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The S&P 500 more than doubled since March 2009. Did you sleep through it or something?
Despite this, the 21st century has featured slower stock market growth than the 1980's and 1990's, which was the point being made earlier. The fact that it's bounced back from the crash doesn't change that. The crash itself was simply the most dramatic period of it all, when the middle class was the most upset about the loss in value in their retirement plans.
You have a point. However, aren't there billions of consumers outside of America, now ready and able to buy American products or American services or at least stuff associated with companies headquartered in America? If so, then why isn't that driving American corporate profits upward? And if we completely disregard American corporations, well, why are foreign corporations doing even worse? Germany is supposed to have figured out how to pay their workers decent wages, who to train them and to retain them and to retire them with dignity. Right? Then why is the DAX at levels not much above those of the 1990s? And why are European-equity P/E levels persistently below those in America?
A lower P/E is a good thing; it means more potential future value for shareholders. What baffles me however is P/E compression in a time of falling interest rates. If rates are high, investors should be demanding lower P/E, or in other words a higher risk-premium for stocks. But what about when rates are low?
I'm not "angry" that rates are low. The FED, in my view, is one of our most stalwart and responsible institutions. What angers me is that monetary policy has been forced - in the absence of expansive fiscal policy - to do the work of keeping the economy functioning.
A lower P/E is a good thing going forward, but if you sell at a lower P/E than you bought at, your capital growth is less than expected given the underlying income growth. You have to hold for 20 years or so for the lower P/E to benefit you more than enough to counter that (since your reinvested dividends are effectively "buying more income").
Not angry about low rates? Well, some people are on the winning end and some on the losing end, even WITHIN the middle class - you've got the middle-class debtors that want the low rates, and then you've got the middle-class saver or fixed income investors that want higher rates.
The 21st century has thus far been one of the most horrendous investment environments in history, especially if we consider worldwide stock markets, and not just American large-capitalization stocks. Once we include the parlously low dividend yield, it seems to me that these 16 years have been the most challenging investment-climate since the "long depression" of the 19th century. Yes, I am asserting that the past 16 years have been worse than the Great Depression. Why? Because during the Great Depression, stocks dropped precipitously during 3-4 years, and then resumed a punctuated but more or less solid climb. And dividend-yields were excellent. We on the other hand have had two brutal bear-markets in the past 16 years, and are possibly wading into a third.
Low interest rates however don't much "anger" me. Higher interest rates generally track with inflation, so that the real gains aren't that much. More importantly, "savings" is something that we do to accumulate cash for an upcoming expense. It is not an investment. The purpose of investment to build exponential growth from existing capital in perpetuity. The purpose of savings is to scrape together enough money to be able to afford something (car, house, college, etc.).
The 1980s and 1990s were an unusual and perhaps inimitable time to invest, whether in stocks or bonds. I don't expect to see a repeat of it within any reasonable time-horizon. But it does bother me immensely that worldwide we seem to be stuck in a slow-growth, low-profit miasma.
Those who note the strong stock-recovery since the nadir of 2009 do of course have a point. But they should also mention that March 2009 retraced the level of American stocks of 1996, and abroad it was even worse. Yes, stocks more than doubled since 2009; maybe even tripled. But if we say that stocks doubled since 1996, which is effectively the same thing - well, that's hardly a resounding endorsement, is it?
While some middle class people were being angry, other middle class folks were devising escape room attractions where folks with lots of expendable income pay exorbitant sums for the privilege of being locked in a room while they gather clues and solve puzzles in order to be released.
I bet you that the escape room creators aren't angry.
Despite this, the 21st century has featured slower stock market growth than the 1980's and 1990's, which was the point being made earlier. The fact that it's bounced back from the crash doesn't change that. The crash itself was simply the most dramatic period of it all, when the middle class was the most upset about the loss in value in their retirement plans.
You are comparing the last 20 years of the stock market of the 20th century to the first 15 of the 21st century?
It's just like the young people thinking older people had it "easier" based on 1 or two decades... out of 7-8 decades...
The 21st century has thus far been one of the most horrendous investment environments in history, especially if we consider worldwide stock markets, and not just American large-capitalization stocks. Once we include the parlously low dividend yield, it seems to me that these 16 years have been the most challenging investment-climate since the "long depression" of the 19th century. Yes, I am asserting that the past 16 years have been worse than the Great Depression. Why? Because during the Great Depression, stocks dropped precipitously during 3-4 years, and then resumed a punctuated but more or less solid climb. And dividend-yields were excellent. We on the other hand have had two brutal bear-markets in the past 16 years, and are possibly wading into a third.
Low interest rates however don't much "anger" me. Higher interest rates generally track with inflation, so that the real gains aren't that much. More importantly, "savings" is something that we do to accumulate cash for an upcoming expense. It is not an investment. The purpose of investment to build exponential growth from existing capital in perpetuity. The purpose of savings is to scrape together enough money to be able to afford something (car, house, college, etc.).
The 1980s and 1990s were an unusual and perhaps inimitable time to invest, whether in stocks or bonds. I don't expect to see a repeat of it within any reasonable time-horizon. But it does bother me immensely that worldwide we seem to be stuck in a slow-growth, low-profit miasma.
Those who note the strong stock-recovery since the nadir of 2009 do of course have a point. But they should also mention that March 2009 retraced the level of American stocks of 1996, and abroad it was even worse. Yes, stocks more than doubled since 2009; maybe even tripled. But if we say that stocks doubled since 1996, which is effectively the same thing - well, that's hardly a resounding endorsement, is it?
how you did the last 15 years is really going to vary for all of us .
as time goes on when we are accumulating assets the weighting of your assets dollar wise is more important then the time frame you look at .
back in 2000 i had a fair amount of assets saved BUT and a big but , the bulk of our net worth really came in to being after that point . so that money going in which represented the biggest part saw very good growth .
today with our tanks full market moves have far more of an effect then any move in 2000 .
so yes , since 2000 markets have been crappy but as a time frame for us it is not an important time frame . the years from 2007 to date were our most important years as lots of new money got fed in over those years right up until 2014 which is the last big real estate sale we had .
Last edited by mathjak107; 03-06-2016 at 05:23 AM..
You are comparing the last 20 years of the stock market of the 20th century to the first 15 of the 21st century?
It's just like the young people thinking older people had it "easier" based on 1 or two decades... out of 7-8 decades...
Very few people alive today have been investing in equities for 8 decades (apart from those with trust funds set up for them as kids). Even if they started at age 15, that would make them now 95 years old...
I think the lower class, the middle class, and the upper class have plenty of members that are upset about the lingering effects of the last recession as well, as it hit really hard. Career disruption and lackluster investment performance are two of the ways in which the recession caused lingering trouble. Education is another - the recession resulted in state budgets for higher education being cut, and they have not gone back to previous levels despite the economic recovery. The result of this is that millions of Americans are dealing with levels of student debt that are far beyond those that would previously have been necessary for the same degree(s), even adjusting for inflation. In my opinion, there is some legitimacy to being "angry" at this (but it is not, of course, a good reason for personal inaction....)
"Investing," for the middle class, is mostly BS. And "middle class" is not the correct term for middle income people. In days gone by, lots of middle class families didn't really invest much and they were fine. They had relatively secure jobs based on their skills. They had a retirement system through their job. Their health care was through their neighbor, the doctor, or through an employer provided insurance probram. They just didn't NEED the gobs of cash we think we need now, either to live or especially to retire. After FDR, they had social security to help out their pension, and poor people had social security as their only pension for the first time. And after LBJ, people over age 65 had Medicare. Again, for poor people, that was the first health insurance they'd ever seen.
But back to the middle class. If they were truly middle class in values as well as income, they didn't expect or want every new car they saw for every person over the age of 18 in their household. They didn't expect "luxury" vacations or expensive restaurant meals. And, as alluded to earlier, they didn't need one, two or three million dollars in their name just to quit working.
So yeah, let's have a reality check on what middle class means, and on what government policy (or lack of it) has allowed corporate America to do to the middle class. Don't be afraid to ascribe blame to political policies of specific parties or actors. An occasional look back can be instructive.
for the last 40 years that i have been working my retirement plan has been the YOYO PLAN at every job i ever had .
you are on your own .
it was all on me as far back as my working career went whether the company was big or small . pensions were popular in the day of my father not me .boomers were the first generation to be minus these pensions for the most part
Greece suffered precisely due to people not paying their taxes, and also due to generous government retirements. Not due to taxes used to invest in science, education, or infrastructure.
Don't forget barriers to entry in the form of governmental employee corruption. Want to start a business in Greece? You'll need a huge wad of cash for bribes for business licenses and permits and whatnot. Government employees view their official capacity as a way to generate bribery income.
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Middle Class is a widely abused term.
