Stocks should recover before that

Post #53,798 by ben_tilly 9/29/02 7:42:38 AM Reply	Stocks should recover before that The 1929 figure that you are quoting is seriously misleading in two ways. The first is that it only tracks the price of the stocks. It does not track the dividends that you (presumably) reinvested. Which effect would earn your money back much faster. The second way it is misleading is that the Great Depression was a sea-change in American business. Established companies went under. New companies became cultural icons. The result is that a lot of companies on the DOW in 1929 died protracted and painful deaths, while there was a lot of growth in small-cap stocks. A study in the early 90's at the University of Chicago found that if you had invested at random in January of 1929, and then randomly reinvested dividends, then from just after the end of 1937 onwards you were in the black, and from the end of 1944 onwards your annualized compound returns from the start never again fell below 8%. (Figures drawn from a table included in How To Buy Stocks by Engel and Hecht. Highly recommended.) Doesn't that sound a little more promising? Even if the next few years suck, your 20 year future should do OK as long as you use some common sense. Cheers, Ben "Career politicians are inherently untrustworthy; if it spends its life buzzing around the outhouse, it\ufffds probably a fly." - [link\|http://www.nationalinterest.org/issues/58/Mead.html\|Walter Mead]
Post #53,846 by gdaustin 9/29/02 6:00:51 PM Reply	Re: Stocks should recover before that <QUOTE> The second way it is misleading is that the Great Depression was a sea-change in American business. Established companies went under. New companies became cultural icons. The result is that a lot of companies on the DOW in 1929 died protracted and painful deaths, while there was a lot of growth in small-cap stocks. </QUOTE> I don't know if we're not going through exactly the same thing right now. I can think of many companies doing business the "old way" that are either out of business or on the way. Montgomery Ward, Consolidated Freightways, Sears, JCPenney all being replaced with the likes of WalMart, Kohl's, and Fedex. Also, I disagree in the fact that a lot of what caused 1929 was greed, fraud, corruption, and the general public believing a lie that stocks would go up forever. Shell companies were created in droves in the 1920's, along with the 1920's version of the "virtual corporation". The bottom line is that a lack of integrity by the companies in the stock market caused a crisis in 1929, and the same is true today. We're on the edge of a new "tech depression", which I really hope will be just a recession, but I fear will be a depression.
Post #53,862 by Ashton 9/29/02 9:04:31 PM Reply	My psych take also. Much faith is required, to surrender hard-earned $-thingies for.. little promissory notes. Promissory of: 1) Competence foremost, but a tie? for 2) Integrity (not necessarily omniscient planning though) 3) BOTH 1) and 2) must generally describe 'The Players' overall As with the reputation of the USSC - an unknown time to repair next (?) I believe it will also be a lengthy process to restore that entry-level of faith as leads to regular investment. Too many have just flat-out Stolen obscene sums; Too few are seen to be likely Ever! of prosecution = still, today, (and it ain't over yet at all). I couldn't try to compare with 1929 - but the outstanding rubric of ALL of the above in '90s thru today seems a mix of Greed, many many flat-out crooks in positions of access to the money. Insufficient Government oversight. The growing commoditization of all workers: international corps. owe / feel no obligations whatsoever to 'countries' or to people/society in general. So long as these remain facts, and no new laws are actually passed - removing the clause about "Corporations having the rights of an individual citizen" -- it won't matter if above are 'facts' or are skewed -- perception is all. Alternatives to The Market As Usual: it's your time to Show & Tell. Ashton
Post #53,866 by ben_tilly 9/29/02 9:17:02 PM Reply	Why is that disagreement? What you seem to think I disagree with, I agree with. I was just explaining why the historical performance of the DOW during the Great Depression didn't reflect actual performance of a diversified portfolio at the same time. With the conclusion that the current troubles are likewise unlikely to be as bad as you might fear. Cheers, Ben "Career politicians are inherently untrustworthy; if it spends its life buzzing around the outhouse, it\ufffds probably a fly." - [link\|http://www.nationalinterest.org/issues/58/Mead.html\|Walter Mead]
Post #53,882 by gdaustin 9/29/02 11:01:16 PM Reply	I see your point... You're just questioning using the stock price/index as a single measure of a return to wealth during the 1929 - 1950's period. And I can agree with that somewhat. For example, our SBC stock is down about 33% since we bought it. However, SBC pays dividends, so we need to compute the dividends we'll be paid into the valuation model. And I'm probably stretching to use that single indicator as a good general indicator of renewed business activity. Actually, I've studied the Great Depression and, based on GDP figures, things bottomed out in 1933, slowly turned around in 1934, and things really started looking up by the late 1930's (1938, 1939) when the U.S. started supplying munitions and arms to Europe, which was already engaged in WWII. So, I can't imagine things going down for much longer than 4 years. And we're already 2 1/2 years into this one, so maybe we're already halfway done. Then again, Japan's economy seems to be in a decade-long malaise that I can only attribute to their lack of political will to allow companies to fail, their assets to be sold, and new companies to be created from their remains. Hopefully, we're still enough of a "capitalistic" country that we can get this downturn overwith in the next year to 1 1/2, then assets will be sufficiently redistributed to capable capitalists where we can develop and grow again.

Welcome to IWETHEY!