7 ms·

So what you're saying is that past performance is indicative of future results...

by dharbin 11y ago

outside1234 11y ago
over a long enough time period? yes.
- knodi123 11y ago
  The stock market is less than 200 years old. Let's not make any bold predictions about unbreakable trends when we're talking about time periods up to 25% of the age of the market itself. After all, at one time the conventional wisdom was "No football team who plays their home games in a domed stadium will ever win the superbowl." And there were decades of evidence to support that statistical fact!
  - freehunter 11y ago
    Yes but that fact doesn't have any scientific basis, it's just pure coincidence. There's no reason why it didn't happen other than the fact that it didn't. The stock market on the other hand, indicates the overall health of the country. It's not a coincidence that it keeps going up as the wealth of the nation goes up. Recently in baseball, all 30 teams played on the same day, and all 15 home teams won on the same day. That hasn't ever happened before. Why hasn't it happened before? Not because of how unlikely it is. It hadn't happened before because it hadn't happened before. Because it happened now doesn't mean it's more or less likely to happen in the future. It doesn't mean baseball is changing. It doesn't mean anything. But a long term downward trend in the stock market? Means death for a nation's economy. Even a short term downward trend does significant damage. Football and the stock market are not as closely related as you may think.
    - wrong_internet 11y ago
      The stock market on the other hand, indicates the overall health of the country. I think the parent's ultimate point is that no country (by which I mean under the same constitution, monetary system, or de facto political arrangement) has lasted longer than a few hundred years. Even if everything seems economically fine right now and for the foreseeable future, at some point all countries and their associated economies go away and are replaced by something else entirely, at which point the stock market index within said structure goes to at or near zero. You just need to take a longer time horizon than "when I retire".
    - knodi123 11y ago
      > Why hasn't it happened before? Not because of how unlikely it is. It hadn't happened before because it hadn't happened before. Yes, that was the basis of my analogy. I do indeed think those situations are similar for that reason. > But a long term downward trend in the stock market? Means death for a nation's economy. Well, you're forgetting the idea of a steady-state stable non-growing non-shrinking economy, which is one possibility (see spain: https://www.google.com/finance?q=MADX%3AIND&ei=p5LcVYr0EI6S2Aatm4igCA https://www.google.com/finance?q=MADX%3AIND&ei=p5LcVYr0EI6S2...) But even talking about down-trends, I think "death" is a bit strong. It could also indicate a gradual transition to a lower stable position. Plenty of economies survive at small sizes.
    - freyr 11y ago
      > the wealth of the nation goes up. What is the scientific basis by which we can expect this to continue indefinitely? In fact, all evidence points to the contrary.
      - runamok 11y ago
        Not my area of expertise but I'd imagine it's a function of population and interconnectedness of economies. I do see that some nation economies will be hurt and others helped as everything will probably revert to a mean to some degree. I saw this data on how fast China's economy had grown recently and thought it relevant: https://en.wikipedia.org/wiki/Historical_GDP_of_China https://en.wikipedia.org/wiki/Historical_GDP_of_China What evidence is contrary? I do imagine this growth will be asymptotic though on a longer timespan as we need to slow down population growth due to the environmental impact. But who knows? At some point maybe we will be mining asteroids and finding wealth (and places to spend it) outside of Earth.
        freyr 11y ago
        > Not my area of expertise but I'd imagine it's a function of population and interconnectedness of economies. So the population growth rate of the U.S. is declining, and many developed nations now have negative population growth rate. > I do see that some nation economies will be hurt and others helped as everything will probably revert to a mean to some degree. Right, so would you expect the U.S. economy to be helped or hurt by the decline of its economic dominance and a reversion to the mean? > What evidence is contrary? No nation, empire, or civilization in history has managed to sustain global economic dominance indefinitely. There are probably many events that could cause the U.S. economy to contract. But even if the U.S. economy continues to grow, though at a much slower pace than competitors or the global economy, I just don't expect the U.S. markets to continue rising in a meaningful way. People in this thread are claiming that local markets always rise as though they're stating a law of physics, and it's absurd.
        crucialfelix 11y ago
        > No nation, empire, or civilization in history has managed to sustain global economic dominance indefinitely. The US stock market is made up of mostly multi-national companies. Its a financial center for earth, not an isolated economy. If we talk about civilization at this point in time then its the global civilization of earth we are talking about.
  - outside1234 11y ago
    There are real forces that propel the stock market upwards: productivity and an ever increasing population (so more overall revenue and therefore profits over time). This is why its a pretty safe bet that over 15 year+ time periods that the stock market will go up.
    - knodi123 11y ago
      But our population can't increase steadily forever. That trend HAS to end or even reverse at some point. I understand increases in productivity enable support for a larger population- but that's not a bottomless well. There are insurmountable practical limitations.
      - AnimalMuppet 11y ago
        Well, the US population can continue to grow until overcrowding becomes a problem, or food becomes a problem, or energy becomes a problem, or nobody wants to live here anymore. The first three seem a long way out; the fourth might arrive sooner...
        deleted 11y ago
        [deleted]
    - freyr 11y ago
      Except that, in many nations around the world, the population growth rate is negative. There is no shortage of space, or food, or energy, but the populations are aging and couples are having fewer children. This is the situation in Japan, Germany, Russia, South Korea, and almost all of Eastern Europe. The U.S. population growth rate has also been in decline for the past 50 years, dropping from 1.7 percent to 0.7 percent, heading towards negative growth if this trend continues. So much for "an ever increasing population" to bolster a market that always goes up.
- deleted 11y ago
  [deleted]
- freyr 11y ago
  How long of a time period? Is 20 years sufficient? 200 years? Historically, most empires rose to greatness and then imploded in fewer than 200 years. So I guess we shouldn't look over too long a time period. We've enjoyed the repercussions of the United States' rapid ascent from a fledgling colony to a world superpower. If we look at the stock market during this period of remarkable growth, it's very easy to conclude that markets will always go up. Of course, this would be a very foolish conclusion.
n72 11y ago
You realize that phrase is used in terms of stock picking, not the nature of a free market, right?
- freyr 11y ago
  I'm pretty sure the phrase was just used in terms of the nature of a free market. Are you suggesting that because the U.S. stock market has risen during the tiny blip in history that the U.S. has been an uncontested world superpower, we can expect it to rise forever?
  - codingdave 11y ago
    What else would you have us expect? That when the US is no longer relevant, and the stock market is permanently declining, that somehow a stash of dollars will be meaningful? No, for all practical purposes, go ahead and expect it to rise forever. Anything that would make that untrue would make your investment balance unimportant.
    - tacon 11y ago
      How to Protect Your Life Savings from Hyperinflation & Depression, 2nd edition by John T. Reed http://johntreed.com/hyperinflationdepression.html http://johntreed.com/hyperinflationdepression.html
    - itsybitsycoder 11y ago
      In that case you would invest in assets, not cash or stocks. A chunk of land with a garden and a couple of goats would be very handy when a loaf of bread costs $10 billion at the store.
      - sopooneo 11y ago
        Then what if you invested in a bread factory? You'll be part owner of a business that can sell it's wears for $10 billion.

So what you're saying is that past performance is indicative of future results...

by dharbin 11y ago

So what you're saying is that past performance is indicative of future results...

outside1234 11y ago

over a long enough time period? yes.

knodi123 11y ago
The stock market is less than 200 years old. Let's not make any bold predictions about unbreakable trends when we're talking about time periods up to 25% of the age of the market itself. After all, at one time the conventional wisdom was "No football team who plays their home games in a domed stadium will ever win the superbowl." And there were decades of evidence to support that statistical fact!
- freehunter 11y ago
  Yes but that fact doesn't have any scientific basis, it's just pure coincidence. There's no reason why it didn't happen other than the fact that it didn't. The stock market on the other hand, indicates the overall health of the country. It's not a coincidence that it keeps going up as the wealth of the nation goes up. Recently in baseball, all 30 teams played on the same day, and all 15 home teams won on the same day. That hasn't ever happened before. Why hasn't it happened before? Not because of how unlikely it is. It hadn't happened before because it hadn't happened before. Because it happened now doesn't mean it's more or less likely to happen in the future. It doesn't mean baseball is changing. It doesn't mean anything. But a long term downward trend in the stock market? Means death for a nation's economy. Even a short term downward trend does significant damage. Football and the stock market are not as closely related as you may think.
  - wrong_internet 11y ago
    The stock market on the other hand, indicates the overall health of the country. I think the parent's ultimate point is that no country (by which I mean under the same constitution, monetary system, or de facto political arrangement) has lasted longer than a few hundred years. Even if everything seems economically fine right now and for the foreseeable future, at some point all countries and their associated economies go away and are replaced by something else entirely, at which point the stock market index within said structure goes to at or near zero. You just need to take a longer time horizon than "when I retire".
  - knodi123 11y ago
    > Why hasn't it happened before? Not because of how unlikely it is. It hadn't happened before because it hadn't happened before. Yes, that was the basis of my analogy. I do indeed think those situations are similar for that reason. > But a long term downward trend in the stock market? Means death for a nation's economy. Well, you're forgetting the idea of a steady-state stable non-growing non-shrinking economy, which is one possibility (see spain: https://www.google.com/finance?q=MADX%3AIND&ei=p5LcVYr0EI6S2Aatm4igCA https://www.google.com/finance?q=MADX%3AIND&ei=p5LcVYr0EI6S2...) But even talking about down-trends, I think "death" is a bit strong. It could also indicate a gradual transition to a lower stable position. Plenty of economies survive at small sizes.
  - freyr 11y ago
    > the wealth of the nation goes up. What is the scientific basis by which we can expect this to continue indefinitely? In fact, all evidence points to the contrary.
    - runamok 11y ago
      Not my area of expertise but I'd imagine it's a function of population and interconnectedness of economies. I do see that some nation economies will be hurt and others helped as everything will probably revert to a mean to some degree. I saw this data on how fast China's economy had grown recently and thought it relevant: https://en.wikipedia.org/wiki/Historical_GDP_of_China https://en.wikipedia.org/wiki/Historical_GDP_of_China What evidence is contrary? I do imagine this growth will be asymptotic though on a longer timespan as we need to slow down population growth due to the environmental impact. But who knows? At some point maybe we will be mining asteroids and finding wealth (and places to spend it) outside of Earth.
      - freyr 11y ago
        > Not my area of expertise but I'd imagine it's a function of population and interconnectedness of economies. So the population growth rate of the U.S. is declining, and many developed nations now have negative population growth rate. > I do see that some nation economies will be hurt and others helped as everything will probably revert to a mean to some degree. Right, so would you expect the U.S. economy to be helped or hurt by the decline of its economic dominance and a reversion to the mean? > What evidence is contrary? No nation, empire, or civilization in history has managed to sustain global economic dominance indefinitely. There are probably many events that could cause the U.S. economy to contract. But even if the U.S. economy continues to grow, though at a much slower pace than competitors or the global economy, I just don't expect the U.S. markets to continue rising in a meaningful way. People in this thread are claiming that local markets always rise as though they're stating a law of physics, and it's absurd.
        crucialfelix 11y ago
        > No nation, empire, or civilization in history has managed to sustain global economic dominance indefinitely. The US stock market is made up of mostly multi-national companies. Its a financial center for earth, not an isolated economy. If we talk about civilization at this point in time then its the global civilization of earth we are talking about.
- outside1234 11y ago
  There are real forces that propel the stock market upwards: productivity and an ever increasing population (so more overall revenue and therefore profits over time). This is why its a pretty safe bet that over 15 year+ time periods that the stock market will go up.
  - knodi123 11y ago
    But our population can't increase steadily forever. That trend HAS to end or even reverse at some point. I understand increases in productivity enable support for a larger population- but that's not a bottomless well. There are insurmountable practical limitations.
    - AnimalMuppet 11y ago
      Well, the US population can continue to grow until overcrowding becomes a problem, or food becomes a problem, or energy becomes a problem, or nobody wants to live here anymore. The first three seem a long way out; the fourth might arrive sooner...
      - deleted 11y ago
        [deleted]
  - freyr 11y ago
    Except that, in many nations around the world, the population growth rate is negative. There is no shortage of space, or food, or energy, but the populations are aging and couples are having fewer children. This is the situation in Japan, Germany, Russia, South Korea, and almost all of Eastern Europe. The U.S. population growth rate has also been in decline for the past 50 years, dropping from 1.7 percent to 0.7 percent, heading towards negative growth if this trend continues. So much for "an ever increasing population" to bolster a market that always goes up.
deleted 11y ago
[deleted]
freyr 11y ago
How long of a time period? Is 20 years sufficient? 200 years? Historically, most empires rose to greatness and then imploded in fewer than 200 years. So I guess we shouldn't look over too long a time period. We've enjoyed the repercussions of the United States' rapid ascent from a fledgling colony to a world superpower. If we look at the stock market during this period of remarkable growth, it's very easy to conclude that markets will always go up. Of course, this would be a very foolish conclusion.

n72 11y ago

You realize that phrase is used in terms of stock picking, not the nature of a free market, right?

freyr 11y ago
I'm pretty sure the phrase was just used in terms of the nature of a free market. Are you suggesting that because the U.S. stock market has risen during the tiny blip in history that the U.S. has been an uncontested world superpower, we can expect it to rise forever?
- codingdave 11y ago
  What else would you have us expect? That when the US is no longer relevant, and the stock market is permanently declining, that somehow a stash of dollars will be meaningful? No, for all practical purposes, go ahead and expect it to rise forever. Anything that would make that untrue would make your investment balance unimportant.
  - tacon 11y ago
    How to Protect Your Life Savings from Hyperinflation & Depression, 2nd edition by John T. Reed http://johntreed.com/hyperinflationdepression.html http://johntreed.com/hyperinflationdepression.html
  - itsybitsycoder 11y ago
    In that case you would invest in assets, not cash or stocks. A chunk of land with a garden and a couple of goats would be very handy when a loaf of bread costs $10 billion at the store.
    - sopooneo 11y ago
      Then what if you invested in a bread factory? You'll be part owner of a business that can sell it's wears for $10 billion.