If You Bought 30 Years Ago Today...

Tyler Durden's picture

30 year ago today, traders were having a bad day: the Dow, S&P 500, FTSE, DAX and CAC fell -23%, -20%, -11%, -9% and -10% respectively. The FTSE fell a further 12% the day after, reflecting the difficulties in fully reopening
the market after the great storm a few days before. The day would eventually become known as Black Monday.

In a "bit of fun" Deutsche Bank's credit strategist, Jim Reid, decided to calculate where returns would be today had you bought various assets the morning after the crash. For this the credit analyst used his regular monthly template of assets, and notes that the most important decision to have made was whether to buy the S&P 500 or the Nikkei back in October 1987. The former tops the charts and has returned +2123% (+10.9% pa) since this day and the latter is at the bottom of the pile returning a meager +12% (+0.4% pa). These are local currency returns but even if you were dollar hedged, the Nikkei still only returns a relatively small +41% (+1.1% pa).

Another interesting observation: outside of the Nikkei, the three bottom performers have been commodity based with the CRB index (+60%, +1.6% pa), Oil (+163%, +3.3% pa) and Gold (+166%, +3.3% pa).

This shows how difficult it is for commodities to keep up over time with income producing securities with compounded interest or dividend reinvestment. In fairness when we look at dollar hedged returns Greek equities do fall  to the bottom of the pile at just +27% (+0.8% pa) given the huge depreciation in the Greek Drachma prior to the Euro.

Considering the turmoil around the Euro Sovereign Crisis it’s impressive that Italian and Spanish Government bonds make the top 5 performers in local currency terms returning +1086% (+8.6% pa) and +1037% (+8.4% pa) respectively over the period. Obviously the Euro convergence story from very high starting yields and in later years ECB bond purchases have provided the impetus here. To repeat these returns over the next 30 years their respective yields would have to migrate towards -21%. Which after the next deflationary crisis, which will unleash even more NIRP and QE is not exactly unthinkable.

In this context, for US Treasuries to repeat the +602% (+6.7%  pa) returns out to 2047 we’d need to see -18% yields at the end of our journey. As Reid explains, "We’ve calculated this on what the returns would be if yields moved to that level tomorrow and were then stable for 30 years. A bit spurious but an illustration of how impossible it will be to get anywhere near these type of returns again."

Meanwhile, US HY investors can claim to lead the way in fixed income returns though with a +1106% (+8.7% pa) return over the period. The DAX sneaks into the top 5 in dollar adjusted returns and pips Spanish and Italian debt as the DM mark appreciated and the Peseta and Lira depreciated in the following 12 years leading up to the introduction of the Euro.

The table and chart show the full list of performers over the period, first in local currency terms...

... denominated in USD...

... and combined.

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spastic_colon's picture

what if you bot the week before??

BullyBearish's picture

...you'd be close to checking out...like art cashin

overbet's picture

How much is added value and how much is curreny debasement?

Took Red Pill's picture

and what will the next 30 years look like? I hear people saying how much they are making in the market. You don't get a profit until you've cashed out. You could lose it all tomorrow. And if you do cash out when it's high, what do you have? Fiat money backed by nothing else but full faith and credit of the united states.

MisterMousePotato's picture

Correct me if I'm wrong, but number three on the list (USHY) has returned roughly 3% per year over 30 years.

During this time, we had, inter alia, the dot.com and Lehman troubles, Long Term (whatever it was), the Peso, the Ruble, and I'm sure those who have paid attention longer than me could name another dozen things that absolutely roiled the markets, High Yield most of all(?).

I guess if you like excitement, it might seem worth it, but I would be happier with something less volatile than the balance in my checking account.


Mementoil's picture

In this specific case it doesn't matter, because you are comparing assets.
In the past 30 years stocks were the best in compensating for inflation, and commodities were almost the worst.

I'm guessing the next 30 years we are going to see the absolute reverse...

Solio's picture

I didn't see your comment prior to making mine. We agree the calculation must include the devaluation.

TerminalDebt's picture

and still we see the "OMG you have to buy gold because history doesn't matter" comments


PrezTrump's picture

Gold ONLY MADE 166% in the last 30 freaking years!!!!!!

Get off your high-horses you stupid bugs and join the crypto millenium.

Txpl9421's picture

Bitcoin made that in the last month...well not quite.  But it is up $1,700 from a month ago.

Things are slow for the Bit-man.

LightBeamCowboy's picture

Yeah, but gold stackers sleep better. I hardly bother to check prices anymore because I know it ain't fallin' to zero. Ever.

TerminalDebt's picture

no point checking because you know gold prices don't change decade to decade

Dig Deeper1's picture

"How much is added value and how much is curreny debasement?"

< 10AV + > 90CD = FIRE

2_legs_bahhhhhd's picture

You are still up gagillions, that's how they spin it. The question is, if you bought the dow30 or the snp 40 years ago, how many of those companies still exist? That's the wizards trick they don't show you.

Btfd, that's all you need to know /s

ReturnOfDaMac's picture

And THAT is why you buy the index!  Bulllish y'all, just BTFD.

HRClinton's picture

Anybody here have the honesty and decency to admit that Gold isn't everything? 

Just look how poorly it performed, compared to the S&P.

If you really want to torture yourself, look at what your portfolio would have looked like, if you had bought early stock of Microsoft, Apple, Dell, and Amazon. How about if you had bought BTC at 50 cents or $1 ?

People should be mad at themselves for their lot in life, not blame others. You can tell who is who, who won, and who lost or missed out, by their attitude -- which projects (or betrays) the hidden, inner self.

If you listen to all the wrong people here (and there are MANY), you'll miss out or be poor. Get informed and follow Basic Investment Principles, to have a sensible and balanced portfolio -- allowing a fraction for Speculative investment, whose losses won't break you, but whose gains could make you very comfortable or rich.

If you're a moron, you'll bet it all on one asset and pay the price. And then you'll sound just like all the Wrong people here.

east of eden's picture

Well of course it performed poorly in relation to the S&P for two very important reasons. One, the Fed, ECB, BOJ and SNB were busy printing trillions that they handed out to the investment banks, who, instead of investing it, put it into the S&P under 'orders' from the CB and then there was deliberate and ongoing price suppression on gold and silver through the use of naked shorts.

So, does an additional 80 Trillion in taxpayers liabilities count or not, because if it does then investors in the S&P are actually a whole lot POORER than they were 10 years ago, it just seems like they are richer than the other 90% at the moment.

So, not only did 'the muppers' get wacked for 80 Trillion, but then they were virtually forced to buy overpriced stock in the very companies that had received all the taxpayer 'largesse' in the first place. Is that what you call 'free market capitalism', because I don't. I call it 'cashing in to the muppets before the bottom falls out', capitalism.

All trends mean revert.

Consuelo's picture



Better check your straw man - I see smoke billowing...  

Whoever here said gold was everything...?

Secondly, just what type of gold are you speaking of - what trades from day to day in the ether, or what the prudent hand holds and keeps for insurance...?

LawsofPhysics's picture

NEVER put all your eggs in one basket BUT physical gold IS and will remain the preferred collateral by all central banks, regardless of the "fiat du jour"...

eventually all fiat will die.  This may or may not result in another world war (as it did last time).  Regardless, once the dust settles and the population is sufficiently culled, the next monetary system (just like post WWII) will be built on real fucking collateral.

Same as it ever was.

east of eden's picture

Well, you see, there are some of us who still want to believe that we are playing on a level playing field. And it will be that way some day again.

Sanity Bear's picture

If we're starting to become honest and decent here - and I really don't see the reason for such a massive change, but I'll play along - then no one could have forseen the various beyond-extraordinary and mathematically unsustainable events that led to the current results.

Full disclosure: all my bets are on one asset - me.

malek's picture

"Everything" for what?
Get rich quick schemes? Or preserving value.

RagaMuffin's picture

Don't you wish all your payroll taxes, Social security, etc had gone into the market and not Uncle Sam?

LightBeamCowboy's picture

Then who would pay for Israel's wars?


What happens if you take out all the money printing handouts to the banks and the illegal stuff?

Willard J Clinton's picture

What are these returns when adjusted for inflation?

Hikikomori's picture

Divide the returns by 2.17 and you will get a close approximation of inflation-adjusted returns.

Sanity Bear's picture

That would be "inflation"-adjusted returns.

Justin Case's picture

Ya, coulda, shoulda, woulda. But no one has a crystal ball that works. If it wasn't for bad luck, I'd have no luck at all.

0valueleft's picture

Think about assets and investments in a reasonable and logical fashion, then do the opposite. It's now contrarian to not be contrarian. That is what happens when money is as close to free as it can be for a long duration. That is the lesson that history will teach from this experiment.

The game Monopoly is a lesson in animal spirits, it takes a little more effort than the rest of the players, but it's always worth being the banker. 

FEDbuster's picture

Bitcoin up 50,000+ % in 7 years, just saying.

Agent P's picture

So were tulip bulbs at one point in time...

Badsamm's picture

Did you make money on tulips?

Agent P's picture

No, but I didn't lose any either. 

FEDbuster's picture

Supply of tulip bulbs was manipulated and constrained to create a mania, then the market was flooded with "hidden" bulbs creating a crash in prices.

Supply of Bitcoin in constrained by math.  There are however several entities holding the majority of Bitcoins, and they could flood the market creating a short term crash due to over supply.  Bitcoin as a store of value is new, volitile and unproven due to it's short history.  Cryptos are here to stay, and adoption by the masses will just be a matter of time.  Tulip bulbs not so much.

Two Pizzas Are First Material Item Purchased Using Bitcoin - May 22, 2010

BitcoinTalk user laszlo (Laszlo Hanyecz) pays 10,000 BTC for two pizzas delivered to their house (valued at about $25), ordered and paid for by another user, jercos. This assigns the first concrete valuation to bitcoin - about $0.0025 per coin.

Agent P's picture

Every crypto is is limited in supply by math, but what isn't limited by math is the number of cryptos, and many are being launched, and all are created from thin air with no economic backing.  As best I can tell, the only concrete valuation of bitcoin (and others) is based purely on the greater fool theory.  But hey, more power to you if you're making money while the demand exists. 

FEDbuster's picture

The one with the most acceptance will win.  There are thousands of credit cards, but Vias, Mastercard and AMEX are the most widely accepted, the first Dinners Club is a footnote in history.  So far, Bitcoin is winning the race.

therover's picture

Someone paid $1 for a lottery ticket and won 300 million. What's the return on that ?

Luck ALWAYS plays a part in shit like this.

fishwharf's picture

Sure glad it's not in a bubble.

Blue Dog's picture

The stock market doesn't always go up. It stayed about the same from 1967 to 1977. And it's going to drop like a rock sometime soon.

CJgipper's picture

I disagree.  I think that they've printed enough to induce a melt up this time instetad of a melt down.

Justin Case's picture

Better to look at the inflation adjusted index, than just past and present numbers.

moorewasthebestbond's picture

All those gains being sucked dry by .1% interest rates, overdrawn pensions, Obamacare, and the welfare-warfare state.

bshirley1968's picture

It would be nice to see those charts minus the last 10 years.

asteroids's picture

You can buy the SPY, but remember, the SPY is bought and sold all the time as companies come in and out of the list.

Solio's picture

Couple those calculations with the declined value of the dollar since 1913.

syzygysus's picture

Maybe tomorrow will be Black Fronday 


(abbreviation: fro)
a day that comes either right after a day off and before a weekend, or visa versa. This day feels like both a monday, and a friday and plays tricks with your mind

foxenburg's picture

puente (Spanish for bridge) is a holiday in Spain, it is the day off to bridge the time between the weekend and a holiday, thereby creating a long weekend. A puente typically occurs when a holiday falls on a Tuesday or Thursday, workers will then take the Monday or Friday as a puente, a day off.[1