I’ve posted Podcast #71 to the “RobCasts” section of the site. It’s called I Was Wrong — The Bull Market Started in 1975, Not 1982.
The big move upward in valuations began in 1982. But stocks pay a return of over 6 percent real in years when the P/E10 level remains the same. Stocks were a fine investment from 1975 all the way through early 2000. We should be encouraging people to own stocks in years when the P/E10 level remains constant, so it is a mistake to suggest that the bull market did not begin until 1982.
I will have to listen again. I was busy running the S&P500 numbers. Here is one set (Total Return, dividend reinvested):
Here are the annualized and average real and nominal TOTAL returns of the S&P500. They favor calling the bull market from 1982.
P/E10 low was in 1982
Annualized Real Returns
1975 to 1999:
24 years 10.85%
1982 to 1999:
17 years 14.29%
Annualized Nominal Returns
1975 to 1999:
24 years 16.28%
1982 to 1999:
17 years 18.09%
Average Real Returns
1975 to 1999 or 2000:
24 years 11.72%
1982 to 1999 or 2000:
17 years 14.80%
Average Nominal Returns
1975 to 1999 or 2000:
24 years 16.96%
1982 to 1999 or 2000:
17 years 18.50%
Have fun.
John Walter Russell
Here are the S&P500 Price-Only results:
Here are the annualized and average real and nominal PRICE ONLY (dividends removed) returns of the S&P500. They favor calling the bull market from 1982.
P/E10 low was in 1982
Annualized Real Returns
1975 to 1999:
24 years 7.33%
1982 to 1999:
17 years 8.43%
Annualized Nominal Returns
1975 to 1999:
24 years 12.59%
1982 to 1999:
17 years 14.93%
Average Real Returns
1975 to 1999:
24 years 8.40%
1982 to 1999:
17 years 11.90%
Average Nominal Returns
1975 to 1999:
24 years 13.46%
1982 to 1999:
17 years 15.50%
Have fun.
John Walter Russell
Your main point is right. Investing at the bottom fails to tell the story. You have to invest somewhere in the intervening years. Being out of stocks from 1975 to 1982 just to spot the market bottom is hard to justify.
Have fun.
John Walter Russell
Thanks for all your help, John.
I am thinking that one very basic question is — What is the meaning of the word “bull”?
Is it a “bull” if the P/E10 level remains steady and the annualized real return is 6 percent real?
I don’t think we can say whether that is what other people mean by the word “bull” or not.
If by “bull,” you mean “a wonderful time to be invested in stocks,” that’s a bull.
If by “bull,” you mean “a time at which valuations go up,” that’s not a bull.
Our understanding of how investing works is not yet sufficiently advanced for us even to be able to define the word “bull” in a way that all are willing to go along with.
My guess is that, as we make the shift from Passive Investing to Rational Investing, words like “bull” will be discarded. The distinction between “bull” and “bear” made a lot more sense in the days in which people thought that “timing” meant “short-term timing” than they do now that we know that short-term timing does not work and that long-term timing is required.
What we are looking at today is long-term value propositions, not “bulls” and “bears.” Invest heavily in stocks when stocks offer a strong long-term value proposition, and you will always do well. Invest heavily in stocks when stocks do not offer a long-term value proposition, and you are doomed.
I am beginning to think that the “bull” and “bear” terminology is dated terminology.
Rob