A number of newspapers noted that the major stock market indices closed at their lowest levels since 2004. What I think is more remarkable is what this means for 10-year trailing returns. As of yesterday's close, the S&P 500 increased by a paltry 6.25% over the last 10 years -- roughly a .45% return per year. (The Russell 2000 index did better, reflecting small cap stocks' outperformance of large caps over the last 10 years.) And what's really striking is that October of 1998 was a trough in the market, and the S&P 500 rose 50% in the following two years (before, of course, precipitously falling). The bottom line is that, over a 10-year period, you would have been better off investing your money in just about anything other than the stocks of major U.S. corporations.
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Democrats like to talk about working class middle Americans voting against their class interests. Can we start talking now about the wealthy voting Republicans as against their class interests?
In short, what's your point?
Really, all this shows is that the worst time to get out of the market is right after a crash. But everyone knows that, right? (The difficulty is, of course, in finding the courage to stay in.)
1) Does this include reinvested dividends?
2) Does this factor out inflation?
My guess, for both, is no.
I am not saying that Republicans caused anything. However, for those who argue that Republicans are good for business, I kind of wonder where the emperical evidence lies.
The same could be said for Democrats, and for a fusion goverment of both parties.
Perhaps it would be best for a new party to develop. One which promotes small business and small government. One which wants to leave decisions to the states and give the 10th amendment its due.
Is there such a party? Oh yeah, the Libertarian Party may fit the bill.
The Republicans used to have some significant "small government" leanings... but that seems to be quite thoroughly killed off.
At some point, as the Dems and Reps get closer and closer together, there will be a revolt, one of them will split, there will be a mess for a few years, and then we'll end up with 2 different parties again.
Unfortunately, I think the Republicans will the party to split (meaning that the Dems, the worse of the two IMO, will end up end charge for a while as that gets sorted out), as they are too far left for a significant portion of the country, and the Dems are even further (look at the opinion polls on Bush, for instance, and realize that a significant part of his problem is that he is too far to the left for many people).
Either that, or the Reps somehow get back to their roots, but I just don't see the path they would take at this point (see my first line of this post about "damaged goods").
It was best shown (IMO) when Bush was running against Kerry. There were polls showing people didn't like Bush, and so the MSM was confused that Kerry's numbers plus Bush's numbers didn't add to nearly 100... after a couple of weeks of this, they ran a poll asking better questions and realized that a large number of people didn't like Bush because he was too far to the left, so OF COURSE they didn't like Kerry, as he was farther.
The Repus are taking the right for granted and moving farther left. If a viable party can form or split from the Reps that better represents the real right, I think times will get very interesting (the "first past the post" method of voting strongly favors a two-party system, so it won't be three-party for long, one way or the other).
Indeed.
The numbers are quite easy to manipulate. If we look to the height of the S&P about 1 year ago, the 10 year number then is something upwards of 50%. It's up more than 20% in the last 6 years (to date). If we look at a 20 year number then we're around a 475% increase. If we look at that peak a year ago and do a 20 year number from there, the rise is more than 600%. A 30 year number from today (1978) is about a 1000% increase. For reference, that last is about an 8% return, while the 20 year number is about a 7% return. The 20 year number from a year ago is about a 9.5% rate of return. The 10 year number from a year ago is about 5% per year.
The morals are: don't invest for the short term and don't pull your money out at the bottom of the market.
I think Berkshire Hathaway has compounded at about 12% annually for the past 10 years. Beats 0.45%.
the big tech bubble burst, 9/11 and all of its ramifications, the war in Iraq and Afghanistan, the ruination of a major American city by a hundred-year hurricane, the housing bubble burst--this has been a very rough decade as far as exogenous events are concerned, and the Dow has held its own.
It would be a significant loss. For roughly 8 of the 10 years, the S &P was higher than it was exactly 10 years ago. Any purchases made then are now at a loss. Only a few purchases around 2002-2003 would be up today.
Normally, looking back over any given 10 year period, one can find that an S&P 500 index fund increased by about 10% a year, no? This tends to beat inflation and other asset classes, and tends to be adequate diversification . . . I wonder how a portfolio of index funds including Europe, Asia and emerging markets for about half, plus half US indices has performed over the same period Stuart measured. My guess is not much better, and that the same period events, the LTCM blowup, the Asian and Latin American crises, the Russian debt default, 9/11 and the current credit crunch have similarly devastated such a portfolio.
That's not to say that they've been competent, but competence isn't the reason they haven't won. (It's the structural problem for third parties that makes them incompetent; nobody who is good at running elections is going to work for the LP. Why would you? It's a waste of your talents, since the LP can't win.)
Yes, but it's run by an America hating liberal.
Gold and silver ^_^.
http://en.wikipedia.org/wiki/National_Action_Party_(Mexico)
The markets had slow, steady growth during the 80's and early 90's (minus the crash in '87, which was just a blip). They then starting going crazy in 1995, which marks the start of the credit bubble.
The Dow is still higher than it would be without the credit bubble (where it would be about 8,000). The Nasdaq and S&P 500 are about where they should be. The Russel 2000 is a little low. However, the Russel 2000 never spiked during the tech bubble. This suggests that many stocks that comprise the Russel 2000 are undervalued. These will be the first to recover.
Oh that's right, the good for the economy Republicans. They care about YOU!
The Palins sure know this. According to the New York Times, their financial statements show [their] retirement accounts included a sophisticated range of investments, including mutual funds invested in Latin America, small-cap stocks, shares in Spanish, Belgian and Australian indexes and a midcap growth fund.
But the dollar is recovering against the Euro. The dollar, which was worth 1Eur08 when Bush was first inaugurated, is worth 0Eur74 today, recovering from a low of 0Eur63.
If the Dow remains around 10,000, its still up at an annual return of 7% from 1995. If the Dow goes down to 8,000, then its annual return is 5.2% from 1995.
Historically, the Dow has averaged a 5-7% return, averaged over the past 100 years.
Instead of a crash, I think the stock market is simply returning to its "real" value absent the 13 year credit bubble.
I see, exactly. The S&P 500's performance during the W. administration mirrors the S&P performance during the Ford and Carter administrations.
Neither Paul nor Barr have been able to win a Presidential election with any letter after their name. Strong political parties simply work too well for those few who've managed to succeed at that level in the US to even think about trying to pull something off with any third party, except when they're about to lose or get kicked out of their party anyway (Teddy Roosevelt, for instance.) This is also why independents caucus with a major political party in Congress -- parties weren't something folks came up with because they wanted to be difficult and undemocratic; they solved a problem.
We've managed exactly one election without any strong political parties in the US, and that's only because the guy who won was regarded by the populace like a God (it really helped his reputation that he'd already turned down jobs like "Emperor for Life.") Parties that split (like the Democrats in 1860) and create four or five-way elections, get punished severely for it. The Democrats, even after the party was basically put back together and the South had the vote again, didn't win until 1885, and other than Grover Cleveland's split terms, didn't win at all until 1913. If I take out Woodrow Wilson the streak extends through to Roosevelt (that's eleven Republican presidents, one Democrat who got in via Lincoln's assassination, and two Democrats who won a total of three terms, over the course of 73 years.)
1) Does this include reinvested dividends?
Most mature companies, which are overrpresented in the DOW and S&P produce, sacrafice growth for dividends.
While this is obvious to all but the least informed, I think you have a point that the elite media outlets enjoy making it look like capitalism doesn't work, and that an "ownership" society will always be subject to the whims of the market. Of course, they have to make the market look much worse than it actually is for any of their arguments to make sense.
Please don't help them spread the filth!
Not at all. Companies have been paying cash dividends forever; they did not start ten years ago. In fact, length of time paying cash dividends was an essential criterion for selecting investment-grade stock. Pick up a copy of Ben Graham's Intelligent Investor.
Thanks Josh. Let me give you my e-mail address so that you can write me and tell me the day the market makes a "bottom."
In 1876, Tilden (D) beat Hayes (R) in the popular vote 51% to 48%. Both candidates claimed to win Florida, Louisiana, and South Carolina, and there were confusing ballots. The dispute was resolved in the House of Representatives in favor of Hayes, not on the merits but on the politics of the day.
I really wish this weren't true, but the Democrats did as well. Clinton proposed it during his presidency. (He just wanted the government to do it instead of private accountholders.)
When the stock market is booming for a prolonged period of time, politicians of all parties forget about the risks and just start dreaming of those bigger returns vs. the paltry interest rates on T-bills.
The terrible return for this particular 10 year period really sucks if you need for some reason to get your money out now. If you have a longer time horizon things may look a lot different.
Kindly provide evidence to support that assertion.
Bush has never been all that popular with his "base", except in the following ways:
1) he isn't Gore
2) his foreign policy sounded good after 9-11 (but then his follow-thru was poor)
3) he isn't Kerry
Bush's domestic policies have never sat well with conservatives (as best I can tell). Describing them as "too far to the left" for conservatives seemed fair to me - how would you describe it?
So in other words, just a little bit better than what a passbook savings account used to earn in the sixties and early seventies.
And what if AIG were still on the Dow? What would it be at today--a hell of a lot lower than 10,000 since the value of AIG stock is now basically zero.
Well, there was before George W. Bush got elected, when we were running surpluses.
Seriously, I know everyone talks about Iraq and Katrina, but there may not have been a truly more idiotic political decision in my lifetime than Dick Cheney's "Reagan proved deficits don't matter, this is our due".
It's like unemployment rates. The national rate may be 6%, but if you personally don't have a job, for you it's 100%.
The question is not what the market did but what you did. Were you enamoured of Enron and WorldCom? Then you probably underperformed the indexes.
Ebay? You probably beat 'em.
But that's just gambling. Every smart investor diversifies his or her portfolio because you don't know what companies will turn into Ebays and what companies will not.
So choosing one of the strongest performing stocks as an example of returns in the stock market is like choosing the one time a 100-1 shot wins at the racetrack as an example of the returns in playing the horses.
No kiddin'. Wall Street has been run like a bucket shop for the last 15 years, or hadn't you noticed?
Cumulatively the S&P 500 is up 2.69% since the beginning of 1998, and has produced an average monthly return of 0.10%. Surely that qualifies as a "lost decade". But is even worse when we consider that money market has drastically outperformed with returns of nearly 40% (cumulative) with virtually no risk. But one of the characteristics of equity market returns that fly in the face of Buy &Hold, Dollar-Cost Averaging is that market tops typically develop very slowly relative to the velocity of market bottoms. The result is that the investor with no active risk management or tactical guidance within portfolios will tend to buy more shares near market tops and substantially less shares near market bottoms. This doesn't bring into account the emotional side of the equation that will often deter even the most dogmatic of dollar-cost averagers in washed-out markets.
Let's look at this quantitatively, however. Take an investor who purchased one share of the S&P 500 each month going back to the beginning of 1998. Despite a slightly positive overall return for the S&P during that time, this investor owns 130 shares of SPX after more than a decade, and owns them at a cumulative loss. The cost basis of such a portfolio is $158,201.26, while the equity value of that portfolio is $129,610.00; a loss of 18.07%. If we instead took a true dollar-cost averaging approach the results have been painfully similar. The investor who simply, and religiously, purchased $1,000 of the SPX at month-end since the beginning of 1998 effectively purchased 109.22 shares of SPX at a cumulative cost of $130,000.00 ($1000 per month over 130 months). The value of that portfolio is currently $108,891.87, a loss of 16.24%. No dividends or commissions were included in those numbers.
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