Dow 38,000

[andrew]

The S&P500’s p/e is what, 25? That’s just 5 points above what’s supposed to be carefully optimistic. Of course I know that the S&P500's growth is driven by the Magnificent Seven but what's the alternative for someone looking to build savings for the future? Cash? HYSAs/CDs/MMFs? Bonds?
I only started investing 2 year ago, so one year was a net zero, and the next was a spectacular bull. I am not too comfortable with either but see it as good mental training.

I think p/e ratios considered reasonable (15-20) may be shifted upwards, we'll see.
I went back and found p/e ratios for Japan in the 80s-90s and .com in late 90s and they were spectacularly crazy, in the hundreds, while EVEN nVidia has a p/e ratio of just under 80 today. The whole Nikkei 225 index had a p/e of nearly 70, investors had to wait 30 years to start getting their money back - likely a lot died before they ever did. Diversification solves a big part of this problem. The Greek index was/is so bad that people who invested between 1998 and 2008 will likely never get their money back.

I had a position in nVidia which I sold after it doubled, just because I wanted to prove a point to my wife that investing is more than "looking at the numbers". But the point remains, leading up to the .com crash there were companies with p/e ratios of 200-500, which in plain English means they were little more than an idea sketched on used toilet paper valued at billions.

I do believe the Mag Seven are overvalued, but not THAT BAD. nVidia is not even the most expensive in terms of p/e (Amazon is), but MS, Google, Apple, Meta, Tesla are hovering between 30-40. Amazon is the other very expensive one but still at 80 p/e. Even Buffett's own stock is not a value stock right now, yet I am eagerly buying it
Learning about and getting into low cost diversified index investing has been a life changer for me, without a shred of exaggeration.

As much as everyone laughs at them mutual funds have been my best performers long term in my portfolio. They make up around half of my portfolio. I'm leaning more and more towards index funds though and a passive consistently buy once a month kind of routine. Trying to time the market is too complicated to the average investor

 

[ThermionicScott]

https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart

After 1930 it took another 30 years for the economy to recover to the same position in 1960.
After 1965 it took another 30 years for the economy to recover to the same position in 1995.

History repeats itself.

That’s just a price chart. It doesn’t show returns from dividends, which helped investors recover much sooner than 30 years.

 

[Briar Lee]

The price of prairie land was five dollars an acre in the decade after the Civil War when dozens of the tall troopers of the 12th Missouri Cavalry bought their farms in the four corners area around Humansville, along with their darling wives.

They were foxhunters. Their grandfathers and grandmothers had been foxhunters in Scotland long ago.

The industrial might of the United States in 1863 allowed Lincoln to have an equal number of Nathan Bedford Forrest’s cavalry hand picked from loyal Missouri boys to the saddle born, give each one a new Spencer rifle and four Colt revolvers on the best horses and best saddles and they just crushed Forrest at Nashville.

Then they sent them West, but Sitting Bull and Roman Nose and Red Cloud didn’t let our cavalry catch them, and stayed out of field artillery range.



Only 36 died in battle , 227 of disease, none deserted, none captured, and were mustered out in April 1866.



And a hundred years later their last surviving son was afraid his money would be worthless unless his pocket change was real silver.

Young men will ride headlong at a gallop against Nathan Forrest at Nashville and Roman Nose at Broadus.

Old men are afraid.

They always will be.

 

[sablebrush52]

Legitimately timing the market is not a possibility, but a lot of fools live and die by it.
A book on investing that I found very helpful is “Winning At The Losers Game”, by Charlie Ellis. No fancy bullshit quick rich theories, just an approach that works over the long term.
Assuming the world doesn’t explode you’ll do fine, and if it does you’re dead anyway, so what the heck.

 

[frozenchurchwarden]

That’s just a price chart. It doesn’t show returns from dividends, which helped investors recover much sooner than 30 years.

There's no getting around opportunity cost, the bottom of the market was 1/4 of the peak and a broad portfolio would have lost insane amounts of money compared to alternative investments.
And that's why realestate is now the #1 preferred method of storing wealth, which has the side effect of making it impossible to own property for practical reasons.

 

[karam]

As much as everyone laughs at them mutual funds have been my best performers long term in my portfolio. They make up around half of my portfolio. I'm leaning more and more towards index funds though and a passive consistently buy once a month kind of routine. Trying to time the market is too complicated to the average investor

Not sure who laughs at mutual funds. Maybe degenerate stock trading gamblers writing naked calls etc. I am regretting exiting nVidia, but so be it. I was checking it several times per day. Ok, I lied, per hour. That's a slippery slope. Sure, if I had held on to that position it'd have been a nice +30% from the time I sold it. And then what? FOMO to buy at $600 when I first bought at $200 and sold at $400? It was a no brainer in early 2023, took home a 2x RoI and funded a Christmas holiday in Paris with it. It probably still is a no brainer, but I don't like the stress associated with it. I already got it through index funds anyway! I am just buying BRK.B, I see it as an index of sorts picked by some of the best long-term stock pickers in history. When the old man passes I think I'll back up the truck and load up on more, as I feel it'll explode in value.

I am convinced the key to success is passively-managed, index-tracking, low-cost, broadly-diversified funds, either mutual funds or exchange traded funds. Won't make one rich fast, but has a great chance of making one rich slowly.

@warren is right, there's a lot of great advice for free, I try to sniff for profit, and if the advisor is standing to make profit after they have given their advice I avoid them. Charlie Munger said there's wisdom worth trillions in public libraries. I'd agree to that too.

 

[karam]

There's no getting around opportunity cost, the bottom of the market was 1/4 of the peak and a broad portfolio would have lost insane amounts of money compared to alternative investments.
And that's why realestate is now the #1 preferred method of storing wealth, which has the side effect of making it impossible to own property for practical reasons.

Eh, let me introduce you to Bob, the world's worst market timer: What if You Only Invested at Market Peaks? - A Wealth of Common Sense - https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Newbies (like me) with worse critical thinking and nerves post all the time in the Boglehead forum that the S&P500 is at an all time high. Old hands tell them it's been at an all time high for most of the last 120 years, and that it really doesn't make sense to wait because, as sable and others said, by the time me and you hear of any news about movements the effect of these news is already priced in by people employing supercomputers analyzing huge amounts of data. Look at this, 7 out of 10 best days in 20 years were in deep bear territory: Timing the Market: Why It’s So Hard, in One Chart - https://www.visualcapitalist.com/chart-timing-the-market/. I am convinced that timing the market has its own huge opportunity cost.

The DJIA is an archaic index, also many of the troughs in that chart are peaks outside the US.

Maybe I've taken the Vanguard blue pill, who knows, personally I feel it's the red pill!

Real estate is, as you said, great for storing wealth, I wouldn't want it for growing.

 

[brian64]

Oh, pleeze. Wall St and Main St have never been connected.

Sorry, been too busy trading my time and energy for federal reserve notes to reply sooner.

By disconnected I simply mean the health of one does not necessarily imply the health of the other. There is a general mentality that the DOW is like some kind of single gauge by which we can measure the well being of the entire country (not saying you're saying that...but the OP seems to imply it).

Anyway, it's just my two cents worth...and I'm just another dumb yokel in fly-over country...just one of the many useless eaters who are completely irrelevant to such a discussion regarding the "United States of America" as understood from the Wall St perspective.

And OH, I forgot to mention previously...I HEREBY CALL DIBS ON STARTING THE THREAD WHEN THE DOW REACHES 40,000!!! (I'm already shivering with excitement just thinking about it).

 

[Briar Lee]

The majority of the babies born this year will live to see January 1, 2100, and none of us will. Let’s round it to 75 years, and the nearest round number.

The Dow was 200 in 1950

800 in 1975

10,000 in 2000

40,000 next year, or the next. It’s coming.

If the Dow is four times higher in 2050 it will be 160,000

In 2075 it should be Dow 640,000

And in 2100 Dow 2.5 million. It will go up and down 40,000 points a day.

Hair cuts were a dollar in 1950, they are $15 today, and may be $225 in 2100.

The old rich men will be afraid to leave a $25 tip.

 

[Simmerdown☕️]

The majority of the babies born this year will live to see January 1, 2100, and none of us will. Let’s round it to 75 years, and the nearest round number.

The Dow was 200 in 1950

800 in 1975

10,000 in 2000

40,000 next year, or the next. It’s coming.

If the Dow is four times higher in 2050 it will be 160,000

In 2075 it should be Dow 640,000

And in 2100 Dow 2.5 million. It will go up and down 40,000 points a day.

Hair cuts were a dollar in 1950, they are $15 today, and may be $225 in 2100.

The old rich men will be afraid to leave a $25 tip.

My wife cuts my hair. And, the only tip she gets is mine…when she gives me the ok. ️

 

[frozenchurchwarden]

Eh, let me introduce you to Bob, the world's worst market timer: What if You Only Invested at Market Peaks? - A Wealth of Common Sense - https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Newbies (like me) with worse critical thinking and nerves post all the time in the Boglehead forum that the S&P500 is at an all time high. Old hands tell them it's been at an all time high for most of the last 120 years, and that it really doesn't make sense to wait because, as sable and others said, by the time me and you hear of any news about movements the effect of these news is already priced in by people employing supercomputers analyzing huge amounts of data. Look at this, 7 out of 10 best days in 20 years were in deep bear territory: Timing the Market: Why It’s So Hard, in One Chart - https://www.visualcapitalist.com/chart-timing-the-market/. I am convinced that timing the market has its own huge opportunity cost.

The DJIA is an archaic index, also many of the troughs in that chart are peaks outside the US.

Maybe I've taken the Vanguard blue pill, who knows, personally I feel it's the red pill!

Real estate is, as you said, great for storing wealth, I wouldn't want it for growing.

Despite the verbiage of the article, the "Bob" example is still more on the optimistic side because of the chosen timeframe, anyone who invested at average market conditions in the first half of the century and needed money in the 1980's was getting the short end of the stick.
However, given that the example has 5x returns off of only a 2x increase in market value, that leaves triple your money for a flat economy.
Apparently it's hard to go wrong with stocks in the long run.

The most pessimistic argument I can make to counter that is the global population tripled in the last hundred years and that's never going to happen again, the global economy must contract from this point forward.

 

[Briar Lee]

The most pessimistic argument I can make to counter that is the global population tripled in the last hundred years and that's never going to happen again, the global economy must contract from this point forward.

Xxxxx

Ethanol manufacturers use about 40 percent of the U.S. corn crop for ethanol and related co-products, with the majority of the ethanol being consumed in the domestic transportation fuel market.

Xxxxx

Each morning my father’s herd of dairy cows was standing in a perfect line of twelve cows on each side, with the hind cow on the south, making twenty five.

But of evening they waited to be called in. My Daddy would stand tall and bellow at the top of his lungs—

Soooooo——calllllllf——Sooooo-calllllf—-

Soocalf——whoooooooeeeee!

And way off the lead cow would bawl, and they’d lumber in to be milked.

A half a century ago my father tilled and cropped 200 acres of his own and 170 more in Cedar County across the road he rented and grazed 100 acres.

The 370 acres of fertile upland crop land hasn’t seen a grain crop in forty years, but it could next year.

That total of 470 acres of land, plus the Elza Hopper place would be 670 acres. The Hopper place needs a bulldozer really bad, but there are lots of bulldozers.

The pioneer farmers knew, that dairy cows needed no fences. They knew there was a good military road from Humansville to Springfield (present Highway 13) When the railroad reached Springfield in 1870, Humansville exploded with growth.

My Amish renter asked me last year what a huge concrete pad and old bridge were for and I said that’s where the Leaky Roof Railroad had a spur and cattle and hog pens from 1885 to 1935, to haul livestock to Springfield. There was a hobo jungle here, and no man who wanted food and shelter and an honest day’s pay was ever turned away.


He said how do you know these things, and I said I walked behind Elza Hopper, and my father.

640 acres is a section. One square mile.

Xxxxxx

The contiguous United States occupies an area of 3,119,884.69 square miles (8,080,464.3 km2). Of this area, 2,959,064.44 square miles (7,663,941.7 km2) is actual land, composing 83.65 percent of the country's total land area, and is comparable in size to the area of Australia.

Xxxxxx

New Jersey is the most densely populated state in the United States. With approximately 1,300 people per square mile, it stands out as a compact and highly urbanized region. New Jersey is home to a significant population, largely due to its proximity to major metropolitan areas like New York City and Philadelphia.

Xxxxx

The population of the United Kingdom was estimated at over 67.0 million in 2020. It is the 21st most populated country in the world and has a population density of 270 people per square kilometre (700 people/sq mi), with England having significantly greater density than Wales, Scotland, and Northern Ireland.

Xxxxx

The population density of the square mile I’m describing is about ten per square mile.

You could build hundreds of new homes on that space.

America could support over a billion people and still have plenty of room for billions more.

One Billion Americans - Wikipedia

en.m.wikipedia.org

We are wealthy beyond measurement, in the United States of America.

Not that any old men in the barbershop would admit it.

 

[karam]

Despite the verbiage of the article, the "Bob" example is still more on the optimistic side because of the chosen timeframe, anyone who invested at average market conditions in the first half of the century and needed money in the 1980's was getting the short end of the stick.
However, given that the example has 5x returns off of only a 2x increase in market value, that leaves triple your money for a flat economy.
Apparently it's hard to go wrong with stocks in the long run.

The most pessimistic argument I can make to counter that is the global population tripled in the last hundred years and that's never going to happen again, the global economy must contract from this point forward.

I’d stand by Churchill’s point that being anything other than an optimist is not much good for anything.

The Bob example indeed ends in a high note because it ends at the beginning of a statistically improbably mega bull run. Indeed people retiring in November 1987, 2000, 2008 in the US got shafted. Or people planning to retire in March 2022.

A lot of the academics, theory and stats forget there are real people behind these numbers, that’s my criticism of the theory, yet a theory needs to be general.

The whole US stockmarket is really not that overvalued, some stocks are, and ex-US markets are pretty attractive. I like to watch this guy for financial education:

On the world population…all predictions say it will continue rising, yet the counter argument is that infinite growth in a finite system (ie our planet) is a definition of cancer, and cancer eventually kills its host. Whether this will happen in mine or my kids’ lifetime, I doubt it, and I can’t care for whatever happens after that!

 

[frozenchurchwarden]

I’d stand by Churchill’s point that being anything other than an optimist is not much good for anything.

The Bob example indeed ends in a high note because it ends at the beginning of a statistically improbably mega bull run. Indeed people retiring in November 1987, 2000, 2008 in the US got shafted. Or people planning to retire in March 2022.

A lot of the academics, theory and stats forget there are real people behind these numbers, that’s my criticism of the theory, yet a theory needs to be general.

The whole US stockmarket is really not that overvalued, some stocks are, and ex-US markets are pretty attractive. I like to watch this guy for financial education:

On the world population…all predictions say it will continue rising, yet the counter argument is that infinite growth in a finite system (ie our planet) is a definition of cancer, and cancer eventually kills its host. Whether this will happen in mine or my kids’ lifetime, I doubt it, and I can’t care for whatever happens after that!

The practicality of sustaining a billion people makes no claim to the happiness of those people.
Past the baby boom, every developed nation has naturally contracted its population (including the U.S. in the last decade).
Population "can" increase but people don't like it.
The exponential exploitation of natural resources can only support so many people, past a certain point GPD per-capita must go down with population growth.
As soon as you put a billion people in the U.S. the living conditions of the average person is going to look nearly identical to China.

 

[karam]

The practicality of sustaining a billion people makes no claim to the happiness of those people.
Past the baby boom, every developed nation has naturally contracted its population (including the U.S. in the last decade).
Population "can" increase but people don't like it.
The exponential exploitation of natural resources can only support so many people, past a certain point GPD per-capita must go down with population growth.
As soon as you put a billion people in the U.S. the living conditions of the average person is going to look nearly identical to China.

There's a lot to unpack here, and not really relevant. The US has never not grown its population since the baby boom. What has changed is the rate of growth (1.68% in 1955, 0.58% in 2022 according to worldometers). Many developed countries have declining rates of growth, but not absolute declining growth. Developing countries grow both in rates and absolute numbers. There's a lot of land on the planet (including in the US), and in fact most of it is not inhabited. Similar to you, I am convinced we could do a lot better with our management of natural resources. If only we pulled our collective head out of our collective ass, that is. Either way, as I said the extent of my caring for the world extends at most to my grandchildren (if/when I get any), and only because I care about my children being happy. After that...the ocean can boil using the fat of baby pandas, I'll be long gone.

Not sure about living conditions either, density doesn't necessarily mean bad. Monaco has 6 times the population density of Gaza, and about 10000 times better living conditions. China is a vast country with huge wealth inequalities and variance in standards of living. I would bet a super rich person in China feels better than a super rich person in the US. Once all material stuff can be acquired with the drop of a hat there are subtler differences like influence, having more freedom than most others, being above the law etc etc etc. I'd bet the few super rich in third world countries have a better life than Elon Musk or Jeff Bezos. They practically live like Medieval royalty, they make the laws, have absolute power over everything in their lands, face no scrutiny or criticism. Not saying it's good, just stating the fact.

 

[canucklehead]

The thousands of tent cities appearing within the last 2 years must be because the economy is so good that people have enough disposable income to go camping year round.

 

[cosmicfolklore]

Tent cities have been a thing since 2000 and is not a new thing this last 2 years. Most of the homeless are there not because they can't get a job, but because of drug addiction and mental health issues. As long as we keep turning a blind eye to the fact that our mental health and health insurance systems suck beyond belief, it will keep getting worse.

 

[sham]

Tent cities have been a thing since 2000 and is not a new thing this last 2 years. Most of the homeless are there not because they can't get a job, but because of drug addiction and mental health issues. As long as we keep turning a blind eye to the fact that our mental health and health insurance systems suck beyond belief, it will keep getting worse.

who is turning a blind eye to our mental health and health insurance problems? It very much is an issue, but a well known one. Nearly everyone I've spoken to seems informed of it, and goverment offices campaign that they will fix it time and time again. Our health insurance is a meme to others around the globe

 

[EA-6B]

Open-source bitcoin which anyone could have mined plenty of in a short period of time with their desktop p.c., (Pyramid scheme, what?) just cracked $100k...

 

[Servant King]

I can't help but be reminded of Stan's bank deposit in that one South Park episode...



Such a massive fleecing being set up here! I'm sure someone will make a movie out of it in a few years, and hopefully reference Tulip mania to help folks make the connection, albeit after the fact. At least tulips actually exist! Hell, even the US dollar has some intrinsic value, though it's pretty much just tinder or toilet paper. And speaking of TP, I think it was PT Barnum (sorry, chintzy segue, but that's what you get for free) that said there's a sucker born every minute, and two to take him. He didn't even know the half of it! We appear to be on the fast track now. Yikes...