will the SP500 double in 7 years?

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will the SP500 double in 7 years?

yes, it will have doubled nominally in 7 years
78
35%
no, it will not have doubled in 7 years
128
57%
yes, it will have doubled nominally and in real terms as well in 7 years
17
8%
 
Total votes: 223

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bob90245
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Re: will the SP500 double in 7 years?

Post by bob90245 » Fri Dec 23, 2011 12:29 pm

grayfox wrote:
bob90245 wrote:
grayfox wrote:Let's look at earnings first. After Tax Earnings equals Sales * Net Profit Margin After Taxes. Aggregate Sales is GDP. From 1950 to 2010, real GDP grew at 3.27% p.a. But since 2000, U.S. GDP growth fell behind the exponential growth curve. (See chart) I would not count on 3% GDP growth. Maybe 1.5%
If you ignore that companies in the S&P 500 derive half or more revenues from outside the US. This also ignores the possibility that one or more Apples grow from small- or mid-cap to large-cap.
Suppose that instead of using U.S. GDP growth, we use World GDP growth rate.

World real GDP growth rate has averaged about 3% over the past several decades and also since 2000. (While the developed world like U.S., Japan and Europe has seen slower growth in the 21st century, the developing world has seen higher growth making up for it.)

3% growth is basically the good scenario above, which still doesn't get the S&P500 doubling without 1. expansion of Profit Margins, 2. expansion of P/E, or 3. high inflation.
OK, but these numbers don't mesh with what actually happened in your example.

You use "From 1950 to 2010, real GDP grew at 3.27% p.a." as a basis from which the rest of your analysis follows. But why is that important? How does it explain that from 1950 to 2010, the S&P 500 grew at real rate of 7% p.a.? [1] Are you saying that there was an extra 3.73% return from expansion of profit margins and/or expansion of P/E?

[1] http://politicalcalculations.blogspot.c ... rtips.html
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.

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Re: will the SP500 double in 7 years?

Post by newbie001 » Fri Dec 23, 2011 12:38 pm

I'm mildly surprised by how many cast a vote for "yes," unless those BHs are guessing that based on unexpectedly-high inflation. If we have 10% nominal returns over the next 7 years and there is anything close to normal inflation over that time period, I'll turn cartwheels.

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grayfox
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Re: will the SP500 double in 7 years?

Post by grayfox » Fri Dec 23, 2011 12:41 pm

bob90245 wrote:
grayfox wrote:
bob90245 wrote:
grayfox wrote:Let's look at earnings first. After Tax Earnings equals Sales * Net Profit Margin After Taxes. Aggregate Sales is GDP. From 1950 to 2010, real GDP grew at 3.27% p.a. But since 2000, U.S. GDP growth fell behind the exponential growth curve. (See chart) I would not count on 3% GDP growth. Maybe 1.5%
If you ignore that companies in the S&P 500 derive half or more revenues from outside the US. This also ignores the possibility that one or more Apples grow from small- or mid-cap to large-cap.
Suppose that instead of using U.S. GDP growth, we use World GDP growth rate.

World real GDP growth rate has averaged about 3% over the past several decades and also since 2000. (While the developed world like U.S., Japan and Europe has seen slower growth in the 21st century, the developing world has seen higher growth making up for it.)

3% growth is basically the good scenario above, which still doesn't get the S&P500 doubling without 1. expansion of Profit Margins, 2. expansion of P/E, or 3. high inflation.
OK, but these numbers don't mesh with what actually happened in your example.

You use "From 1950 to 2010, real GDP grew at 3.27% p.a." as a basis from which the rest of your analysis follows. But why is that important? How does it explain that from 1950 to 2010, the S&P 500 grew at real rate of 7% p.a.? [1] Are you saying that there was an extra 3.73% return from expansion of profit margins and/or expansion of P/E?

[1] http://politicalcalculations.blogspot.c ... rtips.html
I put in January 1950 to December 2010 and it reported
Annualized Rates of Change Between Selected Dates
(Unadjusted for Inflation)
Index Rate of Return without Dividend Reinvestment (%) 7.31

Annualized Rates of Change Between Selected Dates
(Adjusted for Inflation)
Inflation Rate (%) 3.73
Index Rate of Return without Dividend Reinvestment (%) 3.45
So the 3.73% was inflation, and after inflation the S&P500 index grew at 3.45% (not 7% that you stated), about the same rate as the Real GDP growth rate of 3.27%. So I would say that changes in Net Profit Margin and P/E Ration are zero over long periods, which one would expect if they mean revert.

Note: This discussion is about what level the S&P 500 will reach in 7 years. It's not about total return or growth of $100, so the numbers without dividend reinvestment are relevant.

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bob90245
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Re: will the SP500 double in 7 years?

Post by bob90245 » Fri Dec 23, 2011 1:26 pm

All right. If there is this confusion whether this is about price or reinvested dividends, then it's not worth discussing.

What are you doing with your dividends, anyway? Tossing them out the window? :roll: Give them to me if you don't want them...
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.

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Re: will the SP500 double in 7 years?

Post by Valuethinker » Sun Dec 25, 2011 10:04 am

bob90245 wrote:All right. If there is this confusion whether this is about price or reinvested dividends, then it's not worth discussing.

What are you doing with your dividends, anyway? Tossing them out the window? :roll: Give them to me if you don't want them...
Generally, paying tax.

Because there was not a lot of tax shelter available to US investors in the period up to the 1980s for dividend income, and marginal tax rates were quite high.

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Re: will the SP500 double in 7 years?

Post by BlueEars » Sun Dec 25, 2011 11:49 am

Being optimistic tends to make me more money.

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Re: will the SP500 double in 7 years?

Post by kontango » Sun Dec 25, 2011 12:26 pm

I think the market will be up significantly in the next 7 years, but I don't know if it will double. Whether it doubles or not, I am optimistic. There's no reason to believe that the bad global economic news hasn't already been reflected in the market. To the extent this has depressed prices, it has raised expected returns. If so, this bodes well for stocks.

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Re: will the SP500 double in 7 years?

Post by Snowjob » Sun May 20, 2018 10:00 pm

Snowjob wrote:
Thu Dec 22, 2011 6:54 am
I guess I'm a perma bear, but you really need a lot of global wage inflation combined with comodity deflation or at least stagnation in order for the market to move that much in 7 years. I think speculation as measured by high PE's on a broad basis wont be back for a long time. We know what the current demographics story is, the sovergn and personal debt story, the over capcacity of housing and factories. I dont see a double in the S&P over that time horizon. I do see it for individual names (fraud / act of god / act of congress / nuke hitting the corporate hq and factories aside) , just not for the market in agregate. I can always be wrong and we could go higher, but my individual names will participate on the upside. If im right I think I will have sustained significant outperformance by holding individual stocks. Only time will tell if I will be compensated or descimated by my risk taking.
Just necro'ing this post to remind myself and others that you should never get to bullish or bearish. Set your allocation and keep it. If I bet on my own prognostications and went much more conservative I'd be kicking myself. I know a some of the board members were investing in the 90's and had pulled a bunch of money off the table in the early/mid 90's because they thought for sure the S&P had topped out -- whoops!

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Re: will the SP500 double in 7 years?

Post by VictoriaF » Sun May 20, 2018 10:14 pm

Snowjob wrote:
Sun May 20, 2018 10:00 pm
Snowjob wrote:
Thu Dec 22, 2011 6:54 am
I guess I'm a perma bear, but you really need a lot of global wage inflation combined with comodity deflation or at least stagnation in order for the market to move that much in 7 years. I think speculation as measured by high PE's on a broad basis wont be back for a long time. We know what the current demographics story is, the sovergn and personal debt story, the over capcacity of housing and factories. I dont see a double in the S&P over that time horizon. I do see it for individual names (fraud / act of god / act of congress / nuke hitting the corporate hq and factories aside) , just not for the market in agregate. I can always be wrong and we could go higher, but my individual names will participate on the upside. If im right I think I will have sustained significant outperformance by holding individual stocks. Only time will tell if I will be compensated or descimated by my risk taking.
Just necro'ing this post to remind myself and others that you should never get to bullish or bearish. Set your allocation and keep it. If I bet on my own prognostications and went much more conservative I'd be kicking myself. I know a some of the board members were investing in the 90's and had pulled a bunch of money off the table in the early/mid 90's because they thought for sure the S&P had topped out -- whoops!
Your cited message was written on 22 Dec 2011. Wait until its 7th anniversary.

Victoria
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Re: will the SP500 double in 7 years?

Post by willthrill81 » Sun May 20, 2018 10:25 pm

It would take a drop of nearly 20% from current levels for stocks to not have doubled since the time of the OP. That is, of course, possible, but historically not likely to occur within the next seven months.

It goes to show you that a majority of Bogleheads (at least those who participated in the survey) are no better predictors of the market than anyone else.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: will the SP500 double in 7 years?

Post by Snowjob » Sun May 20, 2018 10:41 pm

VictoriaF wrote:
Sun May 20, 2018 10:14 pm
Snowjob wrote:
Sun May 20, 2018 10:00 pm
Snowjob wrote:
Thu Dec 22, 2011 6:54 am

Your cited message was written on 22 Dec 2011. Wait until its 7th anniversary.

Victoria
Ha, I was just browsing through my old posts out of curiosity to see how my thoughts may have changed over the years with respect to various things, and in some cases to see if old threads had continued on that interested me at the time. I wasn't necessarily marking an end to the forecast period more just making an observation =)

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Re: will the SP500 double in 7 years?

Post by Snowjob » Sun May 20, 2018 10:45 pm

willthrill81 wrote:
Sun May 20, 2018 10:25 pm
It would take a drop of nearly 20% from current levels for stocks to not have doubled since the time of the OP. That is, of course, possible, but historically not likely to occur within the next seven months.

It goes to show you that a majority of Bogleheads (at least those who participated in the survey) are no better predictors of the market than anyone else.
Of course all us pessimists back then would have been espousing the benefits of balanced (or even conservative?) portfolios given the bleak outlook for future returns. We were all wrong -- I wonder if all the bullish members parroting the 100% equity portfolios today will 7 years hence be looking back with similar sort embarrassment?

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Re: will the SP500 double in 7 years?

Post by VictoriaF » Sun May 20, 2018 10:45 pm

willthrill81 wrote:
Sun May 20, 2018 10:25 pm
It would take a drop of nearly 20% from current levels for stocks to not have doubled since the time of the OP. That is, of course, possible, but historically not likely to occur within the next seven months.

It goes to show you that a majority of Bogleheads (at least those who participated in the survey) are no better predictors of the market than anyone else.
Note that your doubt that the market may drop 20% from the current level by 22 December is also a prediction. "Historically" is not the controlling factor. More important, and currently unknown, market influencers between now and then are geopolitical events, financial events, crowd psychology, and the quirks of randomness.

The higher the market rises, the more room it has to fall.

Victoria
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Re: will the SP500 double in 7 years?

Post by software » Sun May 20, 2018 11:07 pm

Snowjob wrote:
Sun May 20, 2018 10:45 pm
willthrill81 wrote:
Sun May 20, 2018 10:25 pm
It would take a drop of nearly 20% from current levels for stocks to not have doubled since the time of the OP. That is, of course, possible, but historically not likely to occur within the next seven months.

It goes to show you that a majority of Bogleheads (at least those who participated in the survey) are no better predictors of the market than anyone else.
Of course all us pessimists back then would have been espousing the benefits of balanced (or even conservative?) portfolios given the bleak outlook for future returns. We were all wrong -- I wonder if all the bullish members parroting the 100% equity portfolios today will 7 years hence be looking back with similar sort embarrassment?
Anyone that would be embarrassed with a 100% equity portfolio within 7 years doesn’t understand what a long term investment is.

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Re: will the SP500 double in 7 years?

Post by david1082b » Mon May 21, 2018 3:10 am

The OP stated clearly that 10% nominal return is the historical average for the S&P 500, so you would expect a doubling every seven years nominally, but the important thing to note is that the 10% historical return includes dividend payouts. The price return was not all of the 10%, but merely a component of it. However, the OP asked about whether the index price will double in seven years, which means they perhaps thought that the index price is the total return. If you remove dividends from historical returns, you get a much lower nominal yearly return than 10%.

A lot of the arguments in the thread seemed to be based on the issue of whether the price would double in seven years, which is not what has happened on average historically. Dividends may be much lower today as a % of payouts of earnings, but they still contribute something and will have contributed 14% or more to total return since late 2011 I guess.

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CyclingDuo
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Re: will the SP500 double in 7 years?

Post by CyclingDuo » Mon May 21, 2018 5:24 am

Snowjob wrote:
Sun May 20, 2018 10:45 pm
willthrill81 wrote:
Sun May 20, 2018 10:25 pm
It would take a drop of nearly 20% from current levels for stocks to not have doubled since the time of the OP. That is, of course, possible, but historically not likely to occur within the next seven months.

It goes to show you that a majority of Bogleheads (at least those who participated in the survey) are no better predictors of the market than anyone else.
Of course all us pessimists back then would have been espousing the benefits of balanced (or even conservative?) portfolios given the bleak outlook for future returns. We were all wrong -- I wonder if all the bullish members parroting the 100% equity portfolios today will 7 years hence be looking back with similar sort embarrassment?
This author in a well written article on Sunday, sums up in eloquent words...

It's important so let me repeat this again, the stock market doesn't care about opinions, yet many market participants base their strategy on them. Successful investors will tell you that is a very dangerous thing to do when managing your money. A struggling investor gets this "feeling" that a certain event or issue has to resolve itself in a certain way. Let's be honest, that feeling is usually based on emotion, facts aren't involved, they come later.

That is what has transpired recently and it also is a repeat of what we have witnessed for a decent part of this bull market. So one can manage money with their opinions, OR be aware, then react to what is really happening. The Russell 2000 established yet another new all time high this past week; there was no celebrations, no fanfare. The chatter is still about interest rates, inflation, trade talks, the Russian connection, and now North Korea cancelling the scheduled meeting with the administration. So the choice is form an opinion on those headlines or pay attention to what the rally in the small cap index is telling us.

For anyone using the typical expansion time frames, this was not in their forecasts. Recession calls were around in 2015 because the feeling was the expansion was too old back then. The problem with that opinion was that this isn't your "typical" expansion. The economy was coming off a severe recession and advancing much slower than prior recoveries. It took on a life of its own. Investors should now be on the lookout for excesses. That is what typically takes down expansions and bull markets. None are in sight.


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Re: will the SP500 double in 7 years?

Post by aqan » Mon May 21, 2018 6:56 am

willthrill81 wrote:
Sun May 20, 2018 10:25 pm
It would take a drop of nearly 20% from current levels for stocks to not have doubled since the time of the OP. That is, of course, possible, but historically not likely to occur within the next seven months.

It goes to show you that a majority of Bogleheads (at least those who participated in the survey) are no better predictors of the market than anyone else.
you'll get flamed for saying that here.. anything can happen in the next seven months - trump indictment, escalation with north korea, iran etc. or the market goes up by another 20% for no reason

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Re: will the SP500 double in 7 years?

Post by nisiprius » Mon May 21, 2018 7:24 am

I'm with Victoria. Yes, it's worth revisiting one's old predictions, but by jumping the gun, Snowjob has simply launched a fresh round of arguments over our personal predictions about the next seven months. Of course, willthrill's point is how bad predictions are, but he is predicting that Snowjob's post will turn out to be an example of a bad prediction.

A 20% decline in 7 months not only isn't impossible, it hasn't even been a "black swan" or "ten sigma" event. It doesn't require fantasizing any monumental history-making event. It wasn't just 1929 or 1987. It's happened in about 3% of all seven-month periods since 1871, and thus has had about same chance as rolling 2 on a pair of dice, which has happened to me often enough playing Monopoly.
willthrill81 wrote:
VictoriaF wrote:
Snowjob wrote:...Just necro'ing this post to remind myself and others that you should never get too bullish or bearish. Set your allocation and keep it.
Your cited message was written on 22 Dec 2011. Wait until its 7th anniversary. Victoria
It would take a drop of nearly 20% from current levels for stocks to not have doubled since the time of the OP. That is, of course, possible, but historically not likely to occur within the next seven months.
I hated it when Buffett and Seides both agreed that Buffett had won their bet almost a year before it was over. I think there is something about big investors that makes them want to insist that followers treat a confident prediction by an alpha male as being the same thing as a fact.

For the record, in on Shiller's online "Irrational Exuberance" data set there have been:
56 declines of 20% or more in 1763 overlapping periods of 7 months

-23.74% (from 3.58 to 2.73), 12/1876-7/1877
-25.49% (from 5.61 to 4.18), 1/1893-8/1893
-25.95% (from 5.51 to 4.08), 2/1893-9/1893
-21.17% (from 8.41 to 6.63), 2/1903-9/1903
-20.33% (from 9.84 to 7.84), 12/1906-7/1907
-20.86% (from 8.39 to 6.64), 4/1907-11/1907
-22.84% (from 8.10 to 6.25), 5/1907-12/1907
-20.54% (from 8.86 to 7.04), 5/1917-12/1917
-24.78% (from 9.04 to 6.80), 6/1917-1/1918
-23.77% (from 28.48 to 21.71), 7/1929-2/1930
-23.36% (from 30.10 to 23.07), 8/1929-3/1930
-23.51% (from 31.30 to 23.94), 9/1929-4/1930
-29.62% (from 25.46 to 17.92), 4/1930-11/1930
-30.58% (from 23.94 to 16.62), 5/1930-12/1930
-27.93% (from 21.52 to 15.51), 6/1930-1/1931
-24.12% (from 21.06 to 15.98), 7/1930-2/1931
-32.52% (from 17.53 to 11.83), 3/1931-10/1931
-35.37% (from 15.86 to 10.25), 4/1931-11/1931
-27.49% (from 14.33 to 10.39), 5/1931-12/1931
-39.15% (from 13.87 to 8.44), 6/1931-1/1932
-42.08% (from 14.33 to 8.30), 7/1931-2/1932
-40.79% (from 13.90 to 8.23), 8/1931-3/1932
-30.18% (from 11.83 to 8.26), 9/1931-4/1932
-38.73% (from 10.25 to 6.28), 10/1931-5/1932
-46.97% (from 10.39 to 5.51), 11/1931-6/1932
-43.48% (from 8.44 to 4.77), 12/1931-7/1932
-39.64% (from 8.30 to 5.01), 1/1932-8/1932
-24.58% (from 8.26 to 6.23), 9/1932-4/1933
-20.56% (from 18.09 to 14.37), 3/1937-10/1937
-27.81% (from 17.01 to 12.28), 4/1937-11/1937
-31.08% (from 16.25 to 11.20), 5/1937-12/1937
-29.54% (from 15.64 to 11.02), 6/1937-1/1938
-31.74% (from 16.57 to 11.31), 7/1937-2/1938
-34.05% (from 16.74 to 11.04), 8/1937-3/1938
-28.25% (from 14.37 to 10.31), 9/1937-4/1938
-21.83% (from 12.37 to 9.67), 12/1939-7/1940
-20.12% (from 10.24 to 8.18), 9/1941-4/1942
-20.24% (from 9.83 to 7.84), 10/1941-5/1942
-20.95% (from 18.66 to 14.75), 4/1946-11/1946
-21.44% (from 18.70 to 14.69), 5/1946-12/1946
-22.46% (from 71.74 to 55.63), 12/1961-7/1962
-20.94% (from 96.21 to 76.06), 11/1969-6/1970
-30.09% (from 97.44 to 68.12), 3/1974-10/1974
-24.90% (from 92.46 to 69.44), 4/1974-11/1974
-25.30% (from 89.79 to 67.07), 6/1974-1/1975
-20.04% (from 301.40 to 241.00), 6/1987-1/1988
-21.65% (from 329.40 to 258.10), 8/1987-3/1988
-20.75% (from 1140.21 to 903.59), 1/2002-8/2002
-24.79% (from 1153.79 to 867.81), 3/2002-10/2002
-23.14% (from 1111.93 to 854.63), 4/2002-11/2002
-29.31% (from 1370.47 to 968.80), 4/2008-11/2008
-37.07% (from 1403.22 to 883.04), 5/2008-12/2008
-34.57% (from 1341.25 to 877.56), 6/2008-1/2009
-31.16% (from 1257.33 to 865.58), 7/2008-2/2009
-37.16% (from 1281.47 to 805.23), 8/2008-3/2009
-37.78% (from 1216.95 to 757.13), 9/2008-4/2009
Last edited by nisiprius on Mon May 21, 2018 7:40 am, edited 4 times in total.
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balbrec2
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Re: will the SP500 double in 7 years?

Post by balbrec2 » Mon May 21, 2018 7:36 am

According to the Warren Buffett model, it will not !

https://www.gurufocus.com/stock-market-valuations.php

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Re: will the SP500 double in 7 years?

Post by Snowjob » Mon May 21, 2018 9:43 am

nisiprius wrote:
Mon May 21, 2018 7:24 am
I'm with Victoria. Yes, it's worth revisiting one's old predictions, but by jumping the gun, Snowjob has simply launched a fresh round of arguments over our personal predictions about the next seven months. Of course, willthrill's point is how bad predictions are, but he is predicting that Snowjob's post will turn out to be an example of a bad prediction....
While I understand that a new argument may have started that was not my intention at all -- this is merely an untended consequence of posting.

If some crazy event that's not on anyone's radar suddenly plunges the market down 30% in the next 7 months, sure, S&P will not have doubled. However, that end point is not important. What is important is how we got there. My prediction was based on perceived structural headwinds, overcapacity, demographics, lack of demand and so on. I had predicted we wouldn't get there because I believed the economy would struggle for years. That was my prediction and that was clearly wrong. To claim victory if there happens be some last minute North Korea panic or other oddity that depresses market valuation at the very end would be silly and miss the point. I'd be fooling myself. For me this reinforces that my ability to predict the future is still suspect at best, and surely enough time has passed to make that conclusion given what has transpired since 2011. That is the point of my post, and that is what people should take away. I find it hard to not see the spirit of my post but I do have trouble articulating things often so I understand haha =)

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Re: will the SP500 double in 7 years?

Post by willthrill81 » Mon May 21, 2018 10:39 am

nisiprius wrote:
Mon May 21, 2018 7:24 am
I'm with Victoria. Yes, it's worth revisiting one's old predictions, but by jumping the gun, Snowjob has simply launched a fresh round of arguments over our personal predictions about the next seven months. Of course, willthrill's point is how bad predictions are, but he is predicting that Snowjob's post will turn out to be an example of a bad prediction.

A 20% decline in 7 months not only isn't impossible, it hasn't even been a "black swan" or "ten sigma" event. It doesn't require fantasizing any monumental history-making event. It wasn't just 1929 or 1987. It's happened in about 3% of all seven-month periods since 1871, and thus has had about same chance as rolling 2 on a pair of dice, which has happened to me often enough playing Monopoly.
Wow, people are jumping all over for this. But as you clearly state, a 20% decline has only occurred in about 3% of the seven month periods for which we have data. That means that 97% of the time it didn't. I said that it wasn't historically likely, and you've demonstrated my point for me very well.
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Re: will the SP500 double in 7 years?

Post by wrongfunds » Mon May 21, 2018 11:11 am

Did we all forget "the mantra" that the market could drop 20% any time it feels like? I mean the market could double in 7 years and still drop 20% on 7 year + 1 day/week/month

Please don't come up the data to prove me wrong by saying it has never done that in last 100 years. You know the counter argument to that, don't you?

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Re: will the SP500 double in 7 years?

Post by nisiprius » Mon May 21, 2018 12:36 pm

willthrill81 wrote:
Mon May 21, 2018 10:39 am
nisiprius wrote:
Mon May 21, 2018 7:24 am
I'm with Victoria. Yes, it's worth revisiting one's old predictions, but by jumping the gun, Snowjob has simply launched a fresh round of arguments over our personal predictions about the next seven months. Of course, willthrill's point is how bad predictions are, but he is predicting that Snowjob's post will turn out to be an example of a bad prediction.

A 20% decline in 7 months not only isn't impossible, it hasn't even been a "black swan" or "ten sigma" event. It doesn't require fantasizing any monumental history-making event. It wasn't just 1929 or 1987. It's happened in about 3% of all seven-month periods since 1871, and thus has had about same chance as rolling 2 on a pair of dice, which has happened to me often enough playing Monopoly.
Wow, people are jumping all over for this. But as you clearly state, a 20% decline has only occurred in about 3% of the seven month periods for which we have data. That means that 97% of the time it didn't. I said that it wasn't historically likely, and you've demonstrated my point for me very well.
My intent was to present accurate data and quantify "not historically likely." It's been about a 2.5σ event. Based on past data, the odds are 30:1 that Snowjob will in fact be say, on the ten year anniversary, that the S&P 500 did double.
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Re: will the SP500 double in 7 years?

Post by WhiteMaxima » Mon May 21, 2018 12:55 pm

Everything is possible. But the chance is small. fed is raising interest rate, wage inflation is coming back, oil price is going up, though we have the tax cut. Can company revenue and profit double in 7 years? I doubt.

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Re: will the SP500 double in 7 years?

Post by Runalong » Mon May 21, 2018 1:12 pm

Two quick thoughts:

1) Be a contrarian: your best bet is to tabulate the results of this survey and do the opposite of the consensus.

2) I read an article somewhere online this morning that asked something like, "What are the odds that at some point in the next 7 years the market will be lower than it is now?" I would have to think that the odds are very good, which would be an argument for increasing cash and decreasing equity exposure... assuming you are willing to buy back in at a lower level (which will happen at a time when doom and gloom are in the air)... and you don't mind that it might well continue to go down before it bounces back to new highs (which, short of the end of the world as we know it, is as sure a bet as there is).

I'm gradually increasing my cash allocation (1- I'm transitioning from a period of life when I needed growth to a period where preservation of capital is more important, 2- seems logical after many years of a bull market) but I do everything gradually. And you can earn 1.9% money market while inflation is 2.5% so the inflation risk is minimal. Plus there could be some good deals in the bond market a few years from now.

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Re: will the SP500 double in 7 years?

Post by knpstr » Mon May 21, 2018 1:26 pm

WhiteMaxima wrote:
Mon May 21, 2018 12:55 pm
Everything is possible. But the chance is small. fed is raising interest rate, wage inflation is coming back, oil price is going up, though we have the tax cut. Can company revenue and profit double in 7 years? I doubt.
The original post was from about 6.5 years ago. We are currently over double from when the question was asked. :beer
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Re: will the SP500 double in 7 years?

Post by wrongfunds » Mon May 21, 2018 2:28 pm

Runalong wrote:
Mon May 21, 2018 1:12 pm
"What are the odds that at some point in the next 7 years the market will be lower than it is now?"
Is this a trick question? I will take that bet starting at *any* day! It does not matter if the market is "high" or "low".

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Re: will the SP500 double in 7 years?

Post by Investment101 » Mon May 21, 2018 4:43 pm

WhiteMaxima wrote:
Mon May 21, 2018 12:55 pm
Everything is possible. But the chance is small. fed is raising interest rate, wage inflation is coming back, oil price is going up, though we have the tax cut. Can company revenue and profit double in 7 years? I doubt.
What's making oil go up, thinking about buy more oil.

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Re: will the SP500 double in 7 years?

Post by WhiteMaxima » Mon May 21, 2018 5:00 pm

Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.

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Re: will the SP500 double in 7 years?

Post by Investment101 » Mon May 21, 2018 5:05 pm

WhiteMaxima wrote:
Mon May 21, 2018 5:00 pm
Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.
I see Thanks!

Probably will reach high around summer or a little after summer? Will sell then as I don't follow oil that much.

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Re: will the SP500 double in 7 years?

Post by WhiteMaxima » Mon May 21, 2018 5:11 pm

Investment101 wrote:
Mon May 21, 2018 5:05 pm
WhiteMaxima wrote:
Mon May 21, 2018 5:00 pm
Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.
I see Thanks!

Probably will reach high around summer or a little after summer? Will sell then as I don't follow oil that much.
oil is also a hedging against inflation. It's the blood of inductry world. Saudi will IPO its oil ARAMCO so remain higher oil price is good for Saudi. at $70 a barrel, many American Shale oil company can make decent money. I think their cost is 45-50 a barrel.

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Re: will the SP500 double in 7 years?

Post by david1082b » Mon May 21, 2018 5:36 pm

M*'s total return chart has $10k in VFINX in 21st Dec 2011 turning into $24,794 now. I think this is nearly 147% return? http://quotes.morningstar.com/chart/fun ... 2%3A955%7D

The price for VFINX has gone up 118% in the same time according to M*. http://quotes.morningstar.com/chart/fun ... 2%3A955%7D

The total return will be the relevant one for whether there will be a doubling at the end of the seven years. Clearly the OP mixed up total return and index price return, asking about the 500 index price while citing 10% as the historical annualized return, not realising that the 10% was not price only but included dividends. I wish total return indexes were used by the MSM, it would solve so many of these misunderstandings.

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Re: will the SP500 double in 7 years?

Post by TomCat96 » Mon May 21, 2018 6:03 pm

I would argue that once you have hit your goal prior to the "strike date", the remaining time is irrelevant.
The point is that one has the option of taking the entirety of one's investment out of the market and moving it to riskless treasuries for the remainder of the time period.

Remaining in the market and exposing yourself to a 20% drop is simply taking advantage of the ambiguity of the initial goalposts.

The only reason why one would remain in the market is because one desires to capture additional potential gain, at the risk of potential losses on the entirety of the initial investment.

In my experience, it is precisely this kind of ambiguity which causes so many to fail in active trading. You use your analytical skills and make a prediction within a given time period. If you strike before that time, you exit. Failure to comprehend additional possible gains were simply part of the limitations of one's analytical foresight at the outset of the prediction.

The market performance of any product after the strike price has realized is a matter that always becomes extremely attenuated from the original rationale of the original prediction. That has been my repeated experience.

One should be faithful to the limitations of the original force of their rationale.

Here OP has already won and has the option to exit, depart and seal the deal with riskless securities. Exposure to the possibility of failing the prediction by remaining in the market, or out of some ad-hoc poorly reasoned rationale to capture additional marginal gains in the market is outside the scope of the initial prediction at this point and should properly be construed as an independent subsequent investment decision.

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Re: will the SP500 double in 7 years?

Post by nisiprius » Mon May 21, 2018 7:35 pm

WhiteMaxima wrote:
Mon May 21, 2018 5:00 pm
Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.
Venezuela, too. Incredible as it seems, the Venezuelan government has not even managed to maintain the infrastructure for oil production: Oil Rises as World Grapples with Venezuelan Crude Oil Risks
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: will the SP500 double in 7 years?

Post by willthrill81 » Mon May 21, 2018 7:42 pm

TomCat96 wrote:
Mon May 21, 2018 6:03 pm
I would argue that once you have hit your goal prior to the "strike date", the remaining time is irrelevant.
The point is that one has the option of taking the entirety of one's investment out of the market and moving it to riskless treasuries for the remainder of the time period.

Remaining in the market and exposing yourself to a 20% drop is simply taking advantage of the ambiguity of the initial goalposts.

The only reason why one would remain in the market is because one desires to capture additional potential gain, at the risk of potential losses on the entirety of the initial investment.
I agree with your thoughts.
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Re: Will the SP500 double in 7 years?

Post by Taylor Larimore » Mon May 21, 2018 7:49 pm

"Will the SP500 double in 7 years?"
Bogleheads:

The only correct answer is: NO ONE KNOWS.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: will the SP500 double in 7 years?

Post by Snowjob » Tue May 22, 2018 9:35 am

willthrill81 wrote:
Mon May 21, 2018 7:42 pm
TomCat96 wrote:
Mon May 21, 2018 6:03 pm
I would argue that once you have hit your goal prior to the "strike date", the remaining time is irrelevant.
The point is that one has the option of taking the entirety of one's investment out of the market and moving it to riskless treasuries for the remainder of the time period.

Remaining in the market and exposing yourself to a 20% drop is simply taking advantage of the ambiguity of the initial goalposts.

The only reason why one would remain in the market is because one desires to capture additional potential gain, at the risk of potential losses on the entirety of the initial investment.
I agree with your thoughts.
Same.

As I responded to Nisi earlier, dropping that 20% or so over the next 7 months so as to be a shade under doubling may be factually correct, but thats really irrelevant. What matters is the path we took to get there. I was explicit in my comments from 2011 that I was expecting both the economy and market to struggle for years. Based on what has transpired I was clearly wrong, regardless if we take an unexpected dive from here. I was simply commenting on how wrong my prediction was and that its a good thing to not bet your entire portfolio on your own predictions.

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Re: will the SP500 double in 7 years?

Post by shelanman » Tue May 22, 2018 11:25 am

So... should we do this again? Start a poll for whether the S&P will get to 4,800 (or, anyway, that total return will exceed 100%) over the next 7 years?

(I would, but apparently I don't have permission to create polls)

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Re: will the SP500 double in 7 years?

Post by WhiteMaxima » Tue May 22, 2018 11:41 am

The question is: can S&P500 profit double in 7 years and if the borrowing cost stay the same. It doesn't seems likely. Could S&P500 profit reduction by 50% and borrowing cost double during the same period? If we had a recession and inflation goes up, it will more seems likely.

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Re: will the SP500 double in 7 years?

Post by Portfolio7 » Tue May 22, 2018 3:05 pm

Well, odds don't seem to support the SPY Index doubling, that would require a nominal return that's higher than the historical average I believe - but under 'normal' conditions you might expect the "dividend-adjusted" index to roughly double.

I think the possibility of the latter is still fairly robust, valuations notwithstanding..... but I'll stick with my AA.
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Re: will the SP500 double in 7 years?

Post by david1082b » Tue May 22, 2018 4:16 pm

WhiteMaxima wrote:
Tue May 22, 2018 11:41 am
The question is: can S&P500 profit double in 7 years and if the borrowing cost stay the same. It doesn't seems likely. Could S&P500 profit reduction by 50% and borrowing cost double during the same period? If we had a recession and inflation goes up, it will more seems likely.
Earnings didn't double from late 2010 to late 2017 but the S&P 500 did more than double in total return http://www.multpl.com/s-p-500-earnings/table

That table is inflation adjusted but even nominally there was no doubling in earnings. 1993 to 2000 saw returns in excess of earnings growth too. Earnings growth and returns don't always seem to be joined at the hip over fairly short spans of time.

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Re: will the SP500 double in 7 years?

Post by HomerJ » Tue May 22, 2018 4:55 pm

newbie001 wrote:
Fri Dec 23, 2011 12:38 pm
I'm mildly surprised by how many cast a vote for "yes," unless those BHs are guessing that based on unexpectedly-high inflation. If we have 10% nominal returns over the next 7 years and there is anything close to normal inflation over that time period, I'll turn cartwheels.
Let's all meet back here on Dec 22, and see if newbie001 has to do some cartwheels!
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Re: will the SP500 double in 7 years?

Post by whodidntante » Tue May 22, 2018 5:48 pm

The real question is, will the S&P 500 double in 7 years?

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Re: will the SP500 double in 7 years?

Post by willthrill81 » Tue May 22, 2018 6:13 pm

whodidntante wrote:
Tue May 22, 2018 5:48 pm
The real question is, will the S&P 500 double in 7 years?
From now?

My crystal ball is in the shop, and they don't return my calls. :(
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: will the SP500 double in 7 years?

Post by Investment101 » Tue May 22, 2018 7:06 pm

WhiteMaxima wrote:
Mon May 21, 2018 5:11 pm
Investment101 wrote:
Mon May 21, 2018 5:05 pm
WhiteMaxima wrote:
Mon May 21, 2018 5:00 pm
Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.
I see Thanks!

Probably will reach high around summer or a little after summer? Will sell then as I don't follow oil that much.
oil is also a hedging against inflation. It's the blood of inductry world. Saudi will IPO its oil ARAMCO so remain higher oil price is good for Saudi. at $70 a barrel, many American Shale oil company can make decent money. I think their cost is 45-50 a barrel.
nisiprius wrote:
Mon May 21, 2018 7:35 pm
WhiteMaxima wrote:
Mon May 21, 2018 5:00 pm
Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.
Venezuela, too. Incredible as it seems, the Venezuelan government has not even managed to maintain the infrastructure for oil production: Oil Rises as World Grapples with Venezuelan Crude Oil Risks

Ok for sure gonna get more VGENX ! Thanks.

Is there a thread that I can sub to keep up with the oil discussion, searched for VGENX and oil, both didn't have too good of results.
Last edited by Investment101 on Tue May 22, 2018 7:30 pm, edited 1 time in total.

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Re: will the SP500 double in 7 years?

Post by whodidntante » Tue May 22, 2018 7:14 pm

willthrill81 wrote:
Tue May 22, 2018 6:13 pm
whodidntante wrote:
Tue May 22, 2018 5:48 pm
The real question is, will the S&P 500 double in 7 years?
From now?

My crystal ball is in the shop, and they don't return my calls. :(
If you repaired a crystal ball, would you give it back? :twisted:

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Re: will the SP500 double in 7 years?

Post by willthrill81 » Tue May 22, 2018 8:39 pm

whodidntante wrote:
Tue May 22, 2018 7:14 pm
willthrill81 wrote:
Tue May 22, 2018 6:13 pm
whodidntante wrote:
Tue May 22, 2018 5:48 pm
The real question is, will the S&P 500 double in 7 years?
From now?

My crystal ball is in the shop, and they don't return my calls. :(
If you repaired a crystal ball, would you give it back? :twisted:
Good point. :oops:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: will the SP500 double in 7 years?

Post by cfs » Tue May 22, 2018 11:17 pm

The real question should be

Will YOUR portfolio double in 7 years

Good luck y gracias por leer / cfs
~ Member of the Active Retired Force since 2014 ~

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Re: will the SP500 double in 7 years?

Post by CurlyDave » Wed May 23, 2018 12:17 am

PreserveCapital wrote:
Thu Dec 22, 2011 11:23 am
The S&P can only grow, over time, as much as the underlying economy grows...
I don't think this is really true. There are at least three ways the S&P can grow. One is as the economy grows, a second is that the S&P 500 could increase the share of the total economy that it represents, and a third is that profitability and/or productivity could increase.

Now, what do I mean by "total economy". This is not just the total stock market but is actually the total world economy. Even if we limit ourselves to just the US economy there are lots of mom and pop operations which are not part of the US stock market, but which can lose market share to S&P 500 companies. An example is Amazon, which is knocking the stuffing out of traditional retail, taking market share from small retailers. And, almost all S&P 500 companies have international sales, and they can grow sales in lots of non-traditional areas.

So, there is lots of room for growth in the S&P 500.

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Re: will the SP500 double in 7 years?

Post by WhiteMaxima » Wed May 23, 2018 11:33 am

Investment101 wrote:
Tue May 22, 2018 7:06 pm
WhiteMaxima wrote:
Mon May 21, 2018 5:11 pm
Investment101 wrote:
Mon May 21, 2018 5:05 pm
WhiteMaxima wrote:
Mon May 21, 2018 5:00 pm
Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.
I see Thanks!

Probably will reach high around summer or a little after summer? Will sell then as I don't follow oil that much.
oil is also a hedging against inflation. It's the blood of inductry world. Saudi will IPO its oil ARAMCO so remain higher oil price is good for Saudi. at $70 a barrel, many American Shale oil company can make decent money. I think their cost is 45-50 a barrel.
nisiprius wrote:
Mon May 21, 2018 7:35 pm
WhiteMaxima wrote:
Mon May 21, 2018 5:00 pm
Iran sanction. Production cut and consumption up. Supply and demand. Usually at end of business cycle, oil will perform well. I am adding energy too.
Venezuela, too. Incredible as it seems, the Venezuelan government has not even managed to maintain the infrastructure for oil production: Oil Rises as World Grapples with Venezuelan Crude Oil Risks
$70 - $80 is the sweet spot for all oil companies. Higher enough to make profit. Lower enough not to tip down the economy. Of course, Saudi want high oil price for state oil company IPO. US shale oil company will produce more oil at this price.


Ok for sure gonna get more VGENX ! Thanks.

Is there a thread that I can sub to keep up with the oil discussion, searched for VGENX and oil, both didn't have too good of results.

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