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

Re: Stock market charts you never saw (2021)

#221

Post by malthaus » Fri, Jan 20, 2023, 6:55 AM UTC

devops000 wrote: post #124

It’s very common nowadays to see people suggest investing into S&P500 ETFs and keep them forever. More then 20% of US population owns stocks. I think we are near a change into this paradigm.

And it is still (by a mile) the best advice you can give someone who (1) doesn't rely on the money in the short term and (2) doesn't want to spend mental capacity on managing his money.

The only difference i'd suggest for people who want to spend 1% more mental capacity is to mix their ETF up so they have global and other-assets exposure.

People like to feel in control, like to gamble, like to be clever, like to know a secret trick. But they are just lying to themselves.

No matter the macroeconomical circumstances, there's no magical risk/return profile that will beat stocks until there's a significant paradigm shift (and no, a minor recession after a period of weird monetary policies isn't it)

Re: Stock market charts you never saw (2021)

#222

Post by dougSF70 » Fri, Jan 20, 2023, 6:56 AM UTC

kqr wrote: post #214

dougSF70 wrote: post #95

Earlier quoted context omitted.

> 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.

I was going on to make a comment about how many firms that have IPO'd of late are never been profitable. These firms have not paid any dividends and may never. Yet these firms are hyped up to lure in the retail investor, yet the evidence presented in this paper is that compound growth of dividends is the route to wealth.

Re: Stock market charts you never saw (2021)

#223

Post by user_named » Fri, Jan 20, 2023, 7:24 AM UTC

gkuan wrote: post #181

danuker wrote: post #28

Earlier quoted context omitted.

Dividends aren't enough to cover living expenses. If you plan to withdraw 4% per year, so you preserve your wealth indefinitely, you're more than 2 percentage points short when the dividend yield is 1.71% [1] If you want to live solely from dividends, you'll need more than double the capital. If you want to die with zero [2], it's impossible. I'd much rather invest in a dividend-accumulating index fund and sell as I…

It may be hard to imagine, but dividend yields were not always this low [1]. Investopedia has it usually something healthy over 4% up until 1990s it seems. Over that 1926- time frame, dividends are said to have contributed 32% of the total return of S&P 500 [2]. [1] https://www.investopedia.com/articles/markets/071616/history... [2] https://www.spglobal.com/spdji/en/research/article/a-fundame...

US stocks are arguably overpriced leading to low dividend yields. In emerging markets you easily get 5-7%.

Re: Stock market charts you never saw (2021)

#224

Post by trompetenaccoun » Fri, Jan 20, 2023, 7:37 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,…

The Japanese market crashed precisely because of excessive government intervention, not a lack thereof. It was heavily manipulated by Japan's own central bank, which worked well initially, but they were eventually pressured into liberalizing by the US and it went downhill from there. Sure, one could argue they should have doubled down and they probably could have kept it going for another decade or two. Eventually though these systems always collapse, planned economies do not work. Look into the term "window guidance" to learn more about what they were doing.

The US isn't doing anything on the scale Japan was doing but it's still less of a free market than it used to be. Keep in mind also that the US doesn't exist in empty space, the factories where American products are made are located in places like China and there are heavy financial links to this country that follows the exact strategy Japan had, with even more centralization and state ownership actually. This is also part of the US economy now, you can't just ignore that. It's a risk for the US economy, even some of the elites that heavily invested admit this now. Take Soros as a very late example.

Re: Stock market charts you never saw (2021)

#225

Post by Galanwe » Fri, Jan 20, 2023, 7:46 AM UTC

compumike wrote: post #210

NovemberWhiskey wrote: post #170

Earlier quoted context omitted.

Definitely not seeing Alphabet's 20:1 split in July 2022 when I glance at Yahoo Finance charts - you sure about that? Or are you saying they're adjusted for some corporate actions but not for others? EDIT: OK, I see there's a note that close is split-adjusted but not dividend-adjusted.

That’s correct: their charts are split-adjusted but that’s all.

Dividend adjustment wouldn't really matter in this study. The price discount at dividend ex date should match the price increase post earnings announcements, so it's netted and disappears once you compute >=quarterly returns.

Re: Stock market charts you never saw (2021)

#226

Post by astrange » Fri, Jan 20, 2023, 7:49 AM UTC

sleton38234234 wrote: post #157

treis wrote: post #146

Earlier quoted context omitted.

Your etc is doing a lot of work here, but post COVID craziness aside I don't think building materials are more expensive than they were in 1990. As an example, lumber has been flat or slightly down since 1995: https://www.lesprom.com/en/news/U_S_lumber_prices_in_2020_an...

His point is, the material standard of living is low as ever or even lower. This surprises people, but the bare necesities of the lowest level of maslow's heirarchy of needs are now more expensive than they have been in a long time. Just look at the cost of shelter. Housing costs sooo much more than it did 50 years ago or even 200 years ago. During the time of Henry david thoreau, an average house cost 800 days of un…

That's not because of material scarcity most of the time, it's because the US has very bad land use policies so we don't build enough houses for you to buy.

(And industrialization, like prefab houses, doesn't work because the policies are set by local governments so you can't produce a single viable product for all of them.)

Re: Stock market charts you never saw (2021)

#227

Post by astrange » Fri, Jan 20, 2023, 7:51 AM UTC

sleton38234234 wrote: post #160

zie wrote: post #100

Earlier quoted context omitted.

The other option is they raise taxes, cut spending and they actually pay those debts off. All debt comes due eventually, you can choose to go bankrupt or you can choose to pay it. But if neither option happens in your lifetime, you don't need to care, if you are just trying to optimize for yourself.

>> you can choose to go bankrupt or you can choose to pay it. There's another option. One that's far more politically favorable: You simply take out more and more debt, until finally the whole world sells US treasuries. at that point the fed prints unlimited amount of money to buy up all that debt. And when the US pays interest on that debt, it just pays it to the federal reserve which then sends it back to the US. T…

Does the market, who should know, agree with you?

(Hint: US 10 year T-bond rate is 3.4%. That's not very high. Also, we have the world's largest military and can do whatever we want.)

If you want an exciting doomer story to believe in, try deflation. It's worse than inflation, so you'll look more cynical.

Re: Stock market charts you never saw (2021)

#228

Post by astrange » Fri, Jan 20, 2023, 7:54 AM UTC

autokad wrote: post #137

pjc50 wrote: post #115

Earlier quoted context omitted.

> since 1928 dividends plus inflation accounted for 99.7% of the nominal wealth produced, as of 2008, by investing in stocks. OK, so strip out inflation to get real rather than nominal returns, and it becomes "stock investment produces almost all its returns in dividends over a long period". Which is .. not that surprising? Because dividends are ultimately why people buy stocks in the first place? The present value o…

> Because dividends are ultimately why people buy stocks in the first place? I would disagree, I feel like the mojority of stonk owners think dividends are passe companies, and a real company would reinvest its earnings or buy back stock. I disagree with these people. I think a company that has no intention of paying a dividend is merely an over produced digital collectible.

There's other ways to return capital. Another larger company, or Elon Musk, might buy them.

Re: Stock market charts you never saw (2021)

#229

Post by robbintt » Fri, Jan 20, 2023, 7:55 AM UTC

ryeights wrote: post #169

krembanan wrote: post #159

Earlier quoted context omitted.

The Medallion Fund by Renaissance Technologies has had an average annual return of 71.8% from 1994-2014.

What is not known, however, is if those returns were achieved through legal means…

Are you referring to the tax evasion? I think they paid a slap on the wrist. Otherwise I am interested.

Re: Stock market charts you never saw (2021)

#230

Post by trompetenaccoun » Fri, Jan 20, 2023, 7:55 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.

Everyone doesn't know how to successfully invest or there wouldn't be so many middle class and poor people. Buying and holding (a broad index tracker) seems like the best strategy for someone who doesn't know about the businesses or can't be bothered to follow the market. It's the most passive strategy.

Imo the mistake most make is they mentally compare it to themselves reading a bit online and then picking stocks based on what they feel will perform well. Of course this can only go wrong. If you're an expert in an area like the first quant traders or someone who understands startups and does angel investing, you can absolutely beat the market and people do it all the time. That's how some people get rich, you can not become truly rich by working a 9-5 office job and buying a few stocks. Unless theoretically you trade the riskiest penny stocks with leverage and magically come out on top every time like some of those WSB guys. I've yet to hear of cases where this works long term. The smartest ones know when they get lucky and stop playing, because that's pure gambling.