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Presenting Crestmont Research's Much "Borrowed" S&P Returns Since 1920 Chart

Tyler Durden's picture





 

You have seen it it in the New York Times in a much abridged version...So here it is in the original, in both real and nominal terms. Via Ed Esterling, Crestmont Research. (and yes, full size requires much zooming).

Nominal...

 

And Real - not nearly as hot...

 

 


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Mon, 01/03/2011 - 22:35 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

Frist!

Mon, 01/03/2011 - 22:44 | Link to Comment Lionhead
Lionhead's picture

Well, since you're "frist," give us the explanatory notes how to interpret this colorful work.

Tue, 01/04/2011 - 01:00 | Link to Comment Diogenes
Diogenes's picture

'give us the explanatory notes how to interpret this colorful work.'

 

Tells the story of stock market returns since 1900. Right side, shows the year from 1900 at the top, to 2010 at the bottom. Top line, shows the number of years.

So, the first line shows all the years since 1900. Second line shows all the years since 1901 etc.

Colors show total return. Red for loss, pink for small loss, blue for small profit, green for profit, dark green for big profit.

So go down the list to see what would have happened if you bought the whole market in that year, and how much money you would have made or lost to date.

Mon, 01/03/2011 - 22:55 | Link to Comment Roscoe
Roscoe's picture

Frist, as in Pwned?

Mon, 01/03/2011 - 22:44 | Link to Comment GhostTrader
GhostTrader's picture

Hey, how come did ZH not mention the biggest story of the day aka GS investing $450 mil into Facebook?! Well, I just wanted to point out that a 1% stake in the company is not a real bet by GS on Facebook, but more of a sign of a goodwill towards a potential IPO client, or something else along those lines. But the whole $50 billion valuation seems as somewhat overvalued (not that it can't get any more overvalued - did HFT crews get their hands on private share exchanges?). Its like saying that if I have bought a bottle of Coke for $5 dollars at a Capitals Game (I'm from DC), which usually goes for about a $1 at a supermarket store near you, I valued the company (KO) at 5x their current market cap of $150 billion - at $750 billion. I guess my point is that extrapolating  the value for a company from a 1% stake purchase is ridiculous, unless you're Goldman and you are about to help Facebook with IPO, which will see a fee multiples of that initial investment. Brilliant!

Mon, 01/03/2011 - 22:47 | Link to Comment Lionhead
Lionhead's picture

Hey, how come you didn't put this in the Forum section where it belongs? What has this to do with the Crestmont S&P returns? So, you got a "second" huh?

Mon, 01/03/2011 - 22:47 | Link to Comment wiskeyrunner
wiskeyrunner's picture

Making money in this market is so easy a cave man can do it. Buy the sp500 futures anywhere and make free money $$$$$$$$$$$$$$

 

ZERO RISK IN THIS MARKET $$$$$$$$$$$$$

Mon, 01/03/2011 - 23:16 | Link to Comment buzzsaw99
buzzsaw99's picture

+1

Mon, 01/03/2011 - 22:56 | Link to Comment f16hoser
f16hoser's picture

Can someone give me the Readers Digest version on these charts. My head hurts....

Tue, 01/04/2011 - 00:05 | Link to Comment cswjr
cswjr's picture

TL;DR version: buy and hold ain't working too well in real terms.

Tue, 01/04/2011 - 01:05 | Link to Comment Diogenes
Diogenes's picture

"Can someone give me the Readers Digest version on these charts. My head hurts...."

Tells the story of stock market returns since 1900. Right side, shows the year from 1900 at the top, to 2010 at the bottom. Top line, shows the number of years.

So, the first line shows all the years since 1900. Second line shows all the years since 1901 etc.

Colors show total return. Red for loss, pink for small loss, blue for small profit, green for profit, dark green for big profit.

So go down the list then read across to see what would have happened if you bought the whole market in that year, and how much money you would have made to date.

Tue, 01/04/2011 - 03:00 | Link to Comment Freddie
Freddie's picture

"Can someone give me the Readers Digest version on these charts."

Buy The Fucking Dip.

http://www.youtube.com/watch?v=jllJ-HeErjU

Tue, 01/04/2011 - 06:30 | Link to Comment ebworthen
ebworthen's picture

Make sure you have a friend on the inside.

The markets will not follow common sense, they will follow FED QE and the rest of the gravy train.

Tue, 01/04/2011 - 08:34 | Link to Comment Boilermaker
Boilermaker's picture

Green good; red bad.

Mon, 01/03/2011 - 22:57 | Link to Comment Jasper M
Jasper M's picture

Hiya, Cetin! Long time no drool!

Mon, 01/03/2011 - 23:03 | Link to Comment TideFighter
TideFighter's picture

And... soc sec managed to make less.

Mon, 01/03/2011 - 23:07 | Link to Comment TideFighter
TideFighter's picture

Sooo simple...buy and sell +1/-1 years of the middle of each decade and you're a winner. Don't buy +1/-1 years at end of decade (2010, 2011).

Tue, 01/04/2011 - 00:03 | Link to Comment TruthInSunshine
TruthInSunshine's picture

You risk your life savings, pension and retirement for a measly 4.1% average annual return - BEFORE paying taxes on that return (so lop off anywhere from 15% to 38%, roughly, from that 4.1%, giving you between 2.5% and 3.4%, NOMINAL), ASSUMING you are lucky enough NOT to be one of the unlucky ones to have your meaty portion of your earnings invested at the inception or early on in a secular bear.

And this does or does not take into account survivorship bias?

Yes, Las Vegas & Macau have NOTHING on the criminal syndicate & enterprise known as Wall Street.

Tue, 01/04/2011 - 00:05 | Link to Comment PC Load Letter
PC Load Letter's picture

At least Vegas tells you upfront the odds are in their favor. Wall Street tries to convince you it is a level playing field

Tue, 01/04/2011 - 03:01 | Link to Comment Rick Blaine
Rick Blaine's picture

Exactly.

I hear "the stock market is legalized gambling..." all the time.

Bull$#!^.

That is not fair to casinos, etc.  For the most part, when you gamble at a casino or play the lottery, you know (or at least the info is available) EXACTLY what your odds are.  Sure, the odds are slightly in the house's favor - BUT you know that.

At this point, the stock market is basically a game of musical chairs in which the majority of the people playing the game are the same people who control when the music stops.

To what few retail investors are still playing the game:  good luck.

Tue, 01/04/2011 - 01:06 | Link to Comment Diogenes
Diogenes's picture

Doesn't count dividends either. Dividends could amount to more than the growth, especially if you have owned the stock for a few years and dividends increase.

To account for survivorship bias you would have had to sell off stocks as they dropped from the S&P list and bought new ones as they were added.

Tue, 01/04/2011 - 01:17 | Link to Comment TruthInSunshine
TruthInSunshine's picture

To account for survivorship bias you would have had to sell off stocks as they dropped from the S&P list and bought new ones as they were added.

Including stocks like Lehman, General Motors, many of the dot.com's, and many others that go to 0, ultimately.

You wouldn't be able to but much replacement stock for your dollar.

Tue, 01/04/2011 - 02:03 | Link to Comment Skeptical_10016
Skeptical_10016's picture

(1) Go to Crestmont's site for the full description of the tables, including the "Financial Physics" presentation........

(2) There are versions of the above table with/ without dividends, taxes, inflation and trading costs..........thus, you can see pretty clearly long term secular cycles.......and when the initial P/E is high and falling........well that's not the start of a secular bull market.......

(3) Buy Mr. Easterling's book "Unexpected Returns" (FANTASTIC)........and his new book is coming out this month.........

http://www.crestmontresearch.com/

But yes, the chart makes your head hurt.......however, there are versions on the site for 11x17 paper........etc.......

Tue, 01/04/2011 - 02:47 | Link to Comment Sad Sufi
Sad Sufi's picture

Thank you.

Tue, 01/04/2011 - 08:29 | Link to Comment zhandax
zhandax's picture

No, it just means keep cash balances in PMs and buy the fuckin dip for a short term pop (1987, 2001, 2008).  You know, a real dip.

Tue, 01/04/2011 - 12:20 | Link to Comment ebworthen
ebworthen's picture

The macro picture is that we are just getting into the edge of another reddish/pinkish BLOB of pain, like the one you see at 1964-1982.

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