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Old 01-30-2016, 12:32 PM   #41
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I think this grow directly relates to inflation. Compare dollar value of 1940 and 2016. In 1940 minimum pay was $0.30 p hour while currently it is about $9 p hour and many States push it to $13 -$15 p hour.
Wage growth has historically exceeded inflation.

As part of his PE10 calc Robert Shiller already discounts the S&P 500 by the CPI index. If you look at his data, you'll see that the 1940 S&P as priced in today's dollars would be around 210 vs. nearly 2,000 today.
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Old 01-30-2016, 12:44 PM   #42
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Well, certainly those of us who retired in 1999 or 2000 have been very aware we have been in a long bear market phase. Maybe for those who retired later it was not so obvious.
Absolutely. Adjusted for inflation the S&P 500 has gone nowhere since the end of the dot.com bubble. As measured in today's dollars the S&P peaked somewhere around 2,040 in August 2000. This Friday the S&P 500 closed at 1,940.

So for 15 year's you've basically kept pace with inflation, plus clipped a dividend of around 1.9% per year.
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Old 01-30-2016, 01:37 PM   #43
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If I read his article correctly, am I alone in not realizing that the past 17 years have been a bear market?

A year or two ago, someone here posted this chart which I found helpful. Now I'm just confused..
If you work through the math of the chart it might become a little clearer. Following the peak which occurred around the year 2000 what followed was a sequence of returns of (44.7%), 108.7%, (50.9%), and 183% (according to the chart). When I apply those returns to a starting balance of $100, this is what I get:

Year 0: $100
Bear 1: $55
Bull 1: $115
Bear 2: $56
Bull 2: $160
Bear 3:

Now there is certainly growth from peak to peak (about 3% annualized). But that's an awful lot of pain for some pretty modest gain. Even if the general trend has been modestly upward, you might forgive people who put money into the market in 2000 for thinking it wasn't a great idea. If you invested at any other time, though, you probably did quite well.
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Old 01-30-2016, 03:38 PM   #44
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Why do they continue focusing on all the meaningless transformations. Lets get the best minds together and focus on something important....Like growing a real scalp full head of hair.
Eh, I still have a full head of dark hair with so little gray that people have accused me of dyeing. No need for help there.

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Absolutely. Adjusted for inflation the S&P 500 has gone nowhere since the end of the dot.com bubble. As measured in today's dollars the S&P peaked somewhere around 2,040 in August 2000. This Friday the S&P 500 closed at 1,940...
I checked and it is worse than that.

The S&P closed at 1527 on 3/24/2000. The cumulative inflation since then is 1.382, so that is equivalent to 2110 today, vs. 1940 last Friday. So, not counting the puny dividend of 2%/yr, you have lost 8% over the years.

During the bull run of 2009-2014, accumulators were chest thumping for building up their stash, which was of course great. However, ER's like myself have no fresh money to buy, and the only way to buy cheap stocks is for the market to crash, and to rebalance.

Still, with rebalancing, you can only get ahead by overweighting equity when the market is low, and lightening up when the market is high. In other words, you need to be market timing. Not that I think it is "dirty" or anything (why is buy low/sell high anything is smart, but dirty with stocks?), but just that it is hard.
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Old 01-30-2016, 03:43 PM   #45
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Eh, I still have a full head of dark hair with so little gray that people have accused me of dyeing. No need for help there.


I checked and it is worse than that.

The S&P closed at 1527 on 3/24/2000. The cumulative inflation since then is 1.382, so that is equivalent to 2110 today, vs. 1940 last Friday. So, not counting the puny dividend of 2%/yr, you have lost 8% over the years.

During the bull run of 2009-2014, accumulators were chest thumping for building up their stash, which was of course great. However, ER's like myself have no fresh money to buy, and the only way to buy cheap stocks is for the market to crash, and to rebalance.

Still, with rebalancing, you can only get ahead by overweighting equity when the market is low, and lightening up when the market is high. In other words, you need to be market timing. Not that I think it is "dirty" or anything (why is buy low/sell high anything is smart, but dirty with stocks?), but just that it is hard.
It is great to be working and buying more shares at lower prices!


No it isn't.
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Old 01-30-2016, 03:54 PM   #46
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It all depends. How has butter production in Bangladesh been lately?

The Bangladeshi butter-production theory of asset prices | TIME.com
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Old 01-30-2016, 03:56 PM   #47
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I checked and it is worse than that.
I'm not surprised. I did my calc based on month-end numbers, which almost certainly wasn't the ultimate peak.

But maybe a possible positive spin on this is that even folks who absolutely top-ticked the market didn't fare that poorly considering how ridiculous that market was. Of course plenty of people bought into tech stocks that went to zero, so there's that.

On the idea of dirty market timing through re-balancing, that's my strategy. I'm a seller into bull markets when valuations look stretched (like now) and a buyer when valuations give me more earnings and dividends per dollar.

Right now I'm only 50/50 stocks/fixed income. I'll start increasing my allocation when / if valuations go down. If not, I'm comfortable owning expensive assets with this mix of risk for as long as they remain expensive. (P.S., I'm also underweight duration)
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Old 01-30-2016, 05:48 PM   #48
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If you work through the math of the chart it might become a little clearer. Following the peak which occurred around the year 2000 what followed was a sequence of returns of (44.7%), 108.7%, (50.9%), and 183% (according to the chart). When I apply those returns to a starting balance of $100, this is what I get:

Year 0: $100
Bear 1: $55
Bull 1: $115
Bear 2: $56
Bull 2: $160
Bear 3:

Now there is certainly growth from peak to peak (about 3% annualized). But that's an awful lot of pain for some pretty modest gain. Even if the general trend has been modestly upward, you might forgive people who put money into the market in 2000 for thinking it wasn't a great idea. If you invested at any other time, though, you probably did quite well.
So, I've been fat, dumb and happy for the past two decades thinking things --on average--are great with my 7-8%+ average annual growth. If indeed we are leaving a bear market and entering a bull, (in the words of that great wit, Mike Tyson) I won't know whether to be ecstatic or ludicrous!
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Old 01-30-2016, 08:06 PM   #49
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I just realized I made an error in the title of this thread and the link to the article.

I put "Bear" when it should have been "Bull".
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Old 01-30-2016, 10:43 PM   #50
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I'm always left wondering if the people who lived in the mid-1700s or mid-1800s had any idea what was to come. My guess is.... NOT!
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Old 01-31-2016, 09:38 AM   #51
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Hmmm... Lemme see. In the mid-1700's, the American Revolution, followed by the brutal French Revolution across the pond. In the mid-1800's the American Civil War. Then, in the mid-1900's the WWII.

We still have a few decades before the mid-2000's. I may or may not be alive by then.
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Old 02-03-2016, 12:27 AM   #52
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Penicillin was discovered prior to 1930. That really was a huge game changer but it also fits right in with Gordon's second industrial revolution.
To be a bit pedantic, penicillin was indeed discovered a long time ago and not the first antibiotic.

Practical use however, as well as commercial availability and subsequent mass production only happened from 1932 onwards.

Fleming himself couldn't reproduce it in mass to be of any use.

So I'd argue that antibiotics is a post 1930 thing (even 1940). What use are antibiotics if you can't mass produce them ..
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Old 02-03-2016, 01:36 AM   #53
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Even during WW II, penicillin was so precious that it was recycled from patients' urine when it was discovered that most of the injected penicillin was quickly filtered out by the kidney.

In 1943, even with recycling from urine, there was only enough penicillin to treat 100 patients. However, a major breakthrough came about, and by the end of WW II enough penicillin was produced, and urine recycling effort was stopped.

See: Doctors Once Recycled Penicillin Out Of Urine - KnowledgeNuts.
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Old 02-03-2016, 07:59 AM   #54
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To be a bit pedantic, penicillin was indeed discovered a long time ago and not the first antibiotic.

Practical use however, as well as commercial availability and subsequent mass production only happened from 1932 onwards.
But that's Gordon's whole point. There were really big discoveries in the late 19th and early 20th centuries. Those discoveries powered 50-100 years of economic growth. Today the exploitation of those things have mostly played out. And there's nothing comparable in recent times to rival those innovations.

The computer age so far pales in comparison.
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Old 02-03-2016, 08:05 AM   #55
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But that's Gordon's whole point. There were really big discoveries in the late 19th and early 20th centuries. Those discoveries powered 50-100 years of economic growth. Today the exploitation of those things have mostly played out. And there's nothing comparable in recent times to rival those innovations.

The computer age so far pales in comparison.
Huh? Facebook and selfie sticks will change the world.
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Old 02-03-2016, 08:27 AM   #56
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Huh? Facebook and selfie sticks will change the world.
Ugh, they already have.
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Old 02-03-2016, 08:38 AM   #57
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But that's Gordon's whole point. There were really big discoveries in the late 19th and early 20th centuries. Those discoveries powered 50-100 years of economic growth. Today the exploitation of those things have mostly played out. And there's nothing comparable in recent times to rival those innovations.

The computer age so far pales in comparison.
I have to disagree. We may be at the cusp, but I think the whole digital integration aspect will deliver an entirely new world.

I often consider hundreds of things I can now do so simply--things that were a lot harder to do-- and think about how this is how people must've felt when they first got electricity or a phone in their home.
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Old 02-03-2016, 08:46 AM   #58
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Huh? Facebook and selfie sticks will change the world.
C'mon. Half the people here talk about living in other countries while keeping in touch with their family via video conference, banking in the "US" from anywhere etc.

Everyone seems to sign up for SS online, monitor their hot tubs up north from their Florida home, making plane reservations from their beach chair etc.

Even my car now has collision avoidance! (already saved DW from a bad crash)
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Old 02-03-2016, 08:49 AM   #59
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If I read his article correctly, am I alone in not realizing that the past 17 years have been a bear market?

A year or two ago, someone here posted this chart which I found helpful. Now I'm just confused..

Attachment 23117
This is confusing because it only shows net ups and downs. What is missing is the total perspecitve over the period. In the 2000's for example, we started with a near 50% drop, followed by a near 100% rise. The chart makes the rise look larger than the drop, but in reality the market only got back to roughly where it started. 2000-2013 was a secular bear market period.
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Old 02-03-2016, 09:49 AM   #60
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I have to disagree. We may be at the cusp, but I think the whole digital integration aspect will deliver an entirely new world.

I often consider hundreds of things I can now do so simply--things that were a lot harder to do-- and think about how this is how people must've felt when they first got electricity or a phone in their home.
Yes and no.

Whether we're on the cusp of some revolutionary new technology that will have an economic impact equal to electricity is yet to be seen. No one is denying that that possibility exists. We're all hopeful we'll see it in our lifetimes and we can all think of possibilities that seem tantalizingly close. So on this point, you, me and Robert Gordon are all in agreement.

Where we disagree is whether the computer age we've actually experienced over the past half century is as big a deal as it seems on the surface. Here the economic statistics unequivocally say no. The computer age, with all it's apparent changes and improvements, just hasn't had the impact on growth and productivity that those earlier innovations did.
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