tag:blogger.com,1999:blog-5465015914589377788.post5126943134224187962..comments2024-02-17T11:07:06.232-05:00Comments on Michael James on Money: Stocks for the Long RunMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-5465015914589377788.post-59105483529817677732014-06-25T15:54:33.916-04:002014-06-25T15:54:33.916-04:00Interestingly, using an online calculator that use...Interestingly, using an online calculator that uses Schiller's data, I found that the real peak with dividends in November 1936 was not reached again until January 1945, so the period of 8 years and 2 months stands as the longest period that real stock prices plus dividends took to regain full value following a crash including the Depression years. Grantnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-12671126390955005212014-06-24T09:45:44.589-04:002014-06-24T09:45:44.589-04:00@Grant: The 5 years and 8 months maximum was just ...@Grant: The 5 years and 8 months maximum was just since World War II. I just poked through Robert Shiller's online monthly data. The peak in 1929 was in September. Counting inflation (deflation, actually) and dividends, purchasing power recovered in November 1936 (but soon plunged again). Without inflation, nominal prices with dividends recovered in December 1944. Ignoring both inflation and dividends, prices recovered in September 1954.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-3876020875466921902014-06-23T22:59:34.694-04:002014-06-23T22:59:34.694-04:00Very interesting. I have heard it said that it too...Very interesting. I have heard it said that it took 25 years for the stock market to recover after the 1929 crash. But that must mean nominal prices, without dividends reinvested, and ignores the point in the mid thirties when, because of deflation there was a temporary return to real new high. This is a reminder, for those in the withdrawal phase, who are using a "bucket" approach, to reinvest dividends when the market crashes so their equities get back to full value before their 5 years of cash/short term bonds runs out and needs replenishing. Mind you, one should never assume the unlikely (stocks taking longer than about 5 years to recover) is impossible.Grantnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-48506913543110275622014-01-29T21:13:31.014-05:002014-01-29T21:13:31.014-05:00Ah, right thanks. If only everyone reported this c...Ah, right thanks. If only everyone reported this consistently :)Richardnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-49621000247864813952014-01-29T14:49:01.892-05:002014-01-29T14:49:01.892-05:00@Richard: Not when you factor in dividends. SPY ...@Richard: Not when you factor in dividends. SPY (S&P 500 fund) trades right now at $178.08. According to Yahoo's historical prices adjusted for dividends, the highest dividend-adjusted SPY level in 2000 was $119.11. The current quote is 50.3% higher than the 2000 max. Inflation over that period has only been about 35%. Dividends matter.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-46383638034357620402014-01-29T14:25:42.575-05:002014-01-29T14:25:42.575-05:00Aren't real stock prices below what they were ...Aren't real stock prices below what they were in 2000?Richardnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-92149602970205990822014-01-29T11:19:05.335-05:002014-01-29T11:19:05.335-05:00@Richard: Yes, it's using real returns. The q...@Richard: Yes, it's using real returns. The question Siegel is answering is <br /><br />1. What is the longest time it has taken for real stock prices to come back up to where they are at a given starting point?<br /><br />This is quite different from asking <br /><br />2. What is the longest time it has taken real stock prices to permanently rise above the value they held at a given point in time? <br /><br />We can see the difference with an example. Suppose stocks are at 1000 in year X and start dropping. They return to 1000 in year X+4. However, they later drop below 1000 again in year x+7. It's not until year X+9 that prices rise above 1000 and never dip below 1000 again. The 4-year spread is relevant to Q1, but the 9-year spread is relevant to Q2.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-32355642293759764062014-01-29T11:03:55.748-05:002014-01-29T11:03:55.748-05:00That seems really short too. Was it using real ret...That seems really short too. Was it using real returns?Richardnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-60874336277037508152014-01-29T09:46:08.536-05:002014-01-29T09:46:08.536-05:00@Bet Crooks: Yes, he's talking about buying th...@Bet Crooks: Yes, he's talking about buying the entire U.S. stock market. There have been plenty of stocks that have gone to zero. Many speculators have lost money permanently. I agree that this is another argument in favour of low-cost broad indexing.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-52565926267462791162014-01-29T09:42:16.371-05:002014-01-29T09:42:16.371-05:00Am I correct in thinking when he says "The lo...Am I correct in thinking when he says "The longest it has ever taken an investor to recover an original investment in the stock market (including reinvested dividends) was the five-year, eight-month period from August 2000 through April 2006." he's talking about someone who "buys the entire market?" Because there were lots of people who put money in dot coms who never got any of their investment back because the companies poofed into hyperspace.<br /><br />So this might be another argument strongly in favour of full-market-index-investing?BetCrookshttp://financialcrooks.comnoreply@blogger.com