Revisiting the "Lost Decade," 2000-2009

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Beensabu
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Beensabu »

WhitePuma wrote: Wed Jul 10, 2024 12:17 am The absence of a deep, prolonged recession for 15 years now has me worried. Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
Nobody wants a recession. Nobody wants to lose their job and not be able to find another one and blow through all their savings and lose their housing. Nobody wants to see that happen to people in their community. A recession has real consequences on the lives of actual people, and lots of them.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by HanSolo »

rockstar wrote: Mon Jul 08, 2024 2:05 pm Better off being an optimist than a pessimist.
My preferred cliche is "hope for the best and prepare for the worst".
Beensabu wrote: Wed Jul 10, 2024 12:54 am
WhitePuma wrote: Wed Jul 10, 2024 12:17 am The absence of a deep, prolonged recession for 15 years now has me worried. Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
Nobody wants a recession. Nobody wants to lose their job and not be able to find another one and blow through all their savings and lose their housing. Nobody wants to see that happen to people in their community. A recession has real consequences on the lives of actual people, and lots of them.
This is another case where my above-mentioned cliche can be useful. As pointed out, recessions are a fact of the economic cycle (just like inclement weather, etc.). So it's better to be prepared for one than to simply not want one.

Recessions are also known to have some positive effects (such as reducing inflation, or forcing discipline on companies with poor business plans). If you can invent and implement a way to get the positive effects without the negative ones, you could win a Nobel prize.

What the "lost decade" tells us is that there are also down periods, not just up. The Boy Scouts say "be prepared" and it's a good principle (i.e., be prepared not just for ups, and not just for downs, but for whatever reality might bring).
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Re: Revisiting the "Lost Decade," 2000-2009

Post by AnnetteLouisan »

Five year insured CDs were paying between 5 and 7 percent a year during some or much of that time, but you were laughed out of town if you were saying you bought one. CDs were typically mentioned with reference to the 3 month rate.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by grahamite »

Returns from 1965-1982 were even worse for the USA.

And interestingly what 1965, 2000 and today's stock markets all have in common is they are bifurcated markets. Nifty Fifty. Dot Com. AI.

If you are 100% US stocks you are at least 1/3 technology stocks and betting that they can continue their outperformance and grow earnings a lot faster than the rest of the market, avoid punitive regulation, and therefore sustain their premium valuations. And you are also betting that the hundreds of billions they are investing in AI chips will generate a decent return even though there's been no transformative use-case found yet and that the incumbents won't get disrupted and can capture and retain a large portion of the market opportunity in AI.

I'm all for tech optimism and the market leaders are fantastic businesses and betting against them has been a mistake over the last decade. But market leadership does change dramatically over time and when over 30% of the S&P 500 market cap is in the top 10 companies and most of those companies are technology businesses that seems to present a risk that can easily be insured against by diversifying more widely.

And by diversifying your portfolio and including some international stocks (EAFE/EM), small cap stocks, bonds etc. you get more exposure to other sectors and lower the average valuation of your portfolio as well as the income return from your portfolio and that will mean you can continue to participate in the technology/AI boom but have more insulation in case boom turns to bust and elevated valuations fall back to earth.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by FoolMeOnce »

Over a longer time period, did the S&P500 beat a more diversified portfolio despite the lost decade?
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Re: Revisiting the "Lost Decade," 2000-2009

Post by tibbitts »

FoolMeOnce wrote: Wed Jul 10, 2024 6:50 am Over a longer time period, did the S&P500 beat a more diversified portfolio despite the lost decade?
Why does that matter? Are you looking to invest 100% in the highest-returning component you can find over these "longer time periods"? Won't a "more diversified portfolio" by definition always underperform whatever the higher-performing components of that portfolio are over whatever time periods you mention.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by FoolMeOnce »

tibbitts wrote: Wed Jul 10, 2024 7:10 am
FoolMeOnce wrote: Wed Jul 10, 2024 6:50 am Over a longer time period, did the S&P500 beat a more diversified portfolio despite the lost decade?
Why does that matter? Are you looking to invest 100% in the highest-returning component you can find over these "longer time periods"? Won't a "more diversified portfolio" by definition always underperform whatever the higher-performing components of that portfolio are over whatever time periods you mention.
Perhaps it will always underperform. It matters, though, to know if and to what extent there may be a cost to diversification. There is an implication in the OP and this thread that diversification will perform better. Like the post lamenting the tech-heavy top of the S&P right now. But what if riding that up and going through the low period still comes out ahead of a portfolio that did not reap the benefit of that initial rise?

The S&P underperfomed a diversified portfolio from 2000-2009? What does that matter? It tells us that if you are dependent on withdrawals, a bad might be more likely in a concentrated portfolio than a diversified one, and this could run you into trouble. If you are accumulating, what if S&P performed better 1995-2009 and/or 1990-2009? At the end of 2009, would you have been better off with just the S&P and regret having a more diversified portfolio?

Diversification can help smooth the ride. I think it matters to look at what that could cost, if anything.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by rogue_economist »

Dottie57 wrote: Tue Jul 09, 2024 7:55 pm
rogue_economist wrote: Mon Jul 08, 2024 12:27 pm The "lost decade" is very much an example of choosing dates to get a very particular outcome.

Just using portfolio visualizer and 100% US Total Stock.

10k invested in Jan 2000 - Dec 2009 declined in real terms to $7585.

But 10k invested Jan 1999 - Dec 2010 ended at $10,551, a very small real return, but at least the spending power was preserved.

Measuring peak to trough can get a worst case scenario, but it is almost as meaningless as measuring trough to peak. Only if someone needs to withdraw the full portfolio at a given time does this type of measure become really important.
But it is also true I felt like I wasn’t getting anywher in my 401k and then the GFC occurred, i wondered at that time if I would ever be able to retire.
But that is an especially poor way of thinking about it because 401k space is both limited in quantity and rate.

For a taxable account, theoretically, someone could have kept cash from 2000 to 2009 and bought the dip and not lost out on anything. Theoretically. The odds of actually timing the market that way are very low. But at least in theory if someone had the dry powder they could have caught up for a lot of lost time.

A 401k is different. You have a limited amount you can contribute. Consider someone who was contributing from 2000-2009 and someone who started in 2009. Did the person who started earlier actually "loose" a decade? No, because they were able to put in 10 years of contributions that someone starting in 2009 couldn't. So even though they both start from the same price in terms of buying the market, the one who started earlier has far more capital available in their account and owns far more shares to start with. So they still win.

For taxable 2008 was an enormous tax loss harvesting opportunity which partially offsets the sense in which taxable did loose a decade. Someone who had been consistently investing in taxable should have been able to harvest a large amount of loss which would have been helpful in the future.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by tibbitts »

FoolMeOnce wrote: Wed Jul 10, 2024 9:19 am
tibbitts wrote: Wed Jul 10, 2024 7:10 am
FoolMeOnce wrote: Wed Jul 10, 2024 6:50 am Over a longer time period, did the S&P500 beat a more diversified portfolio despite the lost decade?
Why does that matter? Are you looking to invest 100% in the highest-returning component you can find over these "longer time periods"? Won't a "more diversified portfolio" by definition always underperform whatever the higher-performing components of that portfolio are over whatever time periods you mention.
Perhaps it will always underperform. It matters, though, to know if and to what extent there may be a cost to diversification. There is an implication in the OP and this thread that diversification will perform better. Like the post lamenting the tech-heavy top of the S&P right now. But what if riding that up and going through the low period still comes out ahead of a portfolio that did not reap the benefit of that initial rise?

The S&P underperfomed a diversified portfolio from 2000-2009? What does that matter? It tells us that if you are dependent on withdrawals, a bad might be more likely in a concentrated portfolio than a diversified one, and this could run you into trouble. If you are accumulating, what if S&P performed better 1995-2009 and/or 1990-2009? At the end of 2009, would you have been better off with just the S&P and regret having a more diversified portfolio?

Diversification can help smooth the ride. I think it matters to look at what that could cost, if anything.
I don't believe there is any debate that diversification will always carry a a cost. The problem is knowing ahead of time what to avoid diversifying away from if you want to prevent incurring that cost. I'm trying to understand why you're concentrating on the S&P vs. comparing a diversified portfolio to... for example SCV, or EM, or ... ?
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Re: Revisiting the "Lost Decade," 2000-2009

Post by jimkinny »

AnnetteLouisan wrote: Wed Jul 10, 2024 5:00 am Five year insured CDs were paying between 5 and 7 percent a year during some or much of that time, but you were laughed out of town if you were saying you bought one. CDs were typically mentioned with reference to the 3 month rate.
There was long period back then that CDs paid about 1% more than Treasuries with the same term. I do not understand the appeal of a brokered CD unless they pay enough more than a Treasury to make up for the cost of selling a CD if that became necessary.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by jimkinny »

SimpleGift wrote: Mon Jul 08, 2024 2:03 pm
jarjarM wrote: Mon Jul 08, 2024 12:34 pm Thank you for posting this, it does seem like we're in need of a reminder why stock doesn't always go up and why bond/emergency funds can be useful. :beer
In the midst of a bull market in stocks, especially one driven by a specific sector or industry, it can be easy to think "Oh, the market is fundamentally and permanently changing — and I’m missing out with my investments!" Looking back over history, specific sectors of the market have at times been overwhelmingly dominant for certain periods, whether railroad stocks in the 19th century, energy companies or Japanese stocks in the 20th century, or tech companies in the 21st century.

But "trees don’t grow to the sky," as the saying goes. The market changes in unpredictable ways. One proven way to deal with this unpredictability and uncertainty over the span of decades is to start with a sound plan, diversify broadly, and then stick with it. Otherwise, those little voices coming from your collective unconscious can easily lead to market timing and ruin.
yes, thanks
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Re: Revisiting the "Lost Decade," 2000-2009

Post by SimpleGift »

FoolMeOnce wrote: Wed Jul 10, 2024 9:19 am There is an implication in the OP and this thread that diversification will perform better. Like the post lamenting the tech-heavy top of the S&P right now. But what if riding that up and going through the low period still comes out ahead of a portfolio that did not reap the benefit of that initial rise?
Diversification is not about "performing better" over the long haul. No one can know in advance what asset classes or portfolio mixes will be the best performers in the decades ahead. One can only make a plan that, based on expected returns, will hopefully allow one to reach their financial goals.

A primary advantage of diversifying broadly in one’s investment plan is that it greatly reduces the temptation to "performance chase" after the current hot asset class of the day. If I have a diverse mix of assets in my investment plan, one asset or another is usually doing well, while at the same time another asset is usually doing horribly. To be a successful buy-and-hold investor, one needs to accept and learn to live happily with this dichotomy.
Last edited by SimpleGift on Wed Jul 10, 2024 10:06 am, edited 1 time in total.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by WhitePuma »

Beensabu wrote: Wed Jul 10, 2024 12:54 am
WhitePuma wrote: Wed Jul 10, 2024 12:17 am The absence of a deep, prolonged recession for 15 years now has me worried. Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
Nobody wants a recession. Nobody wants to lose their job and not be able to find another one and blow through all their savings and lose their housing. Nobody wants to see that happen to people in their community. A recession has real consequences on the lives of actual people, and lots of them.
I hope this isn’t an attempt to shame me. I stand by my comment. A recession is a healthy part of an economic cycle and is much needed at this point.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by AnnetteLouisan »

jimkinny wrote: Wed Jul 10, 2024 9:52 am
AnnetteLouisan wrote: Wed Jul 10, 2024 5:00 am Five year insured CDs were paying between 5 and 7 percent a year during some or much of that time, but you were laughed out of town if you were saying you bought one. CDs were typically mentioned with reference to the 3 month rate.
There was long period back then that CDs paid about 1% more than Treasuries with the same term. I do not understand the appeal of a brokered CD unless they pay enough more than a Treasury to make up for the cost of selling a CD if that became necessary.
I wasn’t doing brokered CDs so I can’t speak to that. I was just collecting my 6-7 percent while my circle was … not. One can buy CDs in tranches so that there is no need to cash a large amount out early. I hadn’t been thinking of tax efficiency at the time, nor did the prospect of a 5 year CD then require me to consult the actuarial tables. Regular bank CDs are broken with a penalty of a few months interest, or returned at maturity not sold, so one didn’t have to worry about resale value.
Last edited by AnnetteLouisan on Wed Jul 10, 2024 10:27 am, edited 1 time in total.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by JakeyLee »

WhitePuma wrote: Wed Jul 10, 2024 12:17 am The absence of a deep, prolonged recession for 15 years now has me worried. Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
One could argue that folks clamoring for “a deep prolonged recession” are the ones suffering from “FOMO”. Maybe they wished their asset allocation was more aggressive the last decade. Maybe they caved and bailed during the “lost decade”? A 50% haircut would surely allow them to finally buy low, right?

As for me, I’m not trying to be argumentative. Not all recessions are made the same. We might have a sell-off. Heck, I’ve planned for them since I bought my first index fund (1995). But we could also see a small pullback, followed by several years of the market moving sideways. Who knows? I certainly don’t, as I’ve predicted 8 out of the last 3 recessions. Thank God I just stood there, and did nothin’. :beer
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Re: Revisiting the "Lost Decade," 2000-2009

Post by WhitePuma »

JakeyLee wrote: Wed Jul 10, 2024 10:27 am
WhitePuma wrote: Wed Jul 10, 2024 12:17 am The absence of a deep, prolonged recession for 15 years now has me worried. Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
One could argue that folks clamoring for “a deep prolonged recession” are the ones suffering from “FOMO”. Maybe they wished their asset allocation was more aggressive the last decade. Maybe they caved and bailed during the “lost decade”? A 50% haircut would surely allow them to finally buy low, right?

As for me, I’m not trying to be argumentative. Not all recessions are made the same. We might have a sell-off. Heck, I’ve planned for them since I bought my first index fund (1995). But we could also see a small pullback, followed by several years of the market moving sideways. Who knows? I certainly don’t, as I’ve predicted 8 out of the last 3 recessions. Thank God I just stood there, and did nothin’. :beer
The stock market and the economy are very different. My point is that a recession is needed. Not necessarily a stock market crash, although I’d be fine with that too (and it too would be healthy at this point).
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Re: Revisiting the "Lost Decade," 2000-2009

Post by JakeyLee »

*deleted
Last edited by JakeyLee on Wed Jul 10, 2024 11:05 am, edited 1 time in total.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by rockstar »

JakeyLee wrote: Wed Jul 10, 2024 10:55 am For the point of this discussion, that assumption seemed obvious. We are all aware that the economy and stock market are not one and the same. Seems like folk’s clamoring for a deep prolonged recession, in a thread regarding the “lost decade” are not just talking about the economy in a vacuum. But also the market. I guess I was wrong. :oops:
Be careful to not be too pessimistic.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by WhitePuma »

JakeyLee wrote: Wed Jul 10, 2024 10:55 am For the point of this discussion, that assumption seemed obvious. We are all aware that the economy and stock market are not one and the same. Seems like folk’s clamoring for a deep prolonged recession, in a thread regarding the “lost decade” are not just talking about the economy in a vacuum. But also the market. I guess I was wrong. :oops:
Now now, let’s be nice. Your sarcasm is showing.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by JakeyLee »

WhitePuma wrote: Wed Jul 10, 2024 11:00 am
JakeyLee wrote: Wed Jul 10, 2024 10:55 am For the point of this discussion, that assumption seemed obvious. We are all aware that the economy and stock market are not one and the same. Seems like folk’s clamoring for a deep prolonged recession, in a thread regarding the “lost decade” are not just talking about the economy in a vacuum. But also the market. I guess I was wrong. :oops:
Now now, let’s be nice. Your sarcasm is showing.
You’re right. I just re-read my post. I didn’t intend to sound snarky. I have deleted said post. My apologies. Back to the topic at hand …
:beer
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Re: Revisiting the "Lost Decade," 2000-2009

Post by BitTooAggressive »

FoolMeOnce wrote: Wed Jul 10, 2024 6:50 am Over a longer time period, did the S&P500 beat a more diversified portfolio despite the lost decade?
It depends how you diversify and time frame.

Also when you start withdrawing you certainly don’t want to retire into a lost decade if all you hold in equities is the SP500. In accumulation it is not as painful.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by HomerJ »

pennsylvania211 wrote: Mon Jul 08, 2024 5:26 pm Lost decade is a matter of perspective. For sellers, yes it was a bad time. For buyers, it was a great decade to buy stocks at relatively stable price while their incomes generally increased as their careers progressed. It’s probably why generation X is the richest generation for their age in inflation adjusted dollars.
This... INVESTING in the SP500 all through 2000-2009 has made me rich today.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Beensabu »

WhitePuma wrote: Wed Jul 10, 2024 10:05 am I hope this isn’t an attempt to shame me. I stand by my comment. A recession is a healthy part of an economic cycle and is much needed at this point.
It is an attempt to expand your awareness. Just because someone wants a deflation in asset values so they can accumulate at a lower price point because they think they won't be one of the millions to lose their income and become long-term unemployed or underemployed doesn't mean we need a recession. We can have a deflation in asset values without a recession. The stock market is not the economy.

Also, we just had a recession 4 years ago.
HanSolo wrote: Wed Jul 10, 2024 3:13 am As pointed out, recessions are a fact of the economic cycle (just like inclement weather, etc.). So it's better to be prepared for one than to simply not want one.
Just because you have a storm shelter, that doesn't mean you wish for a tornado.
Recessions are also known to have some positive effects (such as reducing inflation, or forcing discipline on companies with poor business plans). If you can invent and implement a way to get the positive effects without the negative ones, you could win a Nobel prize.
Pretty sure that's the intent of a "soft landing".
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Re: Revisiting the "Lost Decade," 2000-2009

Post by AlwaysLearningMore »

IIRC Mr. Bogle wrote in Little Book of Common sense Investing that dividends have contributed about 42% of long term stock returns. So the "lost decade" can also be viewed as a good time to have accumulated from that lens as well. It worked for us.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by WhitePuma »

Beensabu wrote: Wed Jul 10, 2024 11:23 am
WhitePuma wrote: Wed Jul 10, 2024 10:05 am I hope this isn’t an attempt to shame me. I stand by my comment. A recession is a healthy part of an economic cycle and is much needed at this point.
It is an attempt to expand your awareness. Just because someone wants a deflation in asset values so they can accumulate at a lower price point because they think they won't be one of the millions to lose their income and become long-term unemployed or underemployed doesn't mean we need a recession. We can have a deflation in asset values without a recession. The stock market is not the economy.

Also, we just had a recession 4 years ago.
HanSolo wrote: Wed Jul 10, 2024 3:13 am As pointed out, recessions are a fact of the economic cycle (just like inclement weather, etc.). So it's better to be prepared for one than to simply not want one.
Just because you have a storm shelter, that doesn't mean you wish for a tornado.
Recessions are also known to have some positive effects (such as reducing inflation, or forcing discipline on companies with poor business plans). If you can invent and implement a way to get the positive effects without the negative ones, you could win a Nobel prize.
Pretty sure that's the intent of a "soft landing".
Thanks for "expanding my awareness", but I'm not a spring chicken.

You ignored my stated reasons for wanting a recession and decided to ascribe a new one to me, that being, a deflation in asset values to buy at a lower price point. Please don't do that.

Also, when did I say that I didn't think I wouldn't be underemployed or unemployed, as your statement indicates: "because they think they won't be one of the millions to lose their income and become long-term unemployed or underemployed doesn't mean we need a recession". I made my comment in full recognition that it could impact my short-term employment. Again, please don't ascribe false statements to me.

"The stock market is not the economy." Yes I know, that's why I stated it upthread. But I'm not sure you know what it means if you think we had a recession 4 years ago. The corona outbreak caused a stock market crash, not a recession.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by FoolMeOnce »

tibbitts wrote: Wed Jul 10, 2024 9:42 am
FoolMeOnce wrote: Wed Jul 10, 2024 9:19 am
tibbitts wrote: Wed Jul 10, 2024 7:10 am
FoolMeOnce wrote: Wed Jul 10, 2024 6:50 am Over a longer time period, did the S&P500 beat a more diversified portfolio despite the lost decade?
Why does that matter? Are you looking to invest 100% in the highest-returning component you can find over these "longer time periods"? Won't a "more diversified portfolio" by definition always underperform whatever the higher-performing components of that portfolio are over whatever time periods you mention.
Perhaps it will always underperform. It matters, though, to know if and to what extent there may be a cost to diversification. There is an implication in the OP and this thread that diversification will perform better. Like the post lamenting the tech-heavy top of the S&P right now. But what if riding that up and going through the low period still comes out ahead of a portfolio that did not reap the benefit of that initial rise?

The S&P underperfomed a diversified portfolio from 2000-2009? What does that matter? It tells us that if you are dependent on withdrawals, a bad might be more likely in a concentrated portfolio than a diversified one, and this could run you into trouble. If you are accumulating, what if S&P performed better 1995-2009 and/or 1990-2009? At the end of 2009, would you have been better off with just the S&P and regret having a more diversified portfolio?

Diversification can help smooth the ride. I think it matters to look at what that could cost, if anything.
I don't believe there is any debate that diversification will always carry a a cost. The problem is knowing ahead of time what to avoid diversifying away from if you want to prevent incurring that cost. I'm trying to understand why you're concentrating on the S&P vs. comparing a diversified portfolio to... for example SCV, or EM, or ... ?
I asked about the S&P because that was the poor performer in the chart in the OP.

To be clear, I'm not arguing against diversification. I asked my question because 1) the cost of diversification during a longer period covering the "lost decade" was interesting to me, 2) it would provide better context to consider what that period says about portfolio construction, and 3) I couldn't figure out how to find the answer.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by firebirdparts »

Sadly, it seems like no one is grateful for the fabulous sequence of returns we've had as of today. The "Lost Decade" was a gift to people my age. Obviously it was bad for some people. I am not one of them.

Thank you, thank you, thank you.

Maybe that's useless, but it seems like to me, if you acknowledge what's going on properly, it might be less confusing to assess the risks of where we are.
Last edited by firebirdparts on Wed Jul 10, 2024 1:29 pm, edited 1 time in total.
This time is the same
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Beensabu »

WhitePuma wrote: Wed Jul 10, 2024 12:17 pm You ignored my stated reasons for wanting a recession and decided to ascribe a new one to me, that being, a deflation in asset values to buy at a lower price point. Please don't do that.
You said this:
WhitePuma wrote: Wed Jul 10, 2024 12:17 am Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
To get rid of frothiness, FOMO, and entitlement. Those are your stated reasons for wanting a recession, and I haven't seen you supply any other ones.

Frothiness and FOMO refers to the market and asset values. I'm not sure what entitlement refers to.
The corona outbreak caused a stock market crash, not a recession.
It caused a recession.

"The NBER determined the beginning and end of the COVID-19-induced recession as February 2020 and April 2020, respectively."

https://fredblog.stlouisfed.org/2022/06 ... es-in-fred
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Re: Revisiting the "Lost Decade," 2000-2009

Post by WhitePuma »

Beensabu wrote: Wed Jul 10, 2024 1:28 pm
WhitePuma wrote: Wed Jul 10, 2024 12:17 pm You ignored my stated reasons for wanting a recession and decided to ascribe a new one to me, that being, a deflation in asset values to buy at a lower price point. Please don't do that.
You said this:
WhitePuma wrote: Wed Jul 10, 2024 12:17 am Recessions are a normal, healthy part of the economic cycle. The absence of such is in large part to blame for all the frothiness, FOMO, and entitlement that so rampant today. The system needs a good flush.
To get rid of frothiness, FOMO, and entitlement. Those are your stated reasons for wanting a recession, and I haven't seen you supply any other ones.

Frothiness and FOMO refers to the market and asset values. I'm not sure what entitlement refers to.
The corona outbreak caused a stock market crash, not a recession.
It caused a recession.

"The NBER determined the beginning and end of the COVID-19-induced recession as February 2020 and April 2020, respectively."

https://fredblog.stlouisfed.org/2022/06 ... es-in-fred
I will grant you FOMO is market-related. But frothiness and entitlement, as I used them, refers to business practices that are poor and would sink a business if the economy were normal (such as, the need to provide good quality, good service, etc.).

No, it didn't cause a recession. Even the two consecutive negative quarters of GDP in 2022 weren't considered a recession. Let alone 2 months.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Dottie57 »

rogue_economist wrote: Wed Jul 10, 2024 9:23 am
Dottie57 wrote: Tue Jul 09, 2024 7:55 pm
rogue_economist wrote: Mon Jul 08, 2024 12:27 pm The "lost decade" is very much an example of choosing dates to get a very particular outcome.

Just using portfolio visualizer and 100% US Total Stock.

10k invested in Jan 2000 - Dec 2009 declined in real terms to $7585.

But 10k invested Jan 1999 - Dec 2010 ended at $10,551, a very small real return, but at least the spending power was preserved.

Measuring peak to trough can get a worst case scenario, but it is almost as meaningless as measuring trough to peak. Only if someone needs to withdraw the full portfolio at a given time does this type of measure become really important.
But it is also true I felt like I wasn’t getting anywher in my 401k and then the GFC occurred, i wondered at that time if I would ever be able to retire.
But that is an especially poor way of thinking about it because 401k space is both limited in quantity and rate.

For a taxable account, theoretically, someone could have kept cash from 2000 to 2009 and bought the dip and not lost out on anything. Theoretically. The odds of actually timing the market that way are very low. But at least in theory if someone had the dry powder they could have caught up for a lot of lost time.

A 401k is different. You have a limited amount you can contribute. Consider someone who was contributing from 2000-2009 and someone who started in 2009. Did the person who started earlier actually "loose" a decade? No, because they were able to put in 10 years of contributions that someone starting in 2009 couldn't. So even though they both start from the same price in terms of buying the market, the one who started earlier has far more capital available in their account and owns far more shares to start with. So they still win.

For taxable 2008 was an enormous tax loss harvesting opportunity which partially offsets the sense in which taxable did loose a decade. Someone who had been consistently investing in taxable should have been able to harvest a large amount of loss which would have been helpful in the future.
I reject your notion of “poor thinking”.

I was 51 at the time and the number of years until retirement was declining. If you think that was a poor way of thinking, well that’s on you. No one knew at that time what would happen in the next 15 years.

My actions were to be very happy that my employer was healthy. The next few years gave me better salary increases. This meant more money into 401k and I was able to retire earlier than expected (61 vs 67 or later).

The next crises may not turn out so well - it is worth thinking about when deciding of all stocks or nearly all stock portfolios.
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Re: Revisiting the "Lost Decade," 2000-2009

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I removed a contentious disagreement. As a reminder, see: General Etiquette
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Re: Revisiting the "Lost Decade," 2000-2009

Post by HanSolo »

Beensabu wrote: Wed Jul 10, 2024 11:23 am
HanSolo wrote: Wed Jul 10, 2024 3:13 am As pointed out, recessions are a fact of the economic cycle (just like inclement weather, etc.). So it's better to be prepared for one than to simply not want one.
Just because you have a storm shelter, that doesn't mean you wish for a tornado.
Yes, of course. Nobody said otherwise. Similarly, just because you have an umbrella doesn't mean you wish for rain.

It would also be unwise to wish that it never rained.
Recessions are also known to have some positive effects (such as reducing inflation, or forcing discipline on companies with poor business plans). If you can invent and implement a way to get the positive effects without the negative ones, you could win a Nobel prize.
Pretty sure that's the intent of a "soft landing".
I don't know whether or not the beneficial effects of recessions (like the ones I mentioned, and there are others) are fully realized in a soft landing. For all I know, it's a case-by-case thing. If you know of an objective and conclusive assessment of that, please cite it.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by pennsylvania211 »

As a buyer, I want as many recessions as I can bear.
As a seller, I want as many long bull markets leading up to my sale as possible.

Different people want different things.

Even the same person can want different things in different stages of life. It's a matter of perspective.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Mayacallie »

My perspective predates the lost decade by 30 years. Every downturn is an opportunity to profit, every extended bull is a time to be more cautious.
I sold all international holdings and actively managed mutual funds after the dot com crash and went 90 % S&P 500 by 2001. I’m 100% S&P now on the equity side. But now, i am buying treasuries
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Cah »

Was the best Bob Brinker call of all time. Go to a high % of cash in early 2000. 100 % invested at the lows a couple years later. He was the only one on record with those two calls to my knowledge. Has been fully invested until his retirement a couple years ago. What a fortune made for those lucky enough to follow his advise through that lost decade and beyond.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by moneyflowin »

unwitting_gulag wrote: Tue Jul 09, 2024 11:08 am
Nathan Drake wrote: Tue Jul 09, 2024 10:04 am
BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
What’s interesting is the suggestion that those buying another “lost decade” asset at lower prices, such as exUS now, are doing something foolhardy because US will always return more in their minds no matter the valuation gulf.

S&P500 has fortuitously seen valuations in 2000 at 44 rise back up to 36 in 2024 rather than the far more severe and sustained contraction in exUS valuations
My personal worry, is that during the next recession (to borrow Klangfool's quip), all equities will fall, more or less equally. There won't be any place to hide.
Equities don't all fall equally though. Tech stocks fell 80% in 2000-2002 compared to 50% for the broader market. In the 2022 bear market, SPY fell 25% (peak to trough), QQQ fell 34%, but the DJI fell only 19%

Growth stocks are almost always more volatile; they climb more in bull markets but drop more in bears.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by anagram »

Catalina25 wrote: Tue Jul 09, 2024 8:50 am As I was relatively early in my accumulation phase during 2000-2009, and knowing that markets will eventually recover, my focus wasn’t on the investments made prior to 2000, but rather the new money invested during those down years. I didn’t pay attention to quarterly/annual returns or account balances, nor did I care as I wouldn’t need this money for a few decades. As I plowed as much as I could into stocks then, including moving my bond funds/fixed income into stocks (the beginning of my going 100% equities), the seeds planted then have blossomed wonderfully.

In contrast, some of my same age co-workers at the time were so distressed during those years, focusing instead on annual returns, short term gains, etc., they moved everything out of stocks and into fixed income hoping to preserve capital or chase rather modest short-term gains. Obviously, not a good strategy.

2000-2009 (or really through 2012) wasn’t a lost decade for me, but probably one of the greatest long term buying opportunities of my lifetime. Having recently retired, I can’t thank my optimistic younger self enough for not taking his eyes off the prize.
However it could have been a lost quarter century for stocks and your co-workers would have had the right strategy.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by anagram »

moneyflowin wrote: Wed Jul 10, 2024 8:44 pm
unwitting_gulag wrote: Tue Jul 09, 2024 11:08 am
Nathan Drake wrote: Tue Jul 09, 2024 10:04 am
BitTooAggressive wrote: Tue Jul 09, 2024 9:59 am
KlangFool wrote: Tue Jul 09, 2024 6:28 am Folks,

Just a reminder. Some of us were unemployed for more than 1 year during that time period too.

KlangFool
Yeah it seems like many just want to shrug the data off as it does not matter. You should have been a buyer and I guess you should have gotten a job or come out of retirement if you were in it.


There is an SP500 group that are pretty militant in their views.
What’s interesting is the suggestion that those buying another “lost decade” asset at lower prices, such as exUS now, are doing something foolhardy because US will always return more in their minds no matter the valuation gulf.

S&P500 has fortuitously seen valuations in 2000 at 44 rise back up to 36 in 2024 rather than the far more severe and sustained contraction in exUS valuations
My personal worry, is that during the next recession (to borrow Klangfool's quip), all equities will fall, more or less equally. There won't be any place to hide.
Equities don't all fall equally though. Tech stocks fell 80% in 2000-2002 compared to 50% for the broader market. In the 2022 bear market, SPY fell 25% (peak to trough), QQQ fell 34%, but the DJI fell only 19%

Growth stocks are almost always more volatile; they climb more in bull markets but drop more in bears.
There is no law of nature that says that has to be so.
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Re: Revisiting the "Lost Decade," 2000-2009

Post by Beensabu »

HanSolo wrote: Wed Jul 10, 2024 6:42 pm
Recessions are also known to have some positive effects (such as reducing inflation, or forcing discipline on companies with poor business plans). If you can invent and implement a way to get the positive effects without the negative ones, you could win a Nobel prize.
Pretty sure that's the intent of a "soft landing".
I don't know whether or not the beneficial effects of recessions (like the ones I mentioned, and there are others) are fully realized in a soft landing. For all I know, it's a case-by-case thing. If you know of an objective and conclusive assessment of that, please cite it.
Achieving a soft landing means that consumer and business spending has slowed enough (due to the cost of borrowing getting too expensive for too long) to reduce inflation without significantly increasing unemployment. Cooling down an overheated economy (too much spending) without putting millions of people out of work.

https://www.stlouisfed.org/open-vault/2 ... to-look-at

https://www.brookings.edu/articles/what ... t-landing/
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Re: Revisiting the "Lost Decade," 2000-2009

Post by HanSolo »

Beensabu wrote: Wed Jul 10, 2024 10:36 pm
HanSolo wrote: Wed Jul 10, 2024 6:42 pm
Recessions are also known to have some positive effects (such as reducing inflation, or forcing discipline on companies with poor business plans). If you can invent and implement a way to get the positive effects without the negative ones, you could win a Nobel prize.
Pretty sure that's the intent of a "soft landing".
I don't know whether or not the beneficial effects of recessions (like the ones I mentioned, and there are others) are fully realized in a soft landing. For all I know, it's a case-by-case thing. If you know of an objective and conclusive assessment of that, please cite it.
Achieving a soft landing means that consumer and business spending has slowed enough (due to the cost of borrowing getting too expensive for too long) to reduce inflation without significantly increasing unemployment. Cooling down an overheated economy (too much spending) without putting millions of people out of work.

https://www.stlouisfed.org/open-vault/2 ... to-look-at

https://www.brookings.edu/articles/what ... t-landing/
OK, but as I already mentioned, reducing inflation isn't the only beneficial effect of recessions. More info:

https://www.investopedia.com/ask/answer ... itable.asp

https://www.investopedia.com/articles/e ... ssions.asp

I can see where a soft landing might achieve some of those benefits, to some degree. I didn't see anything in your cited articles that says a soft landing provides all of the benefits, and to the same degree, as a recession.

As with rain, I can dislike the unpleasant effects while appreciating the positive ones.

The same is true in the mirror image: when the economy is booming to the point of proliferation of poor business planning and other rampant irresponsibility, I can dislike the unpleasant effects while appreciating the positive ones.
Investopedia wrote: In the end, once the process of the artificial boom in the economy by the issuance of credit is set in motion, then the ensuing bust and recession are indeed inevitable. But this does not mean that recessions are always and generally inevitable, other than after episodes of inappropriate creation of money and credit.
Investopedia wrote: Similarly, a recession can end the misallocation of investment capital, whether fueled by a housing bubble or a dot-com one. Although the process can be painful for many investors, recessions may be instrumental in bringing the markets back down to earth, setting the stage for an eventual recovery, and renewing the foundations for economic growth.
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Re: Revisiting the "Lost Decade," 2000-2009

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