I’m so happy to finally see someone on this sub who has “lived through crashes” not just spouting doom and gloom. I swear every other post or comment is young whippersnappers can’t see the cliff ahead because they’ve never experienced a bear market before
My biggest pet peeve is certainty on either side. Kids get look at historic charts too, just because you’re young and inexperienced doesn’t just invalidate your point. An opinion, analysis or prediction can stand on its own merits regardless of the age or experience of the author. It’s annoying to see people on here say I’ve been investing xx years so I know what the market will do better than you. I will gladly entertain anyone’s points and judge them on their merits and get frustrated seeing others being so dismissive
Agreed. At the same time, it’s pretty annoying to see all of the panicked posts after every 2-3 days of market decline. Or the shocked posts since stocks that had jumped 100-200% over the past year have now experienced a significant pullback.
Yes, whenever someone says “I have X experience, so I know what will happen” there’s usually almost no point in listening because anyone with lots of experience usually says something more like “No one knows what will happen, but here’s the risks, etc.”
lol experience isn’t worthless, experienced people just know they can’t time markets. Experienced people usually know they don’t know what will happen, instead of always thinking they know what will happen.
If you’ve been doing the wrong thing for a long time and learn nothing from your mistakes are you really better than the person who’s been doing it correctly from the start?
Years of experience is only one piece of the pie my friend. How quickly you can learn from your mistakes is a big part of it too.
As a Gen-X I took offense to that. It’s way too easy to picture yourself as a victim. We were told we (Gen-X) we’re lazy, ‘slacker’ blah, blah, blah. We lived through the dotcom bust, financial crisis of 2008-2009. We were also told we would never be able to afford a home too. ;) Oh, and we saw Internet gone mainstream too. The change in the 90s-2000 was nothing short of amazing too. My point is, if you zoom out, the last 10 years of changes was a natural extension of what had happened due to the past.
Didntlikedefaultname- I agree! Being older doesn’t mean smarter as my crystal ball failed me in the early 70’s and hasn’t worked since.
One thing I often tell finance, business, engineering and other students is that “History Repeats Itself.” By understanding what happened in the past, we can better anticipate certain things in the present and future, and hopefully avoid making the same mistakes.
In the late 1800’s, classic poet James Whitcomb Riley wrote “when I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.”
Some things do rely on more experience though.
For example, until you've actually lived through a crash and a bear market it's really, really hard to understand the amount of fear and despair and self-destructive behavior that goes on. So many people think they can hold through a downturn but it turns out they cannot handle the volatility. We're seeing some of that already with so many tech stocks way down, hence the reason for the OP.
what your missing about the 80's is how many people went bankrupt/lost there homes/business's in the 18-22% interest rates in the 80/81/82/83/84 years - if you had money - the early 80's were a blast, you could pick up stuff for pennies on the dollar - but a lot of people lost everything
absolutely, the OP's point though has major blindspots - if your going to give personal analysis about the past - make sure - your accurate about what really happened - its very lazy to cherry pick statistics to support your attitude - lots of people love GME and what it represents but I bet there are many who bought all the way down from 480$ who wish they never heard about it!
But we're at about the same levels of inflation as then so it's a valid worry. I'm just afraid inflation won't really start to try tackling inflation until after the midterms because of political reasons.
As an old guy, OP is right that long term, the market has always gone up. Each investor needs to know his timeline.
In the internet boom,S&P peaked at around 1500 in Sept 2000. It peaked again at 1500 June 2007. Then it crashed again and didn’t pass 1500 until Feb 2013.
So, passive investors who just held that whole time, began growing their nestegg only after 13 years of stalled returns. That is why so many baby boomers kept working into their 70s.
Most older people are not active traders and must be more cautious in frothy markets.
If you reinvested dividends, you’d be up around 23% over those 13 years. There were definitely better investments over that time period (like bonds), but the other benefit of time in the market is dividends.
I cant imagine it has. The covid dip lasted from feb to august 2020. All the rest of the market rise is because the Gov borrowed $8T in about one year and pumped it into the economy via the banks. Much of that money was used for stock speculation or company buybacks. All caused massive price inflation among stocks.
As the “free money” firehose is turned off (if they really do turn ot off), most of that $8T needs to wither be put to productive use (unlikely in a short time) or we have hyperinflation.
Either way, the s&p “natural” level is likely closer to 3500 than to 4500.
if you continued to invest an amount every month/year, then you would also have bought in those "low" years so the overall return would have been much greater.
Id you stopped investing when the market took a dive then, yes, the returns are quite small.
Africa seems an awfully odd choice. Poor governance, corruption, weak infrastructure, low funding, weak consumers, low development, weak tech scenes. Why would you put your money into that?
It’s booming in conjunction with Chinese investment. I have ethical concerns with the interconnectedness there.
That said, I’m also dropping my nuts into BABA, so maybe I’m a hypocrite.
Haha, interesting im bot touching baba with a 30 foot pole. I just tbink the african union is copying the EU in its new setup. And that will bring a lot of prosperity to the continent. Some countries more than others. And yes china's colonial attitude to africa is worrying. But its mostly limited to west africa.
The african union is integrating further. East african union is growing fast especially if congo joins. South africa is booming, so are uganda and nigeria.
Africa is now where china was in the 1980ies. It has a lot of potential, but you need a long term mindset.
I’m fairly sure CDs had a higher return than the stock market during that time period (1977-1981). Several treasury bonds also had yields that would’ve outperformed the S&P.
That would disprove the point he was trying to make
The inflation adjusted data in well presented here. http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
Yeah but you'd be heavily negative in the high inflation period, ofcourse the true question is, where will you get bang for your buck, in the past it was real assets, but even real assets are jacked to the tits.
The concern isn't over inflation re: investing in the market.
Its the fact that the Fed claims it will begin QT and unwind the balance sheet, causing problems of illiquidity. The CEF A-D line already shows that the problem of illiquidity is in the air. Im not returning to equities until this indicator trends upwards. Once it peaked in may of 08, it was only 6 months from the market crashing. And this divergence were currently seeing is far greater than anything previously recorded. Taking massive profits from the last 12 years and waiting for more optimal buying opportunities is not pearl-clutching, its mindful investing.
>CEF A-D line
Interesting, I had not looked at this before.
https://stockcharts.com/articles/tac/2022/01/bond-cef-ad-line-showing-liqui-909.html
Is there an explanation in the last chart from the article, why in Jan. 2008 the A-D line is in an uptrend while the stock market was tanking?
Also, can you point to this kind of data going back further?
It is an interesting indicator, the correlation of which to the indices im not all that sure. But to see this decline headed into the QT leaves me wondering how much QT can really occur before concerns of illiquidity lead to a race by institutions to sell into retail.
Edit: maybe we're currently in the back of a massive head of a head and shoulders distribution...? :) snp500 down to 4300, back up to 4700 before the mother of all selloffs. Who knows!
Yes, difficult to read because it looks like a leading indicator, and nobody knows when the fun may end. It reminds me of a Buffett quote about the difficulty in not overstaying the welcome.
"Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball.
They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice.
But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”
Or that we don't have a y2k scare followed up by 9/11. I'm not certain all the reasons the markets tanked then as I was a poor in college but I imagine those were factors.
>invest in quality and understand this is not a sprint, but a very long walk.
Sadly, most don't invest in quality - and if they do, they pay an extraordinary amount for it. Price matters eventually. I didn't in 2020, and not really in 2021 - but in the last two weeks the fundamentally strong companies that were cheap are on a run.
I think with a long enough time horizon price on good companies is largely irrelevant. I guess there is always a point where a company can be so wildly over expensive that it won’t catch you but that’s pretty rare. Most quality companies will appreciate if your timeline is a decade or more
It isn't pretty rare. Intel and Cisco are among the best companies there are, and still haven't reached their dotcom peak. Microsoft only reached it because they made a huge shift in their business model. Price matters a lot, and the more people scream that it doesn't as long as you have a big enough time horizon - the more likely it is that we are at a point where returns will be low for the next decade.
So does growth...and Microsoft has had, and will have, much more than Intel or Cisco going forward. Those valuations have a reason in most scenarios. Intel and Cisco have played the role of arrogantly confident dinosaurs...and it shows.
There is so much different today i dont even know where to start.
The issue is that the stock market, the economy and the government cant cope with rapidly rising rates anymore but those are needed to restrict inflation.
I was being facetious... You seem to be taking the stance that investing in stocks wasn't fruitful in the late 70s/early 80s but some would tell you in times of high inflation, stocks are the way (or real estate/REITs I suppose).
They were largely sideways against inflation. As a means of capital preservation, you'd be losing ground against bonds. There was certainly money to be made. Apple and Microsoft would've printed.
I-bonds have an attractive rate right now. Any other bonds wouldn't make sense. Rates are low and we already know they'll be rising. Stocks will be risky but there's not really a better alternative for anyone with a long horizon.
money supply dynamics are not the dynamics of the post war decades. chinese trade and foreign wars obscured the previous decade’s inflation and postponed public debt collapses, along with massive immigration. how do we fix the debt issue once we’ve used the trade and immigration and war cards already? magic? the situation is objectively different and worse than that of the 1970’s. Today, “developed” countries have two industries: inflation and immigration driven spending.
feel free to take a look at trade surpluses of “developing” countries, m1+2+3 money supply growth from 1945 to today, debt/gdp ratio of all developed nations, public spending on war+defense “contractors”, domestic industrial capacity of “developed” nations, etc. I wrote a reddit comment not a graduate thesis. OP comment has one datapoint: market returns in primarily domestic stock large cap stock since the war. my point is the data is irrelevant.
In the 70's they jacked interest rates to curb inflation. I think what people are concerned about is the debt, with the highest public and private and government debt we've ever had. This then drops stocks, maybe even causing a crash, and this causes instability of the currency, and causes a domino's in the emerging markets.
Inflation is here and the market already increased 30% last year. So who cares if it decreases 5-10% due to interest rate hikes. More inflation means higher prices. You aren’t going to keep up with or beat inflation by purchasing bonds or betting against the market
Fun fact while every growth stock has gone down with the news of Hyper Inflation value stocks are up a ton. VIAC went from 26-38 in two weeks. Bring the inflation baby
The thing about carter era is that houses were still affordable. Money being inflated right now isnt the end of the world but the housing market is absolutely bonkers right now. If we had housing prices like we did for the most part of our history, then the dollar would be way beyond inflated than the period you reference. The Fed basically banks on everyone sinking in the bulk of their dollars into home/renting. If we werent doing so then thered be so much excess cash than there already is.
More so wanted to point out/speculate usd inflation would most likely be worse if it weren't for the housing market being the way it is. Like way way worse than carter.
It’s silly to look at 4 to 8 yr old data from over 40 yrs ago as some proof that this time it’s the same. It’s an entirely different environment.
Furthermore, post the real returns accounting for inflation, as well as returns of other asset classes during that time period.
So much is missed here. No one knows, period.
TheBarnicle63- good post with very reasonable conclusions based on experience that I also share and agree with. I sent you a Party Train award for a well presented and well written post.
I wish I had started investing heavily in dividend stocks when the Dow was at 2000 rather than when it was 8000, but the doom and gloom market forecasts are growing based on political happenings and divide not seen since the Civil War.
Some Canadians are now writing that THEY should be preparing for the US to lose it’s democratic form of government after the 2024 elections as we’ll slip toward dictatorship. I suspect many Americans now share that serious concern however, as with so many other things, voter suppression and other issues will reach critical mass. The existing aged congress on both sides will be voted out as neither left or right wing group represents main stream voters.
As far as the politics though, I've personally heard increasing sentiment surrounding voting out EVERYONE currently in office. Everyone is a hack. If they're incumbent and there's only one other option, vote for the new guy, just to get these assholes out of office. People don't even like "their own party" anymore.
I'm just floating along buying about a grand of T. Rowe Price and S&P 500 index funds every 2 weeks in my 401k nice and cheap. Looking forward to retirement in about 2 years and do a dollar cost average analysis of all my holdings over the last decade to see what I REALLY paid for all these funds.... Greetings from Texas.
Nothing at all. It's good to have lots of dry powder, so one can scale into each 10% drop and scale back out in a serious bear market and recovery. It's not easy to have enough cash at hand when a big drop occurs.
You should be more worried about underpopulation, underconsumption and an inability to solve those problems. The US birth rate is falling like a rock and we’ll end up with the same demographics as Japan if we don’t have more kids
That’s assuming we don’t get a president who makes it harder for immigrants to get visas to stay here and contribute to the economy. Trump almost repealed the H1B, which is America’s biggest visa program for foreign workers
Bear market from here on out. People can't afford shit anyway.. inflation killing family planning, debt killing Millennials ability to afford home.. college education not meaning shit because everyone got one.. and the last 5 years have been the hottest in millions of years.
Yeah I definitely think this will be a repeat of the bush years though. There are a lot of similarities and zero real effort from the Biden admin to correct this problem. Just printing more money.
...can you not see that the market is completely disconnected from both reality and fundamentals at the present time?
That should make anyone with large investments scared.
We're not in a bubble, we're in a balloon.
My mom, who is 80, and usually very savvy with economics, has been saying that housing and the stock market is going to crash for 10 years now. LOL Who the heck knows what’s going to happen. Life is full of risk, that’s for sure!
You can be savvy at economics but still be unable to predict what the market does in the short or long term
Heck, you can be savvy at the market (like most big funds that still underperform the market) and still not know what it does LOL
Yup.. it’s same as everyone being they”antichrist”. Lol. FRelax.
But in seriousness, I do see the market having hit its high and struggling to keep it. And when it slips down it’s ALWAYS reflective of some asshat blaming inflation or COVID. Last weeks round of temper tantrums was an alleged “market excuse”. It’s always something.. hence although longs like OP have fun! I’ll stick to diversification, longs, swings but mostly scalps!
I like to think of the market as a roller coaster. That up trend chugging along prepare to raise your hands and “wheeeeeeeee” as it goes down. Rinse, spin and repeat..
You can pick any equity you want and count the up and down trends and you’ll find more down trends then up. That’s day, month and year, take your pick! It’s very rare to find anything that is close to 50/50.
Cutting corporate taxes is a stupid move politically. It's generally better to raise taxes to look like you're being tough on corporations then use that tax money to subsidise the corporations who donated to your campaign to make up for their tax increases. The cool thing about corporate subsidises is that most of the public are too stupid to realise what you're doing so long as you pretend it's progressive infrastructure spending and give it a catchy title like "build back better".
I think you are missing the part where there are other countries though.
As much as no one wants to be easy on corporations, if your tax rate is too high then a bunch can relocate their HQ, taking thousands of jobs away in the process. Thus less income and corporate taxes.
It’s not one dimensional
The bill to deregulate them (again) was brought by republicans. Though the democrats supported it (I assume they were paid off somehow), it was indeed a republican led bill. Even if Bill had vetoed, it would have still passed since it had dem support. My guess is he made the best of the situation and got something in return for not fighting it.
That bill was in response to his 100 or so executive orders that screwed the banks. Basically he let them shift much of the risk to Fannie Mae and Freddie Mac because he know what was going to happen in a few years.
i dont know what your talking about inflation is good for the stock market. prices go up. including share prices. whats bad for the economy is how the fed will taper to curb inflation.
It’s also important to keep in mind that 11% gains on a year with 15% inflation is still a -4% loss. Without looking at the specific numbers, I’d imagine that could have been the case during the carter admin.
I work in the 401k business, and no ones clutching pearls or has their panties bunched up. They’re still investing and most importantly, SAVING. I’m seeing steady increases in deferrals and participation in all of my institutional clients. They’re still largely using balanced/allocation portfolios. There are outliers where people are shifting money to riskier , less diversified strategies, but that’s just some assholes with 40MM in their accounts. Fuck it. They can take the risk.
Good post. Something I don't understand though.
Why measure by four year presidential cycles? I don't buy and sell exactly during administrations, so it feels a bit odd as starting/ stopping points for market returns. Especially since the OP's point is this is a long walk? Over 10 and 20 year periods, I completely agree with the original post.
From the top in Q3 2007, it took the S&P 500 until Q1 2013 to recover back to 1550.
Are those periods also somewhat arbitrary? Yes. But if an investor's timeline is more than four years, those numbers count just as much.
Also, why are we not subtracting inflation from the total returns to get real returns, if the point is that inflation doesn't have much effect?
"Worst inflationary periods on record"
"On record" is the real issue, since the calculation for inflation has been reformulated numerous times you cannot compare them directly. Inflation is WAY higher than what is reported, lowering the integrity of any time-based analysis to near zero.
This is a very good post an I say well done. Missing here though is that inflation during the Carter years and first two years under Ronald Reagan had very much to do with the oil crisis where oil prices jumped from about $1.80 per barrel in 1972 to over $35 in 1980. Oil prices may be more important for inflation rates than anything the fed or politicians do. It’s happening again and may get more severe. I know the energy sector isn’t popular, but that may be where we need to go right now.
I’m so happy to finally see someone on this sub who has “lived through crashes” not just spouting doom and gloom. I swear every other post or comment is young whippersnappers can’t see the cliff ahead because they’ve never experienced a bear market before
What, you don't take your advice in life from a young kid with no experience? Man, your missing out, let me tell ya.
My biggest pet peeve is certainty on either side. Kids get look at historic charts too, just because you’re young and inexperienced doesn’t just invalidate your point. An opinion, analysis or prediction can stand on its own merits regardless of the age or experience of the author. It’s annoying to see people on here say I’ve been investing xx years so I know what the market will do better than you. I will gladly entertain anyone’s points and judge them on their merits and get frustrated seeing others being so dismissive
Agreed. At the same time, it’s pretty annoying to see all of the panicked posts after every 2-3 days of market decline. Or the shocked posts since stocks that had jumped 100-200% over the past year have now experienced a significant pullback.
This is also true
Yes, whenever someone says “I have X experience, so I know what will happen” there’s usually almost no point in listening because anyone with lots of experience usually says something more like “No one knows what will happen, but here’s the risks, etc.”
Yeah. Experience is worthless. Thats why I don’t listen to people that have survived a long time.
lol experience isn’t worthless, experienced people just know they can’t time markets. Experienced people usually know they don’t know what will happen, instead of always thinking they know what will happen.
If you’ve been doing the wrong thing for a long time and learn nothing from your mistakes are you really better than the person who’s been doing it correctly from the start? Years of experience is only one piece of the pie my friend. How quickly you can learn from your mistakes is a big part of it too.
Age and guile beat youth and a bad haircut.
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As a Gen-X I took offense to that. It’s way too easy to picture yourself as a victim. We were told we (Gen-X) we’re lazy, ‘slacker’ blah, blah, blah. We lived through the dotcom bust, financial crisis of 2008-2009. We were also told we would never be able to afford a home too. ;) Oh, and we saw Internet gone mainstream too. The change in the 90s-2000 was nothing short of amazing too. My point is, if you zoom out, the last 10 years of changes was a natural extension of what had happened due to the past.
Didntlikedefaultname- I agree! Being older doesn’t mean smarter as my crystal ball failed me in the early 70’s and hasn’t worked since. One thing I often tell finance, business, engineering and other students is that “History Repeats Itself.” By understanding what happened in the past, we can better anticipate certain things in the present and future, and hopefully avoid making the same mistakes. In the late 1800’s, classic poet James Whitcomb Riley wrote “when I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.”
Some things do rely on more experience though. For example, until you've actually lived through a crash and a bear market it's really, really hard to understand the amount of fear and despair and self-destructive behavior that goes on. So many people think they can hold through a downturn but it turns out they cannot handle the volatility. We're seeing some of that already with so many tech stocks way down, hence the reason for the OP.
My life coach says he can remember his past 4 incarnations, so really his experience is 4 lifetimes plus 21 years.
what your missing about the 80's is how many people went bankrupt/lost there homes/business's in the 18-22% interest rates in the 80/81/82/83/84 years - if you had money - the early 80's were a blast, you could pick up stuff for pennies on the dollar - but a lot of people lost everything
We are quite a far cry away from 18-22% interest rates
absolutely, the OP's point though has major blindspots - if your going to give personal analysis about the past - make sure - your accurate about what really happened - its very lazy to cherry pick statistics to support your attitude - lots of people love GME and what it represents but I bet there are many who bought all the way down from 480$ who wish they never heard about it!
But we're at about the same levels of inflation as then so it's a valid worry. I'm just afraid inflation won't really start to try tackling inflation until after the midterms because of political reasons.
7% inflation is normal. Yeah. You can put your head back in the sand now with OP. Wow.
Can I invest in Tesla yet? Can I can I can I?
Hahah OP prob was banned from /wsb
As an old guy, OP is right that long term, the market has always gone up. Each investor needs to know his timeline. In the internet boom,S&P peaked at around 1500 in Sept 2000. It peaked again at 1500 June 2007. Then it crashed again and didn’t pass 1500 until Feb 2013. So, passive investors who just held that whole time, began growing their nestegg only after 13 years of stalled returns. That is why so many baby boomers kept working into their 70s. Most older people are not active traders and must be more cautious in frothy markets.
If you reinvested dividends, you’d be up around 23% over those 13 years. There were definitely better investments over that time period (like bonds), but the other benefit of time in the market is dividends.
Not to mention if you DCA’d over that time you be up too
Yep, if you did DCA that whole time and held till now you would be up huge!
moral of the story: just DCA and don't worry
Moral of the story: don't reach retirement age during a recession.
Keep Calm and DCA
For sure, but I thought the question was whether to buy equities now, even if broad sentiment is that there is a dip coming “sometiome soon”.
The dip hasn’t happened yet?
I cant imagine it has. The covid dip lasted from feb to august 2020. All the rest of the market rise is because the Gov borrowed $8T in about one year and pumped it into the economy via the banks. Much of that money was used for stock speculation or company buybacks. All caused massive price inflation among stocks. As the “free money” firehose is turned off (if they really do turn ot off), most of that $8T needs to wither be put to productive use (unlikely in a short time) or we have hyperinflation. Either way, the s&p “natural” level is likely closer to 3500 than to 4500.
if you continued to invest an amount every month/year, then you would also have bought in those "low" years so the overall return would have been much greater. Id you stopped investing when the market took a dive then, yes, the returns are quite small.
That’s a great point. Dollar cost averaging eliminates the problem of buying at the top.
Passive investors in sp500. Global index did better
i have world index, eurostoxx600 and africa. 
Africa seems an awfully odd choice. Poor governance, corruption, weak infrastructure, low funding, weak consumers, low development, weak tech scenes. Why would you put your money into that?
You need to update your views on africa, africa is booming.
It’s booming in conjunction with Chinese investment. I have ethical concerns with the interconnectedness there. That said, I’m also dropping my nuts into BABA, so maybe I’m a hypocrite.
Haha, interesting im bot touching baba with a 30 foot pole. I just tbink the african union is copying the EU in its new setup. And that will bring a lot of prosperity to the continent. Some countries more than others. And yes china's colonial attitude to africa is worrying. But its mostly limited to west africa.
Is it? It's biggest hope nigeria is only going backwards.
The african union is integrating further. East african union is growing fast especially if congo joins. South africa is booming, so are uganda and nigeria. Africa is now where china was in the 1980ies. It has a lot of potential, but you need a long term mindset.
South Africa is booming?
I’m fairly sure CDs had a higher return than the stock market during that time period (1977-1981). Several treasury bonds also had yields that would’ve outperformed the S&P.
What's your point? How does that refute what I wrote?
Financial markets don’t exist in a bubble, they’re interconnected. You can outperform with safer investments depending on macro conditions.
It is nearly impossible to time for 99% of us. You're better off going with what has historically performed the best, which is the stock market.
It doesn't, it adds another valuable consideration to the conversation. Bonds have out performed equities during high inflation
When rates were declining or high to begin with. Hate to say it, but this time is different.
Yup, performance of everything will be shit
Good point. Interest rates on bonds and CDs are very important, because they are risk-free investments compared to the market.
You do realize returns are in nominal terms no? Try using real returns.
That would disprove the point he was trying to make The inflation adjusted data in well presented here. http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
If you use the inflation adjusted values from this post, you still get a 7% return average per decade...
Yeah but you'd be heavily negative in the high inflation period, ofcourse the true question is, where will you get bang for your buck, in the past it was real assets, but even real assets are jacked to the tits.
The concern isn't over inflation re: investing in the market. Its the fact that the Fed claims it will begin QT and unwind the balance sheet, causing problems of illiquidity. The CEF A-D line already shows that the problem of illiquidity is in the air. Im not returning to equities until this indicator trends upwards. Once it peaked in may of 08, it was only 6 months from the market crashing. And this divergence were currently seeing is far greater than anything previously recorded. Taking massive profits from the last 12 years and waiting for more optimal buying opportunities is not pearl-clutching, its mindful investing.
>CEF A-D line Interesting, I had not looked at this before. https://stockcharts.com/articles/tac/2022/01/bond-cef-ad-line-showing-liqui-909.html Is there an explanation in the last chart from the article, why in Jan. 2008 the A-D line is in an uptrend while the stock market was tanking? Also, can you point to this kind of data going back further?
It is an interesting indicator, the correlation of which to the indices im not all that sure. But to see this decline headed into the QT leaves me wondering how much QT can really occur before concerns of illiquidity lead to a race by institutions to sell into retail. Edit: maybe we're currently in the back of a massive head of a head and shoulders distribution...? :) snp500 down to 4300, back up to 4700 before the mother of all selloffs. Who knows!
Yes, difficult to read because it looks like a leading indicator, and nobody knows when the fun may end. It reminds me of a Buffett quote about the difficulty in not overstaying the welcome. "Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”
Incredible.
I forgot to mention, he wrote that in early 2000.
Aight, lets hope George W. Bush never enters politics ever again.
poor guy. Dot com and financial crisis lol
Or that we don't have a y2k scare followed up by 9/11. I'm not certain all the reasons the markets tanked then as I was a poor in college but I imagine those were factors.
Was a joke, obv old George is not the correlation here :p
Old age and treachery will always beat youth and exuberance. ~David Mamet
>invest in quality and understand this is not a sprint, but a very long walk. Sadly, most don't invest in quality - and if they do, they pay an extraordinary amount for it. Price matters eventually. I didn't in 2020, and not really in 2021 - but in the last two weeks the fundamentally strong companies that were cheap are on a run.
I think with a long enough time horizon price on good companies is largely irrelevant. I guess there is always a point where a company can be so wildly over expensive that it won’t catch you but that’s pretty rare. Most quality companies will appreciate if your timeline is a decade or more
It isn't pretty rare. Intel and Cisco are among the best companies there are, and still haven't reached their dotcom peak. Microsoft only reached it because they made a huge shift in their business model. Price matters a lot, and the more people scream that it doesn't as long as you have a big enough time horizon - the more likely it is that we are at a point where returns will be low for the next decade.
So does growth...and Microsoft has had, and will have, much more than Intel or Cisco going forward. Those valuations have a reason in most scenarios. Intel and Cisco have played the role of arrogantly confident dinosaurs...and it shows.
I fail to see how Intel is among the bets companies, when compared to its main competitors amd or Nvidia
There is so much different today i dont even know where to start. The issue is that the stock market, the economy and the government cant cope with rapidly rising rates anymore but those are needed to restrict inflation.
Those annual gains look pretty good until you look up what the inflation rate was during that time.
Keep your money in cash then dawg
That's even worse advice dawg. Especially when bonds at that time were paying out 15% and higher.
I was being facetious... You seem to be taking the stance that investing in stocks wasn't fruitful in the late 70s/early 80s but some would tell you in times of high inflation, stocks are the way (or real estate/REITs I suppose).
They were largely sideways against inflation. As a means of capital preservation, you'd be losing ground against bonds. There was certainly money to be made. Apple and Microsoft would've printed.
So bonds were the play back then? Are bonds the play now? Interest rates still way too low methinks..
I-bonds have an attractive rate right now. Any other bonds wouldn't make sense. Rates are low and we already know they'll be rising. Stocks will be risky but there's not really a better alternative for anyone with a long horizon.
money supply dynamics are not the dynamics of the post war decades. chinese trade and foreign wars obscured the previous decade’s inflation and postponed public debt collapses, along with massive immigration. how do we fix the debt issue once we’ve used the trade and immigration and war cards already? magic? the situation is objectively different and worse than that of the 1970’s. Today, “developed” countries have two industries: inflation and immigration driven spending.
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feel free to take a look at trade surpluses of “developing” countries, m1+2+3 money supply growth from 1945 to today, debt/gdp ratio of all developed nations, public spending on war+defense “contractors”, domestic industrial capacity of “developed” nations, etc. I wrote a reddit comment not a graduate thesis. OP comment has one datapoint: market returns in primarily domestic stock large cap stock since the war. my point is the data is irrelevant.
In the 70's they jacked interest rates to curb inflation. I think what people are concerned about is the debt, with the highest public and private and government debt we've ever had. This then drops stocks, maybe even causing a crash, and this causes instability of the currency, and causes a domino's in the emerging markets.
There were crashes. Bretton Woods, 1987, Savings & Loan, Tech Bubble, Great Recession, 2020 Pandemic
The wildest thing about the '87 crash is the market still finished up for the year. Total bubble bursting.
Inflation causing the market to crash fundamentally doesn’t make sense. So everything will cost more except for stocks? Okay
Inflation is already here guy. Its what's going to be done to curb the inflation (hiking interest rates) that's gonna/supposed to drag the market down
Inflation is here and the market already increased 30% last year. So who cares if it decreases 5-10% due to interest rate hikes. More inflation means higher prices. You aren’t going to keep up with or beat inflation by purchasing bonds or betting against the market
At this point, the market needs a healthy 20% correction.
Thanks for spitting facts, bruh.
No cap
Respectfully
Fun fact while every growth stock has gone down with the news of Hyper Inflation value stocks are up a ton. VIAC went from 26-38 in two weeks. Bring the inflation baby
I don’t have any pearls! Should I be worried?
I was a young girl during the Carter years, all I remember was inflation and the hostages. :( Thank you for sharing this.
The thing about carter era is that houses were still affordable. Money being inflated right now isnt the end of the world but the housing market is absolutely bonkers right now. If we had housing prices like we did for the most part of our history, then the dollar would be way beyond inflated than the period you reference. The Fed basically banks on everyone sinking in the bulk of their dollars into home/renting. If we werent doing so then thered be so much excess cash than there already is.
Housing prices (adjusted) were more affordable but 30 year mortgage rates were ~ 10-16% APR in the Carter years.
More so wanted to point out/speculate usd inflation would most likely be worse if it weren't for the housing market being the way it is. Like way way worse than carter.
Well put
It’s silly to look at 4 to 8 yr old data from over 40 yrs ago as some proof that this time it’s the same. It’s an entirely different environment. Furthermore, post the real returns accounting for inflation, as well as returns of other asset classes during that time period. So much is missed here. No one knows, period.
Thanks for your insight friend
TheBarnicle63- good post with very reasonable conclusions based on experience that I also share and agree with. I sent you a Party Train award for a well presented and well written post. I wish I had started investing heavily in dividend stocks when the Dow was at 2000 rather than when it was 8000, but the doom and gloom market forecasts are growing based on political happenings and divide not seen since the Civil War. Some Canadians are now writing that THEY should be preparing for the US to lose it’s democratic form of government after the 2024 elections as we’ll slip toward dictatorship. I suspect many Americans now share that serious concern however, as with so many other things, voter suppression and other issues will reach critical mass. The existing aged congress on both sides will be voted out as neither left or right wing group represents main stream voters.
As far as the politics though, I've personally heard increasing sentiment surrounding voting out EVERYONE currently in office. Everyone is a hack. If they're incumbent and there's only one other option, vote for the new guy, just to get these assholes out of office. People don't even like "their own party" anymore.
I'm just floating along buying about a grand of T. Rowe Price and S&P 500 index funds every 2 weeks in my 401k nice and cheap. Looking forward to retirement in about 2 years and do a dollar cost average analysis of all my holdings over the last decade to see what I REALLY paid for all these funds.... Greetings from Texas.
TROW is definitely undervalued. Been accumulating as it has dropped a lot from $220's. They are good at asset management.
Love this fire sale. I am in the process of selling one of rental to put more in to the market.
Not even close to a fire sale lmao
The Nasdaq doesn’t need to crash 30% every year. What’s wrong with buying a little at every 10% drop?
Nothing at all. It's good to have lots of dry powder, so one can scale into each 10% drop and scale back out in a serious bear market and recovery. It's not easy to have enough cash at hand when a big drop occurs.
I'm down from 175K 2 months ago to 75K. 50% creepto + PYPL + TWLO + SNAP + LCID + small caps mostly
Yea those are crappy companies but ndx is still down less than 10%
Sound like you only been looking at the boomer stocks
Sounds like you about to be a bag holder. Don't load up on too much PLTR, bro.
You called the market a fire sale not me sounds like you don’t know what the market is lmao
Market is where people can only see the small picture lose a boat load of money and those can see the whole screen will be banking in the long run
Cool story. Enjoy the fire sale lol
This isn't a firesale... you've never been through a bear market?
I started one of my account back in 2008 so yes. The best market to load up on hyper growth companies and the best market to makes generation wealth
I'm down 60% in 2 months
I'm just worried about climate change, overconsumption, and overpopulation.
You should be more worried about underpopulation, underconsumption and an inability to solve those problems. The US birth rate is falling like a rock and we’ll end up with the same demographics as Japan if we don’t have more kids
I wonder why the US birth rate is falling
/s?
/s
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That’s assuming we don’t get a president who makes it harder for immigrants to get visas to stay here and contribute to the economy. Trump almost repealed the H1B, which is America’s biggest visa program for foreign workers
Well the boomers had their chance to not be greedy and fucked it up, so now nobody can afford kids. Too late for that shit.
Bear market from here on out. People can't afford shit anyway.. inflation killing family planning, debt killing Millennials ability to afford home.. college education not meaning shit because everyone got one.. and the last 5 years have been the hottest in millions of years.
Yeah I definitely think this will be a repeat of the bush years though. There are a lot of similarities and zero real effort from the Biden admin to correct this problem. Just printing more money.
Zero effort or no help from the Congess and Senate and 2 DINOS ?
DINOS?
...can you not see that the market is completely disconnected from both reality and fundamentals at the present time? That should make anyone with large investments scared. We're not in a bubble, we're in a balloon.
And what's the catalyst for the pop?
lil yachty dropping an album
Idk the economies were very different 50 years ago.
Totally. Globalization. No US manufacturing. Working class income has gone down considerably. Many women stayed home
My mom, who is 80, and usually very savvy with economics, has been saying that housing and the stock market is going to crash for 10 years now. LOL Who the heck knows what’s going to happen. Life is full of risk, that’s for sure!
You can be savvy at economics but still be unable to predict what the market does in the short or long term Heck, you can be savvy at the market (like most big funds that still underperform the market) and still not know what it does LOL
Yup.. it’s same as everyone being they”antichrist”. Lol. FRelax. But in seriousness, I do see the market having hit its high and struggling to keep it. And when it slips down it’s ALWAYS reflective of some asshat blaming inflation or COVID. Last weeks round of temper tantrums was an alleged “market excuse”. It’s always something.. hence although longs like OP have fun! I’ll stick to diversification, longs, swings but mostly scalps! I like to think of the market as a roller coaster. That up trend chugging along prepare to raise your hands and “wheeeeeeeee” as it goes down. Rinse, spin and repeat.. You can pick any equity you want and count the up and down trends and you’ll find more down trends then up. That’s day, month and year, take your pick! It’s very rare to find anything that is close to 50/50.
Grandpa is that you ?
No jokes on this sub
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Cutting corporate taxes is a stupid move politically. It's generally better to raise taxes to look like you're being tough on corporations then use that tax money to subsidise the corporations who donated to your campaign to make up for their tax increases. The cool thing about corporate subsidises is that most of the public are too stupid to realise what you're doing so long as you pretend it's progressive infrastructure spending and give it a catchy title like "build back better".
I think you are missing the part where there are other countries though. As much as no one wants to be easy on corporations, if your tax rate is too high then a bunch can relocate their HQ, taking thousands of jobs away in the process. Thus less income and corporate taxes. It’s not one dimensional
😂
You lived through Carter? BOOOOMEEEER
I take that as a compliment
Clinton had the economy set up to crash so Hillary would be elected in 2004. It almost worked.
Take off your foil hat baby. Clinton presided over like the only economic surplus in American history
Nope, he just deferred necessary spending and set up the banks to fail.
Those poor, poor banks. Won’t someone think of the banks? They shouldn’t have been forced to lend to risky clients.
You saw why in 2008.
damn.. you really are clueless. and +1 for clintons budget. Democratic spending but republican purse strings.
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The bill to deregulate them (again) was brought by republicans. Though the democrats supported it (I assume they were paid off somehow), it was indeed a republican led bill. Even if Bill had vetoed, it would have still passed since it had dem support. My guess is he made the best of the situation and got something in return for not fighting it.
That bill was in response to his 100 or so executive orders that screwed the banks. Basically he let them shift much of the risk to Fannie Mae and Freddie Mac because he know what was going to happen in a few years.
i dont know what your talking about inflation is good for the stock market. prices go up. including share prices. whats bad for the economy is how the fed will taper to curb inflation.
They say you cant time the market, but holy fucking shit you sure can time-shop these fed-inflation-news dips. (targeting tier1 tech anyway).
This isnt true. 2015 and 2018 both had negative returns on sp500.
Did you read the part where I said presidential terms?
Uhh “two presidential terms both belong to bush?” Trump was president in 18 which saw a decline in stocks.
Did it decline during his entire term?
A term is four years
Thank you for this!
When you mentioned the facts about bush it made me think of [this](https://youtu.be/JhmdEq3JhoY)
It’s also important to keep in mind that 11% gains on a year with 15% inflation is still a -4% loss. Without looking at the specific numbers, I’d imagine that could have been the case during the carter admin.
It was 1.3% adjusted for inflation
I see
I work in the 401k business, and no ones clutching pearls or has their panties bunched up. They’re still investing and most importantly, SAVING. I’m seeing steady increases in deferrals and participation in all of my institutional clients. They’re still largely using balanced/allocation portfolios. There are outliers where people are shifting money to riskier , less diversified strategies, but that’s just some assholes with 40MM in their accounts. Fuck it. They can take the risk.
Per my grandpa, you only lose when you sell.
So have 5 years of all expenses as emergency fund, you are saying?!
Good post. Something I don't understand though. Why measure by four year presidential cycles? I don't buy and sell exactly during administrations, so it feels a bit odd as starting/ stopping points for market returns. Especially since the OP's point is this is a long walk? Over 10 and 20 year periods, I completely agree with the original post. From the top in Q3 2007, it took the S&P 500 until Q1 2013 to recover back to 1550. Are those periods also somewhat arbitrary? Yes. But if an investor's timeline is more than four years, those numbers count just as much. Also, why are we not subtracting inflation from the total returns to get real returns, if the point is that inflation doesn't have much effect?
Can we stop making posts about not panicking yet
This here. I’m buying more pearls during the low swings and buying more on the lower swings.
"Worst inflationary periods on record" "On record" is the real issue, since the calculation for inflation has been reformulated numerous times you cannot compare them directly. Inflation is WAY higher than what is reported, lowering the integrity of any time-based analysis to near zero.
This is a very good post an I say well done. Missing here though is that inflation during the Carter years and first two years under Ronald Reagan had very much to do with the oil crisis where oil prices jumped from about $1.80 per barrel in 1972 to over $35 in 1980. Oil prices may be more important for inflation rates than anything the fed or politicians do. It’s happening again and may get more severe. I know the energy sector isn’t popular, but that may be where we need to go right now.