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Thread: Inverted yield curve

  1. #36
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    Default Re: Inverted yield curve

    Quote Originally Posted by peb View Post
    That depends on your starting and stopping point and what you define as long term. If you are fortunate enough that long term equates to "never needing the money", I suppose you are right. But few people are that fortunate.

    I will also add, even if one was to use the "never needing the money" approach, the long term gains, adjusted for inflation are in the 6-7% range. Which makes sense, over the very long term, in an advanced economy, overall stock market growth has to be approximately equal to inflation + economic growth + dividends paid.

    Its always best to look at possible returns adjusted for inflation as opposed to in nominal dollars. Nominal dollars are pretty worthless for any type of economic or investment analysis.
    For me long term is the time period that essentially guarantees a profit. So 20 years if one invests in the S&P 500. The money I will be using for college education in the next 2-6 years is all long term money. (At least I am willing to say I invested it 20-30 years ago.)

    Inflation is useful for some purposes, but for the college money I put away only one component - college costs, is really relevant. For most purposes it is easy to look at nominal dollars and determine if you have moved up or down in the economy.
    Life is complex.

  2. #37
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    Default Re: Inverted yield curve

    Quote Originally Posted by peb View Post
    I will also add, even if one was to use the "never needing the money" approach, the long term gains, adjusted for inflation are in the 6-7% range. Which makes sense, over the very long term, in an advanced economy, overall stock market growth has to be approximately equal to inflation + economic growth + dividends paid.
    There is, of course, some variability to that. over the past ten years, the S&P 500 has returned around 13%.... but few people invest exclusively in the S&P 500 (indeed, they'd be crazy to do so), so most will have other investments performing less well... possibly far less.

    The perspective depends, of course, on just how rich someone is. For people like me, at the beginning of their retirement phase, we have to take a long term look... we could be around for another 30 years, and it's almost guaranteed that in the last few years, the costs of nursing care, etc., will be staggering.... so one would have to have a pretty BIG investment pile, to not have to worry about the long term outlook. How big? A million bucks is decidedly NOT enough.

    Recessions come along periodically, so those who have enough invested in cash or secure fixed income will be able to ride out the recessions without having to liquidate equities. This represents my thinking; I've done well in life, but not so well that I can afford to ignore the disruptions to income and earnings that those periodic recessions result in.
    "Reason and facts are sacrificed to opinion and myth. Demonstrable falsehoods are circulated and recycled as fact. Narrow minded opinion refuses to be subjected to thought and analysis. Too many now subject events to a prefabricated set of interpretations, usually provided by a biased media source. The myth is more comfortable than the often difficult search for truth."







  3. #38
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    Default Re: Inverted yield curve

    Quote Originally Posted by Norman Bernstein View Post
    There is, of course, some variability to that. over the past ten years, the S&P 500 has returned around 13%.... but few people invest exclusively in the S&P 500 (indeed, they'd be crazy to do so), so most will have other investments performing less well... possibly far less.

    .
    Just did a quick check on this. From Jan 1, 2008 until Dec.31, 2017 (last 10 years), the S&P total return was 8.49%. Of course, 2008 was a bad year, and my calculator doesn't do 2018 yet, so leaving from 2009 to 2017 (9 years) on gets 15.29%. That would be less if 2018 was taken into accoutnm. So your last 10 years is correct, but there is quite a bit of variability. Which is why I say, one can really only claim a 10% annual return if one's definition of long term is "I never need the money".

  4. #39
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    Default Re: Inverted yield curve

    Quote Originally Posted by peb View Post
    Just did a quick check on this. From Jan 1, 2008 until Dec.31, 2017 (last 10 years), the S&P total return was 8.49%. Of course, 2008 was a bad year, and my calculator doesn't do 2018 yet, so leaving from 2009 to 2017 (9 years) on gets 15.29%. That would be less if 2018 was taken into account. So your last 10 years is correct, but there is quite a bit of variability. Which is why I say, one can really only claim a 10% annual return if one's definition of long term is "I never need the money".
    Jan 08 to Jan 18 seems to yield 9.6%. (using the second link below; read how the calculation is done.)

    My usual references:

    https://awealthofcommonsense.com/201...-stock-market/
    https://dqydj.com/sp-500-return-calculator/

    But comments about $1 million not being enough are disconnected from reality. See either of the following links. One might note that those who save $1 million generally receive substantial Social Security benefits.

    https://fourpillarfreedom.com/visual...ricans-by-age/
    https://dqydj.com/net-worth-by-age-c...united-states/

    If the S&P 500 does not give a sufficient return on investments, one can always invest elsewhere.
    Life is complex.

  5. #40
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    Default Re: Inverted yield curve

    Quote Originally Posted by peb View Post
    Just did a quick check on this. From Jan 1, 2008 until Dec.31, 2017 (last 10 years), the S&P total return was 8.49%. Of course, 2008 was a bad year, and my calculator doesn't do 2018 yet, so leaving from 2009 to 2017 (9 years) on gets 15.29%. That would be less if 2018 was taken into accoutnm. So your last 10 years is correct, but there is quite a bit of variability. Which is why I say, one can really only claim a 10% annual return if one's definition of long term is "I never need the money".
    You may be right... my Schwab portfolio performance report claims that the S&P 500 return was around 13%, from 1/1/2009 to date. My own return was about 1% lower than that.

    The '10% annual return' is a macro examination of market performance... not a personal examination of how the market affects an investor. For someone employed, and earning enough so that they NEVER have to draw from their investment portfolio... and are able to REMAIN in that condition, for decades... the 10% number just might have some meaning.

    I don't personally know too many people in that situation, though. Throughout my working years, I did indeed dip into my investment portfolio, for various reasons... some, just for the sake of a better standard of living... other times, because an interruption in my income (I was a self-employed consultant) required that I do so. It's one thing, to save for retirement... but people save for the sake of a variety of objectives OTHER than retirement. For example, my daughter is drawing a couple of percent of her stock portfolio to install a pool behind her house; being in her late 30's, and with young kids, the purpose is to give the kids a summertime activity that in the long run is cheaper than membership in a pool club. Whether this is a wise use of the money isn't relevant to anything other than her own judgment.

    So, what's the point of the apocryphal 10% number? It has significance only to a pretty small percentage of the population.

    AFTER retirement, there is always the debate about what can be safely drawn, annually, from a retirement portfolio, without damaging the capability of that portfolio to generate sufficient income in future years. Yes, there is a '4%' number kicking around. It isn't anything proven or conclusive... it's just a judgment about what might happen in future years. I happen to think it's a good starting point, myself... but individual lives and circumstances certainly vary, so that number might not be right for everyone. The only thing I am fairly sure of is that drawing 10% per year, based on the notion that the stock market returns 10% annually, is foolish and risky.
    "Reason and facts are sacrificed to opinion and myth. Demonstrable falsehoods are circulated and recycled as fact. Narrow minded opinion refuses to be subjected to thought and analysis. Too many now subject events to a prefabricated set of interpretations, usually provided by a biased media source. The myth is more comfortable than the often difficult search for truth."







  6. #41
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    Default Re: Inverted yield curve

    Quote Originally Posted by Norman Bernstein View Post
    The '10% annual return' is a macro examination of market performance... not a personal examination of how the market affects an investor.

    I don't personally know too many people in that situation, though. Throughout my working years, I did indeed dip into my investment portfolio,

    but people save for the sake of a variety of objectives OTHER than retirement.

    So, what's the point of the apocryphal 10% number? It has significance only to a pretty small percentage of the population.
    You seem to be working very hard to oppose a claim no one made. But I guess it helps to paint rich people as impoverished.

    If the S&P 500 or any other investment does not fit a person's needs, they have a lot of other options.

    (10% of individuals in the 40-45 age group have over $200K in retirement savings. They will hit 30 years of investing during retirement. Hardly a small percentage of the population.)
    Life is complex.

  7. #42
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    Default Re: Inverted yield curve

    Quote Originally Posted by peb View Post
    I will also add ... the long term gains, adjusted for inflation are in the 6-7% range.
    This comment keeps coming back and pestering me.

    I use 10% as a return in part because I selected it out of the air 30 or so years ago as a promise to my wife. It also close to the be the MINIMUM 30 years ROI for the S&P 500 for 30 year periods ending in the last 60 years. If I look at my contributions to my investments over the last 30 years or so and pretend I invested in the S&P 500, I find I would have done better than 10%. I also find that my actual investments did even better than the S&P 500. Since I regard myself as a poor investor, This would indicate that most others did better than 10% in nominal dollars.

    I don't know anyone who adjusts their economic status to account for inflation. A couple years ago I did that for 30 years of income. It was a worthless task. In part, it was worthless because my personal inflation like everyone's is personal and deviates from the CPI or whatever measure one might use. My overall spending is lower in nominal dollars now than 30 years ago. Much lower in inflation adjusted dollars.

    Inflation affects those who are spending all of their money and because of inflation need to give up needs. While inflation affected me to some extent 30-40 years ago. It no longer affects me. I buy what I need and what I want regardless of price. My wealth increases despite inflation. (Yes, my wealth goes up and down as the market does, but the trend is upward.) I suspect you are in the same situation.

    overall stock market growth has to be approximately equal to inflation + economic growth + dividends paid.
    This is wrong to such a degree that it is hard to know where to start.

    Just consider Walmart for a moment. The local business that Walmart moved from outside of the stock market into the stock market is not accounted for. Similarly, foreign business is not accounted for. So your comment is wrong on both the national level and the world level. And that is a simple "wrong" part of the comment.
    Life is complex.

  8. #43
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    Default Re: Inverted yield curve

    This is wrong to such a degree that it is hard to know where to start.
    Not in the mood for a market theory/economics lesson to the ignorant.

  9. #44
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    Default Re: Inverted yield curve

    Quote Originally Posted by peb View Post
    Not in the mood for a market theory/economics lesson to the ignorant.
    Reminds me of my first term in my major. I and Montgomery (what I called him, but probably not his name) were scholarship students and were kicked out of every course in our major. The dean gave us our walking papers and then we were interrupted by a stranger who asked the dean to reconsider. The stranger had a lot more weight with the school than the dean did. But not enough to have any faculty allow us in their classes. A couple years of independent study (course number 499) and we had degrees and job offers.

    Every 6 months I get a pile of papers from the 499 course to read. Every few years I go back to the school during finals week and evaluate the misfits who are forced to take 499. Some undergrads. Some grads. It is a tough road when one is ignorant. But we help each other.
    Life is complex.

  10. #45
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    Default Re: Inverted yield curve

    MENSA material fer sure.

    LMAO
    The best statement I've seen from this latest carnage came from a student who lived through it -

    "My generation will not allow this to continue!"

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  11. #46
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    Default Re: Inverted yield curve

    Quote Originally Posted by John of Phoenix View Post
    MENSA material fer sure.

    LMAO
    Well... to give credit where credit is due...

    Some among us are quite versed in the Inverted Comprehension Curve.
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  12. #47
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    Default Re: Inverted yield curve

    Quote Originally Posted by peb View Post
    Not in the mood for a market theory/economics lesson to the ignorant.
    Quote Originally Posted by John of Phoenix View Post
    MENSA material fer sure.

    LMAO
    You guys are killing it!
    One of the most enduring qualities of an old wooden boat is the smell it imparts to your clothing.

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