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Interesting Long term study
Old 02-17-2011, 11:53 PM   #1
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Interesting Long term study

This document covers world stock and bond returns in the period of 1900 to 2008. It also breaks out 17 countries.
https://emagazine.credit-suisse.com/...e_yearbook.pdf

Summary for the world as a whole over that period real return with re-invested dividends was 5.2% for stocks, 1.8% for bonds and 1.0% for bills.
The figures for the US are 6.0% 2.1% and 1.0%
The world ex-us was 4.8% 1.2% and 1.0%
For Europe the returns were 4.5% .9% and 1.0%
This is another example of the advantage of stocks over the long term and shows that even Europe with 2 periods of self destruction (WWI and WWII) did not do to badly over the 20th century. Noting the real returns cited over this period, it looks like a 4% swr is not to bad based on history. Of course history is not necessarily a prediction of the future, but reversion to mean is not a bad way to look at things, given that a lot of other predictions are not much better than reading tea leaves or Harspex (consulting entrials of a chicken ala the Romans).
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Old 02-18-2011, 08:33 AM   #2
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And so that Great Depression is now the one we remember, and that we are now desperate to avoid. Indeed, we can be almost certain that a 21st century version of the 1930s would lead to a revolt against the current system of global capitalism and relatively free markets, spark social unrest on a wide scale, and frustrate the ambitions of billions of citizens in the emerging world. Ultimately, peace as well as prosperity would be at risk.
That is prophetic.
The 2010 version of the report is available from this page.
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Old 02-18-2011, 08:49 AM   #3
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The real issue is not average returns but the variability of returns. SWR reflects variability and sequence of returns. I'm not quite as sure that 4% is truly sustainable.
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Old 02-18-2011, 09:18 AM   #4
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Re the depression comment, the 2008 version discusses why the 1930s crash was so bad, it was the Fed defending the gold reserves by raising interest rates after the UK went off gold that did it. The report notes that until 1931 things were tracking 1893 or no worse, then the Fed decided it had to defend its stash of gold (also the fed had weak leadership as Strong had died and there was a leadership vacuum). As a result in 1931-1933 production fell 35% and stocks 75% and there was a 25% deflation. This shows clearly what is also implied in the Lords of Finance, that gold was a fetish for Central Bankers at the time.
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Old 02-18-2011, 09:40 AM   #5
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Originally Posted by Danmar View Post
The real issue is not average returns but the variability of returns. SWR reflects variability and sequence of returns. I'm not quite as sure that 4% is truly sustainable.
The real issue is.... What are the returns of my portfolio over the time-frame that I need it to fund my retirement ? Great gains, or average gains before and after that period are sort of irrelevant.

And yes, you just may be right about the sustainability of 4%.
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Old 02-18-2011, 01:02 PM   #6
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Originally Posted by target2019 View Post
Thanks for posting this page. Lots of interesting stuff here, and all free!

Ha
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Old 02-18-2011, 01:10 PM   #7
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Thanks for posting this page. Lots on interesting stuff here, and all free!
Those Suisse, where do they find the time to study money? LOL
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Old 02-18-2011, 03:01 PM   #8
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The real issue is.... What are the returns of my portfolio over the time-frame that I need it to fund my retirement ? Great gains, or average gains before and after that period are sort of irrelevant.

And yes, you just may be right about the sustainability of 4%.
Agreed about the time frame, but short of looking at the past (really ala firecalc), and looking at best and worst periods, everything else is just crystal ball gazing.
Reversion to the mean is about as good a tool for looking at the future, assuming that the market is going to wander around the mean value shown.
So if you look at returns and they have been higher than the mean expect lower returns over the next period and vice versa.
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Old 02-18-2011, 05:22 PM   #9
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The real issue is.... What are the returns of my portfolio over the time-frame that I need it to fund my retirement ? Great gains, or average gains before and after that period are sort of irrelevant.

And yes, you just may be right about the sustainability of 4%.
Yes Sir!

Plus.... whether one is accumulating or spending.

If spending... the ability of the investor to actually harvest the superior return over time (actually realize it).

I am a stock investor.... but have a healthy respect for what can go wrong. Sometimes the "what can go wrong" has been me.

I wish I was the "super investor" that others seem to be with their superior insight and fantastic gains... I would probably be a gazillionaire.
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Old 02-21-2011, 11:58 AM   #10
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This shows clearly what is also implied in the Lords of Finance, that gold was a fetish for Central Bankers at the time.
One of the best books I've ever read, even though you already know how it ends...
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