4 ms·

Why everyone in the US is betting that the stock market will always go on average up ? This has been proven wrong by so many European indices. And yet the whole

Why everyone in the US is betting that the stock market will always go on average up ? This has been proven wrong by so many European indices. And yet the whole US pension system is based on this casino. I really don’t get it. Elderly People are getting robbed of their life savings during recessions and nobody is held responsible.

wraptile 6y ago
> Why everyone in the US is betting that the stock market will always go on average up? Shouldn't it? I'm not an economist but if you think about it: as we become more advanced we create more resources with less work. Stock market would be just one of many way to distrubute that extra efficiency to the society. Unless there's a crisis we should never produce less resources with more work. Of course this is much more complicated than I make it out to be but my point is that it's relatively safe to assume that stock market should go up on average long term.
- whatever1 6y ago
  If your 401k was in the average European stock market since the 2000, today you would have the same money minus the inflation. The GDP of Europe has increased the last 20 years, yet the stock market did not.
  - occamrazor 6y ago
    Which index? The DAX is above 12000 now and never exceeded 8000 around 2000. And this does not even include dividends.
    - whatever1 6y ago
      Check the stoxx 50 index to get an average view of the european industry. It has been flat for decades. If you go to particular countries the image is much much worse. For example if you had your money in the Italian stock market since 2000, by now you would have less than half (inflation not accounted).
      - catern 6y ago
        That's really interesting. I wasn't aware of this. Thanks for sharing this. Stock indices ideally approximate taking a share of "the whole economy". What's your explanation for why this (seems to) not work in Europe?
        whatever1 6y ago
        Probably because we give all of our money to our govs to manage, so no free cash for us to play in the "predict the most profitable company" casino.
- legulere 6y ago
  Stock markets and indices even more only list big companies, which are often very inefficient and only earn money through market capture.
bagacrap 6y ago
The common practice is that the older you get, the more you shift investments to low risk instruments like bonds. If you're being "robbed" by a recession I think you mismanaged your savings.
proverbialbunny 6y ago
Apart from a war or a government collapse, in the long run the stock market will go up if the economy is expanding. Likewise, it will go down if the economy is contracting. (Eg, Japan with more people dying than new people coming into the country.) imo the fallacy is assuming the economy will continue to grow at the same 7% in the long run, when the more mature an economy becomes the less it will grow and from that the less growth to the stock market will happen. imo 6% long run for the future is a safer number.
- whatever1 6y ago
  The mistake is the assumption that the stock market reflects the (expectation of) economical output of a country. European GDP has doubled since 2000, but the stock market is on average flat (see for example Stoxx50). Some member states' stock markets grew, but most of them either stayed stagnant or plummeted completely.
  - proverbialbunny 6y ago
    If you invested in the FTSE you would have made rates near US investments, because of the dividends given out. The 1960s and 70s was similar in the US where the market went sideways for decades, but if you had invested you would have profited just fine, because of the dividends given out at that time too. imo Europe is being smarter about this. The US is potentially setting itself up for a large crash in the coming decades, where Europe is setting itself up for a much smaller crash, due to being dividend heavy instead of growth heavy. Ofc, I don't really know if it will work out this way. No one does, but we can speculate.

wraptile 6y ago

> Why everyone in the US is betting that the stock market will always go on average up? Shouldn't it? I'm not an economist but if you think about it: as we become more advanced we create more resources with less work. Stock market would be just one of many way to distrubute that extra efficiency to the society. Unless there's a crisis we should never produce less resources with more work. Of course this is much more complicated than I make it out to be but my point is that it's relatively safe to assume that stock market should go up on average long term.

whatever1 6y ago
If your 401k was in the average European stock market since the 2000, today you would have the same money minus the inflation. The GDP of Europe has increased the last 20 years, yet the stock market did not.
- occamrazor 6y ago
  Which index? The DAX is above 12000 now and never exceeded 8000 around 2000. And this does not even include dividends.
  - whatever1 6y ago
    Check the stoxx 50 index to get an average view of the european industry. It has been flat for decades. If you go to particular countries the image is much much worse. For example if you had your money in the Italian stock market since 2000, by now you would have less than half (inflation not accounted).
    - catern 6y ago
      That's really interesting. I wasn't aware of this. Thanks for sharing this. Stock indices ideally approximate taking a share of "the whole economy". What's your explanation for why this (seems to) not work in Europe?
      - whatever1 6y ago
        Probably because we give all of our money to our govs to manage, so no free cash for us to play in the "predict the most profitable company" casino.
legulere 6y ago
Stock markets and indices even more only list big companies, which are often very inefficient and only earn money through market capture.

bagacrap 6y ago

The common practice is that the older you get, the more you shift investments to low risk instruments like bonds. If you're being "robbed" by a recession I think you mismanaged your savings.

proverbialbunny 6y ago

Apart from a war or a government collapse, in the long run the stock market will go up if the economy is expanding. Likewise, it will go down if the economy is contracting. (Eg, Japan with more people dying than new people coming into the country.) imo the fallacy is assuming the economy will continue to grow at the same 7% in the long run, when the more mature an economy becomes the less it will grow and from that the less growth to the stock market will happen. imo 6% long run for the future is a safer number.

whatever1 6y ago
The mistake is the assumption that the stock market reflects the (expectation of) economical output of a country. European GDP has doubled since 2000, but the stock market is on average flat (see for example Stoxx50). Some member states' stock markets grew, but most of them either stayed stagnant or plummeted completely.
- proverbialbunny 6y ago
  If you invested in the FTSE you would have made rates near US investments, because of the dividends given out. The 1960s and 70s was similar in the US where the market went sideways for decades, but if you had invested you would have profited just fine, because of the dividends given out at that time too. imo Europe is being smarter about this. The US is potentially setting itself up for a large crash in the coming decades, where Europe is setting itself up for a much smaller crash, due to being dividend heavy instead of growth heavy. Ofc, I don't really know if it will work out this way. No one does, but we can speculate.