When speaking about the performance of stocks since the turn of the century, analysts frequently refer to the bull market of 2003-07 and the bull market of 2009-11. Certainly, stock prices have rose in nominal terms during those periods, but the fact remains that stocks have been mired in a secular bear market, characterized by falling price/earnings ratios. As illustrated by Robert Shiller of Yale University:

Price/earnings ratios have surged from about 15 to nearly 24 over the course of the rally out of 2009. However, it remains to be seen whether this move represents a change in trend or simply a countertrend affair. Consider that major secular bear markets tend to find bottoms only after PE ratios have printed in the mid-to-high single digits.

Even more revealing is the performance of stocks versus old-fashioned money: gold.

As you can see, the long-term trend for stocks versus gold is down, and the presumed bull markets of 2003-07 and 2009-11 are not even visible when equities are priced in hard money. The latest consolidation period is also forming a bearish wedge right on top of a long-term pivot level at 0.73. Once this wedge breaks lower... which it appears ready to do... we should witness the next major re-pricing of stocks in terms of gold, likely to below 0.50, where the next important pivot lies.

One may also note that these re-pricing periods have coincided with cyclical bear markets in equities. Therefore, if another major re-pricing period is on the horizon, the stock market is very likely to roll over in coming months. Such an outcome is congruent with the cycles analysis detailed in the Member Letter which calls for stocks to presently begin a dive into a 4-year cycle low due in late 2012 or early 2013.