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Stock Market Returns Are Anything but Average

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Re: Stock Market Returns Are Anything but Average

#151

Post by Red_Leaves_Flyy »

PragmaticPulp wrote: post #124
lotsofpulp wrote: post #110

Earlier quoted context omitted.

> You could argue that the entire market is a mania. Objectively, the big publicly listed companies are growing and have stellar financials. I can think of no better place for someone to invest, other than maybe diversifying into real estate with high demand, if they already have a significant amount invested in public equity markets. Public equity market prices are also backed by the federal government, at least on…

I think a lot of newcomers to stock investing in the past year have been given the wrong ideas about the stock market. When all of the headlines are about GameStop and Nokia and AMC and some kid who made it lost a lot of money on RobinHood, the stock market can feel like a place for gambling. Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are owners…

> the next protracted drawdown

We should have seen this drawdown last year.

Re: Stock Market Returns Are Anything but Average

#152

Post by randoramax »

pc86 wrote: post #133
dasil003 wrote: post #105

Earlier quoted context omitted.

Yeah so what are you going to do about it?

What kind of argumentative nonsense comment is this?

I think it's a legitimate question: we all have a large chunk of savings stuck in this game because of perverse incentives set by corrupt/inept US gov. Now what?

Re: Stock Market Returns Are Anything but Average

#153

Post by nemothekid »

hpkuarg wrote: post #2

I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.

I can never coalesce the whole pandemic and stock returns thing with the actual "fundamentals" of these companies. Yes - there was a pandemic, but the 5 largest companies in the index, Apple, Amazon, Microsoft, Facebook and Google, which make up nearly 20% of the index all had insane revenue growth. Amazon nearly doubled it's profits, Google growing as much as 30%.

When every other investment vehicle, except maybe housing is cratering you have a one-two where stocks looks great to invest in, and are much better than everything else. If it were to ever pop it would be because other investment products started to get much healthier - which to me isn't a bad thing.

Re: Stock Market Returns Are Anything but Average

#154

Post by staticman2 »

lotsofpulp wrote: post #128
staticman2 wrote: post #30

Earlier quoted context omitted.

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?

When you need to pony up an extra $100k for a down payment and your monthly payment goes up $300 for the next 30 years because real estate prices rise, is that not impairing your ability to consume other things?

It stinks that housing prices have gone up, but fortunately you can rent instead, which is accounted for in CPI measures of inflation.

I would think we could discuss the affordabity or unaffordability of homeownership without making up terms like "asset inflation" and falling into alternative fact rabbit holes about the collapse of U.S. currency.

Re: Stock Market Returns Are Anything but Average

#155

Post by duxup »

RobertoG wrote: post #146
duxup wrote: post #130

Earlier quoted context omitted.

I remember the banking crisis and the money printing after that, it was absolutely assumed inflation would follow, how much was debatable, but there wasn't much debate about the impending inflation. Didn't happen... for . Who knows what to make of the rules these days.

>"Didn't happen... for ." That's not exactly true, MMT was right about that beforehand, this is from 2009: "There are also those that claim that quantitative easing will expose the economy to uncontrollable inflation. This is just harking back to the old and flawed Monetarist doctrine based on the so-called Quantity Theory of Money. " From: http://bilbo.economicoutlook.net/blog/?p=661

I feel like saying it won't be 'uncontrollable' isn't the same as calling that there won't be inflation and getting the reason right.

Re: Stock Market Returns Are Anything but Average

#156

Post by mumblemumble »

ricardobeat wrote: post #150
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.

The mode is already in the 10-20% bucket in the graph, changing the buckets would not affect the argument that follows, which does mention the 8-12% and 10-15% ranges: > If we look at the calendar year returns plus or minus 2% from the 10% average (so 8% to 12%) this has happened in just 5 calendar years > Just 18% of returns have been between 5% to 15% in any given year. The main point being that the odds of you see…

Yes, that's all true, but none of it changes the point that it's a poorly constructed visualization that is ill-suited to how the author is trying to frame their story. Edward Tufte would weep.

Re: Stock Market Returns Are Anything but Average

#157

Post by YZF »

Rather than looking at returns in isolation it might be more interesting to look at returns vs. P/E or vs. some other parameters like interest rates. e.g.: https://www.alger.com/AlgerDocuments/AOM_singleGreatestPredi...

This is only a 20 year period which is pretty short, but hey, doesn't look as random any more.

Re: Stock Market Returns Are Anything but Average

#158

Post by roenxi »

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?

There has been a big leap in technology over my lifetime. "Not impaired" isn't the target, if all the wealth gains weren't being directed to asset owners by asset price inflation then the people who were working to create them would be getting a bigger share.

I've done the obvious thing and bought assets, but it keeps getting harder and at some point maybe all the people who are working hard might notice that they are doing all the work and people with assets are getting all the benefits. The government should be more neutral on whether asset owners or workers get the benefits of work - the market is naturally slanted enough without it being further tipped towards asset owners.

You might be happy in stasis. But this is an age of wonders and the people who do the work to bring it about should be compensated roughly in line with their contribution. As would be happening if the government didn't keep leaning in with monetary policy to prop up asset prices relative to wages.

As a bonus, if the government did leave the market alone, people would probably work harder and there'd be more stuff to go around, even ignoring the fact that more of it would be distributed to the sort of people who work hard.

Re: Stock Market Returns Are Anything but Average

#159

Post by verbify »

hansor wrote: post #41

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). I…

The NIKKEI would've given you a positive return if you bought and held and reinvested dividends. And picking the worst point in one of the worst indices does not mean much - most investors are not investing a lump sum (they're usually putting into a pension over the course of decades) and they shouldn't be investing in just index/asset class (all-world diversification and having bonds as part of your portfolio is recommended).

Re: Stock Market Returns Are Anything but Average

#160

Post by [deleted] »

jerf wrote: post #137
CarelessExpert wrote: post #114

Earlier quoted context omitted.

Great visual! So I'll just note a few things: 1) You can clearly see the Great Depression and 2008 in here, so I'm just going to ignore those. 2) The other really nasty period for market returns was during the 70s oil crisis and subsequent high inflation period. It also notably marks areas "slightly above inflation" as red, which are not periods where loses would occur (though, yes, the gains would be basically flat)…

I will also agree that if you just erase all the risk from the market due to the downturns, that the market becomes a great investment. But what's the relevance of that? When the next bubble pops, whether it be in two weeks, two years, or a decade, you and your investments are going to experience it. Some of those red splotches go on for twenty years . As for why doing "just barely better than inflation" is marked as…

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