Name That Market? +8.6% Average Annual Return Over 33 Years, Worst Drawdown -4%

Tyler Durden's picture

'Buy-and-Hold'; Bonds-Schmonds. Sometimes a longer-term perspective is useful for context. Whether you are a safety-seeking, "some-return-is-better-than-no-return" bond-holder; or a "Jim Cramer said 'all clear' so I'm nuts deep in stocks" wannabe trader; the charts below at least provide from insight into why all that 'crazy' money might prefer the bond market to the stock market. Since rear-view-mirror investing appears the meme of the moment (and hope is now a strategy), it makes one wonder, when fixed income returns average 8.6% per annum for 33 years with a maximum 4% drawdown annually as opposed to stocks with a 8.9% per annum return and four 10%-plus annual drawdowns (and two 50% intra-period collapses within a decade). While we hold no judgment here, arguing that rates are so low they can't go any further is futile (ask Ben and see Japan) and applies just as well to equity multiples, margin expectations, and fundamentals. Context is king, be informed.


Fixed Income... Slow and steady wins the race (for now)


Equities... Better Returns but the pain...


Fundamentals... not pretty - as a reminder RED is not good...


Charts: Bloomberg and Morgan Stanley

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holdbuysell's picture

Without reading the article and making a guess: Bonds.

Will update accordingly through an 'edit'.

Edit: huh. shorter article than thought. I guess it's time to go all-in on bonds, then. /s

Stuck on Zero's picture

The best investment over the last twenty years has been a government employee pension.  Wow.  Those things are way up!


Thomas's picture

Bonds have been great. Owned them exclusively from 1980-88, but they will become a killing field. Secular moves end.

markmotive's picture

No place for Treasuries in my portfolio, but when will the rise in interest rates actually happen? Hasn't happened in Japan yet and they're far worse than the US.

devo's picture

Seekingalpha is the worst site.

markmotive's picture

Do you remember when ZH was on Seeking Alpha?


Longing for the old America's picture

Picking 1980, the all-time high in American interest rates, as a starting point makes this article worthless information.

The past 30-years is no indictaion of future bond returns.

akak's picture

Agreed.  It is as dishonest and cherry-picking as is the constant trotting-out of the brief 1980 gold price spike by all the anti-gold naysayers as a starting point and baseline in their disingenuous attempts to 'prove' that gold is a poor inflation (currency depreciation) hedge.

Remove the uniquely high interest rates in the 1980-1984 period (which were still actually for the most part negative in real terms) from the equation, and we would see just how 'lucrative' fixed-income investments would actually have been in the years since --- which is to say, a net real loss after taking the depreciation of the dollar during the same period into account.

scatterbrains's picture

no doubt true but I think what TD is saying is the herd will not come pouring out of bonds because they expect past performance to continue well into the future..  Ben's attempts at getting peeps to exit bonds and pour into stocks is stuck in the mud because.... well because peeps are dumber then he calculated...   but the scotch has me doubting my read of things so who knows

ebworthen's picture

Don't worry, the FED will have rates back up to 12% before long so they can really get inflation going, crush housing and have old houses bulldozed for multi-family units for rent by J.P. Morgan Chase and Wells Fargo, and introduce the compulsory 100 year "Patriot" bonds created from conversion of all 401K's and IRA's (paying 2%, taxed at 55% if you die).

knukles's picture

1974 was modern all time high for rates
30 yr try's @ 15.375%
F funds @21+%

Bam_Man's picture

Which is why you need to be diversified. Highest quality bonds, precious metals, blue-chip, dividend-paying stocks, real estate and cash. Whatever happens, you will be able to sleep at night and not be at the mercy of the casino.

CrashisOptimistic's picture

All cross correlations go to 1.0 in an Apocalypse.  Diversification won't save you.



mayhem_korner's picture



In the Apocalypse, assets will be the things within your four walls, not the things represented by paper and on-line "statements."

Clever Name's picture

The object of the exercise is 'better returns'.

Remove the early 80's from the bond chart and what are the returns? I'll just assume that they're inflation adjusted...

If we ever have said early 80's 'returns' again its game over.

Mactheknife's picture

I see the 30yr going to 160....go ahead call me crazy.

Bam_Man's picture

You, me and Gary Shilling.

Water Is Wet's picture

Lemon Party came and went.  You guys missed it.

scatterbrains's picture

I wouldn't doubt it at all.. I think there's at least one more massive flush coming that will spike the shit out of the long end.

CrashisOptimistic's picture

As terror strikes, negative yields are inevitable.

Muppet's picture

"A Good Run for Fixed Income -8.6% Average Annual Return"

Odd is that chart title where the dash reads like a minus sign.  

Never One Roach's picture

My gold and silver are up over 230% so your article makes me feel pretty good!

knukles's picture

I been owning a bond and PM barbell for well over a decade.  Need income, which the PM don't provide (I'm not in the league to loan out my tons of bullion) so the bonditos, and the PM for the cap gain to ensure that there's some salvation after the printing effect.

Cramer and the rest of the world can blow me and the stock market.

lasvegaspersona's picture

" FULL FAITH AND CREDIT " dude what more could you ask for? shesh...

JOYFUL's picture


Clive Maund goes Uber-bull on Gold AND Silver!

1) check out the public sentiment chart.  2) Engage warp-drive. (Maze featuring Frankie Beverly - Back in Stride)

Vint Slugs's picture

Maund is  good and doesn't get enough ZH exposure/credit.  So is Eidetic Research but I understand that they think silver is going nowhere until sometime after first quarter 2014.  Keep warp drive in neutral for now.

JOYFUL's picture

Yes, he is considered by many here to be a CCM*...that alone makes him a must read.

But this is a guy who wrote "gold is suspected to be topping out, at least on an intermediate basis" three day before the 9-2011 massacre, and on the same date penned a piece titled "Imminent Silver Price Crash to Devastate Longs"...($40 to $28 in less than a week!)

Hate to admit it, but CM has done a much better job of following the trends than the superstar commentators we all love to read. Skeptics can check out his work from May and June last year, in particular, if uncertain of that.  Whatever he's saying of the moment, I'm all ears!

*Certified Cartel Messenger

REDALERT!! double down stroke...must be an anti-maundian member of the LGF*...known for unwillingess to accomodate dispassionate debate of the issues surrounding pog!

*Lunatic Goldbug Fringe faction!

lasvegaspersona's picture

One nice thing about gold is that one can own it in privacy and just let it sit for years, generations if need could just hide it and only sell bits and pieces as needed. One could move small bits without detection...if needed. One could pass it on to the grandkids with no one the wiser....hypothetically speaking of course. It does 'pay a yield' of course but sometimes that just does not matter. Say if the world was falling apart and all paper was would just get softer by a would still have it though....all hypothetical of course...

so..... I like gold and at this point in time prefer it to stock, bonds and other 'papery' things.

I may change some day.....but it won't be soon.

ReactionToClosedMinds's picture

Barron's had great short piece by Scott Siegel at JPM.  Makes a number of reverse assertions to Ray Dalio's "cash starts to buy things" ..... all completely credible & compelling ..... essentially underpinning (and more actually) what ZH starts above with.  The key is not to be broad based but sector or company specific ..... so that is where the 'safe/safer' play might be in a topping equity market and/or increasing macro-risk globe environment.

Well played!