Market up 1500% from 80's, what was the cause?

[jclay2]

The S&P 500 is actually trading at a 17 PE ratio. In the 70's I believe that the ratio was around 7-10.

 

[Molly1]

Molly1: What is so bad about investing. Are you mad at my grandparents too because they invested in thier money in the market and made a bunch of cash for retirment?

No, of course not.

I'm not talking about your grandparents, or the man on the street who invested.

I'm trying to think like the folks that are running this show.

Or do you think this chart just happened by accident?

It didn't happen by accident, it happened by design.

 

[JordanQ72]

our dollar is worth less than 4 cents since the inception of the Federal Reserve.....it truly surprises me how little that bothers people when that's brought up.

It's because the vast majority of people don't have salaries on par with those of the 1910s.

Trust me, if most people were still making $1,750/year, you would see a lot more outcry.

 

[Xenophage]

It's because the vast majority of people don't have salaries on par with those of the 1910s.

Trust me, if most people were still making $1,750/year, you would see a lot more outcry.

But people *are* making $1,750/year, in 1950's dollar terms.

Real wages haven't gone up at all in America since the 30's! They *should* have gone up, just like they have around the world due to the massive advancements in technology and efficiency and industrial capacity and demand for productivity, but constant looting and plundering by the socialist welfare state have kept them down.

 

[Xenophage]

I will say that being involved with Dr. Paul has made me more financially aware, and doing some research I've been looking at historical pricing of the market. Looking back, shows a massive increase in the market since the early 80s, on the order of 1500% increase from what was before a steady market.

Was this due to the credit markets becoming unleashed in the late 70s, from the removal of the gold standard?

Massive expansion of credit that affects financial markets more than anything, but also the steady progress of technology and the opening up of worldwide markets that didn't used to exist, especially in Asia and Russia. This happened despite the consistent and heavy loss of America's industrial base that, in real terms, made us quite a bit poorer as a nation.

 

[Kingfisher]

A wise old financial advisor named Richard Russel predicts someday the Dow and the price of gold will cross paths.

 

[JordanQ72]

But people *are* making $1,750/year, in 1950's dollar terms.

Real wages haven't gone up at all in America since the 30's! They *should* have gone up, just like they have around the world due to the massive advancements in technology and efficiency and industrial capacity and demand for productivity, but constant looting and plundering by the socialist welfare state have kept them down.

Wow, good job missing the entire point of my post kid, and instead twisting into some nonsense queue to spout off some dumb shit of your own...

 

[JordanQ72]

This is what I'm talking about. The market has been massively inflated since the 1980s... something caused that and nothing aside from extra money (fiat money) being poured into the market can account for it. My fear is that a normalized market is going to be around the 500-1000 point level for the Dow... and means that a real market correction isn't going to be a few hundred points, but almost a 90% reduction in market value so about 10,000 points.

Have you never dealt with exponential graphs before? The beginning always *appears* flat, but if you zoomed in on that, it would look like the same exponential behavior, or looked at the previous period.

Here, for comparison, using the previous 35 year time frame. In 1935, the DJIA was around 100, it went to around 1000 in 1970, then around 2005 it was around 10500

1935: ~100
1970: ~1000
2005: ~10000

I'm not seeing anything abnormal here

 

[scooter]

The S&P 500 is actually trading at a 17 PE ratio. In the 70's I believe that the ratio was around 7-10.

You are correct, but in the mid-70s we were in the middle of a pretty harsh bear market. The ratios at that point were lower than average. In the 60s the P/E was up in the 20s.

The P/E ratio of the S&P 500 before the crash in 1929 was in the 30s. The P/E ratio before the .com crash was in the 40s. Significantly higher than the 16-17 P/E we have right now.

And, in fact, the long-term average P/E of the S&P 500 is around 17. Thus, I see today's market as not overbought or oversold in a general sense.

Also, great point from the poster above me. When you stretch that graph out that far, obviously you won't see the larger moves at the small end. And conveniently, the picture starts at 1970 right after a really big downturn.

 

[jclay2]

Have you never dealt with exponential graphs before? The beginning always *appears* flat, but if you zoomed in on that, it would look like the same exponential behavior, or looked at the previous period.

Here, for comparison, using the previous 35 year time frame. In 1935, the DJIA was around 100, it went to around 1000 in 1970, then around 2005 it was around 10500

1935: ~100
1970: ~1000
2005: ~10000

I'm not seeing anything abnormal here

Beat me to it Jordan.

 

[Ozwest]

I got my money out a few months ago, and will buy real estate when the market looks right.

Probably 12 months down the track.

So far so good...

 

[Xenophage]

Wow, good job missing the entire point of my post kid, and instead twisting into some nonsense queue to spout off some dumb shit of your own...

Wow, good job being a self-righteous, defensive prick. I wasn't attempting to argue with you or dispute what you said, but your original post was misleading. There's a difference between dollars and wealth, and that's what I was pointing out.

You need to spend less time sitting around pining for your youth and more time exercising your brain muscle before you contribute to the crap heap of pseudo-discussion that is the Internet.

 

[JordanQ72]

Wow, good job being a self-righteous, defensive prick.

Sorry, I just have a habit of calling out bullshit

I wasn't attempting to argue with you or dispute what you said, but your original post was misleading.

Logical contradiciton. If what you say has nothing to do with my post, then don't quote me. You missed the entire point of my post, and the post of the person I was replying to. I called you on it, and you're bitter about it, deal with it. Rest of your post is nonsense.

 

[Molly1]

Have you never dealt with exponential graphs before? The beginning always *appears* flat, but if you zoomed in on that, it would look like the same exponential behavior, or looked at the previous period.

Here, for comparison, using the previous 35 year time frame. In 1935, the DJIA was around 100, it went to around 1000 in 1970, then around 2005 it was around 10500

1935: ~100
1970: ~1000
2005: ~10000

I'm not seeing anything abnormal here

Maybe you could explain to me why financial markets should be 'exponential' --if indeed they are.

Nikola Tesla gave us wireless electricity at the 1898 World's Fair. Everywhere I look, I see wires. It's the same ol' same ol'. Nothing new in 100 years.

 

[jclay2]

Maybe you could explain to me why financial markets should be 'exponential' --if indeed they are.

The market is exponential because the fed increases the money supply exponentially.

 

[JordanQ72]

Maybe you could explain to me why financial markets should be 'exponential' --if indeed they are.

Red Herring

I'm arguing against the fallacious claim that something odd occurred in the 1980s.

 

[jclay2]

Originally Posted by Molly1
Maybe you could explain to me why financial markets should be 'exponential' --if indeed they are.

Ok, a better way to think about it is the fact that savings are exponential. Lets say you loan out money to a business for a 9% annual return. That means in real terms your investment should grow by (1.09(return)/1.04(inflation))^time in years.

 

[Xenophage]

Sorry, I just have a habit of calling out bullshit



Logical contradiciton. If what you say has nothing to do with my post, then don't quote me. You missed the entire point of my post, and the post of the person I was replying to. I called you on it, and you're bitter about it, deal with it. Rest of your post is nonsense.

....

You're an idiot dude, and quite obviously a troll. You need to learn the difference between money and wealth.

 

[captainelectron]

....

You're an idiot dude, and quite obviously a troll. You need to learn the difference between money and wealth.

If you read his original post carefully, I think that is what he was saying. I think you are both right about money, and both wrong about each other -- don't make me wrong on all three counts.

FWIW, enormous World economic growth and dramatic technological progress should have lifted American worker income significantly since 1970, but improvements in real income per hour of labor seemed to "stall-out" once government reached a certain critical mass.

 

[captainelectron]

Sorry that the chart is only to 1998. The picture is just as bad to 2008 though.