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Inflation adjusted stock prices-ouch!
Old 02-02-2008, 03:28 PM   #1
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Inflation adjusted stock prices-ouch!

From InflationData.com

However, when you take inflation into consideration, we can see from the red line (which is the "inflation adjusted NYSE Index stock price" in current dollars) that in inflation adjusted 2007 dollars the index began 1966 just above 3200 and fell to 1312 in July of 1982.

So rather than a 23% increase, if you had held stocks for the 16 years from 1966 to 1982, you would have actually lost 59% of your purchasing power due to inflation.


What is the Real Inflation Adjusted Stock Price?

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Old 02-02-2008, 03:44 PM   #2
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Yeah, the 1966-1982 period is responsible for many of the failure sequences in FIREcalc.

I like these stock return matrices as a visualization tool:

Matrix Options

Take a look especially at the after-tax real return matrix.
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Old 02-02-2008, 03:49 PM   #3
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[cough] reinvesting dividends [cough]

The after inflation annualized returns for various assets from 1/1/1966 - 12/31/1981 [16 years]:

Code:
TSM        -0.44%
S&P 500    -0.97%
Tbill      -0.15%
5 yr Treas -1.16%
Lt Treas   -4.17%
- Alec
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Old 02-02-2008, 04:18 PM   #4
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btw - here is the spreadsheet that I used. Go the the "annual" tab and change the two years in yellow to generate the nominal and real returns from say 1926 - 2000 in row 2. The %'s in row 7 of the "annual" tab are the % in each asset [TSM, S&P 500, Tbill, 5 yr Treas, LT Treas].

[disclosure: I didn't create the spreadsheet. Some guy named Richard that used to post on the VD M* board did]

- Alec
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Old 02-02-2008, 05:33 PM   #5
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Just for fun, I looked at the 1929-1941 (13 year) period using Alec's toy.

BTW, these are annualized returns while the OP was talking about total damage during the period.

TSM: -1.9%
S&P 500: -1.7%

And then the best period in history (1982-1999):

TSM: 14.1%
S&P 500: 14.7%

Quite a range, eh?
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