Just recently Barry Ritholtz wrote an article for Bloomberg Opinion comparing the stock market lows of 1942 and 1974 with 2009.  Barry starts the discussion with:

"Every 30 years or so, markets make what can be described as a generational low. We can define this as a capitulatory bottom, one that might be caused by a variety of factors, but usually includes some combination of fear and panic.

This equity-market low point is likely to be unchallenged during the next 10 to 20 years. After that, the combination of population growth, technological gains and inflation means that we are unlikely to see stock indexes at those prices again."

I have recreated the chart that he used to support that point simply for better clarity.  (Okay, its really just a prettier chart)

While Barry goes on to discuss the need for a market correction in the short term, which I agree with, he does make the following statement:

"The good news is that at this stage in a move off of a generational low, there are bigger gains to be had in the future. Yes, this market has come a long way, but if (and that is a big if) this is a new secular bull market, it has years to run."

While Barry qualifies the assumption of a new secular bull market, the question of a "generational low" peaked by curiosity.

I discussed recently in "Repeating The Secular Bear Market Of The 70's" that:

"Despite much hope that the current breakout of the markets is the beginning of a new secular 'bull' market - the economic and fundamental variables suggest otherwise.  Valuations and sentiment are at very elevated levels, which is the opposite of what has been seen previously.  Interest rates, inflation, wages and savings rates are all at historically low levels which are normally seen at the end of secular bull market periods."

The issue of valuations is the most important to this discussion of "generational" lows and peaks.  The chart below shows the S&P 500 as compared to its P/E ratio going back to 1881.  I have notated generational "lows" with green arrows and "peaks" with yellow.

What is important to notice is that the low generated in 2009 was not anywhere near where previous generational "lows" have normally been witnessed. Secondly, valuations have already returned to levels normally associated with generational "peaks."  This kind of valuation behavior is consistent with the market downtrend in valuations witness post the 1929 market peak. 

The next chart of dividend yields also confirms the valuation study. 

At "generational" lows, yields have historically been pushing levels of 6% or higher.  However, during the "financial crisis" yields remained suppressed below 4%.  

Lastly, as I discussed in "Correcting Some Misconceptions About A New Secular Bull Market":

"It is entirely conceivable that the current momentum driven markets, fueled by ongoing Federal Reserve interventions, could certainly drift higher in the months to come.  However, the reality is that the current underlying demographic trends, economic realities and market fundamentals do not provide the base to support current price levels much less the entrance into a secular bull market akin to that of the 80's and 90's.

Of course, with virtual entirety of Wall Street being extremely bullish on the markets and economy going into 2014, along with bullish sentiment at extremely high levels, it certainly brings to mind Bob Farrell's Rule #9 which states:  "When all experts agree - something else is bound to happen."

With corporate earnings at record levels with increased dividend payouts, leverage at all time highs, investor sentiment pushing exuberance and valuations rich; it is likely that the next major market low will provide the reversion in market prices and fundamentals necessary to create a true "generational" low.  Such an event will likely occur with the onset of the next recession which is likely still 18-24 months away.

While these are very long term views, they have very little to do with managing portfolios in the short term.  In that regard, I very much agree with Barry's closing line:

"The bull market has been overdue for a correction, one that appears to have begun last month. The deeply oversold condition is likely to lead to a bounce before selling resumes. However, market internals (especially breadth) suggest this retreat is merely a correction, and not the end of the bull market.  All the usual caveats apply. Your mileage -- and portfolio returns -- may vary."