13 ms·

Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic ever since the financial crisis

by fny 4y ago

Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic ever since the financial crisis. What made this period so unique? Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. At ever dip, it was an open secret the Fed would cut rates and ease again. At least for now, that game is over. We've had moments in the past when the markets had a similar panic (see 2018), but this period is unique due to the inflationary backdrop. Since 2008 we've never seemed to be able to create significant economic growth or inflation greater. The COVID fiscal canon blew growth and inflation skyward. The fed can't just turn on the printers again or cut rates until we hit proper a proper recession. That's when you buy the dip. [0]: https://www.macrotrends.net/2324/sp-500-historical-chart-data https://www.macrotrends.net/2324/sp-500-historical-chart-dat...

deleted 4y ago
[deleted]
tyre 4y ago
> The COVID fiscal canon blew growth and inflation skyward. This is not true and has wrongly given credit to people who have said, since 2020, that COVID relief would cause inflation. Our current inflation is driven by supply chain issues (unrelated to COVID relief) and rising oil (unrelated to COVID relief.)
- candiddevmike 4y ago
  From what I've read, our current inflation is due to combo of inflated asset prices causing mortgages and rents to skyrocket along with corporate greed raising prices "because of inflation".
  - darkerside 4y ago
    You should probably widen the pool of what you read. You're not wrong (well, corporate greed tends to be a bit of a bogeyman), but it's certainly reductive.
- SamReidHughes 4y ago
  Working class wages have increased, and that is clearly because of Covid relief. Or other Covid-related policies like halting immigration. (I should be clear, this is still supply-side, but related to Covid relief. "Stimulus" money spent unproductively by the government is also supply-side.)
  - bushbaba 4y ago
    Covid relief prevented deflation. Thus when things went back to normal we saw large inflation. You also had PPP loans which went to businesses that saw growth! And those business owners got huge payouts used to buy houses and assets
- ouEight12 4y ago
  > rising oil Monthly inflation numbers have been > 5% since May 2021. Oil didn't exceed 2018 $s until will into October 2021.
- bagacrap 4y ago
  I don't know why you're so confident. All of these things can contribute to inflation.
  - freyr 4y ago
    Probably an adherent of modern monetary theory.
    - RealityVoid 4y ago
      MMT does not say that liberal issue of currency does not cause inflation.
- _uy6i 4y ago
  This may be the case for many goods (e.g. cars, furniture, dishwashers, beef) - but definitely not assets (e.g. homes, bonds, stocks, art)
  - Nevermark 4y ago
    Supply chain issues have pushed up construction costs and times. So buildings increase in value due to supply disruption too.
  - astrange 4y ago
    Asset and good inflation aren't the same kind of thing because you won't die if you can't buy a stock, and you can buy any fraction of a stock not just one share these days. (Although the second one is a reason they've gotten more expensive.) Homes are a special case, but it's entirely possible for the purchase price of homes to go up while rent doesn't.
- astrange 4y ago
  > Our current inflation is driven by supply chain issues (unrelated to COVID relief) Well, specifically it's because everyone went home and switched from purchasing services to goods. So there are serious composition effects comparing 2019 to 2020 and you don't have to assume you're making less money because an inflation number said you are.
chii 4y ago
> dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. i don't really agree with this - the money used to purchase financial products don't disappear, because for every product bought, there was a seller. This seller now has cash, which would be invested elsewhere. The only concern is low interest rates, which makes the hurdle for any investment lower thus making it easy for malinvestments to occur; In hindsight is easy to make judgements on what is a malinvestment, but not so easy at the time.
- bagacrap 4y ago
  I've had this same thought, but everyone seems to be sitting in cash? No one wants to invest unless everyone else invests. Seems the emperor is suddenly naked.
  - JumpCrisscross 4y ago
    > everyone seems to be sitting in cash? What is this based on? Every indicator suggests we’re still in a risk-on mode as an economy. It’s why we have inflation.
    - EGreg 4y ago
      Yield curve inverted and interest rates have begun to go up. Risk on?
      - JumpCrisscross 4y ago
        > curve inverted and interest rates have begun to go up. Risk on? Yes, we’re still seeing billions of dollars being deployed into start-ups [1], crypto and the like. We are less risk on than we were. But within America, there is no flight to safety. (Internationally, it’s more complicated.) [1] https://fortune.com/2022/04/08/venture-capitals-2022-slowdown-4-charts/amp/ https://fortune.com/2022/04/08/venture-capitals-2022-slowdow...
    - baq 4y ago
tedunangst 4y ago
Every even modestly exponential curve has the same shape. https://www.wolframalpha.com/input?i=y+%3D+1.05%5Ex+from+1+to+100 https://www.wolframalpha.com/input?i=y+%3D+1.05%5Ex+from+1+t...
- shawnz 4y ago
  This time is different, every time See for example this nice video from Ben Felix: https://www.youtube.com/watch?v=Jh9Gn58r9Fw https://www.youtube.com/watch?v=Jh9Gn58r9Fw
  - AlchemistCamp 4y ago
    What do you like about it?
    - shawnz 4y ago
      I generally enjoy his evidence-based approach to investing and this video is particularly good at addressing common FUD about today's situation being unique compared to the past.
- grey-area 4y ago
  Exponential curves in real assets are not sustainable.
  - pl-94 4y ago
    The GDP is itself exponential. A growth of +2% a year is an example of an exponential curve. Sure there are "limits to growth" (see Meadows et al.) but it's not clear whether those limits are reached yet.
    - grey-area 4y ago
      GDP rising exponentially is also clearly unsustainable. We have IMO reached a paradigm shift in central bank policy after decades of low rates and low inflation. The recent past is not a good guide to the near future in markets.
throwaway2037 4y ago
There is an saying: The stock market is not the economy. The US economy is still growing faster enough for corporations to fight off the effects of inflation. (People / workers are a different social and economic issue.) The Fed will continue to raise rates and wind down its balance sheet in an orderly manner. Eventually, after enough rate rises, inflation will slow, and the economy will reach a new equilibrium between growth, rates, and inflation. This is all a normal part of an economic cycle.
- baq 4y ago
  Inflation will already slow (oil stopped going up), GDP prints are coming in negative, rates are only now accelerating while economy is slowing down. How this doesn’t end in a recession is beyond me. Mortgage workers have been laid off already due to that. Real economy is next on a lag due to demand destruction.
  - bushbaba 4y ago
    Recession needs just two quarters of negative gdp. Q1 had negative growth. So will q2. We are already in a recession
    - baq 4y ago
      jury is still out on q2, I expect sub-1% growth, so technically not a recession, but it hardly matters. it's going to be interesting for the next 4 quarters anyway.
ars 4y ago
> Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic That's because you are using a linear graph instead of a logarithmic graph. If you have $100 and it double you have $200, if you have $10,000 and it doubles you have $20,000. Both of those are the same chance, but if you use a linear graph it looks parabolic. Do yourself a favor and NEVER use a linear graph of the stockmarket.
- tasuki 4y ago
  > That's because you are using a linear graph instead of a logarithmic graph. The macrotrends.net graph linked by fny is logarithmic (by default, though there's a "Log Scale" checkbox to turn it off). It's also inflation-adjusted by default, which I think is a little unfair.
5350-uiop-1130 4y ago
I hope this is true but I also feel like we no longer follow any kind of logic after 2008, we totally detached from reality.
- tasuki 4y ago
  > I [...] feel like we no longer follow any kind of logic after 2008, we totally detached from reality. What does it mean we have detached from reality? That valuations are not what they should be? What exactly should they be then? Who should be deciding these things? And a bonus question: Why do you think the current valuations are what they are?
  - 5350-uiop-1130 4y ago
    No value anymore, only speculation. houses for sale getting 30+ bids 200k over asking, buyers waiving all contingencies including appraisal gaps and inspections some houses going for $400k+ over asking EV companies valued at billions of dollars with <$50,000 in total revenue retail tripping over themselves to buy SPACs before the SPACs even announce what company is merging with them there was no repurcussion to the 2008 crimes. have been ingested into the system, not a doomsayer but hope the most egregious speculators get bankrupted it won't happen - we are in full bizzarro clown world.
    - mythrwy 4y ago
      "Fake it till you make It" implies when you make it, stop faking it. We apparently didn't "make it" enough so had to keep faking after 2008. Now, we apparently think we can live on fake forever but the universe will likely not oblige. Look at the world. The massive amount of people coming online. The pressure on resources this causes. The diminishing low hanging fruit (oil, water, fertilizer etc). The democratization of knowledge around the globe leading to technical talent in places besides the West and their close acolytes. The broken nature of Western BigCos many of which are one step above Soviet factories at this point in terms of actual efficiency, worker buy in and productive honesty. I don't know what happens from here, but do believe is we are at the cusp of a radical paradigm shift over the next decade. The next 100 years in the West don't look like the last 100 in which Western companies and their captive governments ran the globe unchallenged. Maybe I'm a cynic and a pessimist but have zero desire to invest in indexes of ossified Western big company stocks at the moment. Their paper value (in my mind) generally doesn't support their true value and potential earnings going forward. Now, there are no doubt some winners in the bunch and when things settle they are worth picking through. The US still has a lot of potential but so much faking it backed up with regime change military/intelligence ops instead of encouraging productivity and innovation has to be sorted out first to give a stable platform for growth again. We have much further to fall in my opinion before stability is achieved, and I'm not tossing dice in expectation of a reward on that right now. And that includes things like the obscene housing ponzi. It has to wash out and return to a stable base. Other people might feel differently and they might be right. I thought the same things in 2006 and people with more faith made a lot of money but eventually reality catches up, and perhaps this decade is that time. I'm not a person to bet it isn't.
MichaelMoser123 4y ago
> The COVID fiscal canon blew growth and inflation skyward. COVID is going on for two years now. What really changed is the Russia-Ukraine war, this goes with higher energy and higher food prices (most of the wheat and fertilizers come from that part of the world) that all that stuff trickles down, as they don't know how to fix the metrics now (i guess no one was prepared for such a turn of events...) Most of the metrics for inflation are based on some technicalities (you can fix that, that's why we hadn't much of an inflation), but it can't cope with fundamentals like food and energy.
- chewz 4y ago
  > What really changed is the Russia-Ukraine war, this goes with higher energy and higher food prices Green transformation is the real cause of high energy and food prices. EU's Fit for 55 gave Putin green light to invade Ukraine...
  - andrepd 4y ago
    Lol, very much in the contrary. Had the EU invested heavily in a proper Green New Deal (in ~2010-11 for example, around the time recovery was needed, instead of implementing austerity), we would have robust economic growth instead of a decade of stagnation, and near complete independence of Russian oil and gas, so much so that we could turn the taps off on 24/Feb and suffer only mild consequences.
    - chewz 4y ago
      > Had the EU invested heavily in a proper Green New Deal (in ~2010-11 for example Meantime in the real world in 2021 EU made strategic decisions that guaranteed high food and energy prices for next couple of years and made Putin think that he has a window of when Eu is completely at his mercy. (Putin made a mistake short term. Long term he surely forced EU's hand to go for alternative sources of energy).
- redisman 4y ago
  As we transition out of the emergency mode of Covid the bill will be coming due at some point. Governments spent a whole lot of money to not generate any real work in the economy for two years
stewbrew 4y ago
Did you select logarithmic scale on the y axis? To me the post-WWII looks rather linear with some dips: energy crisis, dot com, financial crisis.
trashtester 4y ago
I think you reference only considers the index adjusted for inflation, but without taking the dividends into account. Optimists tend to consider the dividends too small to matter when buying stocks, but it turns out that over time, the dividends tend to be a large part of the inflation adjusted returns: According to this article [0], the profit of investing just before the .com bust would be only 12.9% by mid 2017, which is about 0.7%pa, if adjusting for inflation but not dividends. When taking dividends into account, that grows to 54.5%, or 2.54%, more than 3x more. And this is more or less the worst case based on recent history. [0]: https://finance.yahoo.com/news/inflation-adjusted-returns-since-2000-102307174.html https://finance.yahoo.com/news/inflation-adjusted-returns-si...
- maire 4y ago
  People (and tool developers) forget that the purpose of a stock is to ultimately produce dividends. It is like buying a house for rental income and forgetting to include the rent. When I retired I had to switch from a growth-stock mindset to an income-stock mindset. I have made the switch but none of the free tools makes that easy. The closest I came was TOS will do this calculation for stocks but not ETFs. Oh well. I now have all the calculations in google sheets. I also now have a backtest that goes the the beginning of the Clinton administration to the end of the Trump administration. I added dividends to the backtest. I only went to the Clinton administration so that I could use ETFs to simplify the calculations. The backtest includes dividends - which I had to add manually.
  - temp_praneshp 4y ago
    Out of curiosity: How do you test your sheets? I feel like I can arrive at such a sheet over a few days of reading, but unsure how I'd test I'm doing the right things (since there isn't a tool or a combination of tools that can act as oracle)
    - maire 4y ago
      I used ETFs (and not stocks) to simplify the test. I was mostly looking for correlations of different investments across different scenarios. I then looked at severe market downturns to see how the correlations changed. As you can imagine - when there is a severe market drop, most investments are highly correlated to the S&P. The most negative correlation I could get was medium term bond ETFs. Short term bonds were still highly correlated and I am not sure why. The dot com bust was particularly interesting because each segment dropped at different times. Telecom dropped first, then tech. It took about a year for the drop to hit mid cap. In comparison - the 2008 crash hit everything quickly. Also - lately I have been using the backtesting tools in TOS. As I said earlier, this only works for stocks and not ETFs.
nabla9 4y ago
>Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. This is the standard response that people repeat year after year. They are not the full or even major factor. They are more like a result of changes in economy. >instead encouraged herding and levering up in the financial economy for returns. Real reason: Capital intensity has deceased dramatically. Capital intensity is the amount of fixed or real capital present in relation to other factors of production (especially labour).
cyanydeez 4y ago
You assume that "parabolic" is some how a natural signal as opposed to an artificial effect that "indexing" has changed from 1920 to today. There's absolutely nothing significant between 1 year and 1 index point. They arnt connected. Full stop. The shape of a 1 year over 1 index point is arbitrary. As such, it's shape is meaningless at arbitrary time ranges.

by fny 4y ago

deleted 4y ago

[deleted]

tyre 4y ago

> The COVID fiscal canon blew growth and inflation skyward. This is not true and has wrongly given credit to people who have said, since 2020, that COVID relief would cause inflation. Our current inflation is driven by supply chain issues (unrelated to COVID relief) and rising oil (unrelated to COVID relief.)

candiddevmike 4y ago
From what I've read, our current inflation is due to combo of inflated asset prices causing mortgages and rents to skyrocket along with corporate greed raising prices "because of inflation".
- darkerside 4y ago
  You should probably widen the pool of what you read. You're not wrong (well, corporate greed tends to be a bit of a bogeyman), but it's certainly reductive.
SamReidHughes 4y ago
Working class wages have increased, and that is clearly because of Covid relief. Or other Covid-related policies like halting immigration. (I should be clear, this is still supply-side, but related to Covid relief. "Stimulus" money spent unproductively by the government is also supply-side.)
- bushbaba 4y ago
  Covid relief prevented deflation. Thus when things went back to normal we saw large inflation. You also had PPP loans which went to businesses that saw growth! And those business owners got huge payouts used to buy houses and assets
ouEight12 4y ago
> rising oil Monthly inflation numbers have been > 5% since May 2021. Oil didn't exceed 2018 $s until will into October 2021.
bagacrap 4y ago
I don't know why you're so confident. All of these things can contribute to inflation.
- freyr 4y ago
  Probably an adherent of modern monetary theory.
  - RealityVoid 4y ago
    MMT does not say that liberal issue of currency does not cause inflation.
_uy6i 4y ago
This may be the case for many goods (e.g. cars, furniture, dishwashers, beef) - but definitely not assets (e.g. homes, bonds, stocks, art)
- Nevermark 4y ago
  Supply chain issues have pushed up construction costs and times. So buildings increase in value due to supply disruption too.
- astrange 4y ago
  Asset and good inflation aren't the same kind of thing because you won't die if you can't buy a stock, and you can buy any fraction of a stock not just one share these days. (Although the second one is a reason they've gotten more expensive.) Homes are a special case, but it's entirely possible for the purchase price of homes to go up while rent doesn't.
astrange 4y ago
> Our current inflation is driven by supply chain issues (unrelated to COVID relief) Well, specifically it's because everyone went home and switched from purchasing services to goods. So there are serious composition effects comparing 2019 to 2020 and you don't have to assume you're making less money because an inflation number said you are.

chii 4y ago

> dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. i don't really agree with this - the money used to purchase financial products don't disappear, because for every product bought, there was a seller. This seller now has cash, which would be invested elsewhere. The only concern is low interest rates, which makes the hurdle for any investment lower thus making it easy for malinvestments to occur; In hindsight is easy to make judgements on what is a malinvestment, but not so easy at the time.

bagacrap 4y ago
I've had this same thought, but everyone seems to be sitting in cash? No one wants to invest unless everyone else invests. Seems the emperor is suddenly naked.
- JumpCrisscross 4y ago
  > everyone seems to be sitting in cash? What is this based on? Every indicator suggests we’re still in a risk-on mode as an economy. It’s why we have inflation.
  - EGreg 4y ago
    Yield curve inverted and interest rates have begun to go up. Risk on?
    - JumpCrisscross 4y ago
      > curve inverted and interest rates have begun to go up. Risk on? Yes, we’re still seeing billions of dollars being deployed into start-ups [1], crypto and the like. We are less risk on than we were. But within America, there is no flight to safety. (Internationally, it’s more complicated.) [1] https://fortune.com/2022/04/08/venture-capitals-2022-slowdown-4-charts/amp/ https://fortune.com/2022/04/08/venture-capitals-2022-slowdow...
  - baq 4y ago

tedunangst 4y ago

Every even modestly exponential curve has the same shape. https://www.wolframalpha.com/input?i=y+%3D+1.05%5Ex+from+1+to+100 https://www.wolframalpha.com/input?i=y+%3D+1.05%5Ex+from+1+t...

shawnz 4y ago
This time is different, every time See for example this nice video from Ben Felix: https://www.youtube.com/watch?v=Jh9Gn58r9Fw https://www.youtube.com/watch?v=Jh9Gn58r9Fw
- AlchemistCamp 4y ago
  What do you like about it?
  - shawnz 4y ago
    I generally enjoy his evidence-based approach to investing and this video is particularly good at addressing common FUD about today's situation being unique compared to the past.
grey-area 4y ago
Exponential curves in real assets are not sustainable.
- pl-94 4y ago
  The GDP is itself exponential. A growth of +2% a year is an example of an exponential curve. Sure there are "limits to growth" (see Meadows et al.) but it's not clear whether those limits are reached yet.
  - grey-area 4y ago
    GDP rising exponentially is also clearly unsustainable. We have IMO reached a paradigm shift in central bank policy after decades of low rates and low inflation. The recent past is not a good guide to the near future in markets.

throwaway2037 4y ago

There is an saying: The stock market is not the economy. The US economy is still growing faster enough for corporations to fight off the effects of inflation. (People / workers are a different social and economic issue.) The Fed will continue to raise rates and wind down its balance sheet in an orderly manner. Eventually, after enough rate rises, inflation will slow, and the economy will reach a new equilibrium between growth, rates, and inflation. This is all a normal part of an economic cycle.

baq 4y ago
Inflation will already slow (oil stopped going up), GDP prints are coming in negative, rates are only now accelerating while economy is slowing down. How this doesn’t end in a recession is beyond me. Mortgage workers have been laid off already due to that. Real economy is next on a lag due to demand destruction.
- bushbaba 4y ago
  Recession needs just two quarters of negative gdp. Q1 had negative growth. So will q2. We are already in a recession
  - baq 4y ago
    jury is still out on q2, I expect sub-1% growth, so technically not a recession, but it hardly matters. it's going to be interesting for the next 4 quarters anyway.

ars 4y ago

> Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic That's because you are using a linear graph instead of a logarithmic graph. If you have $100 and it double you have $200, if you have $10,000 and it doubles you have $20,000. Both of those are the same chance, but if you use a linear graph it looks parabolic. Do yourself a favor and NEVER use a linear graph of the stockmarket.

tasuki 4y ago
> That's because you are using a linear graph instead of a logarithmic graph. The macrotrends.net graph linked by fny is logarithmic (by default, though there's a "Log Scale" checkbox to turn it off). It's also inflation-adjusted by default, which I think is a little unfair.

5350-uiop-1130 4y ago

I hope this is true but I also feel like we no longer follow any kind of logic after 2008, we totally detached from reality.

tasuki 4y ago
> I [...] feel like we no longer follow any kind of logic after 2008, we totally detached from reality. What does it mean we have detached from reality? That valuations are not what they should be? What exactly should they be then? Who should be deciding these things? And a bonus question: Why do you think the current valuations are what they are?
- 5350-uiop-1130 4y ago
  No value anymore, only speculation. houses for sale getting 30+ bids 200k over asking, buyers waiving all contingencies including appraisal gaps and inspections some houses going for $400k+ over asking EV companies valued at billions of dollars with <$50,000 in total revenue retail tripping over themselves to buy SPACs before the SPACs even announce what company is merging with them there was no repurcussion to the 2008 crimes. have been ingested into the system, not a doomsayer but hope the most egregious speculators get bankrupted it won't happen - we are in full bizzarro clown world.
  - mythrwy 4y ago
    "Fake it till you make It" implies when you make it, stop faking it. We apparently didn't "make it" enough so had to keep faking after 2008. Now, we apparently think we can live on fake forever but the universe will likely not oblige. Look at the world. The massive amount of people coming online. The pressure on resources this causes. The diminishing low hanging fruit (oil, water, fertilizer etc). The democratization of knowledge around the globe leading to technical talent in places besides the West and their close acolytes. The broken nature of Western BigCos many of which are one step above Soviet factories at this point in terms of actual efficiency, worker buy in and productive honesty. I don't know what happens from here, but do believe is we are at the cusp of a radical paradigm shift over the next decade. The next 100 years in the West don't look like the last 100 in which Western companies and their captive governments ran the globe unchallenged. Maybe I'm a cynic and a pessimist but have zero desire to invest in indexes of ossified Western big company stocks at the moment. Their paper value (in my mind) generally doesn't support their true value and potential earnings going forward. Now, there are no doubt some winners in the bunch and when things settle they are worth picking through. The US still has a lot of potential but so much faking it backed up with regime change military/intelligence ops instead of encouraging productivity and innovation has to be sorted out first to give a stable platform for growth again. We have much further to fall in my opinion before stability is achieved, and I'm not tossing dice in expectation of a reward on that right now. And that includes things like the obscene housing ponzi. It has to wash out and return to a stable base. Other people might feel differently and they might be right. I thought the same things in 2006 and people with more faith made a lot of money but eventually reality catches up, and perhaps this decade is that time. I'm not a person to bet it isn't.

MichaelMoser123 4y ago

> The COVID fiscal canon blew growth and inflation skyward. COVID is going on for two years now. What really changed is the Russia-Ukraine war, this goes with higher energy and higher food prices (most of the wheat and fertilizers come from that part of the world) that all that stuff trickles down, as they don't know how to fix the metrics now (i guess no one was prepared for such a turn of events...) Most of the metrics for inflation are based on some technicalities (you can fix that, that's why we hadn't much of an inflation), but it can't cope with fundamentals like food and energy.

chewz 4y ago
> What really changed is the Russia-Ukraine war, this goes with higher energy and higher food prices Green transformation is the real cause of high energy and food prices. EU's Fit for 55 gave Putin green light to invade Ukraine...
- andrepd 4y ago
  Lol, very much in the contrary. Had the EU invested heavily in a proper Green New Deal (in ~2010-11 for example, around the time recovery was needed, instead of implementing austerity), we would have robust economic growth instead of a decade of stagnation, and near complete independence of Russian oil and gas, so much so that we could turn the taps off on 24/Feb and suffer only mild consequences.
  - chewz 4y ago
    > Had the EU invested heavily in a proper Green New Deal (in ~2010-11 for example Meantime in the real world in 2021 EU made strategic decisions that guaranteed high food and energy prices for next couple of years and made Putin think that he has a window of when Eu is completely at his mercy. (Putin made a mistake short term. Long term he surely forced EU's hand to go for alternative sources of energy).
redisman 4y ago
As we transition out of the emergency mode of Covid the bill will be coming due at some point. Governments spent a whole lot of money to not generate any real work in the economy for two years

stewbrew 4y ago

Did you select logarithmic scale on the y axis? To me the post-WWII looks rather linear with some dips: energy crisis, dot com, financial crisis.

trashtester 4y ago

I think you reference only considers the index adjusted for inflation, but without taking the dividends into account. Optimists tend to consider the dividends too small to matter when buying stocks, but it turns out that over time, the dividends tend to be a large part of the inflation adjusted returns: According to this article [0], the profit of investing just before the .com bust would be only 12.9% by mid 2017, which is about 0.7%pa, if adjusting for inflation but not dividends. When taking dividends into account, that grows to 54.5%, or 2.54%, more than 3x more. And this is more or less the worst case based on recent history. [0]: https://finance.yahoo.com/news/inflation-adjusted-returns-since-2000-102307174.html https://finance.yahoo.com/news/inflation-adjusted-returns-si...

maire 4y ago
People (and tool developers) forget that the purpose of a stock is to ultimately produce dividends. It is like buying a house for rental income and forgetting to include the rent. When I retired I had to switch from a growth-stock mindset to an income-stock mindset. I have made the switch but none of the free tools makes that easy. The closest I came was TOS will do this calculation for stocks but not ETFs. Oh well. I now have all the calculations in google sheets. I also now have a backtest that goes the the beginning of the Clinton administration to the end of the Trump administration. I added dividends to the backtest. I only went to the Clinton administration so that I could use ETFs to simplify the calculations. The backtest includes dividends - which I had to add manually.
- temp_praneshp 4y ago
  Out of curiosity: How do you test your sheets? I feel like I can arrive at such a sheet over a few days of reading, but unsure how I'd test I'm doing the right things (since there isn't a tool or a combination of tools that can act as oracle)
  - maire 4y ago
    I used ETFs (and not stocks) to simplify the test. I was mostly looking for correlations of different investments across different scenarios. I then looked at severe market downturns to see how the correlations changed. As you can imagine - when there is a severe market drop, most investments are highly correlated to the S&P. The most negative correlation I could get was medium term bond ETFs. Short term bonds were still highly correlated and I am not sure why. The dot com bust was particularly interesting because each segment dropped at different times. Telecom dropped first, then tech. It took about a year for the drop to hit mid cap. In comparison - the 2008 crash hit everything quickly. Also - lately I have been using the backtesting tools in TOS. As I said earlier, this only works for stocks and not ETFs.

nabla9 4y ago

>Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. This is the standard response that people repeat year after year. They are not the full or even major factor. They are more like a result of changes in economy. >instead encouraged herding and levering up in the financial economy for returns. Real reason: Capital intensity has deceased dramatically. Capital intensity is the amount of fixed or real capital present in relation to other factors of production (especially labour).

cyanydeez 4y ago

You assume that "parabolic" is some how a natural signal as opposed to an artificial effect that "indexing" has changed from 1920 to today. There's absolutely nothing significant between 1 year and 1 index point. They arnt connected. Full stop. The shape of a 1 year over 1 index point is arbitrary. As such, it's shape is meaningless at arbitrary time ranges.