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Wrap your brains around this

By AD follow AD   2013 Apr 7, 4:11am 4,201 views   28 comments   watch   nsfw   quote   share    


S&P 500

March 2000: 1530 points
October 2007: 1560 points
Today: 1553 points

Total real return of a typical S&P 500 index fund since March 2000 assuming 2% annual dividend and 3% annual inflation: -13.8%

1   APOCALYPSEFUCKisShostikovitch   ignore (43)   2013 Apr 7, 4:14am     ↓ dislike (0)   quote   flag        

Gosh, that's not good, is it?

Good thing RE will 10x in a year!

2   AD   ignore (0)   2013 Apr 7, 4:24am     ↓ dislike (0)   quote   flag        

ApocalypseF, if it was not for the Federal Reserve three QE's as well as Keynsian economics (i.e., GM bailout, etc.) then the S&P 500 would likely be within the 800 to 1000 points range right now.

3   Ceffer   ignore (3)   2013 Apr 7, 4:24am     ↓ dislike (0)   quote   flag        

Well, it is a casino, after all, the house always wins in the end.

4   curious2   ignore (0)   2013 Apr 7, 4:28am     ↓ dislike (1)   quote   flag        

adarmiento says

the S&P 500 would likely be within the 800 to 1000 points range right now.

That's where it should be. Instead ZIRP and QE have created too many dollars, on too loose terms, chasing too few stocks. Also lemon socialism and crony capitalism (e.g., TARP), and deficit spending, have all increased the profits at the biggest corporations, including the S&P 500 and especially the Dow 30. Instead of market pricing, we see centrally planned Fed pricing, distorting the whole economy.

5   AD   ignore (0)   2013 Apr 7, 5:08am     ↓ dislike (0)   quote   flag        

"centrally planned Fed (Reserve) pricing" is one of the most relevant descriptions of the stock market since October 2008

6   Done   ignore (1)   2013 Apr 7, 9:32am     ↓ dislike (0)   quote   flag        

The bulls have the edge of longer term odds in pricing on their side. S&P could take a 75 point shave easily enough and more and just be getting it's breath (price moves). 1475 might be a good price point to close any shorts and stage some positions of buying, perhaps start to consider the idea anyway.

Filter the media dogs, remember who the dogs owners are.
The more I look at S&P vrs. Gold, I can see S&P $1800 before XAU $1800.

adarmiento says

Total real return of a typical S&P 500 index fund since March 2000 assuming 2% annual dividend and 3% annual inflation: -13.8%

No S&P $1800 is not going to make you whole but it might make you feel a whole lot better.

7   Hysteresis   ignore (2)   2013 Apr 7, 9:50am     ↓ dislike (0)   quote   flag        

http://blogs.ft.com/ft-long-short/2013/03/28/getting-high-on-stock-market-charts/blog-sp-500-inflation-adjusted/?Authorised=false

accurate data, instead of rough estimates:
http://dshort.com/inflation/inflation-sp500-chart.html

real returns by decade:
http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm

Real Total Return
1950's 16.7 %
1960's 5.2 %
1970's -1.4 %
1980's 11.6 %
1990's 14.7 %
2000's -3.4 %
1950-2009 7.0 %

so your theory is that everyone invested everything at the real-peak of the stock market(march 2000) and hasn't invested anything else (at lower prices) in that 13 year span?
okay.

8   RentingForHalfTheCost   ignore (5)   2013 Apr 7, 10:40am     ↓ dislike (0)   quote   flag        

adarmiento says

ApocalypseF, if it was not for the Federal Reserve three QE's as well as Keynsian economics (i.e., GM bailout, etc.) then the S&P 500 would likely be within the 800 to 1000 points range right now.

And we would be on the road to recover, rather than still waiting for the second shoe to drop. This will be labeled the lost generation when it is all done.

9   Tenpoundbass   ignore (15)   2013 Apr 7, 10:49am     ↓ dislike (0)   quote   flag        

adarmiento says

ApocalypseF, if it was not for the Federal Reserve three QE's as well as Keynsian economics (i.e., GM bailout, etc.) then the S&P 500 would likely be within the 800 to 1000 points range right now.

No it wouldn't, the buyers in a post market, where the Government did not bail all of the CEO players out, while the investors all got screwed, would be more willing to invest companies that were on their own to create value. As it stands now, 80% of the traded companies out there are some subsidized or superficial sham, only suckers invest in that market.

10   AD   ignore (0)   2013 Apr 7, 10:57am     ↓ dislike (0)   quote   flag        

Hysteresis, I apologize for providing a Rough-Order-of-Magnitude estimate for the total return. Of course it does not take into account other methods like dollar cost averaging (http://www.buyupside.com/calculators/dollarcostave.php) from 2000 to present day.

Is the below data presentation acceptable ?

S&P 500 (source: http://www.multpl.com/s-p-500-price/table?f=m)
Inflation adjusted, constant February 2013 dollars.

May 2000: $1,659.75
October 2007: $1,710.84
April 5, 2013: $1,553.28

6.4% drop from May 2000 to April 5, 2013

11   AD   ignore (0)   2013 Apr 7, 10:59am     ↓ dislike (0)   quote   flag        

CaptainShuddup, are you saying that the run up is almost akin to a sucker's rally ?

I agree RentForHalfTheCost ! So you think that the S&P 500 will be at the same points level in January 2020 as it was in Spring 2000 ?

12   Dan8267   ignore (3)   2013 Apr 7, 2:06pm     ↓ dislike (0)   quote   flag        

Hysteresis says

Real Total Return

Always be skeptical of "real rates of return" as almost no one adjusts for inflation, but rather CPI, which is a constantly changing metric. And when chained CPI gets accepted, the financial industry and the news media will use that, even worse, metric "to adjust for inflation". So, expect the "real rate of return" of the S&P500 to double just because of that.

13   Waitup   ignore (0)   2013 Apr 7, 2:42pm     ↓ dislike (0)   quote   flag        

Democracy and free market are long gone...

14   MsBennet   ignore (0)   2013 Apr 7, 4:35pm     ↓ dislike (0)   quote   flag        

Maybe you guys don't know how the stock market works. I am sitting pretty because I kept putting money in. Sell on greed and buy on fear. And low-cost index funds. Double your money every 13 years or so. Also bonds have done well the last 8 years. Some years I made more from bonds than stocks.

15   Homeboy   ignore (2)   2013 Apr 7, 5:16pm     ↓ dislike (1)   quote   flag        

I have contributed to an S&P index fund over the last 11 years, and I now have 56% more money in the account than I put in. I don't know how to calculate rate of return, but that's certainly beating inflation, isn't it?

16   Tenpoundbass   ignore (15)   2013 Apr 7, 11:30pm     ↓ dislike (0)   quote   flag        

adarmiento says

So you think that the S&P 500 will be at the same points level in January 2020 as it was in Spring 2000 ?

I'm not saying anything of the sort, how ever. I would wager, that if I were to save every extra dollar I have, vs someone socking their money away into their work 401k, that is either a Luddite in and have no clue to how it works, or is misguided in thinking that there's really a man named Charles Schwabb, who tirelessly toils over their portfolio up until the wee hours of the morning with their best interest in mind.
I would bet all that I saved, that I would have more money in my savings account in 2020 than most of your average 401K investors.
The ones that are actually smart and good at picking winners in their 401k are actually wasting their talent, working at the Piggly Wiggly or 5 and dime.

17   RentingForHalfTheCost   ignore (5)   2013 Apr 8, 2:36am     ↓ dislike (0)   quote   flag        

adarmiento says

CaptainShuddup, are you saying that the run up is almost akin to a sucker's rally ?

I agree RentForHalfTheCost ! So you think that the S&P 500 will be at the same points level in January 2020 as it was in Spring 2000 ?

Inflation adjusted, I would say yes. Might even go to 2030. Every trillion printed is another few years added on the dial. The trick to stock nowadays is to stay away from the industries that are subsidized by the Feds doing their magic tricks. There are opportunities, but there are also bear traps.

18   MsBennet   ignore (0)   2013 Apr 8, 12:43pm     ↓ dislike (0)   quote   flag        

quote: or is misguided in thinking that there's really a man named Charles Schwabb,

Um, there is no Charles Schwab? It's Alfred E. Newman that doesn't actually exist!

http://en.wikipedia.org/wiki/Charles_R._Schwab

21   Entitlemented   ignore (0)   2013 Apr 8, 5:14pm     ↓ dislike (0)   quote   flag        

End of manufacturing is the root cause of all of the woes, since the US massive outsourcing spree of the last 3 decades, 3 decades or so of good firms lost to short term thinking.

22   Entitlemented   ignore (0)   2013 Apr 8, 5:15pm     ↓ dislike (0)   quote   flag        

The S&P chart reflects the collective investments of companies, individuals and government.

23   Entitlemented   ignore (0)   2013 Apr 8, 5:16pm     ↓ dislike (0)   quote   flag        

Try this again......

26   thomaswong.1986   ignore (5)   2013 Apr 8, 5:52pm     ↓ dislike (0)   quote   flag        

Entitlemented says

End of manufacturing is the root cause of all of the woes, since the US massive outsourcing spree of the last 3 decades, 3 decades or so of good firms lost to short term thinking.

yes. this is true. but it wasnt short term thinking since Japan pretty much did plenty of dumping below cost to produce on US and European markets. response therefore moving overseas due was LT thinking.

We havent solved for this yet. But many dont want mfg in the US anyway if you could make it economically. Green jobs isnt one of the solutions either.

i drop the outsourcing as a label here.. we always had this even domestic had outsourcing (outside vendors)... as in auto makers used other vendors for parts (Windows, Seats, Carpets, Dash board, radio etc etc).. thinks they didnt do.

27   Entitlemented   ignore (0)   2013 Apr 9, 12:33am     ↓ dislike (0)   quote   flag        

Mr. Wong,

The variable you suggest of Japan dumping would "fit" into the equation. In my experience truthfully, some of this is ntrinsic, for in college knew some seriously bright Japanese Scientists. And also their hiring Demming, the grandfather of getting all skills to work for high quality/productivity showing their technical acumen was already going strong in the 70s!

28   Entitlemented   ignore (0)   2013 Apr 9, 1:12am     ↓ dislike (0)   quote   flag        

What else is unpleasant to consider is that the US population was about 240M in the late 70s, so that per capita the loss of R&D and Manufacturing is worrisome.

Historically commercial manufacturing jobs went first, NASA and Spacecraft next, and now all much of what is left for Science and Engineering is in DOD, which has been cut -- the Navy fleets down 40% in 20 years, Army, AF, and Marine ranks shrinking.

This dramatic reduction in all sciences and engineering are not only an economy crushing event, but also risk national security. As long as we can avoid getting involved with skirmishes this reduction in military force can appear in the short term to be OK. Its singularities that we must worry about.


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