Bull’s Eye Investing is a book by John Mauldin. When I found it in the local library I was impressed by the amount of useful information it provides. The byline “Targeting Real returns in a Smoke and Mirrors Market” is so consistent with my own attitude.
The final thing that convinced me to read the book was noticing that on page 23 there is a graph showing the relationship between the demographics of age distribution and real S&P price-earnings ratios over the last century. Mauldin uses this in 2004 to announce the imminent arrival of a bear market. It is clear that PE ratios are to move from the vicinity of 30 to somewhere in the region of 5 to 16. That is a very substantial adjustment to happen over a 20 year period.
Here is the graph referred to:
The graph is originally from a paper DEMOGRAPHY AND THE LONG-RUN PREDICTABILITY OF THE STOCK MARKET By John Geanakoplos, Michael Magill and Martine Quinzii. It contains other useful analysis supporting the relationships mentioned.
I have long advocated the importance of age distribution demographics on economic processes, and I consider that most economists do not understand these things. For example my paper on the Cause of the Kondratieff Cycle.