Stock Market from 1966-1982 - Nowhere????

[Cut-Throat]

There is a fact that is bandied about quite often lately that the stock market really never went anywhere from 1966-1982.

I thought I would plug in some numbers into FIRECALC to see if this was true. I plugged in a $100K portfolio with zero withdrawals and 100% in stocks. zero expense ratio.

At the end of the 16 year period from 1966-1982, The portfolio was worth over $250K. This is hardly going nowhere. Can anyone explain any of this to me?

 

[JWR1945]

FIRECalc balances are in nominal dollars, before inflation.

The real value of the S&P500 index in 1966 was 495. In 1982, it was 210. Real dividends were $14.54 in 1966. In 1982, they were $11.92.

In nominal dollars, the S&P 500 index was 93.32 in 1962 and 117.3 in 1982. The dividends were $2.74 in 1962 and $6.66 in 1982. The CPI was 31.8 in 1966 and 94.3 in 1982.

The stock market's price increased very little in nominal dollars between 1966 and 1982. Dividends were a different story and that is why you see an improvement. But in real dollars, the stock market went down, both in terms of price and in terms of dividends.

The data source that FIRECalc and others use is produced and updated by from Yale Professor Shiller. Dr. Shiller's web site is www.econ.yale.edu/~shiller/. You can go directly to his historical SP500 data by using www.econ.yale.edu/~shiller/data/ie_data.xls.

I think that John Bogle (of Vanguard) has drawn attention to this period in his books. I think that is why you hear mention of it so often.

Have fun.

John R.

 

[Cut-Throat]

I guess I was making the assumption that since the Withdrawals were inflation adjusted so were the Balances. I guess not.

One of the other reasons that I also like the Quicken Retirement Planner as its balances are always in Today's Dollars!

It would seem to me that FIRECALC would be even more usefull if the balances were inflation adjusted. Maybe this would be a problem, as I have not put a lot of thought into this.

 

[dory36]

Try putting in a withdrawal of 10,000, which uses inflation-adjusted dollars, and a non-inflation-adjusted -10,000 amount starting from year zero.

A starting $100,000 in 1969 will be depleted by 1989.

Those double-digit inflation days were murder!

Dory36

 

[Mr._johngalt]

Greetings Dory! Those double digit inflation days were
murder, unless you owned a bunch of well located
real estate. I recall a house I owned which went up in value about 80% in 3 years. Of course, when I sold
it I just bought another big one .

 

[unclemick]

DCA'd thru the whole thing into IRA/403/401k -50/50 stocks/fixed and let the market do it's thing. High interest and still not retired helped - not to mention the post 1982-1992 period which allowed ER in 1993. Looking forward, the current low interest/dividend and high P/E environment could get chewy now that our ER is ten years young.

 

[Mr._johngalt]

Hello unclemick! Yep, that low interest/high P.E.
stuff can give one pause. What I always do is to
have double redundancy in my planning (back up plan to
my back up plan). Considering what I would do in a
worst case scenario is instinctive with me and has
saved my bacon more than once. My 10 years in ER
just zipped by (you too I'm guessing). While I don't
particularly like getting older, I can almost smell that
SS money starting to flow.

 

[Mr._johngalt]

And another thing! My downside planning is so
apocalyptic that even if my entire portfolio of invested
capital was wiped out (that's right - 100%), I could still continue on without working until my demise. It wouldn't be pretty but it is doable.

 

[unclemick]

We would be down to SS plus two pensions - SS is two years away yet, so even if 'my capital' were to disappear, capital markets would have to function to keep the pensions coming - doable but chewy.