Stingy Investor Contact - Subscribe - Login
  Home | Articles | Screens | Links | SNW | Rothery Report
     
Tip Sheet
Tip Sheet Archive

Overview

High Dividend Yield
  High Yield DJIA30
  High Yield TSX60

Dividends at Risk
  Dividend Risk DJIA30
  Dividend Risk TSX60

Value Ratio Approach
  Value Ratio DJIA30
  Value Ratio TSX60

Graham's Approach
  Graham DJIA30
  Graham TSX60

Other Screens
  Low P/E DJIA
  Low P/E TSX60
  Low P/B DJIA
  Low P/B TSX60
  Low P/S DJIA



Stingy Investor Tip Sheet

Get A Grip

The markets hit new lows on Monday and there was a great deal of talk about a decade of lost returns. That got me thinking. How did returns adjusted for the impact of inflation fare?

I picked up Robert Shiller's monthly S&P500 real price data and updated it to the close of February 23, 2009. You can see a graph of the data below where I set the 0% gain line at the February 23 price.

Based on monthly real price data for the S&P500, we were last at similar levels in the summer of 1995 not including reinvested dividends. Dividend reinvestment would present a cheerier picture.

But what would happen if we're in the middle of a repeat of the 1929-to-1932 crash where stocks lost 80.6% in real terms from peak to trough?

Well, just take a look at the red line on the graph which shows the 80.6% price decline level from the peak in the fall of 2000.

Should such an event occur, we'd hit very similar price levels on the S&P500 as we did near the lows in 1982 and near the peaks in 1929. That'd make it almost a lost century for the S&P500.

Sure we had a big bubble in 2000, but does a repeat of the 1929-to-1932 crash appear to be a likely scenario? Not really.


(click for larger version)


Correction:

The 1929-32 loss was corrected from 86.1% to 80.61%. The extra 0 was lost in transcription. The text and graph were modified slightly to reflect the change.



02/25/2009   5:30 PM EST   Permlink   save & shareMarkets



 
About Us | Legal | Contact Us
Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...