

100 Year Dow Jones Industrials Chart - troystribling
http://bigpicture.typepad.com/comments/2005/12/100_year_bull_b.html

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drcode
that article is a scam.

To illustrate it, I've redrawn the green and red bars differently to show
that, lo and behold, there are another 15 years of bull market in our future.

[http://tinypic.com/view.php?pic=5uo9q8&s=4](http://tinypic.com/view.php?pic=5uo9q8&s=4)

This type of graph manipulation is a well known trick. No reputable journalist
or economist would do something like this.

~~~
davidmathers
Huh? I have no idea what your point is, but Barry Ritholtz is definitely a
reputable economist.

~~~
mynameishere
Spluh? What kind of reputable economist pulls a howler like this:

 _What will be the catalyst to get them back into equities? My best guess is a
sustained move upwards._

...umm, yeah. And what causes a sustained (or any) move upwards? ....people
"getting back into equities".

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steveplace
Two words: covered calls.

~~~
tocomment1
what about them?

~~~
steveplace
_Assuming_ that we don't have a bull market that rips higher, you can use
covered calls to get an extra 1-3% in premium on your positions. Per month.

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time_management
I'm not sure I agree with the analysis and reasoning, but I definitely think
we're due for a decade or so more of mediocre equity performance, in addition
to the lackluster decade we've had.

The bull market of the 1980s and '90s came from the entrance of middle-class
Americans into the stock market. Before 1980, equities were considered risky
(and were so, compared to bonds and annuities) and were seen as a "rich
person's game", but this changed once people became educated about the "equity
premium", which may no longer exist, and diversification. The influx of new
investors allowed the markets to rally, rejuvenating Wall Street, an industry
that had been fading up to that point.

Given the economic problems the U.S. currently faces, I think we're looking at
a decade or more of mediocre equity performance. S&P/dollar isn't terrible,
but S&P/euro is pathetic. The erosion of the U.S. middle class is a troubling
sign, and I don't think we'll see the next bull market until this trend is
reversed so decisively that a new middle class is being _created_. That point
seems to be rather far off, in my estimation.

~~~
kqr2
But the 21st century should give rise to a new middle class in China and India
who will become a part of the global market.

~~~
kingkongrevenge
Equity returns were pretty lousy during the height of the industrial
revolution in the 19th century. Stock prices only loosely correlate to general
growth. The 1950s were boom years with lousy returns, and stocks shut up
during periods in the 80s and 90s when the economy wasn't fantastic by
historical comparison.

Stocks just haven't been all that great a way to make money, historically.

~~~
byrneseyeview
_The 1950s were boom years with lousy return_

I don't know about globally, but it looks like prices tripled during the
1950's in the US. And that's not counting dividends, which were a bit higher
at the time. Or did you mean something else?

[http://leduc998.wordpress.com/2008/05/20/dow-
jones-1950-1959...](http://leduc998.wordpress.com/2008/05/20/dow-
jones-1950-1959/)

In fact, I seem to remember a William O'Neill book claiming that the 50's were
more speculative than the 60's. He argued that if you just treat prices as
earnings and some multiple, you can demonstrate that returns in the 1950's
were mostly multiple expansion, and in the 60's they were mostly earnings
growth.

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kingkongrevenge
Perhaps a clearer picture: <http://www.itulip.com/realdow.htm>

~~~
troystribling
I would be suspicious of inflation adjusted prices, since they do not
adequately account for deflation caused by technological development. For
example in 2007 inflation adjusted dollars a round trip by steamer to Europe
was $2000 dollars <http://equator.eftours.com/2008/05/transatlantic-t.html>. I
have flown to London, Madrid and Paris from Washington D.C. for prices ranging
from $600 to $800 dollars. By comparison the trip cost 30% to 40% of the 1925
cost and took less than 10% of the time. Assuming that a dollar buys less over
time is not quit accurate.

~~~
kingkongrevenge
Hedonics are in fact used in inflation data. More likely abused. It's really
quite a small number of technology heavy things that have shot up in quality
in great excess over the price increases.

And what about declines in quality? Vegetables have a fraction of the mineral
content they did decades ago. Many food items have substituted artificial
ingredients for relatively healthy natural ingredients. Many services at
hotels and on airliners that were once complementary are now charged for. A
great many houses built in the last ten years will have to be torn down in
less than 20 years they were made so poorly. There are many examples of
declining quality and these adjustments are never made.

~~~
ewanmcteagle
Do you know any data sources for these things? I'm doubtful of the mineral
content claim unless the fraction you mention is something like 9/10. Housing
stock that is on average lasting for much less time is also suspicious to me.
The biggest reconciliation issue is that we're much much wealthier and
healthier than we were decades ago so I'm not sure there are broad meaningful
declines in the quality of most things.

~~~
kingkongrevenge
You're confusing individual purchasing power with measures of inflation, which
is about the value of money.

