Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Stock Market Returns Are Anything but Average

awealthofcommonsense.com

Post reply on HN
Print view View original

41–50 of 433 posts

Re: Stock Market Returns Are Anything but Average

#41

Post by hansor »

US market should NOT be used as any scientific benchmark for anything - as it does not represent "all" typical possible scenarios for the stock market.

Look for example(one of many) at Japanese NIKKEI index - it was going DOWN for like 20 years! So this theory does not work!

Many people in Europe also quote multiple studies based on US market - but they are usually worthless on other markets(both bonds and stocks). If you add inflation and CPI - this theory is even more worthless.

US market is special - as US is one of very few superpowers on Earth.

Re: Stock Market Returns Are Anything but Average

#42

Post by heliodor »

ahelwer wrote: post #25
bryanlarsen wrote: post #22

Earlier quoted context omitted.

Or the German stock market of 1914. An 1914 investor would have had to have held for 100 years to get his investment back. The major point is that only looking at 90 years of American stock market returns is very serious cherry picking. We can get a lot more data by including non-American stock markets. The last century was a century of American ascendance. 100 years from now America still might be at the top, but I…

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

Put your money in real estate.

Our political system is unable/unwilling to address housing needs. Home owners vote for whatever it takes to increase prices. Renters and young people looking to buy their first homes don't have as much political clout. The reality of the situation is sad but the results are clear!

Re: Stock Market Returns Are Anything but Average

#43

Post by ellisv »

mumblemumble wrote: post #18

For that 2nd graph, he chose buckets that are uniquely poorly suited to evaluating his statement about whether returns tend toward 10%. It looks to me like, if he had instead made them (5%)-5%, 5%-15%, 15%-25%, etc., then the mode would indeed have been the 5-15% bracket.

Agreed. I’ve seen that figure before (or some variation) and it is a bad way to try to argue his statement.

Re: Stock Market Returns Are Anything but Average

#44

Post by berkes »

muskox2 wrote: post #21
staticman2 wrote: post #12

Earlier quoted context omitted.

Except measuring the value of money as something other than the ability to provide consumption (the ability to buy things you consume, rather than investments) doesn't make sense, regardless of how fashionable it is on this site to throw around the term "asset inflation".

What is your explanation for the explosion in asset prices over the last year, if not inflation? Do you think the assets have become fundamentally more valuable?

Tell-tales are all over the place. From explosion in asset prices world wide and cross-industry to micro-signals, such as goods coming in smaller packaging (for the same price) or slightly increasing grocery prices[0].

In my bubble, its mostly tinfoil-hat-wearing crypto-enthusiasts pointing at examples of how toiletpaper comes in smaller packages-for-the-same-price, so my view is skewed.

But its safe to consider all these as datapoints that indicate possible worldwide inflation is building up.

[0]: https://politicalcalculations.blogspot.com/2020/01/the-price...

Re: Stock Market Returns Are Anything but Average

#45

Post by staticman2 »

muskox2 wrote: post #21
staticman2 wrote: post #12

Earlier quoted context omitted.

Except measuring the value of money as something other than the ability to provide consumption (the ability to buy things you consume, rather than investments) doesn't make sense, regardless of how fashionable it is on this site to throw around the term "asset inflation".

What is your explanation for the explosion in asset prices over the last year, if not inflation? Do you think the assets have become fundamentally more valuable?

My guess is:

1) Bonds and bank accounts are paying less than inflation, so to not lose money you need to invest in stock. That doesn't mean inflation is high rather bank accounts stink.

2) People figured out based on recent fed action that the U.S. has a policy of privatizing the gains and socializing the losses. Therefore stocks appear to not be risky, so people bought them up. The only reason you'd put money in a bank account rather than stock is stock can go down, but if you think the government will intervene to prevent stock going down, you might hold a greater amount of assets in stock, bidding up the price.

Re: Stock Market Returns Are Anything but Average

#46

Post by willcipriano »

ahelwer wrote: post #25
bryanlarsen wrote: post #22

Earlier quoted context omitted.

Or the German stock market of 1914. An 1914 investor would have had to have held for 100 years to get his investment back. The major point is that only looking at 90 years of American stock market returns is very serious cherry picking. We can get a lot more data by including non-American stock markets. The last century was a century of American ascendance. 100 years from now America still might be at the top, but I…

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

> But what the hell else am I going to do?

Personally I'm taking some money that could go into the stock market and investing in increasing the energy efficiency of my home to reduce my future costs, buying items I'll need in bulk (things like 200 pairs of socks so I'm set for life) and other things that will improve my QOL without ongoing costs.

Re: Stock Market Returns Are Anything but Average

#47

Post by aklemm »

bryanlarsen wrote: post #28
Someone1234 wrote: post #8

Earlier quoted context omitted.

It starts to when you ask yourself: Where else are people meant to store money? Since interest rates and bond rates were at historical lows. So you have people who are looking at 10% YOY returns on one hand and 0.2%/2% on the other and making the rational decision. Does this make stocks overinflated? Yes. Is it going to suddenly pop? Unlikely, since the conditions that caused it won't suddenly change (e.g. certain bo…

We get articles on HN about once a week arguing that massive inflation is coming soon. I think all of these articles are misguided. With such low interest rates, the Fed can and will raise those rates to prevent inflation. That interest rate rise will likely pop the bubble.

Prices are on the rise throughout the economy, so I'm starting to think the inflation has arrived.

Re: Stock Market Returns Are Anything but Average

#48

Post by nocommentguy »

staticman2 wrote: post #30
nocommentguy wrote: post #17

Earlier quoted context omitted.

Actually, measuring the value of money as something other than the measuring stick to compare capital assets doesn’t make sense, regardless of how fashionable it is to defend money printing by verysmart internet economists. See what I did there? It’s not an argument.

Okay, let's phrase this another way. If your ability to consume food, water, shelter, and entertainment has not been impaired but you are complaining about "asset inflation" because you learned economics from message boards perhaps you are being haunted by nonexistent boogeymen and need to chill out?

If you’re not being hurt by the fire alarm, maybe you should stop spreading conspiracy theories about there being a fire?

Re: Stock Market Returns Are Anything but Average

#50

Post by spurgu »

ArtTimeInvestor wrote: post #11

The author falls for the "past equals future" fallacy. The only way to truly take the randomness out of the stock market is to have a multi-decade time horizon. He says so after looking at the data of a few decades. That makes no sense. It is like looking at 3 people and saying "People come in groups no larger than 3". The whole article is based on that premise. He has something like 90 data points and assumes the ne…

> The author falls for the "past equals future" fallacy.

Isn't this more about random events? The stock market is not random, it merely fluctuates a lot.

Post reply on HN