S&P Cumulative Total Return Lags T-Bills From 1997!

[haha]

This graph from John Hussman:



Hussman Funds - Weekly Market Comment: Value Dinosaurs - November 3, 2008

It can look like things are going very well, then the market whacks you on the head and you're back where you started, or in this case, worse off than had you stuck to very boring low return bills.

Maybe it is in value territory now.

Ha

[Texarkandy]

Unless of course you dumped your S&P index for treasuries in Apr 07 as I did.

Not that I'm some kind of genius market timer or anything - I just fortuitously finally got nervous enough about all the doomsaying re: subprimes at the same time that I was becoming more concious of how close I was getting to my projected ER date (12/09)

[haha]

Quote:

Originally Posted by Texarkandy Unless of course you dumped your S&P index for treasuries in Apr 97 as I did.

It isn't clear to me how your actions would have affected the relative perfomance of these two classes.

But anyway, good work, you da man!!!

Ha

[tomintucson]

Mr. Ha,

And you, sir, are quite clever. I always enjoy your posts.

Tom

[Texarkandy]

Point taken.

In any case I'll probably be sticking to those "very boring low return bills" for a while yet.

[TromboneAl]

Even better, yes?

Mattress.jpg

[Gone4Good]

Quote:

Originally Posted by haha It can look like things are going very well, then the market whacks you on the head and you're back where you started, or in this case, worse off than had you stuck to very boring low return bills.

The "nice" thing about a lost decade is that we're already 10 years in to lousy equity returns. Mean reversion was working heavy against you in the late 90's, seems like it will start pulling in our direction again before too long.

[SteveL]

One can pick any decade to make any particular point one wants to make about investing. Ten years isn't enough given the life expectancy of the average person to make conclusions about the desirability of any investing strategy.

[haha]

Quote:

Originally Posted by SteveL One can pick any decade to make any particular point one wants to make about investing. Ten years isn't enough given the life expectancy of the average person to make conclusions about the desirability of any investing strategy.

I don't think anyhone was doing that. At least not I, nor Dr. Hussman. And I doubt that AL was either.

Sometiems descriptive information can be useful, or if you won't grant that, interesting. Perhaps you are a very incurious person?

Ha

[TromboneAl]

Right. It's definitely interesting and important to realize that there are times when just having money under the mattress or in treasuries would have given you a better return for some period. This happened to me for the first time after the crash of 1987, when, IIRC, I lost all of $500 on paper!

[HFWR]

Even given the bloodbaths of 2001-2003 and 2008, I'm up significantly from 1997, with a fairly diversified cadre of index funds representing equities, bonds/cash, and RE...

Knock on wood!

[Abreutime]

Quote:

Originally Posted by HFWR Even given the bloodbaths of 2001-2003 and 2008, I'm up significantly from 1997, with a fairly diversified cadre of index funds representing equities, bonds/cash, and RE... Knock on wood!

Probably for a few other reasons, too: dollar cost averaging, dividend reinvestment.

Why it pays to hang tough in a take-no-prisoners market - Oct. 28, 2008
Random excerpt, which reveals that 10year returns as of mid-October were -11% without dividends, +5% with dividends. That does not include dollar cost averaging (buying in both the peaks and valleys), which would have helped you do better than 5%. This just demonstrates that investors will have much higher returns than simply looking at P1 and P2.

[SteveL]

I agree that it is interesting........just not sure if it is significant.

[HFWR]

Quote:

Originally Posted by Abreutime Probably for a few other reasons, too: dollar cost averaging, dividend reinvestment.

I would add diversification, and rebalancing. And maybe a dash dirty market timing...

[riskadverse]

Quote:

Originally Posted by HFWR I would add diversification, and rebalancing. And maybe a dash dirty market timing...

and the one most people forget to mention - contributions

[Bikerdude]

Quote:

Originally Posted by SteveL I agree that it is interesting........just not sure if it is significant.

The significance to me might be, don't put money you may need in 10 years into the stock market. Although I'll admit it is a rare case.

[HFWR]

Quote:

Originally Posted by riskadverse and the one most people forget to mention - contributions

Which would be similar to DCA and dividend reinvestment.

[tangomonster]

I thought I could read a simple graph---maybe I am brain-dead from the stress of these past weeks (market and election), but I'm just not understanding the graph that Ha posted.

How were treasury bills giving a 50% return? Or even 20? :confused:

And doesn't the graph show that buy and hold may not be advantageous in intermediate periods of time, like ten years? If after ten years you are back to where you started (or below), how can that possibly be beating inflation or giving greater returns than fixed interest investing?

[FIRE'd@51]

Quote:

Originally Posted by tangomonster How were treasury bills giving a 50% return? Or even 20? :confused:

That's 50% total (with interest reinvested) over 10 years, which is about 4% annually, before inflation.

[haha]

Quote:

Originally Posted by tangomonster I thought I could read a simple graph---maybe I am brain-dead from the stress of these past weeks (market and election), but I'm just not understanding the graph that Ha posted. How were treasury bills giving a 50% return? Or even 20? :confused: And doesn't the graph show that buy and hold may not be advantageous in intermediate periods of time, like ten years? If after ten years you are back to where you started (or below), how can that possibly be beating inflation or giving greater returns than fixed interest investing?

Tango, the returns shown both for the 3 month bills and the S&P are cumulative over the entire 11 year period.

And yes, that is what is shown. Hussman's intent was to demonstrate that returns over a complete cycle are contingent on entry valuations. It also shows what you say- if no entry valuation discipline is practiced, then even over a period longer than a decade, you can be better off in T-bills. This without any risk adjustment!

Ha