Friday, May 10, 2013

"Secular Bull Market in Equities" (Musical Tribute)

I heard this quote on CNBC today and there was more head nodding than I could stomach. Apparently the financial "experts" have not yet heard that the 1980s and 1990s are actually over.

The following chart shows the S&P 500 index adjusted for inflation (March 2013 dollars).

Click to enlarge.

The next chart shows real wage and salary disbursements per capita (March 2013 dollars).

Click to enlarge.

Red exponential style trend lines in both charts were generated using an artistic license. Good enough for government work! In any event, both trends have failed spectacularly. I would argue that neither are in any condition to resume their former trends over the long-term. Put another way, I have absolutely no desire to invest in the stock market after it has cyclically doubled. Call me crazy if you must.

As a side note, real wages per capita tend to rise during economic recoveries as more people get put back to work. As seen in the chart above, I guess this recovery is special though. And when I say special, I actually mean FUBAR. If real wages per capita cannot rise during this expansion then what will they do during the next contraction? Don't answer. It's rhetorical. Sigh.

The 1980s and 1990s really are over. This is not a popular theory on CNBC. Perhaps it is because CNBC was launched on April 17, 1989. They may not know financial value but perhaps they do know sentimental value. I'm certainly teared up just thinking about the one hit wonders of the 1980s.

Here in my car
I feel safest of all
I can lock all my doors
It's the only way to live in cars

As seen in the following link, the future is now.

December 25, 2012
Program to help homeless living in cars off to slow, steady start

In the year since Seattle launched the Safe Parking pilot project for homeless people living in their cars, just two churches have opened their parking lots, providing a total of seven spaces. But the city is expanding the project and hopes to provide more services.

And lastly, The Market Ticker has an interesting take on what the S&P 500's dividend yield will get you over the long-term.

The S&P 500's dividend yield is down to 2.03%. May I also remind everyone that the only actual long-term value in common equity is in fact the dividend cash flow off that equity since all companies eventually cease to exist. Think I'm wrong? Where's RCA, a powerhouse that would never die? Uh huh. There are thousands more just like them.

That was certainly true where I once worked. Sierra Entertainment was founded in 1979. It was "aborted and shut down" in 2009. It only survived 30 years. I'm not sure why the word "aborted" was needed when "shut down" would seem to suffice. But then again, I left as a rat would leave a sinking ship in 1999. I can certainly empathize with the sentiment. Sigh.

See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Wage Chart
St. Louis Fed: Custom S&P 500 Chart


Stagflationary Mark said...

I-Bond rates were announce on May 1st. 0.0% again! Big shocker, lol. Sigh. That's in addition to whatever the CPI does. That means it is still a bargain relative to most treasury inflation protected securities (TIPS). Even 0.0% looks good compared to negative numbers. Sigh.

EE-Bond rates are still 0.2% but you get 3.53% if held 20 years (since they are guaranteed to double). Since 3.53% is well above 20-year nominal treasuries at 2.70% they are also a relative bargain.

Of course, Jeremy Siegel continually assures us that the bond bubble will pop once 200 years of prosperous financial history extrapolate well into the distant future!

Okay, might want to worry a bit. Perhaps a moment of silence is in order.

In space, no one can hear you scream.

EconomicDisconnect said...

You are mistaken. YOU HAVE NO WHERE ELSE TO PARK YOUR CASH BUT STOCKS. It's so way totally different this time. Like for realz. 18 months of 5% monthly surges in the Japan market (I actually saw this written 5 times this week) and the US being the best of the worst should be just as good as the dollar gets stronger. I mean check this out:

Also NSFW:

Now why Japan and the Fed waited until now to unleash unlimited free nirvana I have no idea but then again I am not that smart.

Mr Slippery said...

You did a great chart on stocks and a video link to Gary Numan, but you left out precious Metal.

Craig Brandenburg said...

May I also remind everyone that the only actual long-term value in common equity is in fact the dividend cash flow off that equity since all companies eventually cease to exist.

What about stock buybacks? A buyback is like a company paying for its future dividends in the present because it reduces the number of outstanding shares, so buybacks should also count as actual long-term value.

Are there available stats showing a combined dividend + buyback return rate for the S&P500? I would really like to know the historical values of such a stat, as many companies have relied more in modern times on buybacks in lieu of paying dividends, thus skewing the "historical average" dividend rate.

Troy said...

blue is real corporate profits.

red is S&P 500

Stagflationary Mark said...


Now why Japan and the Fed waited until now to unleash unlimited free nirvana I have no idea...

It's a conundrum. It's a mystery wrapped inside an enigma! Extreme credit expansion will "save" us all! ;)

Stagflationary Mark said...

Mr Slippery,

I also left out my precious. Shame on me! It has such a nice "ring" about it!

Stagflationary Mark said...

Craig Brandenburg,

Call me cynical, but when I think of stock buybacks I also think of the offsetting dilution of excessive stock option compensation of corporate executives.

I would like to see stats on the total number of shares (adjusted for stock splits) of the S&P 500 throughtout history.

Stagflationary Mark said...


I trust current real corporate profits about as far as I can throw them, if for no other reason than fat profits would eventually lead to excessive competition.

There is another reason though. Much of the profits at my last employer were actually cooked and "Former CEO Walter Forbes was sentenced to 12 years in prison in 2007".