Stock market charts you never saw (2021) • Hacker News Board

Re: Stock market charts you never saw (2021)

#211

Post by smaddox » Fri, Jan 20, 2023, 5:12 AM UTC

rcme wrote: post #180

smaddox wrote: post #98

Earlier quoted context omitted.

Private debt dwarfed public debt until very recently, and it's still significany higher: https://braveneweurope.com/steve-keen-what-is-the-role-of-pu... Also GDP is a terrible proxy for economic prosperity. A broken window adds to GDP, but subtracts from prosperity. If we had a better proxy for prosperity, it would be easier to see if government debt was actually net negative or net positive effect. As is, all argume…

Just because a broken window contributes to GDP doesn’t mean GDP is bad. Is your argument that the government is spending to break windows?

It's not inherently bad. It measures what it measures. It's just a terrible measure of prosperity.

See, for example https://www.weforum.org/agenda/2018/01/gdp-frog-matchbox-dav...

Re: Stock market charts you never saw (2021)

#212

Post by nostrademons » Fri, Jan 20, 2023, 5:39 AM UTC

worik wrote: post #96

For modern computing/finance type of people (I was but now have reformed) the lack of financial data is a problem. Even if you can get access to every trade, which is hard, the amount of data is not what modern machine learning types require. Thr EMH is a hard mistress too. There is no amount of data that can help you solve unsolvable equations. So alot fall into this trap, synthetic data. Some of the best statistici…

Getting access to every trade is trivial if you're able to fork over $$$:

https://www.nyse.com/market-data/historical/taq-trades

Re: Stock market charts you never saw (2021)

#213

Post by joshlemer » Fri, Jan 20, 2023, 5:52 AM UTC

ClumsyPilot wrote: post #189

nwiswell wrote: post #171

Earlier quoted context omitted.

Moreover the more modern approach is share repurchases, which are largely not subject to the tax drag and use the same money that was used historically for dividends.

It is worth noting that until 1982, stock buybacks were illegal—deemed as market manipulation

And since a few years ago they are highly taxed in Canada.

Re: Stock market charts you never saw (2021)

#214

Post by kqr » Fri, Jan 20, 2023, 6:08 AM UTC

dougSF70 wrote: post #95

dot1x wrote: post #2

An extremely interesting paper that puts into perspective a lot of investment "knowledge" shared at nauseom almost everywhere. > Investors have seen countless charts of US stock market performance which start in 1926 and end near the present. But US trading long predates 1926, and the foreshortened perspective that results from a focus on post-1926 data can be misleading. > The goal is to challenge shibboleths about…

> Put another way, since 1928 dividends plus inflation accounted for 99.7% of the nominal wealth produced, as of 2008, by investing in stocks. This would imply that the average investor will generate wealth by investing in equities that pay dividends...in other words profitable companies...

Net present value profitable -- it doesn't have to be profitable any particular year.

Re: Stock market charts you never saw (2021)

#215

Post by jatins » Fri, Jan 20, 2023, 6:10 AM UTC

bagacrap wrote: post #193

coliveira wrote: post #71

Until the beginning of the 20th century, stocks were viewed as a purely speculative investment. The idea that buy and hold will provide great returns is a modern one and is supported by the growth of the stock market in the 20th century. There is also the issue of survivorship bias. The SP500 and Dow Jones indices regularly discard the losers and add new companies, so we don't know the true results of holding compani…

Is there a strategy that reliably beats buy and hold? Obviously not or everyone would do it. And no investment professional worth their salt would advise to buy individual companies to hold for the long term (almost all will go out of business or underperform eventually) so I'm not sure what purpose the survivorship bias comment serves.

Momentum strategies have done better over long term[0]. Maybe someone else can contribute literature that is more trustworthy than BI

Also investing in Index is Momentum strategy disguised as buy and hold since Index will rebalance periodically to add growing companies and remove the lagging ones.

[0] https://www.businessinsider.com/momentum-trading-has-beaten-...

Re: Stock market charts you never saw (2021)

#216

Post by kqr » Fri, Jan 20, 2023, 6:11 AM UTC

bagacrap wrote: post #193

coliveira wrote: post #71

Until the beginning of the 20th century, stocks were viewed as a purely speculative investment. The idea that buy and hold will provide great returns is a modern one and is supported by the growth of the stock market in the 20th century. There is also the issue of survivorship bias. The SP500 and Dow Jones indices regularly discard the losers and add new companies, so we don't know the true results of holding compani…

Is there a strategy that reliably beats buy and hold? Obviously not or everyone would do it. And no investment professional worth their salt would advise to buy individual companies to hold for the long term (almost all will go out of business or underperform eventually) so I'm not sure what purpose the survivorship bias comment serves.

Constant fraction rebalanced beats buy and hold in the long run[1], under a wide variety of market conditions, including adversarial ones. The difficulty lies in finding (a) what fractions are appropriate for the assets you want to invest in, and (b) the appropriate rate of rebalancing, accounting for transaction costs.

[1]: I don't have citations at hand, but the papers are reproduced (among many other interesting ones!) in Theory and Practise of the Kelly Capital Growth Investment Criterion.

Re: Stock market charts you never saw (2021)

#217

Post by xivzgrev » Fri, Jan 20, 2023, 6:11 AM UTC

This is an interesting analysis, but leaves out a big point: the structural evolution of markets over time

Back in 19th century, accounting standards weren’t as strict, information was not as widely available, and central banks didn’t exist. It was the Wild West so no wonder you had bubbles and long periods of draw downs

Today the US fed would quickly intervene to turn markets around. When Japan crashed in late 80s, they didn’t know QE was the answer so they struggled for a decade. When the US crashed for similar reasons in 2008, they knew QE would help and jumped on it. The stock market was back on track in a freaking year. It didn’t recover to the heights but it was trending on right direction.

To believe we would have similar long draw downs like the 19th century, you’d have to believe that something structural would change where current valuations would decrease: a shrinking economy (very unlikely), or capital flight elsewhere (also very unlikely given US track record).

The US economy has a lot of advantages and I’m having a hard time seeing a long term bear case for it

Re: Stock market charts you never saw (2021)

#218

Post by kccqzy » Fri, Jan 20, 2023, 6:20 AM UTC

xivzgrev wrote: post #217

This is an interesting analysis, but leaves out a big point: the structural evolution of markets over time Back in 19th century, accounting standards weren’t as strict, information was not as widely available, and central banks didn’t exist. It was the Wild West so no wonder you had bubbles and long periods of draw downs Today the US fed would quickly intervene to turn markets around. When Japan crashed in late 80s,…

Furthermore, the perception of the stock market has also evolved greatly since the 19th century. To first approximation, the more people believe in buy-and-hold, the more money gets invested, the more the stock market goes up. It's like a self-fulfilling prophecy.

Re: Stock market charts you never saw (2021)

#219

Post by kqr » Fri, Jan 20, 2023, 6:27 AM UTC

tiffanyh wrote: post #198

Geometric mean I’m surprised to see no mention of geometric mean . People far too often incorrectly use Arithmetic Mean (“average”), which doesn’t compute correctly due to the compounding nature of the stock market. https://www.investopedia.com/articles/investing/071113/break...

It looks like they based it on the arithmetic mean of log-returns, which is equivalent to taking the geometric mean.

Re: Stock market charts you never saw (2021)

#220

Post by kqr » Fri, Jan 20, 2023, 6:34 AM UTC

jorblumesea wrote: post #153

How is data before 1950 even relevant in today's investing world? Between MMT, finanicialization of the economy, stock buy backs, Bretton Woods, tax codes, robo investing and indexing... Interesting stuff but really not super helpful in assessing risk.

I think this sort of retrospective is more about informing people of the possible range of outcomes under various market conditions, rather than claiming to know exact probabilities of specific outcomes.