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Comment by jxf | Hacker News Reader

> “There’s a high probability in my mind that the market, at best, is going to be kind of flat for 10 years, sort of like this ’66 to ’82 time period,” he said in an interview with Alex Karp, CEO of software and A.I. firm Palantir.

Adjusting for inflation, the stock market was not "flat" during this period [0]. The DJIA, for example, closed at an effective price of 9,160.41 in January 1966 and closed at an effective price of 3,176.25 in December 1982. That's a 65% drop, which is a pretty big stretch to call "flat".

[0]: https://www.macrotrends.net/1319/dow-jones-100-year-historic...

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You are correct, but to clarify, you are saying the value declined when adjusted for inflation. The DJIA average sat around 900 the about a decade, with the real value getting eaten away by the high inflation of the time.

> You are correct, but to clarify, you are saying the value declined when adjusted for inflation.

That's what I meant by "adjusting for inflation" and "65% decline". Apologies if that was worded confusingly.

A lot of the adjectives that traders use are different from how casuals would interpret things. They are looking for massive profit opportunities and declare hell on earth when they aren't there because it is for them. People who are just putting 401K money into index funds just need their money to slightly outpace inflation which it will almost always do in a long enough time horizon. We saw an outsize bull market and are now giving up a lot of those gains, but if you just buy and hold, you're nearly guaranteed to come out ahead even if you don't really have much chance of making a killing.

"Nearly guaranteed" may be a stretch. There are decades in US history where you wouldn't really come out ahead (although I'm not sure any alternatives to stock would have done better) but internationally, there are many clear examples where the stock market hasn't been a good investment on a generational basis, like Japan now. The question is how much do you believe in American exceptionalism, are US markets really immune to this kind of failure forever, or have they just been on a really good run?

There's an awesome website posted to HN a while back that calculates total real returns (accounting for dividends and inflation). Here's the chart for the Vanguard S&P500 index fund:

https://totalrealreturns.com/s/VFINX

Question is, will the market be able to make 7-8% p.a. in the face of massive headwinds like QT and rising interest rates and rising inflation from the CRB index.

What about S&P 500? The Dow Jones Industrial Average indexes a mere 30 companies.

S&P was about the same, large decline in real dollars over that time.

https://www.macrotrends.net/2324/sp-500-historical-chart-dat...

I wish we’d stop talking about the Dow. It isn’t useful.

Yes, but also, stock correlations are so high that it's not as big of a difference as you might think.[1]

1: https://www.macroaxis.com/invest/pair-correlation/DIA/%5EGSP...

Yes it is, the Dow is essentially made up of private public partnerships. A good proxy for government spend

Not just that, but weighed by their nominal price which is insane.

Presumably dividends would balance it out though.

With dividends reinvested you get -25.096%, https://dqydj.com/dow-jones-return-calculator/.

S&P 500 is -3.745%.

So one of the worst long-term periods in history - the S&P was still ~50% better than cash.

What else is a passive investor gonna do?

10-year treasuries, coupon payments reinvested, would have returned 18.156% adjusted for inflation over the same period, https://dqydj.com/treasury-return-calculator/.

They returned over 36% in 1982 alone!

I’m not sure it is a good idea to buy longer dated govt bonds when we’re in the middle of the most aggressive rate tightening period in a generation.

Sometimes you can't beat inflation. Wealth equality is inherently inflationary. If people in developing nations start demanding the same standard of living, prices are screwed, costs go up, and certain cost changes cannot be hedged.

For example, how exactly would you plan on protecting yourself against wage increases? It's not like there's a futures market for wages.

If people could agree on some source of unbiased data about average wages that updates frequently for a job type, then there certainly could be (cash-settlement only) futures based on that value.

What seems relatively unlikely is that you will find people willing to offer physical settlement futures!

The market would probably also be somewhat shallow, being more speculators than anything else. Basically only groups acting more like insurance companies would be willing to add much to the depth of the market, and obviously they would sell such futures at such a steep premium that is unlikely to be a very useful hedge.

Grow some balls and start a business?

What if you already have a business with enormous profits and don't want to spend them all, but invest some?

Dividends would balance out a 65% drop during the same period, how so?

A 65% drop in price over 17 years is "only" about 6% per year. The S&P500 annual dividend yield during 1966-1982 was not much less than 6%, especially during the latter half of that period.

If you look at an inflation-adjusted total return chart (as opposed to just price), the actual drop in investment value was much smaller. I think "flat" isn't a terrible way to describe it.

https://www.multpl.com/s-p-500-dividend-yield

http://www.simplestockinvesting.com/SP500-historical-real-to...

Total return (dividends reinvested, inflation adjusted) is -13.4% for 1965-1983.

That’s not terrible considering there aren’t likely a lot of better investments in that environment

I think we'd have to look at the data, but it's possible given that drop happened over an almost 20 year period. Dividends around 2-4% annual over that time could make up for it depending on specifics.

By being more than a 65% drop

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