Anyway, I’m torn on the subject, but I’m also increasing skeptical of any and all comparisons to prior historical periods. I don’t buy trough P/E, or recession length, or relative valuation, or interest rate, or sectoral rotation arguments, or… you get the picture. I love data, but I’m increasingly close to being an outright nihilist when it comes to over-reliance on historical financial data without any truly coherent supporting rationale. We are in a grand experiment with no real history to draw on, and anyone who pretends otherwise is deluded or selling something, or both.

Thoughts?

You say:

All that said, relying on historical patterns to recur, or simple generalizations that say that “the current crisis will follow the same track as the Great Depression,” are too facile and subject to abuse. The fine article by Paul Kedrosky that prompted this piece makes that point. Too often the statistics cited are from small data sets, or unstable distributions generated by processes that are influenced by positive and/or negative feedback effects.

Extremely valid viewpoints IMO. The problem becomes though WHAT IS THE ALTERNATIVE? In the absence of possessing a crystal ball with perfect foresight, isn’t quantitative historical comparisons really all we’ve got?

I’m extremely skeptical of anyone’s ability (including my own) to somehow complete a qualitative assessment that disregards history to determine if “things are different this time”.

In the meantime, decisions MUST be made:

“If you choose not to decide, you still have made a choice.” RUSH

We must decide what to do with our savings? How to STORE and GROW our wealth.

So right now? Stocks or cash? Cash gets you 0% percent, and may very well get you 0% for many years. But there is NO risk, unless the United States collapses and the USD goes into the ashbin of history. Is that a black swan worth even considering?

And then quantitative financial history tells you stocks are a buy (valuation levels, down 50% peak to trough, etc.). Is this time different, and comparisons to history not valuable? Maybe, but am I, you, Paul, or anyone else really going to be able to make that subjective judgement that this time is in fact different and have a good probability of getting it right.

I’ve discussed this subject with a friend who also manages OPM, and I think I’ve got an analogy that maybe will resonate with you. I think this type of “bet” is very much like a Pascal’s wager type bet on God. I think you have to bet the current financial/economic “crisis” is comparable to the past, and stocks are a buy in general. Under the worst-case scenario, portfolio values won’t be important anyway.