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

 

 

Stocks markets are closed and mail won't be delivered today in honor of Jimmy Carter, because everything came to a halt under him, too

 OK, bond markets are open today, because SOMEONE has to pay for the 44% increase in the national debt which was racked up under Jimmy Carter.

Stonks soared, nominally, under Jimmy at 11.81% per annum on average January 1977 to January 1981, but because inflation was so terrible, 10.43%, real return for the S&P 500 clocked in at only 1.25% per annum during his presidency.

S&P 500 Equal Weight Index down 7.25% in December to date, US Treasury yields up a net 2.13% in the aggregate since the end of November

Both stocks and fixed income down at the same time is a real bummer, you know, like in 2022.

UST yields in the aggregate tonight are at 4.45 vs 4.356 at the end of November.

UST yields have risen 375 basis points net in the aggregate in the three months since the Fed started cutting the Fed Funds Rate on September 18. That's +6.93%, which is hilarious.

 

The Fed Chair Jerome Powell gave them what they wanted, a one quarter point interest rate cut, and the spoiled markets threw a fit anyway because of what he said about next year

The S&P 500 Equal Weight Index is down almost 7% this month, to date.

Meanwhile, more inflation for the rest of us, which Powell has never really tried to stop. You know, like Christianity hasn't failed, it just hasn't really been tried.

 

Secular bear Rosie not throwing in the towel . . . again

 Rosie was on the wrong side of the trade in April 2011 when the bear went bullish. Is he again now?

He uses the same phrase, too, "not throwing in the towel", lol.

In April 2011 he claimed he wasn't throwing in the bear towel after the S&P 500 had already recovered from the 2008 debacle. Then the market slid 20% all the way to October 3, 2011, with the index falling to 1099 again, right where it was exactly three years earlier on the very same date.

It was . . . spooky!

If you had followed his take that April, you'd have lost 20% again. On top of all your losses in 2008. Ouch. Ouch.

Many of us who had kept our powder dry couldn't believe it in October 2011. We thought we were headed back to the depths of March 2009 again, too, just like the last time the market fell to 1099. I mean, that was a free-fall from there in 2008. TARP got signed in a panic that week to stop it, to no avail.

But October 2011 turned out to be more of a retest than we realized, one of the last great buying opportunities of the period. It was a brutal, crushing period of doubt, which some of us still live with.

Now it's the reverse, with unbelievable euphoria everywhere, with the S&P 500 at 6075.

A period of euphoria seems to me like a damned strange time to throw in the bear towel again, after missing out for two years by his own admission. I have no idea if Rosie is the contrary indicator he appears to be.

But the valuation of the market is pre-1920s crazy right now. It is literally not on the charts of our experience in the post-war, or even from the roaring '20s. We have GDP of $29.354 trillion, meaning a valuation of 207, when fair value has been 81 since the Great Depression.

I'm not in it, and I intend to keep staying out, because I can.

Good luck out there to those of you who go where angels fear to tread.

Stonks went bananas today

 

how it started

how it went

Stocks remain wildly overvalued and seriously underperforming

 The S&P 500 averaged 5,792.32 in October 2024 (the all-time high was on 10/18 at 5,864.67).

Nominal GDP was updated on Oct 30th at $29.349924 trillion for 3Q2024.

That yields a ratio of SPX/GDP of 197.35 vs. median of 81.

Stocks remain wildly, obscenely, off-the-chart overvalued.

The formula is GDPx = SPX.

29.35(81) = 2,377.

The market would have to fall 3,415 points just to hit median valuation at current GDP, or about 59%.

You can see a similar analysis here, where the median is 79.7 vs. current 200.7.

Real return from SPX since Aug 2000 is now about 5.1% per annum vs. 7.4% before that (including the Great Depression, the depression of 1920, and every collapse before that going back to 1871), 31% worse.

We are living through developments echoing the lunatic era of the 1920s, which ended in tears.

Owe no man anything . . ..

 

 

 

Trump and Harris agreeing on ending the filibuster rule reminds me of McCain and Obama agreeing on something inadvisable in 2008

 

They both interrupted their campaigns to vote for TARP on October 1, 2008, which became law on Friday, October 3, but did nothing to stop the panic.

On Monday, October 6 Jim Cramer came on the Today Show at 7am and told people who needed their money in the next five years to sell their stocks.

The S&P 500 fell from 1099 to 848 by October 27th, almost 23%, on its way to the March 9, 2009 closing low at 676 (there was an intraday low of 666 on March 6).

Over 500 bank failures marked the era fueled by these events, and more than 6 million lost their homes.

And no one went to jail.

Nothing good will come of ending the filibuster, either, not with the country this divided.

 

Gold up 26% . . . in 2024

Gold soared above the $2,600 level on Friday for the first time, extending a rally boosted by bets for further U.S. interest rate cuts, and rising tensions in the Middle East.

Spot gold was up 0.7% at $2,605.50 per ounce, while U.S. gold futures rose 0.6% to $2,630.30. Silver gained 0.5% to $30.93.

Bullion’s latest rally got a fillip after the Federal Reserve initiated an aggressive easing cycle on Wednesday with a half-percentage-point reduction, adding to the appeal for gold, which pays no interest.

Prices of the safe-haven asset have climbed 26% in 2024, its biggest annual rise since 2010 . . .. 

 

More. 

$SPX is up 19.82%.

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!

Welcome to the 55th anniversary of Peak America

 

 

long term return from stocks peaked in 1969, 36 years after 1933 (always buy low)

Core CPI inflation piles another 3.4% price increase on top of all the price increases consumers have had to endure already, and the stock market thinks this is GREAT NEWS

 

Dwight David Eisenhower: Peak America on this day in 1944, and Peak $SPX Return in 1969 when he died

 America also landed on the moon in 1969.

But you said stocks were making all-time highs!

 

S&P 500

Average Real Return, dividends reinvested April 2000-April 2024: 4.65% per annum April 1976-April 2000: 10.45%

The S&P 500 record close 3/28/24: 5254.35

 

The S&P 500 closed at a new record high today: 5224.62

 

As stock indexes make new all time highs, it's still a 7% world, not a 16% world

The current $SPX world, from Aug 2000 (market peak) to Dec 2023, dividends reinvested, average per annum return: 7.019% nominal.

The previous world of similar length, Apr 1977 to Aug 2000: 16.246% nominal.

Remember that no one even dates the bull market conditions of the past starting from 1977. The Reagan bull began in the summer of 1982. But even from 1977, it was a completely different, better world for investors.

The rate of nominal return per annum was 2.31 times better in that world.

Investing $100 per month in the previous world produced over $258k. Investing $100 per month in the current world has produced only $103k.

The following Vanguard mutual funds have inception dates in the year 2000. They reflect the same reality.

I show nominal average annual return since inception for each fund in 2000 through 12/31/23, per Vanguard.

Performance in red beats average SPX nominal 7.019% since 2000, but none by much. Remember that through 12/31/23 stocks generally were only recently buoyed by exceptional returns, after a down year last year. $VTSAX, the total stock market index, was up a whopping 26.01% in 2023.

VIGAX 8.21 Growth Index

VFIAX 7.62  500 Index

VTSAX 7.90  Total Stock Market Index

VEXAX 8.22  Extended Market Index

VSGIX 8.93  Small Cap Growth Index Inst.

VESIX 4.47  European Stock Index Inst.

VSMAX 9.01 Small Cap Index

VBAIX 6.70  Balanced Index Inst.

VBIAX 6.57 Balanced Index

VPKIX 3.40  Pacific Stock Index Inst.

VVIAX 7.18 Value Index

VEMIX 6.37 Emerging Markets Stock Index Inst.

VIPSX 4.49  Inflation Protected Securities

 

These are but a shadow of the former things which obtained in the previous world.

So that's why we can't afford it

 Wealthiest 10% own 93% of stock market...

The market capitalization of the S&P 500 on Dec 29, 2023 was about $42 trillion, each point of the index worth about $8.80535 billion.

8.80535 billion x 4,769.83 SPX 12/29/23  = 42,000 billion. 

One share of VFIAX on 12/29 cost $439.99. 

Price on 3/9/2009 was $62.66.

Jim Cramer strikes again

 

Let's check in on the US Treasury yield curve and year to date performance of selected Vanguard funds

The UST yield curve aggregate closed up a net 0.68% week over week on 9/15, to an average of 5.006923, the first Friday close this cycle in the 5s.

 

As expected, fixed income isn't doing well in this rising-rate environment. Stocks have done surprisingly well this year, and even cash has beaten bonds.

 

YTD performance:

 

Treasury VFISX 0.68% VFITX -0.26% VUSTX -4.12%;

Investment Grade VFSTX 2.21% VFICX 1.73% VWESX 0.00%; 

Total Bond VBTLX 0.44%; Cash VMFXX 3.48%; Total Stock VTSAX 16.45%.

 

Other popular vehicles: 

 

$SPX 16.37%

$AGG -2.12%

$TLT -8.38%.