4 ms·

The Dow is arbitrary. It happened to do well, if you bought a Japanese index in 1929 you’d do well for 60 years and then make losses which would require another

The Dow is arbitrary. It happened to do well, if you bought a Japanese index in 1929 you’d do well for 60 years and then make losses which would require another 30 years to recover from.

eloff 5y ago
You're measuring conveniently from the top of the epic bubble in the late eighties. But yes the US has been a better long term bet than Japan. That doesn't mean it's "arbitrary".
- pessimizer 5y ago
  > measuring conveniently That's a bizarre but accurate way to describe "citing a specific example."
  - eloff 5y ago
    If you pick the top or bottom of the market as a starting point you can tell a very misleading story about returns over time. Starting and ending points matter a lot.
    - carnitine 5y ago
      I didn’t though. That wasn’t my starting point, the 20s was. It’s just the 80s are when things start going wrong. The Nikkei declined over years, hitting just over 8k in 2003, whereas post bubble it went from mid-30s to mid-20s. The bubble wasn’t even the worst of it.
      - eloff 5y ago
        You did though. "and then make losses which would require another 30 years to recover from." Make losses starting from that high in the late eighties. Why choose that date to start from. Start a decade earlier and it doesn't look so grim. Look at the average return since 1929 and it's good as well. Pick a better date than 1929 and get a fairer picture.
        carnitine 5y ago
        Are you missing the ‘and then’? It’s a compound sentence, I was just stating the point at which the losses occur. I didn’t ‘choose’ that date, that’s just when things happened. The start point was the 20s as is the point of this entire comment thread.
        eloff 5y ago
        It's 30 years to recover losses from the high. That sounds bad, but how long to recover losses if you don't count the ridiculous paper gains during the bubble? The point is you're cherry picking to give that statistic. You gave a statistic that is meaningful only in the context of picking the worst possible date for comparison. Surely you can understand that.
        carnitine 5y ago
        I chose no dates. I described what happens if you used the same dates as the original comment at the root of this thread. The American indices recovered from the 2008 crash in a couple of years. Japan’s problems are far worse than a single stock market bubble in the 80s.
- carnitine 5y ago
  I’m not measuring from anywhere, I’m describing what happens if you invested over the same time period as the original comment with the same strategy but a different index. Nor did I say the US is arbitrary, I said the Dow was, which it is given it’s fairly illogical weighting rules and arbitrary size limits. But the US is also somewhat arbitrary, it happens to have been the best performing economy over a period in which it won a World War and Cold War, and became the largest power in the world. To say it is the obvious choice now is to make a massively uncertain bet. I’m sure in 1929 the obvious choice was Britain who at the time controlled the largest empire ever, rather than the US, yet a British index would not have performed nearly as well.
  - ivalm 5y ago
    And if you had a 80/20 equities/cash split that you rebalance annually you would do well in the Japanese market over the same time period.
  - eloff 5y ago
    Your 30 year comment is measured precisely from the top of the epic Japanese stock bubble of the late eighties. Whether you are aware of that or not. Measure from the bottom shortly after, and it's a very different story. You are right about the arbitrary rules of the dow. If you're going to do index investing, I would much rather the S&P 500.
    - carnitine 5y ago
      Well yes. We are talking in the context of buying an index in the 20s and holding it until the present day. I split the Japanese index’s performance into two periods, but I’m not sure what your point is because I’m commenting on the entire 90+ year timeframe. Buying straight after the crash would obviously have a different outcome, but that seems like you’re cherrypicking a particular date rather than me.
      - eloff 5y ago
        I shouldn't have to spell it out so much for you. You have no return for thirty years only if you cherry pick the top of that bubble in the late eighties. Start anywhere else and there is a positive return (ie what you said is false unless you cherry pick the start). You can do the same cherry picking in the US market and people frequently do. To look at long term average returns properly picking fair start and end dates is important. And then remember, we won't see growth over the next 100 years like the last hundred, so expect much lower returns. But the same is true for other assets as well. Bonds have negative real yields right now.

The Dow is arbitrary. It happened to do well, if you bought a Japanese index in 1929 you’d do well for 60 years and then make losses which would require another 30 years to recover from.

eloff 5y ago

You're measuring conveniently from the top of the epic bubble in the late eighties. But yes the US has been a better long term bet than Japan. That doesn't mean it's "arbitrary".

pessimizer 5y ago
> measuring conveniently That's a bizarre but accurate way to describe "citing a specific example."
- eloff 5y ago
  If you pick the top or bottom of the market as a starting point you can tell a very misleading story about returns over time. Starting and ending points matter a lot.
  - carnitine 5y ago
    I didn’t though. That wasn’t my starting point, the 20s was. It’s just the 80s are when things start going wrong. The Nikkei declined over years, hitting just over 8k in 2003, whereas post bubble it went from mid-30s to mid-20s. The bubble wasn’t even the worst of it.
    - eloff 5y ago
      You did though. "and then make losses which would require another 30 years to recover from." Make losses starting from that high in the late eighties. Why choose that date to start from. Start a decade earlier and it doesn't look so grim. Look at the average return since 1929 and it's good as well. Pick a better date than 1929 and get a fairer picture.
      - carnitine 5y ago
        Are you missing the ‘and then’? It’s a compound sentence, I was just stating the point at which the losses occur. I didn’t ‘choose’ that date, that’s just when things happened. The start point was the 20s as is the point of this entire comment thread.
        eloff 5y ago
        It's 30 years to recover losses from the high. That sounds bad, but how long to recover losses if you don't count the ridiculous paper gains during the bubble? The point is you're cherry picking to give that statistic. You gave a statistic that is meaningful only in the context of picking the worst possible date for comparison. Surely you can understand that.
        carnitine 5y ago
        I chose no dates. I described what happens if you used the same dates as the original comment at the root of this thread. The American indices recovered from the 2008 crash in a couple of years. Japan’s problems are far worse than a single stock market bubble in the 80s.
carnitine 5y ago
I’m not measuring from anywhere, I’m describing what happens if you invested over the same time period as the original comment with the same strategy but a different index. Nor did I say the US is arbitrary, I said the Dow was, which it is given it’s fairly illogical weighting rules and arbitrary size limits. But the US is also somewhat arbitrary, it happens to have been the best performing economy over a period in which it won a World War and Cold War, and became the largest power in the world. To say it is the obvious choice now is to make a massively uncertain bet. I’m sure in 1929 the obvious choice was Britain who at the time controlled the largest empire ever, rather than the US, yet a British index would not have performed nearly as well.
- ivalm 5y ago
  And if you had a 80/20 equities/cash split that you rebalance annually you would do well in the Japanese market over the same time period.
- eloff 5y ago
  Your 30 year comment is measured precisely from the top of the epic Japanese stock bubble of the late eighties. Whether you are aware of that or not. Measure from the bottom shortly after, and it's a very different story. You are right about the arbitrary rules of the dow. If you're going to do index investing, I would much rather the S&P 500.
  - carnitine 5y ago
    Well yes. We are talking in the context of buying an index in the 20s and holding it until the present day. I split the Japanese index’s performance into two periods, but I’m not sure what your point is because I’m commenting on the entire 90+ year timeframe. Buying straight after the crash would obviously have a different outcome, but that seems like you’re cherrypicking a particular date rather than me.
    - eloff 5y ago
      I shouldn't have to spell it out so much for you. You have no return for thirty years only if you cherry pick the top of that bubble in the late eighties. Start anywhere else and there is a positive return (ie what you said is false unless you cherry pick the start). You can do the same cherry picking in the US market and people frequently do. To look at long term average returns properly picking fair start and end dates is important. And then remember, we won't see growth over the next 100 years like the last hundred, so expect much lower returns. But the same is true for other assets as well. Bonds have negative real yields right now.