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Again a reading comprehension problem. I have said multiple times that I believe you can predict at least roughly the economy in the "short-term". That is all that is required in this case.
Except you haven't defined "short term". You arbitrarily picked time periods on the order of "a few years". What the heck does that mean? Are you saying you can forecast inflation trends for the next 1 to 3 years? Were you able to predict the rise in energy prices and inflation over the last 5 years? If so, you would not have piled on to bonds and cash as you claimed you did. You would have been in commodities and energy stocks, and would still be in them. And if you believe inflation will continue to be a problem over the short term, you will minimize your cash holdings, which is obviously not what you're doing. Clearly, you are reacting to economic news, not predicting or anticipating them.
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I did the first time you linked it and I didn't think I would have to repeat myself, but I guess I do. These graphs like the others are only looking at government bonds, this is like only looking at stocks in the DOW.
Don't be silly. Government bonds (and T bills) were considered the safest alternatives to stocks between 1910 to 1940. The point of the Dimson study was to compare stocks against the safest possible alternatives available at the time to a risk-averse investor. In other words, government bonds and T bills served as the control (as in a laboratory experiment). Would a risk-averse investor have done better if he merely stuffed his money in T-bills or long term Treasuries, or should he have hung on to his stocks? The Dimson database clearly shows he would have done better if he hung on to stocks.
There were no TIPS in 1910 to 1940. There were corporate bonds, but these were/are riskier than government bonds, and during the Depression, many corporations went bankrupt and defaulted on their loans, demonstrating their riskiness. Corporate bonds have stock-like risk characteristics, so if you are averse to stocks, it makes no sense why you would pick corporate bonds as their alternative. Unlike the government, corporations have no taxing power, so there's no assurance that corporations will actually be able to repay their loans. That's why the correct basis for comparison to stocks should be government bonds and T bills. Clearly, this point was lost on you, and you obviously didn't understand the point of the Dimson study.
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I never said this was the case, rather how they performed in comparison to bonds.
I know that reading is not your strongest suit, but I suggest you go over the Dimson paper again. Stocks were compared to bonds, T-bills, and inflation....and in all 20 year rolling periods from 1900 to 2002, stocks have consistently come out ahead.
f so, you would not have piled on to bonds and cash as you claimed you did.
It would help if I stated that I thought inflation was going to be a problem. I only merely suggested that if there is high inflation its not going its not going to hurt be badly. At worst I will get flat line returns for a year or two.
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no sense why you would pick corporate bonds as their alternative.
Yes, I suppose everyone that buys corporate bonds isn't as smart as you. Of course there are reasons why you'd buy corporate bonds over stocks, but I won't bother explaining.
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The point of the Dimson study was to compare stocks against the safest possible alternatives available at the time to a risk-averse investor.
Great, but what is your point? What does that have to do with what I claimed? Nothing. If you are just posting random information great...but if you are trying to refute my claim then you need to post data that looks at bonds in general.
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That's why the correct basis for comparison to stocks should be government bonds and T bills.
Huh? The issue under consideration is whether bonds (in general) always do worse than stocks. Why would you then restrict your attention to government bonds? It makes no sense. What you think about non-government bonds doesn't matter, the question is again a historic one.
Huh? The issue under consideration is whether bonds (in general) always do worse than stocks. Why would you then restrict your attention to government bonds? It makes no sense. What you think about non-government bonds doesn't matter, the question is again a historic one.
So where is your data showing non-government bonds out-performing stocks between 1910 -1940 or any 30 year period for that matter? I'm still waiting for it.
See, the problem is, you made a bald assertion you can't support.
See, the problem is, you made a bald assertion you can't support.
No, I made an assertion that I don't want to bother debating with you on. I did point you to two books though, one of which you supposedly already read. Read the chapter I referred to, although I believe he looks in terms of 20 year periods. But the point is the same, stocks don't do nearly as well vs bonds as most people think they do.
No, I made an assertion that I don't want to bother debating with you on. I did point you to two books though, one of which you supposedly already read. Read the chapter I referred to, although I believe he looks in terms of 20 year periods. But the point is the same, stocks don't do nearly as well vs bonds as most people think they do.
You're dodging the issue. Where is your data showing bonds outperformed stocks over a 20 to 30 year period? Where is the evidence that bonds outperformed stocks between 1910 to 1940, as you allege? Stop hiding behind Shiller, he's not going to be able to help you here. Nowhere does Shiller say that "bonds outperformed stocks over a 20 year period". What Shiller says is that when stocks are expensive (as measured by PE ratios), their forward returns are expected to be lower. Ironically, Shiller himself makes long term predictions on the order of 20 years. This is contrary to your claim that the long term is unpredictable.
Here are the graphs from Shiller's book. Notice that he compares stocks to themselves, not to bonds. He compares the performance of stocks with high PE ratios to stocks with low PE ratios. Shiller made a stock versus stock comparison, not a stock versus bond comparison, which is what you are doing. Of course, Shiller was correct; when stocks are expensive/overvalued, their forward returns will be lower.
The other point you're missing is that you assume bonds and cash will never be overvalued. Bonds and cash can be overvalued when their yields are very low, as they are now. So what you are doing by piling into bonds and cash is you are chasing performance, following the herd into the latest investment fad (which in your case is TIPS). You are irrationally exuberant for TIPS. The arguments in Shiller's book against irrational exuberance actually apply to you, just involving a different asset class this time.
I am! I have no interest in debating this with you, apparently you didn't see that the other two times I said it. You can think whatever you want about this.
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Nowhere does Shiller say that "bonds outperformed stocks over a 20 year period".
Read the chapter because he does indeed state 20 year periods were bonds did better. He doesn't say that bonds always do better in 20 year periods, but that wasn't what I claimed.
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Shiller made a stock versus stock comparison, not a stock versus bond comparison
Umm....what are you even talking about? Did you read the book? Anyhow, I pointed you to a chapter where he talks about stocks vs bonds. The book isn't about stocks vs bonds, but this is indeed one topic he writes about. To quote the book (page 198, paper back):
"So the "fact" of the superiority of stocks over bonds is not a fact at all. The public
has not learned a fundamental truth. Instead, their attention has shifted away from some
fundamental truths...."
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The other point you're missing is that you assume bonds and cash will never be overvalued.
I do? I didn't know that.
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So what you are doing by piling into bonds and cash is you are chasing performance
I am? I didn't know that either.
Anyhow, assuming things about people you don't know is not particularly successful.
Read the chapter because he does indeed state 20 year periods were bonds did better. He doesn't say that bonds always do better in 20 year periods, but that wasn't what I claimed.
Nope, you cited the 1910-1940 stretch as the period during which bonds supposedly did better than stocks...then, you used Shiller as your reference when, in fact, Shiller did not say anything like this.
Now you appear to be backtracking...you are now implying that there will be some years when bonds will do better than stocks. Well, excuse me, but nobody is disputing that. There will always be some years when bonds will do better than stocks. That's par for the course. That's Investing 101. That's why you diversify. The Depression years showed bonds outperforming stocks.
But a few years of isolated outperformance is not what we are interested in. We are interested in cumulative outperformance. That's what investors are interested in. They are interested in the compounded returns over the entire 20 to 30 year time span, their investing lifetime. I am disputing your assertion that there have been 20 to 30 year rolling periods wherein bonds CUMULATIVELY did better than stocks. The Dimson database and Shiller's own data show no such periods.
Shiller discusses this in the chapter I referenced, read it if you are interested. Like I said he looks in terms of 10 and 20 year periods not just odd ball years. All you are showing is that you apparently didn't read the book. I never claimed that Shiller stated that bonds did better in 1910-1940. At least in the book he started the clock at the beginning of the century and looked at non-overlapping 10 and 20 year periods.
But here if it makes you feel better, you are right about everything. Stocks always do better over 20 year periods. There are no exceptions both in the US and in foreign markets, none at all! Lets all buy stocks for the "long haul" and get rich!
Shiller discusses this in the chapter I referenced, read it if you are interested. Like I said he looks in terms of 10 and 20 year periods not just odd ball years. All you are showing is that you apparently didn't read the book. I never claimed that Shiller stated that bonds did better in 1910-1940. At least in the book he started the clock at the beginning of the century and looked at non-overlapping 10 and 20 year periods.
You cited the dates from 1910-1940 as your example for your assertion that bonds outperformed stocks over long periods (30 years). Then you name-dropped Shiller to make it appear that he was your reference. Now apparently your only reference is yourself. The only example of a 20 year period Shiller mentioned in Irrational Exuberance (Chapter 10) where stocks slightly underperformed "short term interest rates" (which I take to mean cash, not bonds) was from 1901 to 1921. There are no other examples of periods of bonds outperforming stocks over anything longer than 20 years since 1900. None. Zippo. Zilch. This is confirmed by the more comprehensive database of Dimson-Marsh-Staunton.
Shiller's larger point is that stocks are risky. And they should be. You can lose money in stocks. That's why they have higher returns. Investors want to be compensated for the high risks that they take. If stocks were not risky, they would have low long term returns, they would be no better than cash, and the profit maximizers would not be investing in them. Again, this is Investing 101. There's no mystery to this.
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But here if it makes you feel better, you are right about everything. Stocks always do better over 20 year periods. There are no exceptions both in the US and in foreign markets, none at all! Lets all buy stocks for the "long haul" and get rich!
The thing I'm objecting to about your posts is your penchant for distorting the historical record, even though the record is eminently verifiable.
Which would mean 20% of the time bonds do better than stocks over "the long haul", which is far more than what your average investor thinks. If you add foreign stocks into the mix than the percentage is much higher. Additionally, Shiller's point is much more than what you are citing. Over short terms everyone views stocks as risky, but it is a common view that over the "long haul" stocks are no more risky than alternatives and yet magically get a higher return. Among other things it is this claim that he is disputing.
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Now apparently your only reference is yourself.
I have said 4 times now that I'm not interested in debating it. If you are curious you can look, if you don't want to believe it I don't care.
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