Welcome to The 26th Anniversary of The Lost World

When average real return from stocks was 86% better. 

This incorporates the inflation data for August 2026 reported last week.

 

 

Buffett Indicator in the news

 Wall Street on red alert as Warren Buffett’s favorite stock market gauge hits the worst reading EVER

... The so-called Buffett indicator divides the total value of all US stocks by the total economic output of the United States, delivering one simple number that sums up how investors are feeling at the moment.

Buffett said that a reading of 100 percent suggests markets are in balance - in other words, the stock market is worth about as much as the US economy produces in one year - while a lower figure means stocks are undervalued.

Right now, the index hit its highest reading ever - 232 percent - indicating that stocks are historically overvalued. ...

Right now, the indicator is well above its last two all-time highs: The 219 percent reading seen at the height of the 2021 pandemic stock market frenzy, and the 163 percent level at the 2000 peak of the dot com bubble. ...                                                                                                              

 

Using SPX tonight, instead of the Wilshire 5000 as Buffett does, we're at 224.8 vs. 1938-2019 mean level of 81!

The market has been obscenely overvalued way beyond the 1938-2019 experience for six consecutive years and counting, and investors keep keeping it that way by continuing to pour money into it. It won't unwind until they stop. And since they believe that the market goes only up, it will probably take a market-loathing mother of all economic disasters to change their minds and make them do so.

Meanwhile real return since August 2000 (139), the previous secular peak, is now 5.27% per annum through March 2026 (25 years, 7 months).

Real return from January 1975 to August 2000 (the previous 25 years, 7 months) was 11.19% per annum, 112% better because valuation was 61 in 1975 and falling.

Investing at high valuations by definition produces poorer results. Compare August 1965 (118) to August 2000 (139): 6.95% per annum real. 

(I need to update this chart for 2024 and 2025!)

 

 

SPX/GDP, then vs. now

SPX(average annual)/GDP(trillions of dollars), then vs. now

1938: 131

1942: 52

1964/1965: 118 

1982: 35

2000: 139 

2009: 65

2019: 135 

2025: 202

Median 1938-2019: 81

This ratio has been above 139 for six consecutive years 2020-2025, which is unprecedented for the era shown. Even so, return places third because dividends are puny in the age of obscenely overpaid dirty rotten CEOs and management.

Return: nominal/real, average per annum, dividends fully reinvested

12/1942-12/1965: 15.43%/12.30%

12/1982-12/2000: 16.66/12.97

12/2009-12/2025: 14.09/11.23 

 

 

SPX return since August 2000 vs. Jan 1871-Jul 1982

 

Aug 2000-Jan 2026: 8.19% pa / 5.53% real

Jan 1871-Jul 1982: 8.15% pa / 6.18% real

Jul 1982-Aug 2000: 18.99% pa / 15.28% real 

25th anniversary of the August 2000 S&P 500 high

 The 25 years previous to August 2000 were 104.15% better.

 

Let's check in on real return from stocks since and before the August 2000 high to see what a real bull market looks like

 

$SPX since August 2000 through July 2025: 5.24% real, average per annum, dividends fully reinvested.

And the 24 years, 11 months before that to August 2000?

10.90%.

108% better. 

IYKYK. 

The S&P 500 had five record closes in a row this week, and fourteen so far this year, for what it's worth

The S&P 500 averaged 6,029.95 in June. 

Using 1Q2025 GDP, current valuation of SPX 6,388.64 is 213, 163% higher than the 1938-2019 mean of 81.

Full year valuations around 213 were last seen in 1928-1930: 204, 248, and 228.

Real return since August 2000 through June 2025, two months shy of 25-years, is now up to 5.08% per annum vs. 10.75% per annum October 1975 through August 2000.

The mouse that roared. 

 

SPX since August 2000 continues to underperform the pre-Reagan era by almost 20% in real terms, the Reagan bull market era by almost 68%

SPX 8/2000-5/2025: 7.62% per annum nominal, 4.95% per annum real (inflation rate 2.54% per annum)

SPX 1/1871-7/1982: 8.15% per annum nominal, 6.18% per annum real (inflation 1.86%)

SPX 7/1982-8/2000: 18.99% per annum nominal, 15.28% per annum real (inflation 3.22%) 

 

We'll get the June 2025 Consumer Price Index report on Tuesday July 15th. The previous read was 2.4% yoy overall, and 2.8% yoy for the core.  

Secular real return from stocks since investing at the August 2000 high compared with investing at the September 1929 high, twenty-four years out

 August 2000-August 2024 and September 1929-September 1953 both fall far short of 8.74% per annum real return September 1953-August 2000.

Real per annum return from January 1871-September 1929 was 8.34%.

 

 

 

Despite record highs in stocks in 2024, real return since the last secular peak in August 2000 still significantly lags previous periods of peak-to-peak returns

 

During four months in 2021, real return since August 2000 briefly hit the 5s: 5.06% in August, 5.02% in September, 5.17% in November, and 5.15% in December.

Real return swooned after that, as low as 3.63% in October 2022, making it seem like 2021 might have been a secular turning point.

But by October 2024 real return since August 2000 had recovered to 5.11%, and 5.2% in November, and 5.24% in December.

Is this the new secular peak?

Return might suggest, No, seeing how low it still is.

Valuation might suggest, Yes.

The annual average of the S&P 500 divided by GDP in trillions hit 186 in 2024, a level not seen since 1930 (228) on an annualized basis.

That ratio never got above 139 (2000) between 1937 (165) and 2020 (151).

And this ratio was 180 in 2021, 158 in 2022, and 155 in 2023, all unprecedented for the post-war.

But 186 in 2024 really takes the cake.

The price of the market is really, really rich for the return you get.

 

Real return from stocks was better under Trump I than under Biden

 

S&P 500 average real return, dividends fully reinvested

Nov 2016--Nov 2020: 13.18% per annum

Nov 2020--Nov 2024: 9.97% per annum

On a nominal basis it was a draw, that's how bad inflation was for stocks: Trump 15.33% per annum vs. Biden 15.39% per annum.

 

Although the Reagan Bull from July 1982--August 2000 was spectacular, yielding 18.99% nominal and 15.28% real, the actual Reagan era itself was still a huge battle with inflation

Nov 1980--Nov 1984: 10.5% nominal, 4.9% real

Nov 1984--Nov 1988: 17.06% nominal, 13.22% real.

Your reminder that average real return from stonks sux

S&P 500

 

August 2000 -- August 2024

4.90% per annum

August 1976 -- August 2000

10.49% per annum

 

 

Real return from stocks since the August 2000 top after 24 years now underperforms the pre-2000 eras by ONLY 33.7% per annum, nominal by 21.3%, yippee! What a great country!

It's been 23 years of not a bull market

 Average real return per annum from $SPX, dividends fully reinvested:

August 2000 to August 2023:  4.23%

August 1977 to August 2000: 11.35%

 

Real return since August 2000 has been Great Depression-like

 

The investing world's experts, let alone all the sheeple who follow them, don't have a CLUE how bad this market has been since August 2000

 The TOP, do you hear me, was in already last November.

As of May 2022 real return has pulled back all the way to 4.14%.

We truly live in a new period of suck.

 

 

How low could the S&P 500 possibly fall from the Monday, Jan 3, 2022 closing high of 4,796.56?

 Some are calling this a dot-com-like bubble "burst". 

Jeremy Grantham thinks a 40% decline is in the offing.

That burst happened gradually, actually, from August 2000 to February 2003, more like an old balloon slowly deflating in the corner of the room under a table months after the party had ended.

On an average basis, the S&P 500 fell from 2471.50 in August 2000 to 1314.31 in February 2003, in March 2022 dollars. That 1157.19 point drop amounted to a drop of 46.82%.

Before climbing to the spectacular heights we know today, the S&P 500 had another appointment with more bad news, unfortunately, in March 2009, achieving an even lower level than February 2003.

In March 2022 dollars, the S&P 500 bottomed in March 2009, again on an average basis, at 1023.36. That was 1448.14 points from 2471.50 in August 2000, a drop of 58.59%.

That was quite a long process, a very bad, no good, rotten almost a decade for stocks. Real per annum return August 2000 through March 2009 averaged  -8.14%.

Many children watched their parents lose everything, including the house.

Those February 2003 and March 2009 type of events must be recognized as within the realm of real possibility even today.

4796.56 minus 46.82% would put the S&P 500 at 2551.

Minus 58.59% . . . 1986. 

Not saying it will happen. Not saying it's even probable. Just possible, because it has happened before.

Smart investors are ready for the possible.

The index is down 18.19% from the all-time-high tonight.

 

The biggest investing lie of our times: "A host of factors ... has made U.S. equities an attractive place to park money and earn nice returns"

 CNBC, here.

S&P 500, average real return per annum, dividends fully reinvested:

August 2000 through April 2022, 21 years, 8 months . . . 4.6%;

The 21 years, 8 months previous to that, December 1978 through August 2000 . . . 12.35%. 

At 4.6% it takes about 15.5 years to double your money, at 12.35% just under 6 years, which means under current circumstances you haven't yet doubled your money twice, whereas previously you would have doubled it 3.6 times.

The stellar real returns to the August 2000 top have been cut down since then from 12.35% to 8.41%. How long will it be before they are cut back to 6.44%, the long term real return from January 1871 to December 1978?

The odds are not very long.

Those stellar returns of the second half of the 20th century are an artifact of The Great Depression lows. To achieve them again will require another one.

Safety check, Vern.

The 20th anniversary of the end of the Reagan bull in August 2000 shows stock market return hasn't been just sub-bull, it's been sub-normal

Average per annum real return from the S&P 500 in the last 20 years has underperformed the 100+ years up to the beginning of the Reagan era by 36.8%.

Don't even begin to THINK return has compared with the era of the Reagan bull. This isn't a bull market, let alone a normally performing market.

Remember, this is real return, not nominal. 

 

Stonks continue to SUCK since August 2000: July 2020 edition