Probable Outcomes [Hardcover]

Ed Easterling (Author)

Book Description

Publication Date: January 14, 2011

Probable Outcomes continues the Crestmont Research tradition of full-color charts and graphs that enable investors and advisors to differentiate between irrational hope and a rational view of the stock market. The unique combination of investment science and investment art explores the market from several perspectives, and addresses the implications for a broad range of investors. Ed Easterling delivers an insightful analysis of the likely course for the stock market over the 2010 decade. Investors and advisors will benefit from this timely outlook and its message of reasonable expectations and value-added investing. This essential resource provides a comprehensive understanding of the fundamental principles that drive the stock market. Based on years of research, Probable Outcomes offers sensible conclusions that will empower you to take action, guide your investment choices during the current period of below-average returns, and allow you to invest with confidence, whatever your financial strategy.

Editorial Reviews

Review

Ed Easterling has hit another home run! Probable Outcomes is a brilliant follow-on to Unexpected Returns and masterfully explains, in an understandable way, the most likely directions for the stock market over the next decade. This essential resource prepares investors to succeed in volatile and challenging times. You will profit from the many valuable insights that are much more effective than hope.

Source:  John Mauldin, President, Millennium Wave Investments; Author of The Endgame and Bull’s Eye Investing


Probable Outcomes makes a strong case that the stock market over the coming decade at best will deliver only average returns to buy-and-hold investors. Once again, as in his splendid earlier book, Unexpected Returns, Ed Easterling tells investors not what they would like to hear, but instead what they need to know.

Source:  Richard Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets, Stern School of Business; coauthor of A History of Interest Rates


Easterling has done it again. In an investing world obsessed with short-termism, Ed reminds us that the long-term matters, and that investors can prosper – handsomely – by recognizing that valuation and long-term secular trends have an immense impact on our own long-term investment success. Swimming against the current is for heroes and idiots, not for sensible mortals.

Source:  Rob Arnott, Chairman & Founder, Research Affiliates, LLC; Former Editor, Financial Analysts Journal

Every captain needs a good navigator. Now investors can have Ed’s market insights helping them navigate the market’s tricky waters. In Probable Outcomes, Ed sets different courses depending on your view of inflation, the economy, and market valuations, helping you select the best investments for your course. For stock pickers wanting to understand the market environment, Probable Outcomes should never be far from reach.

Source:  David Meier, Senior Analyst and Writer, The Motley Fool

As a practitioner and a teacher of finance and economics, I am captivated with Easterling's insights and quantification of the important and critical role of price stability in producing superior investment returns.

Source:  Harvey Rosenblum, Executive Vice President and Director of Research, Federal Reserve Bank of Dallas; Adjunct Professor of Finance, Southern Methodist University

From the Inside Flap

What's Ahead?

When will the stock market again deliver better returns?

Probable Outcomes continues the Crestmont Research tradition of extensive full-color charts and graphs that enable investors and advisors to differentiate between irrational hope and a rational view of the stock market. This book's empowering insights prepare you to take action during the current period of below-average returns. The unique combination of investment science and investment art explores the market from several perspectives and addresses the significant implications for a broad range of investors. Beyond concepts, Ed Easterling delivers a dramatic analysis of the likely course for the stock market over the 2010 decade. Investors and advisors will benefit from this timely outlook and its message of reasonable expectations and value-added investing. This essential resource offers a compelling understanding of the key fundamental principles that drive the stock market. Derived from years of meticulous research, Probable Outcomes provides sensible conclusions that will guide your future investment choices and allow you to invest with confidence, whatever your financial strategy.

See all Editorial Reviews

Product Details

• Hardcover: 272 pages
• Publisher: Cypress House; first edition (January 14, 2011)
• Language: English
• ISBN-10: 1879384825
• ISBN-13: 978-1879384828
• Product Dimensions: 9 x 6.4 x 0.8 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 4.8 out of 5 stars  See all reviews (16 customer reviews)
• Amazon Best Sellers Rank: #96,555 in Books (See Top 100 in Books)

More About the Author

Ed Easterling is the author of "Probable Outcomes: Secular Stock Market Insights" and "Unexpected Returns: Understanding Secular Stock Market Cycles." In addition, he is contributing author to "Just One Thing" (John Wiley & Sons) and coauthor of chapters in "Bull's Eye Investing" by John Mauldin (John Wiley & Sons). Mr. Easterling serves as a Senior Fellow and an Advisory Board Member at the Alternative Asset Management Center at SMU's Cox School of Business, and previously served for five years as a member of the adjunct faculty, teaching the course on alternative investments and hedge funds for MBA students. He holds a BBA in business, a BA in psychology, and an MBA from Southern Methodist University. Further, Mr. Easterling is the founder and president of an Oregon-based investment management and research firm that publishes provocative research on the financial markets at www.CrestmontResearch.com. He has over thirty years of alternative investment experience, including financial markets, private equity, and business operations. Crestmont Research is an independent financial market research firm serving individual and institutional investors. Crestmont Research, and founder Ed Easterling, have been featured and quoted in The New York Times, The Wall Street Journal, Financial Times, Business Week, The Economist, and other national and international publications.

Customer Reviews

Most Helpful Customer Reviews

55 of 57 people found the following review helpful:

3.0 out of 5 stars Disappointing Sequel from a Investing Sage, February 19, 2011

By 

Elliot R. Royce (New England) - See all my reviews
(REAL NAME)   

Amazon Verified Purchase

This review is from: Probable Outcomes (Hardcover)

It is difficult to give a mediocre review to someone as insightful as Ed Easterling. However, I found little new in this update to his Unexpected Returns. This may partly be because Mr. Easterling's web site at Crestmont Research provides quarterly updates to his vast set of research and also because the overall market dynamic of a long-term bear market punctuated by artificially-induced cyclical bull markets continues. Unexpected Returns is by far the better book and contains the full set of his charts (incredible use of graphics). If you have read and understood UR, then there are no new insights here.

However, because Mr. Easterling provides all his research for free online, perhaps the money spent on this book can be seen as a contribution back to him for his great services to investors.

43 of 46 people found the following review helpful:

5.0 out of 5 stars Look Across the Secular Bear Market in Stocks and Prosper, February 14, 2011

By 

James J Abodeely - See all my reviews

This review is from: Probable Outcomes (Hardcover)

Probable Outcomes: Secular Stock Market Insights by Ed Easterling is a follow-on to his excellent book Unexpected Returns: Understanding Secular Stock Market Cycles.

The book begins by reviewing and elaborating on how to understand and identify what drives secular stock market cycles. Students of secular market cycles or those who follow Easterling's work Unexpected Returns: Understanding Secular Stock Market Cycleswill recognize the key theme of these chapters: those who invest hoping to achieve the long-term "average" returns for the stock market will feel lucky (or smart) during secular bull markets that typically produce mid-teens average annual returns and frustrated (or give up trying) during secular bear markets that typically produce zero or negative real returns.

In the first few sections, the author reviews the characteristics of these secular markets, describing what economic conditions drive changes in P/E multiples and thus eventual returns to the stock market over time. A discussion about various states of potential economic growth and inflation could have been improved with a more global perspective on what will drive future changes to the U.S. economy. Easterling spends considerable time discussing the difference between the widely used Cyclically Adjusted P/E produced and popularized by Robert Shiller ([...])Irrational Exuberance and his own version which aims to improve on the widely used (but often ignored) measure. While some market geeks will appreciate this debate and find Easterling's measure more compelling (as I did), the nuance is probably lost on most readers and may be distracting. The middle chapters of Probable Outcomes also includes a few timely gems like a discussion of divergences of current Earnings from normalized trend and evaluating stocks using the concept of Present Value that will give both novice and seasoned investors something to chew on.

The real meat of the book comes in Sections four and five where the author leads a discussion on assessing the current valuation of the market, likely economic trends, and the implications for future returns. While the book was published using year end 2009 data, the conclusions remain suitable and poignant while all of the charts are updated on the author's website, [crestmontresearch]. The author addresses each of the major investor groups from early accumulators to retirees to pension plan sponsors and describes the key issues each group should be aware of when attempting to navigate a secular bear market. Whether you belong to one of these groups, or make a living advising them, Easterling gives you the information you need to act and the inspiration to do so.

Easterling does an excellent job of presenting the likely challenges investors will face over the next decade, the prospect for low or even negative annual returns, and why a low-volatility, absolute return approach will help us navigate the markets. Probable Outcomes is a book that belongs on any serious investor's book shelf and should be referenced frequently.

Book Source: I received a copy of Probable Outcomes because I asked for it. The review was done of my own volition.

22 of 23 people found the following review helpful:

5.0 out of 5 stars Limited by only 5 stars..., January 24, 2011

By 

Gregory L. Morris - See all my reviews

Amazon Verified Purchase

This review is from: Probable Outcomes (Hardcover)

Ed Easterling has done it again; provided a big picture approach to the market using time-tested historical data and sound principles. Ed's first book, Unexpected Returns, was the first time I had heard of the way secular markets were defined - by valuations. Probable Outcomes expands and updates the first book. Easterling builds a methodology that is robust and clearly void of preconceived notions about the future; a refreshing approach rarely seen in books about the stock market.

The first part of the book is a lesson in market finance and economics from a practitioner view and not the usual financial academic approach - again quite informative and refreshing. Every concept is supported by data and colorful charts, which make learning and understanding the process enjoyable. He spends a great deal of time and effort to ensure that his explanations are easily understood and succinct.

Secular markets are driven by long-term trends in Price Earnings ratios (PE), which, in turn, are driven by inflation/deflation. This removes the scale of time from the secular cycle definition and only uses the trends and cycles of PE and inflation as the identification of secular bear, and bear market cycle beginnings and endings. Simply, a secular bear begins when valuations peak and reverse because of a trend back toward low inflation, then continue to decline throughout the secular period. Once sufficiently low, usually single digit PE, a new secular bull period can begin.

The book wraps up with a thorough evaluation of how the current decade (2010-2019) could possibly play out (currently in a secular bear), using a large number of different EPS, PE, and Inflation combination scenarios. The message is clear, there are times (secular bears) that one needs to change their perspective on investing and seek an approach that at a minimum preserves capital so that when the next secular bull market begins, time is not spent trying to recover from the past secular bear.

It is sad that most people spend a large part of their investing time trying to recover from previous losses. Understanding the secular approach and making the switch in your investing style (rowing vs. sailing) can lead to a long retirement accompanied by dignity and comfort.