Factoid for the PermaBears

Discussion in 'Economics' started by EqtTrdr, Dec 20, 2006.

  1. factoid for the permas: The Great Depression, 1929-1938, provided a positive real return of 1% a year on average. Even including dividends, the current market needs a real index gain of almost 6% a year on average during the remaining years of this decade just to match the Great Depression. Anything less would make this decade worse.


    For the market in this decade to produce the average real performance of the entire 80-year period, the real rate of return during the remaining years of the decade would have to exceed 26% a year. Given today's dividend yields, that figure would require the index to rise by more than 22% a year in real terms for the remaining years of the decade, or about 25% in nominal terms, if inflation stays in the 3% range.

    :eek:
     
  2. noddyboy

    noddyboy

    I assume you are starting Jan 1st 1929?

    When are you starting this decade? Jan 1st 2000?
     
  3. lol you're forgetting the market went up at an avg return 17% a year from 1982-2000 or 2 times the rate of history. also go tell the japs who's market is still down 60% from 18 years ago.
     
  4. Are you refering to the Dow, S&P or Nasdaq?
     
  5. dollar cost averaging into the stock market, there has never been a 20 yr period where there wasn't a positive return, and in most of those 20 yr periods, the market was a better investment than most asset classes.

    this doesn't say much about TRADING anyways. but it says a lot about investing
     
  6. Q12

    Q12

    Nikkei 1989 = 39,000... Nikkei today = 17,000... 15+ years and still an open draw of > 50%... good thing nothing like this could ever happen in the U.S.!!
     
  7. again, read... DOLLAR COST AVERAGING

    dollar cost averaging does not imply fully investing the lump sum at the top.

    it means the same amount of $$$ every (month, week, whatever)

    the US had a pretty terrible crash in 1929

    and if an invester dollar cost averaged through that period he would have done just fine. don't get me wrong. on a shorter timeframe, it would have been sucky. but the point stands. feel free to do the math

    if he margined 10:1 at a bucket shop near the apex in 1929, he would have jumped out a window... as some did
     
  8. Some market data shows a negative return during the period referenced by OP.
    • S&P 500 proxy data (nominal):
      January 1929: 24.86
      December 1938: 12.69

      CPI proxy data:
      January 1929: 17.10
      December 1938: 14.00

      S&P 500 proxy data (normalized to December 1938):
      January 1929: 20.35
      December 1938: 12.69
      Real return = -38%
    The data above is per Dr. Robert Shiller's website (http://www.irrationalexuberance.com/index.htm).

    [Edit: Including dividends would change the real return to -6%.]
     
  9. hels02

    hels02

    Buying at the bottom is absolutely the greatest way of making money.

    The question has always been and always will be... how do you know it's the bottom?
     
    #10     Dec 22, 2006