"I'm not buying stocks when they are at an all-time high" falacy

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Can anyone explain this thinking?

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Here is your guy!

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smilodonfatalis

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spend the cash...you cant take it with you!!

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Frankly, I'm getting sick the concern with the nominal value of the indexes.

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Yeah, it's a little silly.

The penultimate paragraph on Robert Shiller's Online Data webpage gives annual real returns for the S&P 500 going back to 1871, factoring in dividends, and factoring out consumer price inflation.

You can make the case for certain mini-bearish periods for U.S. equities (1819-1829, 1835-1843, 1853-1857, 1867-1877, & 1882-1884) using data even older than Shiller's, like that of Goetzmann ( LINK), but sticking to Shiller, you get the following 4 bearish periods for S&P 500 equity returns:

1906-1920, -25.6% (-1.95% per year), 15 years
1929-1941, -19.4% (-1.64% per year), 13 years
1966-1981, -20.8% (-1.45% per year), 16 years
2000-2012, -3.2% (-0.25% per year), 13 years

But that last period is obviously misleading, since the last 4 years have seen oddly good returns, which seems to indicate that another drop might be in store sometime in the near future--at least if you believe the theory that the modern bearish periods that last ~15 years should be roughly comparable.

2000-2008, -42.9% (-6.04% per year), 9 years
2009-2012, +69.6% (+14.12% per year), 4 years

2000, -8.58%
2001, -14.43%
2002, -22.05%
2003, +25.94%
2004, +2.98%
2005, +5.90%
2006, +11.01%
2007, -5.34%
2008, -35.15%
2009, +29.01%
2010, +14.31%
2011, +0.52%
2012, +14.40%

Another shocking piece of data analysis is just how much rates of return have changed since the beginning of the Great Society programs passed in the mid 1960s:

1871-2012, +6.53% per year, 142 years

1871-1965, +7.43% per year, 95 years

1966-2012, +4.74% per year, 47 years

And it was even worse a few years back before all the extraordinary monetary policy interventions:

1966-2008, +3.91% per year, 43 years

It almost seems as if that historical rate of about 7.4% per year has been effectively cut in half by various policies related to big pension funds and other mandated employee benefits.

According to the Fed's Flow of Funds report issued on March 7, private net wealth in the U.S. has increased to over $66 trillion:

2005, $61.19t
2006, $65.62t
2007, $66.12t
2008, $53.64t
2009, $55.72t
2010, $59.68t
2011, $60.61t
2012, $66.07t

As I've brought up in other threads (such as " Wealth-to-GDP Ratios in the U.S. Since 1945"), that raises the wealth-to-GDP ratio over 4, which makes for a somewhat unstable demographic situation regarding saved wealth--i.e., too many retiree savings plans chasing too few workers.

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Another shocking piece of data analysis is just how much rates of return have changed since the beginning of the Great Society programs passed in the mid 1960s:

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You think that's cause and effect or simple association. I'd guess it would be a combination, but with attribution of the larger slice to association.


ETA: My visceral feelings about LBJ notwithstanding

Also, when it comes to the pension plans and stuff that I mentioned, that was a gradual process that in many respects went all the way back to the wage-control policies put in place during WWII.

ERISA was passed in 1974, I think, but it didn't so much seek to create huge employee funds so much as to attempt to regulate all the vice and corruption that had accumulated in those funds during the mafia-friendly labor union hey day of the 1950s and 1960s.