No link here, just a personal observation. A lot of articles and blog postings stating that a bear market is around the corner, we are due for a correction, worldwide collapse.
That last one is pushing it for sure but it seems that after a good month like we just had in August the doomsayers and eternal bears come out in full force. This is standard operating procedure for them.
The Fed is being very supportive of the markets and there seems to be no end to that support for the near and foreseeable future. A slow recovering economy in the US is balancing out a slightly slowing economy in Asia. Real estate is doing well.
Add your thoughts as we are done with August. The Christmas retail season is upon us. Do you feel bearish as we start to close out 2014 or do you have a sense of optimism as we move ahead?
Comments
You have ebola, ISIS, Russia and a number of other issues, geopolitical or otherwise. The fact that the market has shrugged off all of it says something. That something may be utter complacency because it believes the Fed will always be supportive, who knows.
I don't think we are due for worldwide collapse as much as the pressure seems to be building for more significant geopolitical tension/crisis.
There is some discussion pressing for Russia to be disallowed from the SWIFT system, which would be a very significant heightening of the sanctions push against the country. A couple of years ago, the US dropped Iran from the SWIFT system and soon after, hyperinflation followed. “The United States,” Rickards writes,” had inflicted a currency collapse, hyperinflation, and a bank run and had caused a scarcity of food, gasoline and consumer goods, through the expedient of cutting Iran out of the global payments system.” (http://www.forbes.com/sites/greatspeculations/2014/05/23/how-gold-helped-iran-withstand-u-s-financial-fury/, http://www.businessinsider.com/endgame-how-irans-hyperinflation-will-lead-to-regime-change-2012-10)
I think if the same push is made towards Russia, that will cause significant tension but will also push Russia further into association with China. Jim Rickards on Twitter a few days ago: "#Putin will consolidate territorial gains just before winter weather. Then Europe can sign peace treaty. Or freeze in the dark."
Europe doesn't appear to be in great shape and people are flocking to Treasuries because even at depressed yields, they seem to be a better option than some even lower yielding European options. I don't think Europe's getting any better and don't see the interest rate situation changing there, so do any moves higher in rates here just get swallowed up by foreigners starved for yield?
I have no plans to add any more to current investments for at least the mid-term. I get dividends all the time and will just keep adding little bit by little bit over time to current positions via reinvestment.
The Cold War is back. Putin is pushing the US's buttons as he senses weakness in leadership. But the US is not the only country mad at Russia so I expect an alliance to put pressure on them.
The markets seem to either ignore this or have the me not worry syndrome.
http://blogs.wsj.com/moneybeat/2014/01/03/the-bearish-call-to-end-all-bearish-calls/
Regarding do we feel bearish or a sense of optimism:
I'm concerned about the situation with Russia. I think that has the potential to get ugly. I don't trust Putin one bit. Also, Europe and Japan seem like they are not doing well economically. And how great is the US doing economically? However, my feelings turn out to have no predictive ability with respect to the markets. It's hard to imagine ever having a stable, safe world, like it seemed we used to. That was probably all an illusion then.
It would also be instructive if you would perform the same calculation using the Japan stock market starting from the highs in the late 1980's, until today.
I understand the QE program is coming to an end but the Fed has other methods they will use. It sounds like a transition from one method to another as the circumstances change. The Fed doesn't want to pull the rug out from under the market.
Annualized Percent Return = 100 * ((Ending Month Value / Starting Month Value) ^ (12 / Monthly Periods) - 1)
So, for this case,
APR = 100 * ((195.72/134.01) ^ (12 / 80) - 1) = 5.9
I guess my point is that folks who have invested in US equities since beginning of current full cycle have not fared particularly well in historical terms.
Here's another one to think about...
Since April '00, or 171 months ago...more than 14 years (through June '14), SP500 Annualized Total Return?
Just 3.9%.
For what interest it holds, I thought the data presented in Ten Market Cycles was pretty enlightening.
Now spin this with "Fed Speak" ... And, I think one has to ask themselves ... Is it, Risk On or, Risk Off? Or, is it somewhere in bewteen? I am governing with caution and watching my asset allocation and have been tweaking it towards the conserative side of the scale for me. With this, I am presently light in income and in equities and heavy in cash.
Old_Skeet
Btw such a short period of return measurement seems like data mining to me.
I see it as looking at returns in context of full cycle.
c
My biggest fear is that the Fed is behind the curve on raising rates and that we're going to end up with far more inflation than we'd really like to have, not to mention that when/if the Fed realizes it needs to be more aggressive raising rates there could be a big shock to the system that many people aren't well positioned for.
On the other hand, I'm suspicious of any market that's up 2.5 X over such a short period. I remain very conservatively positioned.
I try to discount global conflict in my thinking. It can work both ways. Increased defense spending and the associated borrowing can be stimulative to a degree. But jeepers - it does sorta look like the world's falling apart. On a side note, it's hard to see how we can continue working with Russia on the ISS. That situation may take some really bizarre turns in the future. Some of this could benefit U.S. areospace.
I've gradually tried to bolster investments which are not correlated too closely to the U.S. equity markets - EM bonds, pure commodities plays, and good old cash. I feel these will hold up a little better if and when the big (equity) slide comes. Govt bonds are so rediculously over-priced they receive little attention from me.
Enjoying everybody's take.
thanks!
http://longrundata.com/longrundata/index.php
They come very close to your calculation. I put in November 1 and June 30. You didn't specify the date you started in November.
But I'm not certain your calculation has included the dividends.
I ran the numbers on the website below
http://longrundata.com/longrundata/index.php
Yes, if you use SPY ending 31 Oct '07, which then includes Nov '07 monthly return, you will get the 5.9% APR value.
@David Moran.
Hi sir. Looks like rjb112 found a quick tool. I use Excel mostly...just like you suggest. Either the equation I presented above or the PRODUCT function on monthly ratios to get Total and Annualized Return.
SPY, by definition, includes dividend reinvestment, so it's "Total Return."
I believe you can use SPX to get return w/o dividend...just the capital appreciation part.
If you want me to run some specifics for you, email me and I will try to follow-up promptly.
Hope all is well.
c
Regarding emailing you.
What is the email address?
I'm not clear on how the formula you presented for calculating the annualized total return takes these dividend distributions into account.
Is it the one below? The one with the "bouncing ball"?
I can't stand that tool, because it doesn't "adjust" the way I want it to. It's a moving target.