Good analysis of the HBPP

[ppnewbie]

https://mutinyfund.com/permanent-portfolio/

[mathjak107]

the first wrong premise is that 17 years later the market was still trying to recover from the great depression.

it actually recovered inflation adjusted in a mere 4-1/2 years from the great depression.

An investor who invested a lump sum in the average stock at the market’s 1929 high would have been back to a break-even by late 1936 — less than four and a half years after the mid-1932 market low.

How can this be? Three factors have obscured this truth from investors: deflation, dividends and the distinction between the Dow Jones industrial average and the overall stock market. Let’s consider them one by one:

DEFLATION The numbers show that from a peak, on a closing basis, of 381.17 on Sept. 3, 1929, the Dow needed until Nov. 23, 1954, to return to its old high. But that’s in “nominal” terms, without adjusting for the effects of inflation or its opposite, deflation.

The Great Depression was a deflationary period. And because the Consumer Price Index in late 1936 was more than 18 percent lower than it was in the fall of 1929, stating market returns without accounting for deflation exaggerates the decline.

DIVIDENDS These payouts played a big role in the 1930s. When the Dow hit a low of 41.22 on July 8, 1932, for example, the dividend yield of the overall stock market was close to 14 percent, according to data compiled by Robert J. Shiller, the Yale economics professor....

you need to look at a broader market index than the dow

Why use a broader measure than the DOW? Because the Dow Jones DOW committee has engaged in some lousy stock picking over the years, including throwing IBM out of the index for 40 years.



https://www.businessinsider.com/henry-b ... 929-2009-4

[dualstow]

https://mutinyfund.com/permanent-portfolio/

Thanks, that was a great read!

[ppnewbie]

the first wrong premise is that 17 years later the market was still trying to recover from the great depression.

it actually recovered inflation adjusted in a mere 4-1/2 years from the great depression.

An investor who invested a lump sum in the average stock at the market’s 1929 high would have been back to a break-even by late 1936 — less than four and a half years after the mid-1932 market low.

How can this be? Three factors have obscured this truth from investors: deflation, dividends and the distinction between the Dow Jones industrial average and the overall stock market. Let’s consider them one by one:

DEFLATION The numbers show that from a peak, on a closing basis, of 381.17 on Sept. 3, 1929, the Dow needed until Nov. 23, 1954, to return to its old high. But that’s in “nominal” terms, without adjusting for the effects of inflation or its opposite, deflation.

The Great Depression was a deflationary period. And because the Consumer Price Index in late 1936 was more than 18 percent lower than it was in the fall of 1929, stating market returns without accounting for deflation exaggerates the decline.

DIVIDENDS These payouts played a big role in the 1930s. When the Dow hit a low of 41.22 on July 8, 1932, for example, the dividend yield of the overall stock market was close to 14 percent, according to data compiled by Robert J. Shiller, the Yale economics professor....

you need to look at a broader market index than the dow

Why use a broader measure than the DOW? Because the Dow Jones DOW committee has engaged in some lousy stock picking over the years, including throwing IBM out of the index for 40 years.


https://www.businessinsider.com/henry-b ... 929-2009-4

Interesting thought. If everything deflates along with your portfolio and you continue to get dividends its not a terrible situation.

[mathjak107]

oh it’s still bad because odds are jobs are going too