many individuals will chastise them into perhaps saving "a little" go forward.

And then the wildcard is inflation - just how bad will it get and how sustained over the next 3-10 years? If it remains elevated (which I believe it will), then you have a permanent dent in consumer buying culture and by proxy our consumerism culture. So what is the next great driver? It appears green energy but frankly a few European countries/Japan have a huge lead time on us. Our top leadership, in some circles, is still denying Global Warming at this stage so how do you become a leader in green energy under that backdrop? So as I try to weigh things in the "long run" I am trying to think what will be the next driver of the US "service" economy to jump start the economy and the markets for a sustained period of time (5-10 years).