Down goes the Dow

just for the record, even after the current 7.3% drop, the stock market in the US is up 17.0% since the OP started the thread.

That's a 13.0% annual rate of return.

I'm using VTI, the Vanguard Total Stock Market Index as my measure.

Since you refer to the original post, the only fair basis for comparison is the DJIA, which is up only 9%, 8% annualized (yes, before dividends).

In my opinion, that's still substantial, especially when combined with dividends (yes, I know there are fees).

DJIA up 60 in early trading, in what seems to be a tepid response to good earnings news, but is probably a very strong response when one considers the trend reversal.

Still, the day is long.

Maserati wrote:

Since you refer to the original post, the only fair basis for comparison is the DJIA, which is up only 9%, 8% annualized (yes, before dividends).

In my opinion, that's still substantial, especially when combined with dividends (yes, I know there are fees).

DJIA up 60 in early trading, in what seems to be a tepid response to good earnings news, but is probably a very strong response when one considers the trend reversal.

Still, the day is long.

I see no value in referring to the djia - it is a silly index created by men in a different era.

for ex:

Visa is 8% of the index

GE is just 1%

even though GE has a market cap 2x Visa.

The only thing that matters is stock price in the DJIA - it is absurd and a relic.

Why would anyone use the DJIA as a measure of stock market return?

as for the OP's intent...

K5 also thinks the planet is run by a cabal of wicked zyonists and lord knows what else. Do we have to follow him on that too?

in other news, another day of traders buying up risky assets - that is bullish.

Big caps: +0.59%

Small caps: +1.6%

I do think most times that indicates some kind of bottom, if only temporary.

The numbers are "fudged" exactly the same way they were under the Bush administration.

R2D3 wrote:

The numbers are "fudged" exactly the same way they were under the Bush administration.

Sure. I have no political fight here.

I will say that, regardless of who sat in the big chair, it was the Oracle and his henchmen who really developed a taste for fudge. The effects continue to resonate.

Up 100 now.

agip wrote:

in other news, another day of traders buying up risky assets - that is bullish.

Big caps: +0.59%

Small caps: +1.6%

I do think most times that indicates some kind of bottom, if only temporary.

I put some idle cash into small caps this morning. I've got some more cash looking for a home.

Klondike5 wrote:

Wow. You really are nuts. Like when the market collapsed in 1929 -- fastest recorded time -- and it bounced back so high and so fast it only took the Dow until the mid 1950s to return to its height in 1929 -- unadjusted for inflation.

I want to clarify something.

The Dow was indeed flat between 1937 and 1950. However, the "real return", if you reinvested dividends was around 10%, as it has been consistently since.

Between 1900 and 1990, about 75% of the real return from the stock market came from its dividend history.

That's very different from the post 1990 period, as most growth stocks do not pay dividends.

R2D3 wrote:

Klondike5 wrote:

Wow. You really are nuts. Like when the market collapsed in 1929 -- fastest recorded time -- and it bounced back so high and so fast it only took the Dow until the mid 1950s to return to its height in 1929 -- unadjusted for inflation.

I want to clarify something.

The Dow was indeed flat between 1937 and 1950. However, the "real return", if you reinvested dividends was around 10%, as it has been consistently since.

Between 1900 and 1990, about 75% of the real return from the stock market came from its dividend history.

That's very different from the post 1990 period, as most growth stocks do not pay dividends.

and I'll add that if the people who decide the 30 dow stocks had not messed around with the index, it would have been up.

And if a more sensible index were measuring the stock market, the return was fine

and if you had a balanced stock bond portfolio, the return was fine.

That 1929-1950s stat is one of the worst, most misleading stats ever.

on the other hand, there is japan 1989ish to the present with major losses still.

Maserati wrote:

How short memories are.

Here are some lows, all within the past 12 months:

15 Oct 2013 15,168

12 Dec 2013 15,739

03 Feb 2014 15,373

11 Apr 2014 16,023

20 May 2014 16,374

07 Aug 2014 16,368

This is not the big crash, it is just a dip. If you are a true believer, like Flagpole, I would think that this would represent a real buying opportunity.

CORRECT! Well, I'm a buyer always, but for those who are out of the market for some reason or wondering what to do with some extra cash they have, now is the time to buy in or buy extra. Investors currently have "Extreme Fear."

I WOULD buy extra, but I have some unknowns coming up that are requiring me to hoard a little bit of extra cash these days.

Oil at $83/bbl

That 1929-1950s stat is one of the worst, most misleading stats ever.

The assertion was made that the market always goes up in the long run. Finding a long period where it did not proves this assertion false. Period. Nothing "misleading" about it. In fact, when you consider inflation -- the "Real Dow", the heights of 1929 were not reached again until 1960. A period of 30 plus years where the market was under water.

And forget this dividends nonsense. It's not like money invested outside the market has zero return.

In fact, if you look up a chart of the Real Dow, you can see that as recently as the early 1990s it was no higher than it was at it's peak in 1929.

Over 60 years where the Dow went up nothing after adjusting for inflation.

This hardly supports the industry propaganda that the market always goes up over time -- propaganda embraced whole-heartedly by geniuses like agip.

DJIA closes down 6 to 16,315

Steering clear of the bulk of the above conversation, I will say that it is possible to make money in the market, for little to no effort.

Even if there were no gains other than dividends, and even if the gains only matched inflation, being in such a market would still permit one to have a job and earn income at the same time as being invested. Then there are compounding, and favorable tax treatment to consider.

Even if you only net 2% annually, you don't have to do anything to get it.

The Japanese experience has been a real problem, of course.

And yes, depending on your timeframe, it is just as easy to lose money in the market as it is to gain. The problem is the asymmetry--you don't have to do anything to get your 2%, but the average investor's rate of return will not increase no matter how much work he puts in to try to increase his gain. Similarly if you are cruising along at -2%, there is nothing you can affirmatively do to improve your lot (again, for the average investor).

To me, this sounds like something worth doing when times are good, as the gain keeps you afloat, while your labor still finds a productive use during your day job--but it also sounds like something that is not worth doing when times are bad, because you can't make it any better no matter how hard you try and your effort is therefore wasted, and that effort must be taken from other uses, like your day job.

How "good" does it have to be to be "good enough" to be in? That depends on your personal situation--how much money you already have, what your income potential is from a job, etc.--as much as it does on what the market returns are likely to be. It also depends on specifically how you are invested, and what kinds of fees you carry.

Regarding the US markets, I don't think it's a profitable discussion to argue back-and-forth as to whether it's worthwhile to be in, in a forward-looking sense, for any particular individual, because everything is relative.

I will say that even with the shit that I still believe is going to hit the fan, it will be worth it for me to get back in at some level, in some capacity.

Maserati wrote:

Steering clear of the bulk of the above conversation, I will say that it is possible to make money in the market, for little to no effort

Good to see you've finally come around to a reasonable viewpoint.

Flashback...

Giles the Coreman wrote:

That 1929-1950s stat is one of the worst, most misleading stats ever.

The assertion was made that the market always goes up in the long run. Finding a long period where it did not proves this assertion false. Period. Nothing "misleading" about it. In fact, when you consider inflation -- the "Real Dow", the heights of 1929 were not reached again until 1960. A period of 30 plus years where the market was under water.

And forget this dividends nonsense. It's not like money invested outside the market has zero return.

good lord. I explained a few posts ago that the market did in fact go up in that 1930-1955 period by measures more meaningful than the dow.

as for the effect of inflation - you have some more ammunition on your side - if I think of it I'll see if I can check your claims. probably not tho - that is a hard number to derive.

do you have any evidence of a 30 year losing period for real returns in teh stock market?

I'll look at dow returns but sp500 would be much more meaningful.

Re stock market total real returns 1930-1960 and 1930-1990:

http://i0.wp.com/www.philosophicaleconomics.com/wp-content/uploads/2014/06/realtrx31.jpg

There are still some mutual funds from that era that have survived to this day.

http://www.investopedia.com/ask/answers/08/oldestmutualfunds.asp

The Fidelity Fund (FFIDX) has been in existence since 1930. From 1930-1960 Geomean was 9.53%; CPI averaged 2%. From 1930-1990 Geomean was 10.21%; CPI averaged 3.6%.

http://finance.yahoo.com/q/pm?s=FFIDX%2C+&ql=1

This is close to the SP 500 inflation adjusted total returns of 7.87% and 6.29% respectively.

http://dqydj.net/sp-500-return-calculator/

. PIODX; 1928-1960: 13.3% and 1928-1990: 12.5%. CENSX; 1928-1960: 6% and 1928-1990: 7.6%. MITTX; 1925-1960: 8.9% and 1925-1990: 9%. PINVX; 1926-1960: 8.9% and 1926-1990: 9.5%. These are all large cap funds. Vanguard Wellington Inv (VWELX) a mixed fund; 1930-1960: 7% and 1930-1990: 7.7%. (Fund returns are nominal)

" It's not like money invested outside the market has zero return." The following chart shows the nominal 30 year total return of the S&P 500 minus the nominal 30 year total return of rolled 3 month treasury bills, from 1911 to 1984:

http://i1.wp.com/www.philosophicaleconomics.com/wp-content/uploads/2014/06/19298011.jpg

Also, The 10-Year Treasury Reinvested Coupon Payments annualized return (With Inflation Adjustment) 1930-1960: 1.05% and 1930-1990: 1.67%.

http://dqydj.net/treasury-return-calculator/

This was also the era of Regulation Q.

https://research.stlouisfed.org/publications/review/86/02/Requiem_Feb1986.pdf

Rates on savings and time deposits were low, CDs required a minimum of $100000 until the late 60s. When I started working I kept my savings account at a S&L because they could pay a 1/2% more then Com.Banks. MMMFs were not available until the early or mid seventies. When you adjust for inflation most of the alternatives did have zero return or just barely above it.

how about a topic sentence and a conclusion, gente?