Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 12-02-2013, 10:49 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,548
Past performance is not indicative of future results...

Have Funds, Will Retire

...not doing anything of true substance...
HFWR 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 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 12-02-2013, 11:50 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
Join Date: Jul 2008
Posts: 15,889
Which past performance will we see in the future?

I'd say all of it. Surely, stocks and bonds will fluctuate as they have always done.

"Old age is the most unexpected of all things that can happen to a man" -- Leo Tolstoy
NW-Bound is offline   Reply With Quote
Old 12-03-2013, 11:14 AM   #23
Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 1,470
Originally Posted by MooreBonds View Post
Does anyone really expect the bond rate anomaly that existed in the early 80s to repeat itself? When you go from 16% long-term yields and - in a nearly linear path - go down to about 3.5% today, of course you'll have kickass returns that are difficult to match. However, I would be willing to bet that you will have a far easier time (relatively speaking) of beating bonds in any given period with stocks in future periods, given that the sky-high rates of the early 80s stand a good chance of never being seen again.

So if that result of bonds beating stocks on every time period up to 40 years due to the constant interest rate decline is a given, then surely supporters of that should all agree that stocks are nearly guaranteed to beat bonds for the next 40 years, since there's a pretty good chance of the exact inverse interest rate movement going forward as we saw from 1980 to now (or, hopefully, just from 1990 to now)

Plus, don't forget the MAJOR difference in net after-tax returns of bond interest vs equity qualified dividends and capital gains (starting around 2000). Paying twice as much in taxes on interest compared to qualified dividends/cap gains can really impact your net return.
I agree with HA that Jeremy Siegel is merely someone who will promote a bull case by utilitzing and changing any data necessary to prove his case. The illustration of how stock market data was created for 200 years for his book and analyzed as to the process is very informative. Notice how the removal of bad performing stocks was allowed both in the 19th century as well as the last decade to prove better performance than what really occured.

In a WSJ article this morning, Jason Zweig puts together a pretty compelling critique Does Stock-Market Data Really Go Back 200 Years? :
“There is just one problem with tracing stock performance all the way back to 1802: It isn’t really valid.
Prof. Siegel based his early numbers on data first gathered decades ago by two economists, Walter Buckingham Smith and Arthur Harrison Cole.
For the years 1802 through 1820, Profs. Smith and Cole collected prices on three dozen banking, insurance, transportation and other stocks — but ended up including only seven, all banks, in their stock-market index. Through 1845, they tracked 19 insurance stocks, but rejected 95% of them, adding only one to their index. For 1834 onward, they added a maximum of 27 railroad stocks.
To be a good measure of stock returns, an index should be comprehensive (by including many stocks) and representative (by including the stocks commonly held by investors). The Smith and Cole indexes are neither, as the professors signaled in their 1935 book, “Fluctuations in American Business.” They cherry-picked their indexes by throwing out any stock that didn’t survive for the whole period, whose share prices were too hard to find or whose returns seemed “inflexible,” “erratic,” or “non-typical.”
Thus, Siegel’s basis for Stocks for the Long Run exclude 97% of all the stocks in the early history of the US market by cherry picking winners, ignoring survivorship bias, and engaging in data smoothing.
Running_Man is offline   Reply With Quote
Old 12-03-2013, 11:38 AM   #24
Thinks s/he gets paid by the post
Lsbcal's Avatar
Join Date: May 2006
Location: west coast, hi there!
Posts: 4,818
I really don't worry about the pre-1920's data. The economy seems to get the less like ours the further we go back. So the Siegel data going back that far isn't very interesting to me.

What is interesting in the Siegel graph is the behavior of bonds after 1930. But still this doesn't help me guess much at the future.

Can we even say the 1930's world economy is relevant to the current one? Maybe, I don't really know the answer to that.

Lsbcal is offline   Reply With Quote

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


All times are GMT -6. The time now is 05:16 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.