2/20/2009

[StageLeft]

Thanks for the numbers. Unfortunately I think average dividends are like 2% or something silly or 2.5% for S&P, but I could google and find out for sure. Oh hell, I will...ok, yeah it's a little over 2%, so if we use the 2009-"depressed" value, then we can use the increased dividends (until they are slashed further, that is). wikipedia:

n 1982 the dividend yield on the S&P 500 Index reached 6.7%. Over the following 16 years, the dividend yield declined to just a percentage value of 1.4% during 1998, because stock prices increased faster than dividend payments from earnings, and public company earnings increased slower than stock prices. During the 20th century, the highest growth rates for earnings and dividends over any 30-year period were 6.3% annually for dividends, and 7.8% for earnings[citation needed]. As of 2008, the average dividend yield is around 2%

 

[JSt0rm]

Originally posted by: dullard

Originally posted by: sactoking
Well, if you assume:

You invest $40 in 1896
You get $7200 in 2009
You invest and get nothing in the interim
1896 and 2009 are both full years
Return is compounded monthly

Then:
The Internal Rate of Return of the stock market from 1896-2009 is 4.6043%

That number looks just about right (I didn't do the math). I already posted earlier in the thread that stocks historically return roughly 5% from share price inflation (very close to your 4.6%) and that they returned an additional ~5% from dividends. Total those up and you get your 10% that people used to expect. They just fail to realize that is an AVERAGE, some years you'll do far better and some years you'll do far worse. Plus, as long as the dividends stay slashed, you'll not be getting 10% long term any more (but I've been ridiculed many times on ATOT or P&N for stating that over the last couple of years).

Historical inflation can be calculated from the CPI, but it only goes back to Jan 1913. Inflation over that whole time is 3.25% (calculated by annual compounding).

It's almost as if working produces more money.

 

[soccerballtux]

Originally posted by: Zebo

Originally posted by: Skoorb

Originally posted by: Zebo

Originally posted by: Skoorb
DOW futures were up decently today, it opened a little high and is negative again. Dayum.

Anyway, some guy named Shiller (I have no idea if he's a guru or not, but sounds convincing enough) says that although the market is now priced at a fair 15 or so P/E based on a decade-history of earnings, in other big bears we've seen the PE go as low as 10, so he's ultimately saying that stocks now are priced where they should be, but will go lower. This would see the DOW like in the 5000-5500 range.

P/E's should be 7 and be paying dividends. I been around a lot business purchases and have done so on my own and we look for 3-6 depending on modifiers like if you have to work in it, or are merely a silent partner/owner - 3 if you're flipping the burgers while 6 if you pick up drawer once a morning and take to bank. Stock is obviously totally passive income so it would get a 7 at most. Other considerations are there too such as accounts receivables, how collectable are they, growth potential, debt, etc, but in general no sane person would purchase a business for 15x yearly earnings. Doing so is pure speculation Dullard talked about in this thread. Might as well go to Vegas and bet on red and black since drinks and rooms are free.

But, baring a bit rules change, I think that for a hundred years the market has tolerated PEs in that range, hasn't it?

Sorta but you can't take P/E alone as you know. 21' 32' 49' and 80-82' they stood below 10 http://www.lowrisk.com/sp500pe.htm the really higher p/e craze and no dividend pay really started post Defined Contribution Plans which is why I never thought it was a sound business decision, just relied on more investors to boost stock price.

By "sound business decision" you mean from the perspective of the business? Can you explain this more? They moved to hold the profits (and not payout to shareholders) because that meant everybody got taxed less. How would the stock price affect the business' ability to operate?

I guess right now I'm just asking in general about stocks, why/how they are a reflection of the company; why/how the price matters if they're not going to pay anything out in cash to you.

edit: this was my 3000'th post. Should have made something more of it. Oh well!

 

[soccerballtux]

Originally posted by: Zebo

Look at bonds Now you see why I am staying put -

Can you explain your reasoning on this more too? I don't see what you're getting at.

 

[Zebo]

Originally posted by: soccerballtux

Originally posted by: Zebo

Originally posted by: Skoorb

Originally posted by: Zebo

Originally posted by: Skoorb
DOW futures were up decently today, it opened a little high and is negative again. Dayum.

Anyway, some guy named Shiller (I have no idea if he's a guru or not, but sounds convincing enough) says that although the market is now priced at a fair 15 or so P/E based on a decade-history of earnings, in other big bears we've seen the PE go as low as 10, so he's ultimately saying that stocks now are priced where they should be, but will go lower. This would see the DOW like in the 5000-5500 range.

P/E's should be 7 and be paying dividends. I been around a lot business purchases and have done so on my own and we look for 3-6 depending on modifiers like if you have to work in it, or are merely a silent partner/owner - 3 if you're flipping the burgers while 6 if you pick up drawer once a morning and take to bank. Stock is obviously totally passive income so it would get a 7 at most. Other considerations are there too such as accounts receivables, how collectable are they, growth potential, debt, etc, but in general no sane person would purchase a business for 15x yearly earnings. Doing so is pure speculation Dullard talked about in this thread. Might as well go to Vegas and bet on red and black since drinks and rooms are free.

But, baring a bit rules change, I think that for a hundred years the market has tolerated PEs in that range, hasn't it?

Sorta but you can't take P/E alone as you know. 21' 32' 49' and 80-82' they stood below 10 http://www.lowrisk.com/sp500pe.htm the really higher p/e craze and no dividend pay really started post Defined Contribution Plans which is why I never thought it was a sound business decision, just relied on more investors to boost stock price.

By "sound business decision" you mean from the perspective of the business? Can you explain this more? They moved to hold the profits (and not payout to shareholders) because that meant everybody got taxed less. How would the stock price affect the business' ability to operate?

I guess right now I'm just asking in general about stocks, why/how they are a reflection of the company; why/how the price matters if they're not going to pay anything out in cash to you.

What I mean Soccer, is from my perspective, my investment philosophy, I no longer believe stock market is a sound business decision due recent to poor dividend return and overvalued share prices - its a big reason I quit a relatively easy job and did my own thing, knowing the market would not put me in comfortable retirement at current saving levels and uncertainty built in because of volatility from those two factors..

 

[Zebo]

Originally posted by: soccerballtux

Originally posted by: Zebo

Look at bonds Now you see why I am staying put -

Can you explain your reasoning on this more too? I don't see what you're getting at.

I was trying to solicit advice on what others would do with those shitty fund options, even the bonds are down.

 

[soccerballtux]

Originally posted by: Zebo

Originally posted by: soccerballtux

Originally posted by: Zebo

Originally posted by: Skoorb

Originally posted by: Zebo

Originally posted by: Skoorb
DOW futures were up decently today, it opened a little high and is negative again. Dayum.

Anyway, some guy named Shiller (I have no idea if he's a guru or not, but sounds convincing enough) says that although the market is now priced at a fair 15 or so P/E based on a decade-history of earnings, in other big bears we've seen the PE go as low as 10, so he's ultimately saying that stocks now are priced where they should be, but will go lower. This would see the DOW like in the 5000-5500 range.

P/E's should be 7 and be paying dividends. I been around a lot business purchases and have done so on my own and we look for 3-6 depending on modifiers like if you have to work in it, or are merely a silent partner/owner - 3 if you're flipping the burgers while 6 if you pick up drawer once a morning and take to bank. Stock is obviously totally passive income so it would get a 7 at most. Other considerations are there too such as accounts receivables, how collectable are they, growth potential, debt, etc, but in general no sane person would purchase a business for 15x yearly earnings. Doing so is pure speculation Dullard talked about in this thread. Might as well go to Vegas and bet on red and black since drinks and rooms are free.

But, baring a bit rules change, I think that for a hundred years the market has tolerated PEs in that range, hasn't it?

Sorta but you can't take P/E alone as you know. 21' 32' 49' and 80-82' they stood below 10 http://www.lowrisk.com/sp500pe.htm the really higher p/e craze and no dividend pay really started post Defined Contribution Plans which is why I never thought it was a sound business decision, just relied on more investors to boost stock price.

By "sound business decision" you mean from the perspective of the business? Can you explain this more? They moved to hold the profits (and not payout to shareholders) because that meant everybody got taxed less. How would the stock price affect the business' ability to operate?

I guess right now I'm just asking in general about stocks, why/how they are a reflection of the company; why/how the price matters if they're not going to pay anything out in cash to you.

What I mean Soccer, is from my perspective, my investment philosophy, I no longer believe stock market is a sound business decision due recent to poor dividend return and overvalued share prices - its a big reason I quit a relatively easy job and did my own thing, knowing the market would not put me in comfortable retirement at current saving levels and uncertainty built in because of volatility from those two factors..

Oh so by "sound business decision" you mean "not a wise place to invest my money". I thought you were saying "a company should no longer pursue an IPO"

You make some good points-- without shareholder dividends it is now a ponzi-scheme.

 

[soccerballtux]

Originally posted by: Zebo

Originally posted by: soccerballtux

Originally posted by: Zebo

Look at bonds Now you see why I am staying put -

Can you explain your reasoning on this more too? I don't see what you're getting at.

I was trying to solicit advice on what others would do with those shitty fund options, even the bonds are down.

I'd been having these thoughts as well-- something to hedge against inflation is/will be my move, perhaps (after I learn more about the options I have, stability those would present). Otherwise, my HSBC savings account has 2.45%. That's pretty good.

 

[Zebo]

That's real good! I don't like big banks ..too impersonal...I go with checking/sav/mm at a local 3 branch bank and it sucks but I get loans on telephone, can call president at his house, etc so it's a give and take....

 

[soccerballtux]

Originally posted by: Zebo
That's real good! I don't like big banks ..too impersonal...I go with checking/sav/mm at a local 3 branch bank and it sucks but I get loans on telephone, can call president at his house, etc so it's a give and take....

Interesting. I suppose you get to know the guy. That's cool.
How much money do you have to have in the account to get those benefits?

 

[Zebo]

Originally posted by: soccerballtux

Originally posted by: Zebo
That's real good! I don't like big banks ..too impersonal...I go with checking/sav/mm at a local 3 branch bank and it sucks but I get loans on telephone, can call president at his house, etc so it's a give and take....

Interesting. I suppose you get to know the guy. That's cool.
How much money do you have to have in the account to get those benefits?

Yeah i know him well hunt, fish, poker, etc. Between 2-60K depending on when bills are paid/what time of month it is. Im pay checks to bills like anyone else in small business or working.