Although in Personal Finance for Dummies, by Eric Tyson, we are told that one should not expect liquid assets to go up more than about 10% a year on average, since the end of 2002, the Wilshire 5000 Index, a proxy for the overall U.S. stock market, has risen over 25% (effective 12/12/03 ). Meanwhile, the earnings yield (the reciprocal of the price/earnings ratio and a measure that permits ready comparison between stocks and bonds) of 500 of the nation's largest companies (the S&P 500 Index) is only 4.6% (below the yield of long-term treasuries, whose principle is assured when held to maturity). Alarmingly, in view of the markets' recent renewal of exuberance, our national debt (government, corporate, and consumer) is at an all-time high in relation to revenues and earnings, currently three times our gross national product (GNP). The average stock's dividend, while not at unprecedented lows, is however less than half its historical average. Indeed, by many significant measures domestic equities are again overvalued.
Stock market prices do not remain indefinitely at their extremes in relation to value. At some point the pendulum will swing back the other way, prices will again be much lower vs. earnings, dividends, free cash flow, sales, or book value, and millions will once more be licking their wounds after trillions of dollars in market worth will have evaporated.