World Stock Market's Greatest Hits
- Taylor Larimore
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World Stock Market's Greatest Hits
Bogleheads:
With the stock market at an all time high, now is an excellent time to remind ourselves how low it can go (think bonds):
http://wpfau.blogspot.com/
Best wishes.
Taylor
With the stock market at an all time high, now is an excellent time to remind ourselves how low it can go (think bonds):
http://wpfau.blogspot.com/
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
- tyler_cracker
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Re: World Stock Market's Greatest Hits
permalink in case dr. pfau decides to blog something else and bumps this down his front page
http://wpfau.blogspot.com/2014/01/greatest-hits.html
http://wpfau.blogspot.com/2014/01/greatest-hits.html
Re: World Stock Market's Greatest Hits
I'd like to see a table comparing these data with the equivalent data for periods of 50 percent and higher gains for each country. For example, what are the shortest two or three periods where the various country stock indices advanced by 50 percent or more?
MichDad
MichDad
- Taylor Larimore
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Re: World Stock Market's Greatest Hits
Tyler:tyler_cracker wrote:permalink in case dr. pfau decides to blog something else and bumps this down his front page
http://wpfau.blogspot.com/2014/01/greatest-hits.html
Thank you. I didn't know how to do it. It's worth a separate link.
Those who don't know stock market history are doomed to repeat it.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: World Stock Market's Greatest Hits
Taylor Larimore wrote:Bogleheads:
With the stock market at an all time high, now is an excellent time to remind ourselves how low it can go (think bonds):
http://wpfau.blogspot.com/
Best wishes.
Taylor
Thanks, found this very interesting. Am I allowed to draw the opposite conclusion that I don't need bonds because a 50% decline really is the worst case for global equities and I'll make it all back if I hang in there?
- Taylor Larimore
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- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Bear market recoveries ?
Imperabo:Am I allowed to draw the opposite conclusion that I don't need bonds because a 50% decline really is the worst case for global equities and I'll make it all back if I hang in there?
Eight countries are "Still Waiting" to recover (not counting inflation) from their bear markets.
Japan, who once had stock market capitalization larger than the United States, has been waiting to recover for more than 20 years.
Best wishes.Never treat the improbable as impossible. -- Larry Swedroe
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: World Stock Market's Greatest Hits
Thanks, Taylor. This is why I keep a nice stash of Ibonds --- for emergency and Bond portion of portfolio.Taylor Larimore wrote:Bogleheads:
With the stock market at an all time high, now is an excellent time to remind ourselves how low it can go (think bonds):
http://wpfau.blogspot.com/
Best wishes.
Taylor
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Re: World Stock Market's Greatest Hits
Taylor - very timely post. There are WAY too many posts about 100% equities portfolios on the forum over the last couple of months.
Ben Graham was adamant that one should NEVER have more than 75% equities. There is much to be learned from that...
Ben Graham was adamant that one should NEVER have more than 75% equities. There is much to be learned from that...
Stay the course. If you can't resist greed, and fear is proven to be 2x as strong, you are doomed as an investor.
Re: World Stock Market's Greatest Hits
I agree that we should all be fully aware of just how bad things can get when invested in the equity markets. If there is anything worse than a boom to create a false sense of security, it's a boom after a crash. You think: Crashes aren't so bad since they're quickly followed by booms! This is bad.
One of the most important things the chart shows is that investors should have strong international diversification. Sure, if you live in Ireland, your market hasn't recovered yet. But if you're an Irish investor who holds Irish stock at global market weights, Irish stock is a tiny percentage of your portfolio. Those Irish investors have more than fully recovered from the last crash. In fact, if you look at the bottom of the chart, the GDP weighted world portfolio has only had a single 50% loss (a loss that was due to the Great Depression) from which it recovered in seven years.
Of course, one thing to worry about is that international markets have become increasingly correlated. Instead of reducing crashes, modern international commerce has globalized them. So we may be in for more global crashes in the future.
One of the most important things the chart shows is that investors should have strong international diversification. Sure, if you live in Ireland, your market hasn't recovered yet. But if you're an Irish investor who holds Irish stock at global market weights, Irish stock is a tiny percentage of your portfolio. Those Irish investors have more than fully recovered from the last crash. In fact, if you look at the bottom of the chart, the GDP weighted world portfolio has only had a single 50% loss (a loss that was due to the Great Depression) from which it recovered in seven years.
Of course, one thing to worry about is that international markets have become increasingly correlated. Instead of reducing crashes, modern international commerce has globalized them. So we may be in for more global crashes in the future.
Re: World Stock Market's Greatest Hits
I don't get it.
The chart said it took Austria 89 years, from 1915 to 2003 to return it is original levels...
So that means in Austria in 1915's stock market was valued to its 2003 stock market???
The chart said it took Austria 89 years, from 1915 to 2003 to return it is original levels...
So that means in Austria in 1915's stock market was valued to its 2003 stock market???
Re: World Stock Market's Greatest Hits
The article definitely says so. Note it also accounts for inflation.techcrium wrote:I don't get it.
The chart said it took Austria 89 years, from 1915 to 2003 to return it is original levels...
So that means in Austria in 1915's stock market was valued to its 2003 stock market???
Re: World Stock Market's Greatest Hits
Scary stuff. Makes me want to dial down the stocks in my portfolio. A lot of this investment stuff is luck (or bad luck) even though we try to convince ourselves it ain't on this forum.
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Re: World Stock Market's Greatest Hits
I thought we were supposed to buy and hold (or dollar cost average) forever and dismiss any news/etc.
Re: Bear market recoveries ?
That's why the "Global GDP-weighted portfolio" listed at the bottom of the table is a good idea!Taylor Larimore wrote:Imperabo:Am I allowed to draw the opposite conclusion that I don't need bonds because a 50% decline really is the worst case for global equities and I'll make it all back if I hang in there?
Eight countries are "Still Waiting" to recover (not counting inflation) from their bear markets.
Japan, who once had stock market capitalization larger than the United States, has been waiting to recover for more than 20 years.Best wishes.Never treat the improbable as impossible. -- Larry Swedroe
Taylor
Most of my posts assume no behavioral errors.
Re: Bear market recoveries ?
How would one even construct a Global GDP-weighted portfolio?baw703916 wrote:That's why the "Global GDP-weighted portfolio" listed at the bottom of the table is a good idea!Taylor Larimore wrote:Imperabo:Am I allowed to draw the opposite conclusion that I don't need bonds because a 50% decline really is the worst case for global equities and I'll make it all back if I hang in there?
Eight countries are "Still Waiting" to recover (not counting inflation) from their bear markets.
Japan, who once had stock market capitalization larger than the United States, has been waiting to recover for more than 20 years.Best wishes.Never treat the improbable as impossible. -- Larry Swedroe
Taylor
Re: World Stock Market's Greatest Hits
Uh, you might want to look at a map of Austria (formally the Austro-Hungarian Empire) before WW1. It included the current countries of Austria, the Czech Republic, Slovakia, Slovenia, Croatia, Bosnia, and Hungary, as well as parts of Poland, Serbia, Italy, Romania, and Ukraine. In other words it had about 10 times the territory and 10 times the population.slbnoob wrote:The article definitely says so. Note it also accounts for inflation.techcrium wrote:I don't get it.
The chart said it took Austria 89 years, from 1915 to 2003 to return it is original levels...
So that means in Austria in 1915's stock market was valued to its 2003 stock market???
Most of my posts assume no behavioral errors.
Re: World Stock Market's Greatest Hits
Indeed. Perhaps we should look at the bond market "greatest hits" also. For Austria, the bond situation is even worse -- approximately a 99% loss compared to where it was a century ago! I suspect it will take quite a long time for that to recover ...slbnoob wrote:The article definitely says so. Note it also accounts for inflation.techcrium wrote:I don't get it.
The chart said it took Austria 89 years, from 1915 to 2003 to return it is original levels...
So that means in Austria in 1915's stock market was valued to its 2003 stock market???
- Taylor Larimore
- Posts: 32839
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
"99% loss" ?
Patrick:Perhaps we should look at the bond market "greatest hits" also. For Austria, the bond situation is even worse -- approximately a 99% loss compared to where it was a century ago!
What is your source for the "approximately a 99% loss" figure?
Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: World Stock Market's Greatest Hits
However, the chart gives market returns, not changes in market cap. If an Austrian company was relocated to Italy after WWI, that wouldn't be reflected as a market decline; it is assumed that you would sell the now-Italian company and buy an equal amount in remaining Austrian stocks. (The same principle occurs even without changing boundaries; if a US company is acquired by a Japanese company, this does not cause a decline in the US stock market or US stock indexes.)baw703916 wrote:Uh, you might want to look at a map of Austria (formally the Austro-Hungarian Empire) before WW1. It included the current countries of Austria, the Czech Republic, Slovakia, Slovenia, Croatia, Bosnia, and Hungary, as well as parts of Poland, Serbia, Italy, Romania, and Ukraine. In other words it had about 10 times the territory and 10 times the population.slbnoob wrote:The article definitely says so. Note it also accounts for inflation.techcrium wrote:I don't get it.
The chart said it took Austria 89 years, from 1915 to 2003 to return it is original levels...
So that means in Austria in 1915's stock market was valued to its 2003 stock market???
Re: "99% loss" ?
Taylor,Taylor Larimore wrote:Patrick:Perhaps we should look at the bond market "greatest hits" also. For Austria, the bond situation is even worse -- approximately a 99% loss compared to where it was a century ago!
What is your source for the "approximately a 99% loss" figure?
Thank you and best wishes.
Taylor
According to the Wikipedia entry on hyperinflation, there was hyperinflation in Austria after WW1, although the hyperinflation in Germany is much better known:
Assuming you started out with Austrian bonds in 1914 paying some reasonable interest rate (I.e. not 375% per annum), your real purchasing power lost 3-4 orders of magnitude by 1923. Since then you might have made back 2 orders of magnitude, which would still leave you with a 99% loss.In 1922, inflation in Austria reached 1426%, and from 1914 to January 1923, the consumer price index rose by a factor of 11836,
Best wishes,
Brad
Most of my posts assume no behavioral errors.
Re: World Stock Market's Greatest Hits
Except that what may have happened is that the assets formerly owned by the Austrian companies were simply expropriated by the governments of the newly-independent countriesgrabiner wrote:However, the chart gives market returns, not changes in market cap. If an Austrian company was relocated to Italy after WWI, that wouldn't be reflected as a market decline; it is assumed that you would sell the now-Italian company and buy an equal amount in remaining Austrian stocks. (The same principle occurs even without changing boundaries; if a US company is acquired by a Japanese company, this does not cause a decline in the US stock market or US stock indexes.)baw703916 wrote:Uh, you might want to look at a map of Austria (formally the Austro-Hungarian Empire) before WW1. It included the current countries of Austria, the Czech Republic, Slovakia, Slovenia, Croatia, Bosnia, and Hungary, as well as parts of Poland, Serbia, Italy, Romania, and Ukraine. In other words it had about 10 times the territory and 10 times the population.slbnoob wrote:The article definitely says so. Note it also accounts for inflation.techcrium wrote:I don't get it.
The chart said it took Austria 89 years, from 1915 to 2003 to return it is original levels...
So that means in Austria in 1915's stock market was valued to its 2003 stock market???
Most of my posts assume no behavioral errors.
Re: "99% loss" ?
It's from the Credit Suisse Global Investment Returns Yearbook 2013, https://publications.credit-suisse.com/ ... 7A27900DACTaylor Larimore wrote:Patrick:Perhaps we should look at the bond market "greatest hits" also. For Austria, the bond situation is even worse -- approximately a 99% loss compared to where it was a century ago!
What is your source for the "approximately a 99% loss" figure?
Thank you and best wishes.
Taylor
Re: World Stock Market's Greatest Hits
Here's the graph of the performance for Austrian bonds and equities for those too lazy to dig through the entire Credit Suisse report.
Re: World Stock Market's Greatest Hits
It is interesting that 3 in every 5 of those examples are due to/during/right after war.
If history stands true, the wealth of past empires reached accelerated growth by plundering other nations.
If history stands true, the wealth of past empires reached accelerated growth by plundering other nations.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
- abuss368
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Re: World Stock Market's Greatest Hits
Thank you Taylor!
John C. Bogle: “Simplicity is the master key to financial success."
Re: World Stock Market's Greatest Hits
The Irish were very diversified internationally - in second homes in Hungary, Bulgaria and Spain. It got ugly.berntson wrote:
One of the most important things the chart shows is that investors should have strong international diversification. Sure, if you live in Ireland, your market hasn't recovered yet. But if you're an Irish investor who holds Irish stock at global market weights, Irish stock is a tiny percentage of your portfolio. Those Irish investors have more than fully recovered from the last crash.
Re: World Stock Market's Greatest Hits
Thanks Taylor,
Combine the chart with this:
Combine the chart with this:
and this:A lot of this investment stuff is luck--am
and this:Never treat the improbable as impossible. -- Larry Swedroe
and you get...Experienced investors know that future expectations must be balanced with the consequences of being wrong--Taylor Larimore
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.