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If you like Crestmont Research’s analyses, graphs, and articles, then you’ll love Unexpected Returns and Probable Outcomes! The books are developed to explore the messages of the research published on this website, and both books include more than 50 full-color graphics as well as new material developed to highlight key issues. Whereas Unexpected Returns introduced and explored the concepts behind secular stock market cycles (extended periods of above-average and below-average returns), Probable Outcomes: Secular Stock Market Insights delves into greater details and applies the concepts to assess the probable outcomes for stock market returns based upon a range of assumptions. The books are written in a style that is directed to casual investors as well as sophisticated scholars. See the bottom of each book’s section for the Table of Contents. Unexpected Returns and Probable Outcomes are available internationally; ask your local bookseller or order online.
Secular Stock Market
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.
Acclaim For Probable Outcomes
“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.”
- 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.”
- Richard Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets, Stern School of Business, New York University; 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.”
- 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.”
- 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.”
- Harvey Rosenblum, Executive Vice President and Director of Research, Federal Reserve Bank of Dallas; Adjunct Professor of Finance, Southern Methodist University
“As with Unexpected Returns, Probable Outcomes will forever change your outlook and will certainly revise your investment approach.”
“I started reading your book at lunch (lunch was a great piece of swordfish, by the way) and am just loving it (the book; not the swordfish, although that swordfish was really good).” - Richard H.
“Ed Easterling has done it again; provided a big picture approach to the market using time-tested historical data and sound principles.” - Greg M.
“I just picked up Probable Outcomes and look forward to reading it. Your previous book, Unexpected Returns, probably influenced by investment process and thinking more than any other.” - Rush Z.
“Hats off to Easterling for a second excellent treatise in stock market investing.” - Paul M.
“This is written is such a way that some one new to investing or a long time investor such as myself can gain insights into what is going on in the stock market and why. Thanks Ed for your putting the confusing into words that make the information understandable.” - Charles S.
“I want to start by saying how impressed I have been with your book, Probable Outcomes…” - Sean A.
“Bought and read the book on vacation. Great job!…The book is easily read by non-professional investors.”
- Christopher G.
“I rate your research for equities as important as Sidney Homer’s on bonds… Keep up the good work.” - Otis C.
“Your two books, the most recent, “PROBABLE OUTCOMES’ and “UNEXPECTED RETURNS” are two of the most interesting and influential books I’ve read in my 27 years in the Securities Business.” - Tom E.
“Overall, I was distinctly impressed with the clarity of your presentation. I have spent time on your website but never reached the level of cohesive understanding that PO managed to convey to me. I don’t think it was because I was already exposed to the arguments, but was due rather to the logical progression of analysis in the book—like building blocks. ” - Barry N.
“I read your first book a couple of years ago and have just finished Probable Outcomes over the weekend… The second book has helped to crystallize many of the concepts for me. ” - Paul T.
“I very much enjoyed reading Probable Outcomes, and found it to be an informative journey through many facets of the investing world, but always coming back to the core focus of the book. Our firm and clients will benefit greatly from the valuable insights pulled from your excellent research and brilliantly written book… Thanks for writing another superb book that will be re-read and referenced over and over again. ” - Tom B.
“I’ve just finished reading your second book ‘Probable Outcomes’, and find it compelling to say the least.” - Craig R.
“I just finished reading Probable Outcomes…for the second time. Your work is simply the best in the world. No other author I know of explains valuation is such a simple and meaningful way.” - Eddy St. L.
“Many thanks for your insightful book (Probable Outcomes). I’ve been reading it with great interest…thanks for a great read.” - Larry T.
“Thank you for the wonderful work you produced in Unexpected Returns and Probable Outcomes as well as the Crestmont Research website.” - Brian D.
“I just finished your Probable Outcomes book, what another great read.” - Jeff A.
“I purchased and enjoyed Probable Outcomes. The pride you take in your work clearly shows through. Outstanding guidance, in my opinion.” - Oscar G.
“Let me start with thanking you for sharing your knowledge with the great books like Unexpected Returns and Probable Outcomes. These are the rare classics in todays investment worlds and great learning experiences.” - Pramod D.
“I finished your book [Probable Outcomes], and it too is truly remarkable.” - Jacque R.
“I wanted to say how much I enjoy reading both of your books, and how easy they are to understand without a lot of jargon.” - Ray M.
“About 4 years ago I read your book Unexpected Returns. It was fantastic. I recently finished reading Probable Outcomes and it is even better!” - Bruce S.
“I finished your book [Probable Outcomes], and it too is truly remarkable.” - Jacque R.
“If you are serious about investing in the stock market I urge you to read this book! [Probable Outcomes] I have read nearly every significant book regarding the stock market and I have professionally managed money for many years. I read this book twice. …Ed has a definitive way of writing that distills the complex into simple concepts that paint a realistic picture of the investment context in which we are living.” - Brian C.
TABLE OF CONTENTS
SECTION I: PAST AND FUTURE
Chapter 1: What’s Ahead
A Few Details
Chapter 2: Unexpected Returns Revisited
Secular Stock Market Cycles
Current Secular Bear Market
Still Not Halfway
Distance, Not Time
What To Do About It
SECTION II: ECONOMICS FOR FINANCIAL PHYSICS
Chapter 3: It’s the Economy
Why Economics Is Relevant
Key Economic Measures
Key Economic Drivers
Fallacy of Consumption
Chapter 4: Inflation Infatuation
Inflation in the Economy
Measures of Inflation
A Second Measure
Risks of Inflation
But Do Deficits Matter?
Deflation Gets Its Due
Chapter 5: Earnings Recycled
Economy and Earnings
Concepts to Consider
The EPS Cycle
SECTION III: FINANCE FOR FINANCIAL PHYSICS
Chapter 6: The Value of Being Present
Discount Rate and Inflation
Chapter 7: Getting to P/E
Every Few Years or So
Chapter 8: Great Theories and Busted Myths
Modern Portfolio Theory
Cousins CAPM and MPT
Monte Carlo Is a Bad Bet
SECTION IV: SECULAR STOCK MARKET CYCLES
Chapter 9: From Several Perspectives
The Long-Term View
Decades, Not Centuries
Influence and Power
A Look Inside
Volatility in Perspective
Chapter 10: Better Than Hope
Coming Back In Style
Absolute vs Relative
Capture and the Impact of Losses
Hope Is Not A Strategy
SECTION V: THE BIG DILEMMA
Chapter 11: Practical Implications
Chunks, Not Streams
Clean Up Your ROOM
Chapter 12: The Four Bears
Stock Market Cycles
Why is the stock market acting differently in the 2000s than in the 1980s and 1990s?
Before you read any how-to investment books or seek financial advice, read Unexpected Returns, the essential resource for investors and investment professionals who want to understand how and why the financial markets are not the same now as they were in 1980s and 1990s. In addition to explaining the fundamentals, this award winning book takes you on a graphic journey through seasons of the market, tying together economics and finance to explain the stock market’s cycles. Using comprehensive full-color charts and graphs, it offers an in-depth exploration of what has changed over the past five years – and what you can do about it to avoid disappointment with your investments. This unique combination of investment science and investment art will enable you to differentiate between irrational hope and a rational view of the current financial markets. Based on years of meticulous research, Unexpected Returns provides the sensible conclusions that will drive your future investment choices and give you the confidence to rely on your investment outlook, whatever your financial strategy.
Acclaim For Unexpected Returns
“Ed Easterling has given the world of investing the single best, easy-to-read, study of stock market cycles of which I know. He lays out a path for you to find your own Unexpected Returns, showing you how to confidently navigate the waters of market volatility. Serious investors will devour this book and profit. It should be required reading for investment professionals.”
- John Mauldin, President, Millennium Wave Investments; author of Bull’s Eye Investing
“Unexpected Returns provides a broad, deep, and provocative exploration of the factors that determine stock market investment returns over a person’s lifetime. Of special interest to me, as a Federal Reserve policy advisor on monetary policy, is Easterling’s exploration of the critical role of low and stable inflation as a key determinant of stock market performance.”
- Harvey Rosenblum, Senior Vice President and Director of Research, Federal Reserve Bank of Dallas
“Unexpected Returns is at once a penetrating analysis of more than a century of stock market experience and a realistic guide to how we may expect the markets to perform in the years ahead. Easterling’s findings and conclusions are grounded on the best economic and financial thinking of our time. This is a book for the serious investor and student of the markets.”
- Richard Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets, Stern School of Business, New York University; co-author of A History of Interest Rates
“The stock market is one of the few places on earth where people become more excited to buy when things are expensive, and more anxious to sell when things are cheap. Ed Easterling has penned a masterful accounting about why this is so wealth-destructive, presented without preconceived notion or bias.”
- Bill Mann, Senior Editor, Investing, The Motley Fool
“People are accustomed to the vagaries of market cycles. Far too few realize that these are subsumed within secular bull and bear markets, spanning decades not years. Ed Easterling has done a fine job of describing how these long cycles work and how the investor can plan investment strategies accordingly.”
- Rob Arnott, Chairman, Research Affiliates, LLC; Editor, Financial Analysts Journal
“If you have financial exposure to the stock market, Unexpected Returns will forever change your outlook and will certainly revise your investment approach.”
“I have read the book three times. Then I highlighted the important parts. Then I underlined the most important parts. I am still enjoying it and learning.” - Allen N.
“This book is truly a remarkable account of the markets history. Very well written and compelling research that all investors must understand.” - Mike S.
“I enjoyed [Unexpected Returns] immensely and believe it will help me be a much better prepared investor…” - Jan C.
“GREAT BOOK! (Yes, I’m shouting).” - Miles H.
“Your book is wonderful, and I have already purchased several copies and sent it to clients.” - Scott S.
“one of the most insightful “big picture” books about the stock market ever written…” - Mark S.
“the most elegantly structured treatment of the subject that I’ve seen to date…” - Zeke A.
“a must read for investment managers and their clients.” - Lorenz W.
“Whether bull or bear…a must read for all investors.” - Rodney M.
“I loved your book…a must read…it is definitely one of the best investment books I’ve read.” - Vitaliy K.
“very thought-provoking…An excellent contribution to the field” - Peter B.
“Written for the non-technical reader but doesn’t talk down•very friendly to read. He doesn’t claim to be a seer, he simply does a brilliant job of laying out piece by piece, how to calculate the future of the stock market.” - Kevin H.
“Your work put it all together, and in my humble opinion is a “must read” for any serious financial advisor.” - Marcel E.
“What a great book–have enjoyed every page.” - Don P.
“…very illuminating and thought provoking…one of those “must read” books for future generations.” - Peter K.
“extremely valuable, and rarely presented elsewhere…great service to public at large exposing some of the investment myths.” - Sreen R.
“…made important contributions to any reader’s understanding of the role of P/E ratios in future market performance.” - Gerald G.
“First of all, GREAT book….” - Richard H.
“I am extremely captivated with the insights in Unexpected Returns.” - Lanny H., Ph. D.
“I’m reading the book for the second time… Every time I pick it up and can’t put it down.” - Mike S.
“You guys should get a copy of his book. It is fascinating and fun reading!!” - Chris B.
“I’ve read many many investment books however, yours is one of the best written works I’ve had the opportunity to read.” - Bill M.
“…changed my business and outlook for risk management like nothing else in my 17 year career!” - Joe M.
“I am having a great time reading Unexpected Returns…” - Mike W.
“This is an excellent book…It is a must read for any investor and financial adviser. ” - John H.
“I am having a great time reading Unexpected Returns…” - Mike W.
“I know that I will be a lot more careful with my investment choices after reading this book.” - Richard M.
“I read with fascination your book. Great material.” - Bill S.
“This is a book everyone interested in the stock market needs to read… Excellent charts and superb explanations.” - Greg M.
“Thank you again, I can not tell you how much I enjoyed your book.” - David S.
“It was a great read! Your insights on Financial Physics and historical P/E analysis influenced my thinking….” - Spencer R.
“[The] book pulls together many of the mysteries against which I have struggled over the years. …provides careful and detailed analysis, presented in a logical and understandable fashion — with many charts and tables. I heartily recommend the book…” - Fred G.
“We had used your Stock Market Matrix at the office, and were impressed with the quality and scope of the project. Thanks for your insightful book.” - Gene F.
“I enjoyed the book, and refer to it often…thanks again for an excellent book and some of the best web resources that I have seen…” - Tom B.
“I am a HUGE SUPPORTER of “Unexpected Returns”… Keep up the fantastic analysis.” - Jim Y.
“Unexpected Returns is great! …is nice to see some good data driven analysis on market behavior and future expectations.” - Toby B.
“First, let me congratulate you on Unexpected Returns. It is the best basic text on modern investment management I have encountered. I plan to use it as my primary text…” - Prof. Ken V.
“You really made a great work with your book Unexpected Returns. I think it is the most useful book I’ve read for years.” - Loic B.
“I only wish I had purchased this book when John Mauldin first recommended it months ago.” - Joel D.
“…an unexpected pleasure to read! Free from fluff and filler and based on solid research, the book sets a new standard for texts of its kind. Another unexpected plus were the color charts and graphs that make it easy for the reader to grasp key concepts.” - James M.
“I have read your book, “Unexpected Returns” and it is an excellent piece of scholarship.” - John C.
“The book was terrific. I learned a great deal that I did not know, and appreciated the style, which repeats the key things, so that you never lose sight of them.” - Peter W.
“Your book, “Unexpected Returns” is absolutely outstanding.” - Kelly C.
“I am the chief market strategist at [...] in NYC, have read your book and find that the high quality and informative data that you put out on your web site is some of the better material on wall street!” - Michael S.
“I have read “Unexpected Returns” and found it very insightful and useful.” - Nick P.
“I found Unexpected Returns one of the best investment writings ever, including all the CFA materials I had to master.” - Garry A.
“I have read and then purchased a copy of Unexpected Returns for my finance/economic library. Your research and findings have filled a big gap in my efforts to put the “puzzle” together.” - David L.
“I really am enjoying your book. It is very informative and educational. I realize now that it will take absolute investment strategies to be successful.” - Paul P.
“Unexpected Returns is not yet another investing book parroting the same stale insights you have read or heard discussed dozens of times before. Easterling’s research tells us something new. Easterling’s research matters. Easterling’s insights are breakthrough insights.” - Rob B.
“Excellent book on the market. It is not a ‘How to get rich fast’ book, but one that explains the dynamics of the stock market and how the returns correlate. The tables, graphs, and figures are extremely well done and the book is well laid out…” - D. B.
“Unexpected Returns…is one of the best, easy-to-read, studies of stock market cycles of which I know.” - Hans W.
“A masterful discussion of the issues, very methodical, clear and compelling. And such a beautiful book, too. Well done!” - Jonathan E.
“Unexpected Returns brought together many of the same concepts and strategies I use in my investment management. Your book is excellent.” - Mike W.
“Your book has me captivated. I am half way through it and will enjoy finishing it.” - Lea J.
“This book brings fresh and unconventional ideas to the table…Many books advocate the buy and hold strategy. I think everyone should at least read some books that challenge this idea, and this one is a very good place to start.” - Joao F.
“I just finished reading “Unexpected Returns” and wanted to thank you for writing an absolutely fabulous book. You have succeeded in putting basic economic and financial concepts together into a consistent, simple and completely rational framework. I have read over 100 books on investing over the past 10 years and there are some truly excellent books out there. However, in my opinion, “Unexpected Returns” is the best of them all.” - Bruce S.
“Thank you for writing that fantastic book. It’s too good. I hope no other investors read it (I like to have an edge).” - Jeff H.
“I love your book “Unexpected Returns”! It is without a doubt the best book I have read on the stock market and I have read many of them!” - Chris N.
“Great book and excellent analysis!” - Ray G.
“I very much enjoyed Unexpected Returns and refer to it as a valuable reference tool, recommending that my colleagues read it to help aid their understanding of the markets.” – Matt R.
“Excellent book…I read it one complete sitting…in terms of elegance and simplicity…” - Sham G.
“I want to share my “unexpected surprise” of Unexpected Returns… Several of the concepts discussed in the book were profound for no other reason that the author’s ability to articulate and document them in very simple and explainable terms.” - Mark M.
“I think your book is the best book ever written for the stock market practitioner, without exception.” - Manuel O.
“I must compliment you for one thing in particular, that is your style of repeating the definition of technical terms each time you use them. How nice for me not to go searching for the meaning each time…I love your book.” - John C.
“…thank you for the outstanding book “Unexpected Returns”. My day job, so to speak, is [a] city bus driver. I am a 50 year old investor…” - Eddy S.
“I continue to find your book exceptional and very appropriate for my practice.” - Skip N.
“In a word… well-done. I’ve thoroughly enjoyed reading and pondering Unexpected Returns as it may apply to my practice.” - Brad G.
“…I ordered your book and thought it was absolutely fabulous. Probably the best piece of financial material I have ever read.” - Daryn H.
“…I am a portfolio manager in Victoria BC. I have read your book and enjoyed it very much. In recent years your Financial Physics research has been very helpful to me.” - Peter S.
“I am a recent follower of the Crestmont Research website and now use information you provide in all of my client meetings. I also bought Ed’s book, Unexpected Returns . . . Which is fantastic.” - Joel B.
“Thank you and keep up the great work — I just re-read Unexpected Returns for the 3rd time. It keeps me grounded.” - David M.
“You do great work by the way, loved the book!” - Marcela McB.
“I think your book is brilliant and have recommended it many times the last few years.” - Eddy St. L.
“Your book and website are a cornerstone of my money management practice.” - Charles O.
“Great read, excellent information, can not put this book down even though I have read it before.” - Ashish D.
“I’m an enthusiast reader of your book “Unexpected Returns” and I always follow the updates you publish on your site.” - Emilio V.
“Unexpected Returns is perhaps the most well-written book on investments that I have ever seen.” - Scott N.
“…I tend to read a lot of research (bullish and bearish). I have to say, ever since I read your secular market book some years ago, and no matter how much research I do, I always fall back on your unbiased, fact-based analysis…thank you for providing your thoughts and insights. It has been a game-changer for me.” - Adam A.
“THANKYOU and the book [Unexpected Returns] is fantastic! How I wish I would have read it in 2007!” - John M.
“Every time I read Unexpected Returns I learn something else that is a eve opener. Great Book” - John F.
TABLE OF CONTENTS
SECTION I: GETTING STARTED
Chapter 1: Planning the Journey
The Right Frame of Mind
Ten Key Concepts
Chapter 2: The Principles
SECTION II: MARKET HISTORY
Chapter 3: Stock Market History
The Stock Market Matrix: Taking the Red Pill
About Returns and Assumptions, and Making Them Relevant
Generational Returns -Twenty-year Returns
Why Volatility Matters
Stock Market Yo-Yo
Must Be Present to Win?
Chapter 4: Interest Rates and the Inflation Roller Coaster
Overview of Interest Rates
Overview of Inflation
Interest Rates and Inflation
The 6/50 Rule
Key Concepts for this Section: Market History
SECTION III: SECULAR CYCLES
Chapter 5: Secular Cycles
Secular Market Profile
Stock Market Profile Across Secular Periods
Inflation, Deflation, and Market Seasons
Dispelling the Myth: It’s Actually Not the Economy
The Y-Curve Effect
Chapter 6: The Current Cycle
Current Market Cycle
The Dividend Insight
Key Concepts for This Section: Secular Cycles
SECTION IV: FINANCIAL PHYSICS
Chapter 7: Financial Physics
Predicting the Future of the Stock Market
Building the Financial Physics Model
Financial Physics: A Tool for Valuing and Predicting the Market
Chapter 8: Implications from Financial Physics
The Voyage So Far
Looking Forward in the Market and in the Book
Valuation Cascade: A Natural Upper Limit for P/Es
Dissecting Returns: Forecasting Stock Market Returns
Limited Returns and Market Vulnerability Going Forward
Key Concepts for this Section: Financial Physics
SECTION V: INVESTMENT PHILOSOPHY
Chapter 9: Investment Philosophy
Absolute Return and Relative Return Investing
Risk Can Be a Friend or a Foe
A Little History: The Devil’s in the Assumptions
Chapter 10: Row, Not Sail
Sailing and Rowing
Drowning in Averages
Key Concepts for this Section: Investment Philosophy
SECTION VI: INVESTMENT STRATEGY
Chapter 11: Investment Techniques for Traditional Investors
Effective Bond Portfolios
Rebalancing Stock Market Portfolios
Chapter 12: Investment Management Evolution
A Brief History
Hedge Fund Investing
Vision of Future Investment Management
Closing the Loop
Ten Key Concepts