Down goes the Dow

seattle prattle wrote:

Ghost of Igloi wrote:

Enjoy your paper wealth “prosperity.”

Thanks, Igy. I have.

And by doing so, i have been enjoying of what Warren Buffet calls 'the magic of compounding'.

Sprinkled with dividends.

All in expectation of the real party to come - the taking of profits.

Those invested over the long term have that opportunity.

This belief is all to common, from Graham and Dodd, Security Analysis, 1934:

"During the latter stage of the bull market culminating in 1929, the public acquired a completely different attitude towards the investment merits of common stocks… Why did the investing public turn its attention from dividends, from asset values, and from average earnings to transfer it almost exclusively to the earnings trend, i.e. to the changes in earnings expected in the future? The answer was, first, that the records of the past were proving an undependable guide to investment; and, second, that the rewards offered by the future had become irresistibly alluring.

"Along with this idea as to what constituted the basis for common-stock selection emerged a companion theory that common stocks represented the most profitable and therefore the most desirable media for long-term investment. This gospel was based on a certain amount of research, showing that diversified lists of common stocks had regularly increased in value over stated intervals of time for many years past.

"These statements sound innocent and plausible. Yet they concealed two theoretical weaknesses that could and did result in untold mischief. The first of these defects was that they abolished the fundamental distinctions between investment and speculation. The second was that they ignored the price of a stock in determining whether or not it was a desirable purchase.

"The notion that the desirability of a common stock was entirely independent of its price seems incredibly absurd. Yet the new-era theory led directly to this thesis… An alluring corollary of this principle was that making money in the stock market was now the easiest thing in the world. It was only necessary to buy 'good' stocks, regardless of price, and then to let nature take her upward course. The results of such a doctrine could not fail to be tragic."

Wow, from 1934! That's really cool.

Hey, if you're buddies Graham and Dudd invested $10 K in the S&P500 that year, do you know how much it would be worth right now?

That $10 K would be worth $2,74,000. today.

Sure hope nobody's making those kind of mistakes today.

-SP

* $2,740,000.

That's a lot.

....and if they were 20 at the time they would be 104 years old.....

Benjamin Graham was Warren Buffett’s mentor by the way.

Ghost of Igloi wrote:

No point to prove other than your usual childish response.

Ah yes, the insult in lieu of a rational response. Of course, there is no alternative for you.

la gente ésta muy loca wrote:

Klondike5 wrote:

Down to 14,850 from a peak of 15,700 I believe.

Maybe 5%

What's the bottom?

I am betting sub 13,000

You gotta be first or right. If you're both then that's lucky. @barnejek

5 years later ( Total Returns ) :

DIA up 93.28%

SPY up 91.24%

QQQ up 151.65%

VTI up 89.61%

RSP up 79.73%

VB up 78.57%

RUT up 66.18%

My mistake , RUT is RU2000 Price Return

IWM up 78.15%

VIOO ( S&P 600 ) up 97.64%

Ghost of Igloi wrote:

....and if they were 20 at the time they would be 104 years old.....

Benjamin Graham was Warren Buffett’s mentor by the way.

What can i say? If they had my stock picking prowess, they would have reached that milestone a lot younger.

Happy trading!

seattle prattle wrote:

Ghost of Igloi wrote:

....and if they were 20 at the time they would be 104 years old.....

Benjamin Graham was Warren Buffett’s mentor by the way.

What can i say? If they had my stock picking prowess, they would have reached that milestone a lot younger.

Happy trading!

Seattle,

You conveniently forgot that if they bought in 1929 that hypothetical person did not get back to even until 1954. Oh by the way the current CAPE 10 is higher than 1929.

Happy trading, maybe unhappy ending!

Igy

There is no “ending”.

Ghost of Igloi wrote:

seattle prattle wrote:

What can i say? If they had my stock picking prowess, they would have reached that milestone a lot younger.

Happy trading!

Seattle,

You conveniently forgot that if they bought in 1929 that hypothetical person did not get back to even until 1954. Oh by the way the current CAPE 10 is higher than 1929.

Happy trading, maybe unhappy ending!

Igy

Do you have a source or working for this claim? I'm pretty sure the index didn't reach the same level in 1954. This is complicated by the changes to the constituents of the index. It also doesn't include dividends. I think it actually took less than a decade to break even, including dividends.

I should also point out that you don't mean any time in 1929, but the peak. Cherry picking the worst time to buy doesn't make much more sense than cherry picking the worst (arguably it's a bit more realistic as, if people are trying to time the market, they will likely be greedy enough to buy near the top and too scared to buy near the bottom.

Wibster wrote:

Do you have a source or working for this claim? I'm pretty sure the index didn't reach the same level in 1954. This is complicated by the changes to the constituents of the index. It also doesn't include dividends. I think it actually took less than a decade to break even, including dividends.

I should also point out that you don't mean any time in 1929, but the peak. Cherry picking the worst time to buy doesn't make much more sense than cherry picking the worst (arguably it's a bit more realistic as, if people are trying to time the market, they will likely be greedy enough to buy near the top and too scared to buy near the bottom.

Total Return ( Dividends Reinvested ) was 5.85%

Dollar cost averaging ; equal amount on a monthly basis beginning September 1929 to September 1954 , had a XIRR of 10.74%

Dollar cost averaging in NIKKEI starting in Dec 1989 - July 2018 :

H/T pensionpartners.com

Fact checker wrote:

Ted Nugent wrote:

This is misleading as it doesn’t include pensions, annuities, mutual funds, stocks, etc.

You are correct that it does not include pensions, brokerage accounts, and annuities. Nor does it include mutual funds held outside of a retirement account. The numbers reflect only bank accounts and retirement savings accounts.

You may also wish to consider this disclaimer accompanying the article: “The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.”

it also doesnt' seem, incredibly, to include Social Security - which is of course the main way people save in this country, besides their home.

All of these wealth stats - inequality included - don't take SS into consideration, and thus ignore a vast, vast store of wealth in this nation's poor and middle class. SS flattens out much of the inequality issue.

Think about it - a two person household with SS has something like an annuity worth $700,000 or so.

Enjoy that penicillin! You might survive your infection now, but 4 decades from now penicillin won’t work and you’ll get a resistant infection and die! Jokes on you

agip,

I hate to mention all the unfunded liabilities of Medicare and Social Security. I took my Social Security at 66 while letting my wife’s spousal benefit grow (she’s four years younger). Hedging insolvency and life expectancy a bit.

Igy

Ghost of Igloi wrote:

agip,

I hate to mention all the unfunded liabilities of Medicare and Social Security. I took my Social Security at 66 while letting my wife’s spousal benefit grow (she’s four years younger). Hedging insolvency and life expectancy a bit.

Igy

yeah that's the catch - that the money is not in peoples' accounts...it is controlled by government.

But worst case the system fails and our SS payments drop 20% or something like that - not a catastrophe and that's worst case. More likely they find a solution. I mean SS is one of the most important thjings the fed gov't does - hard to see them not supporting the program .

Medicare I don't know. That's going to change mightily over the next 20 years. It won't be the same thing as it is now. I'm sure there will be a public option for everyone pretty soon. We can't go on like this - with most of the population wanting government health care and a few politicians stopping the project.

Interestingly that analysts no longer mention the Fed Model or the Dividend Discount Model as suppprt for equity valuations. The proxy on the model for Treasuries is usually the 10 Year but that has long passed the dividend yield on the S&P 500. Interestingly the S&P yield is now 1.7% while the 3 month T-Bill is now over 2.0%.

Igy

Ghost of Igloi wrote:

agip,

I took my Social Security at 66 while letting my wife’s spousal benefit grow (she’s four years younger). Hedging insolvency and life expectancy a bit.

Igy

Why would you not have let your wife start drawing her's, you take the spousal benefit (50%) of her's, and let yours grow?

Ghost of Igloi wrote:

Interestingly that analysts no longer mention the Fed Model or the Dividend Discount Model as suppprt for equity valuations. The proxy on the model for Treasuries is usually the 10 Year but that has long passed the dividend yield on the S&P 500. Interestingly the S&P yield is now 1.7% while the 3 month T-Bill is now over 2.0%.

Igy

most people use the P/E ratio...which shows stocks to be a little expensive. Esp considering fairly low interest rates.

the fed model doesn't really work when the fed is manipulating inter and long term interest rates.

dividend discount model never worked really. not for 30 years anyway.

the Shiller PE is discredited since it says we should have exited the stock market in around 1996 and stayed out ever since.

valuation is not easy

Ghost of Igloi wrote:

I took my Social Security at 66 while letting my wife’s spousal benefit grow (she’s four years younger). Hedging insolvency and life expectancy a bit.

Igy

If anyone still doubts that Igy is a troll, this should convince you otherwise.