Wednesday, February 5, 2014

This Is Not 1982

The following chart shows the annual average of the Dow Jones Industrial Average adjusted for inflation (December 2013 dollars). It does not account for dividends (which over the long-term can be very important clearly).

Click to enlarge.

This is not 1982. We know this because the Dow Jones Industrial Average is not trading at roughly 1916 levels (adjusted for inflation).

I'm just pointing it out for those who truly believe that this is 1982 and that a whole new era of American prosperity will soon be unleashed. That said, something may soon be unleashed (again). 1999 and 2007 weren't enough warnings?

It is yet another ugly chart, but what's new? As a retiree, I'm generally a risk-off kind of guy, and that's got risk written all over it.

1. Profit margins will stay permanently elevated?
2. ZIRP is guaranteed to work long-term?
3. The business cycle is dead so it's nothing but up from here?
4. There aren't any itchy trigger fingers hovering over sell buttons?
5. The Fed knows exactly what it is doing?
6. We can continue to borrow our way to prosperity forever?
7. America can never have too many restaurants?
8. The rise in Internet commerce won't hurt malls irreparably?

About 15% of U.S. malls will fail or be converted into non-retail space within the next 10 years, according to Green Street Advisors, a real estate and REIT analytics firm. That's an increase from less than two years ago, when the firm predicted 10% of malls would fail or be converted.

It takes a great deal of faith and/or hubris to answer a resounding "yes" to all those questions. I don't have enough faith to answer yes to any of them.

This is not investment advice, but damn. Surely there were better times in all of recorded history to put money to work in the stock market.

Source Data:
St. Louis Fed: Custom Chart


Mr Slippery said...

One way Siegel says now is the time to jump in and ride the DOW to 18000 or 18500.

This is not a joke (or investment advice). Well, it is kind of a running joke.

Troy said...

real per-capita (age 25-54) gov't expense (all levels less SSA and Medicare)

Looks like the age of Big Gov't is closing, too, unless it's directed at the Boomers.

Stagflationary Mark said...

From your link:

Meanwhile, Siegel says, many of the market's risks are disappearing, which in itself is worrisome, as bull markets historically climb a wall of worry.

I love that the only risk that bothers him is that the risks are vanishing. That's just priceless, lol.

He did such a "fantastic" job predicting the path of real yields that he's bound to be right on the future of the stock market too!

From the link:

Jeremy Siegel, finance professor at the University of Pennsylvania´s Wharton School of Finance commented, “Two weeks ago was the first time in my life that I was worried about the very stability of the United States financial system.”

That was said in 2008. As far as walls of worries go, that one was like the Great Wall of China, lol.

Troy said...

(I still don't understand how that can be $30,000+ per working-age person. One out of 2 people have a $60,000k+ gov't job . . . 1 in each household???)

Stagflationary Mark said...


Looks like the age of Big Gov't is closing, too, unless it's directed at the Boomers.

Can I Haz NASA back?

Stagflationary Mark said...


(I still don't understand how that can be $30,000+ per working-age person. One out of 2 people have a $60,000k+ gov't job . . . 1 in each household???)

(Don't confuse government spending with government revenue. One is much bigger than the other, lol. Sigh.)

TJandTheBear said...

** COUGH (survivor bias) COUGH **

Stagflationary Mark said...


Survivorship bias

Survivorship bias is the logical error of concentrating on the people or things that "survived" some process and inadvertently overlooking those that did not because of their lack of visibility. This can lead to false conclusions in several different ways. The survivors may literally be people, as in a medical study, or could be companies or research subjects or applicants for a job, or anything that must make it past some selection process to be considered further.

I survived the dotcom bust! I also survived the housing bust! I shall live forever and take excessive risks like the frickin' genius that I am!

Survivorship bias can lead to overly optimistic beliefs because failures are ignored...

D'oh! Never mind, lol. Sigh.

Gallows humor.

Rob Dawg said...

More like half the malls by my reckoning. They aren't needed and they no longer deliver value.

Stagflationary Mark said...

Rob Dawg,

They aren't needed and they no longer deliver value.

From a tongue-in-cheek value perspective:

1. Young unemployed kids like to have a place to hang out.

2. Malls offer free demonstrations of the products sells.

3. Malls offer free heating on cold days and free air conditioning on hot days.

4. Free bathrooms. Don't even need to bring your own toilet paper.

5. No cover charge.

6. No 2 drink minimum. Malls even provide free drinking fountains.

Tremendous value! Sigh.