Convergence to the mean
John Maynard Keynes, the famous English Economist whose theories are back in vogue, wrote: “In the long run, we are all dead.”
Rocky Humbert, the obscure American curmudgeon and speculator, writes: “In the long run, prices revert to their long-run mean.”
This morning’s Case-Schiller Housing Index (-19% annualized) shows that housing continues to revert to its long-run mean.
This chart shows the major asset classes since 1987. Black=Housing. Red=CPI. Yellow=stocks. Green=commodities.