Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Return on S&P500 = 90 day treasuries since 1999
Old 08-29-2007, 09:12 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Houston
Posts: 1,435
Return on S&P500 = 90 day treasuries since 1999

I spotted this chart on another forum...is anyone else concerned when stock returns appear to be doing well year-to-year, yet over the medium term they've been mostly flat versus a "risk-free" bond. Then when you take out inflation (+3%/year), taxes (~2%/year), and the decline in the value of the dollar (depends on which foreign currency you benchmark but it's substantial, as anyone who's been to Europe lately knows) and you've actually lost purchasing power over the last 8 years.

Obviously, this chart was put together by a perma-bear, he selected a particular time scale to make his point...but even so, I think it's easy to be fooled by reporting a 10% "average annual return" on your investments but in reality your true return is much less. The author also ignores the benefits from a more diversified portfolio over this time period - but when I look at returns YTD 2007, there seems to be a lot of correlation between large cap, small cap, and international stocks, particularly on the market's bad days, so I'm not sure diversification is enough to save us all.

Of course, I don't know what other investment options there are that
would have a better chance of generating real returns...

__________________

__________________
soupcxan is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-29-2007, 09:17 AM   #2
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
What exactly is your point here ?

Is it that there are select periods when being in bonds or T-bills will outperform the market ?

Should that be a surprise to anyone ?

I would note that this chart includes a very rough patch for stocks after the tech bubble burst.

Just look at a 10-year S&P500 chart to let you know that the S&P500 is just now breaking/approaching its peak from 2000.

Lets do the same comparison over the last 20 years and over the last 30 years and over the last 5 years. That should be enlightening.
__________________

__________________
MasterBlaster is offline   Reply With Quote
Old 08-29-2007, 09:26 AM   #3
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,405
That 3 Month Treasury Bill Total Return line looks fake to me, and there is no source cited for the data presented. Blech.

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 08-29-2007, 10:01 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Maybe I can dig up another chart that is more accurate.......
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 08-29-2007, 10:25 AM   #5
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Quote:
Originally Posted by SecondCor521 View Post
That 3 Month Treasury Bill Total Return line looks fake to me, and there is no source cited for the data presented. Blech.
Back of the envelope says it looks OK to me. 4% yield over an 8 year period gives you a 37% gain.
__________________
twaddle is offline   Reply With Quote
Old 08-29-2007, 10:31 AM   #6
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,905
Quote:
Originally Posted by twaddle View Post
Back of the envelope says it looks OK to me. 4% yield over an 8 year period gives you a 37% gain.
I think the graph looks like that because of the 8 year period that was selected, and it might look different if it was graphed over 15-20 years.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 08-29-2007, 10:33 AM   #7
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Quote:
Originally Posted by Want2retire View Post
I think the graph looks like that because of the 8 year period that was selected, and it might look different if it was graphed over 15-20 years.
Of course. I think the point of the graph is that expected future returns on stocks are low during times of crazy valuations, and that's exactly what we got -- low returns after crazy valuations.
__________________
twaddle is offline   Reply With Quote
Old 08-29-2007, 10:38 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
or move the starting point of that 8 year period back a year or two and you could double your cumulative return.

Bottom line - data mining can produce beautiful gems to support whatever point you want to make.
__________________
justin is offline   Reply With Quote
Old 08-29-2007, 10:39 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Factor in taxes, and the SP would still be a winner.
__________________
justin is offline   Reply With Quote
Old 08-29-2007, 10:41 AM   #10
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Quote:
Originally Posted by justin View Post
Factor in taxes, and the SP would still be a winner.
Factor in emotional investors who sell low and buy high, and I think the t-bills would be the winner.
__________________
twaddle is offline   Reply With Quote
Old 08-29-2007, 10:51 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Actually, The pic reminded me how much better off you'd be as a DCA-er during such a period.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 08-29-2007, 11:01 AM   #12
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
I checked the chart against the returns of VFINX and Prime MM over 1999-YTD. Prime MM and VFINX had same returns, which were minimal in real terms.

Of course, same thing happened from 1968-1982, both TSM and Tbills had same real return [according to Ken French's data library + Bureau of Labor Stats site]. Guess what happened, post 1982?

btw - Coffee House portfolio, Wellesly, Wellington, and similar Life Strategy fund all beat VFINX and Prime MM from 1999-ytd.
__________________
ats5g is offline   Reply With Quote
Old 08-29-2007, 11:09 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Quote:
Originally Posted by ats5g View Post
btw - Coffee House portfolio, Wellesly, Wellington, and similar Life Strategy fund all beat VFINX and Prime MM from 1999-ytd.
Yep - the guy making this graph had the benefit of hindsight to pick just about the worst performing major index over just about the worst time frame (he could have started a year or so later to make returns seem even worse).
__________________
justin is offline   Reply With Quote
Old 08-29-2007, 11:15 AM   #14
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Hey, he could have picked NASDAQ. The S&P500 is the standard proxy for the market. BTW, bonds did pretty well during that period as well (thanks to declining interest rates).
__________________
twaddle is offline   Reply With Quote
Old 08-29-2007, 11:23 AM   #15
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
BTW, I just realized that the chart came from Hussman.

http://hussmanfunds.com/wmc/wmc070827.htm

This guy is a pretty rigorous economist who also happens to believe that we're currently in a period of high valuations (masked by extremely high recent earnings), and that future returns won't be much better than t-bills for a while....
__________________
twaddle is offline   Reply With Quote
Old 08-29-2007, 11:54 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,644
Well, it just goes to show, we should have cashed out our equities in 2000 and bought treasuries. Then in 2003 we should have gotten back into equities. Duh, what were we thinking? I wish someone would have shown me this chart back in 2000.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 08-29-2007, 11:58 AM   #17
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Quote:
Originally Posted by donheff View Post
Duh, what were we thinking? I wish someone would have shown me this chart back in 2000.
If someone did, would you have believed it? :-)
__________________
Sam is offline   Reply With Quote
Old 08-29-2007, 12:01 PM   #18
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
Yeah, if you read the article, that's essentially what he's telling you now.
__________________
twaddle is offline   Reply With Quote
Old 08-29-2007, 12:24 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,386
Quote:
Originally Posted by soupcxan View Post
Of course, I don't know what other investment options there are that would have a better chance of generating real returns...


TIPS were raging bargains at the time, and not just prospectively.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 08-29-2007, 12:26 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,386
Quote:
Originally Posted by Want2retire View Post
I think the graph looks like that because of the 8 year period that was selected, and it might look different if it was graphed over 15-20 years.
Better hope so anyway!
__________________

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Memorial Day musings from someone I served with.. dory36 Other topics 2 05-30-2005 09:48 AM
S&P 500 drops below 200 day MA cute fuzzy bunny FIRE and Money 21 04-25-2005 11:39 AM
Re: A Bad ER Day? BUM Life after FIRE 22 04-13-2005 07:43 AM
This company pays 1% per day 365 days a year! powercash FIRE and Money 3 02-28-2005 04:33 PM
Your day to do it dex Other topics 7 08-26-2004 12:19 AM

 

 
All times are GMT -6. The time now is 07:14 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.