will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

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linate
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will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by linate »

i've always kind of wondered that, and this article makes that argument
https://awealthofcommonsense.com/2019/0 ... t-history/

as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.

another consideration, is that maybe near future returns will be favorable so that we can revert to the mean in the coming decade or so. but with PE valuations so high, i am skeptical if that will happen.

thoughts?
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Beensabu
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by Beensabu »

linate wrote: Sun Nov 28, 2021 8:17 pm i've always kind of wondered that, and this article makes that argument
https://awealthofcommonsense.com/2019/0 ... t-history/

as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.

another consideration, is that maybe near future returns will be favorable so that we can revert to the mean in the coming decade or so. but with PE valuations so high, i am skeptical if that will happen.

thoughts?
What are you even asking? Yes, Jan 2000 was a terrible all eggs in the US cap weighted market moment.

We've already had the favorable reversion, don't you think? It's been pretty good. It's almost as if it never happened.

Do you want someone to tell you this will continue? I'm sure someone will. You can choose to believe them or not. Not like it matters what anyone says.

All you ever have is now and you can never know what will be.

Don't ask. Nobody can tell you. Know that none of us know. Go with that.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
dukeblue219
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by dukeblue219 »

Article is from early 2019, and states:
The 19 year period from 2000 to 2018 produced a total return of 147% or 4.9% on an annual basis for the S&P 500 index.
Bumping that up to Nov 2021, the annualized return becomes 7.6%.

Yeah Jan 2000 was a bad time for a lump sum market entrance, but if you just held on through the 00 decade the returns haven't been awful. Even after inflation it's 5.2% per year over those 21+ years.

From Sept 1929 until July 1951 (same length) the SP500 returned only 4.1% (2% after inflation). Much worse than the dotcom bust.
Last edited by dukeblue219 on Sun Nov 28, 2021 8:39 pm, edited 1 time in total.
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Candor
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by Candor »

That article was written in March of 2019 so we have almost 3 more years of returns. The author states:

"To put this into perspective, for the 35 year period from 2000-2034 to earn the same return as the 1930-1964 time frame, the S&P 500 would need to earn roughly 15% per year from 2019-2034"


The S&P has increased 24+% per year since the beginning of 2019. Still a ways to go but...
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
59Gibson
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by 59Gibson »

Beensabu wrote: Sun Nov 28, 2021 8:28 pm
linate wrote: Sun Nov 28, 2021 8:17 pm i've always kind of wondered that, and this article makes that argument
https://awealthofcommonsense.com/2019/0 ... t-history/

as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.

another consideration, is that maybe near future returns will be favorable so that we can revert to the mean in the coming decade or so. but with PE valuations so high, i am skeptical if that will happen.

thoughts?
What are you even asking? Yes, Jan 2000 was a terrible all eggs in the US cap weighted market moment.

We've already had the favorable reversion, don't you think? It's been pretty good. It's almost as if it never happened.

Do you want someone to tell you this will continue? I'm sure someone will. You can choose to believe them or not. Not like it matters what anyone says.

All you ever have is now and you can never know what will be.

Don't ask. Nobody can tell you. Know that none of us know. Go with that.
This is it. Plan for a range of reasonable and some unreasonable outcomes. If the worst of all times come to pass, it will just have to be dealt with like everything else in life.
MarkRoulo
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by MarkRoulo »

linate wrote: Sun Nov 28, 2021 8:17 pm i've always kind of wondered that, and this article makes that argument
https://awealthofcommonsense.com/2019/0 ... t-history/

as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.

another consideration, is that maybe near future returns will be favorable so that we can revert to the mean in the coming decade or so. but with PE valuations so high, i am skeptical if that will happen.

thoughts?
The relevant bits:
The 35 year period from 1930 to 1964 produced a total return of 2234% or 9.4% on an annual basis for the S&P 500 index.

The 35 year period from 1965 to 1999 produced a total return of 5947% or 12.4% on an annual basis for the S&P 500 index.

The 19 year period from 2000 to 2018 produced a total return of 147% or 4.9% on an annual basis for the S&P 500 index.
My primary thought is that you can't invest in 1930 or 1965 today.

My second thought is that...

the 20 year return from Jan 1930 -Jan 1950 was 137% (nominal).

The 20 year return from Jan 1965 - Jan 1985 was 345% (nominal, but only 31% real [not a typo]).

The 20 year return from Jan 2000 - Jan 2020 was 235% (nominal).

Using similar time periods doesn't seem quite so scary.
Northern Flicker
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by Northern Flicker »

linate wrote: Sun Nov 28, 2021 8:17 pm i've always kind of wondered that, and this article makes that argument
https://awealthofcommonsense.com/2019/0 ... t-history/

as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.

another consideration, is that maybe near future returns will be favorable so that we can revert to the mean in the coming decade or so. but with PE valuations so high, i am skeptical if that will happen.

thoughts?
The article compares 35 year periods of the past with a 19-year period starting 1/1/2000. Shouldn't we be doing this comparison after 12/31/2034?

The 35-year period in the article starting at the start of the great depression starts at the beginning of 1930. But 9/3/1929 was the market peak. From 9/4/1929 to 11/13/1929 the Dow price index shed 48%. I don't have the returns for that period with dividends included, but using 1/1/1930 as a start date eliminates a substantial part of the full drawdown of the great depression.

I don't know which 35-year period ultimately will be worse (we'll know in 14 years) but I believe that the comparison as presented is nonsense.
retire2022
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by retire2022 »

linate wrote: Sun Nov 28, 2021 8:17 pm i've always kind of wondered that, and this article makes that argument
https://awealthofcommonsense.com/2019/0 ... t-history/

as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.

another consideration, is that maybe near future returns will be favorable so that we can revert to the mean in the coming decade or so. but with PE valuations so high, i am skeptical if that will happen.

thoughts?
No my total contributions approx 600k from 1987 crash to retirement August 2021 was 2.7 million, so 34 years of total investing did pretty good post dot com.

This was my experience, I had steady pay state government job with pension, crashes are good, post crashes I made money.

Pension 66K and SSA at 70 will be 42k.

me no worry.
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willthrill81
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by willthrill81 »

linate wrote: Sun Nov 28, 2021 8:17 pm as the article points out, hardly anyone put their egg basket all in in january 2000. but it's still alarming.
Anyone who was invested during that period was 'all in' with what they had at the time, and there were surely many who retired after the long bull market in both stocks and bonds that had lasted nearly 20 years (excepting the short bear market in stocks in late 1987).

As noted in this long running thread, year 2000 retirees who blindly followed the '4% rule' of withdrawals, which virtually no one would have actually done as they would have reduced their withdrawals along the way, is in great shape now. The first decade would have generated a lot of heartburn for most though.
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AnnetteLouisan
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by AnnetteLouisan »

This question dovetails with something I’ve often wondered about the impact on the market of generational shifts.

As Gen Xers, in many ways we were close enough to the party to be influenced by it, but arrived only when the punch bowl was almost empty.

As large demographic population groups move through the system, not to be macabre, and Gen X becomes the oldest cohort, should we really be too surprised if redemptions have reduced market cap significantly by the time we are set to retire?

Or is this demographic shift mostly irrelevant given the percentage of US stocks owned by foreign investors, institutions and a relatively small percentage of individual investors.
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firebirdparts
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by firebirdparts »

That is a question that interests me greatly. It’s inevitable in my opinion that returns will at least be dull as revenue growth is dull. It’s not that the boomers are truly a large group, exactly. The effect is coming from future generations not being appropriately larger. In the past, the average age on earth was always about 20. What will it be like when it’s 45 or more? Japan gets to try it first, but places with birth rates of 1 get to try it higher.

In the media and popular culture, they never use realistic language to talk about low birth rate effects.

In addition to that, younger people are getting their needs met at much lower levels of economic activity.
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JoMoney
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by JoMoney »

Both the 1929 bust and the 2000 bust took about 12 years to break-even in inflation adjusted returns.
The 1963 through 1982 period took about 20 years to break-even in inflation adjusted returns.
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by lazynovice »

AnnetteLouisan wrote: Sun Nov 28, 2021 11:45 pm This question dovetails with something I’ve often wondered about the impact on the market of generational shifts.

As Gen Xers, in many ways we were close enough to the party to be influenced by it, but arrived only when the punch bowl was almost empty.

As large demographic population groups move through the system, not to be macabre, and Gen X becomes the oldest cohort, should we really be too surprised if redemptions have reduced market cap significantly by the time we are set to retire?

Or is this demographic shift mostly irrelevant given the percentage of US stocks owned by foreign investors, institutions and a relatively small percentage of individual investors.
Yes, to the last sentence. But also without another long lasting bear market, a lot of boomer wealth is going to pass to their children.
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by SchruteB&B »

AnnetteLouisan wrote: Sun Nov 28, 2021 11:45 pm This question dovetails with something I’ve often wondered about the impact on the market of generational shifts.

As Gen Xers, in many ways we were close enough to the party to be influenced by it, but arrived only when the punch bowl was almost empty.

As large demographic population groups move through the system, not to be macabre, and Gen X becomes the oldest cohort, should we really be too surprised if redemptions have reduced market cap significantly by the time we are set to retire?

Or is this demographic shift mostly irrelevant given the percentage of US stocks owned by foreign investors, institutions and a relatively small percentage of individual investors.
I don’t quite get your point, both the Millennials and Gen Z cohorts are each now larger than the Baby Boomer Generation. https://knoema.com/infographics/egyydzc ... on-in-2020

I am squarely in Gen X, born in the early 1970s, and have been investing every year since 1996. When was “the punch bowl almost empty?”
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AnnetteLouisan
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by AnnetteLouisan »

Well, you know….
Divorce revolution as we were kids…
Came of age just as AIDS hit…
Graduated into 87-93 downturn…
Crack epidemic
Offshoring, restructuring, decline of pensions
Walloped by 2000 in our new earning years
9/11
2008 hit many of us
The beat goes on

It didn’t stop some of us - and I personally had undreamed of good fortune and opportunities- but maybe made some of us cautious or even fearful about the future.
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by AlohaBill »

You should be a little fearful: death is around the corner.
finsterfolly
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by finsterfolly »

AnnetteLouisan wrote: Mon Nov 29, 2021 9:19 am Well, you know….
Divorce revolution as we were kids…
Came of age just as AIDS hit…
Graduated into 87-93 downturn…
Crack epidemic
Offshoring, restructuring, decline of pensions
Walloped by 2000 in our new earning years
9/11
2008 hit many of us
The beat goes on

It didn’t stop some of us - and I personally had undreamed of good fortune and opportunities- but maybe made some of us cautious or even fearful about the future.
Looks like we are about the same age. I've often thought about the list of setbacks and the list of fortunes I've had in my life. Written separately, it would seem like the stories of two different people. Each of the setbacks are now just a memory that makes me appreciate where I am at today. They also put me in a better position to handle new setbacks. If I had the choice to not enter in the workforce pre dot com and enter into another set of random events, I would take the last 20+ years.

"Thanksgiving for every wrong move that made it right." Thanksgiving, Poi Dog Pondering
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AnnetteLouisan
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by AnnetteLouisan »

I agree- was just thinking that actually, how negatives conceal the positive within. Any event has both elements and opportunity. I could put together a list of the great aspects of our era as well. Fair point, well said. remarkable group!!
Nathan Drake
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by Nathan Drake »

JoMoney wrote: Mon Nov 29, 2021 7:55 am Both the 1929 bust and the 2000 bust took about 12 years to break-even in inflation adjusted returns.
The 1963 through 1982 period took about 20 years to break-even in inflation adjusted returns.
Yep

Many people don’t recognize just how bad the 63-82 period was from an inflation adjusted SORR scenario. By far the worst period outside of the Great Depression

00 wasn’t as bad if you had bond exposure.

21 onward may be painful given bond and us equity starting valuations with rising inflation
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retire2022
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Re: will the pre dot com bust of the late nineties prove to be a worse market entry point than the pre great depression?

Post by retire2022 »

AnnetteLouisan wrote: Mon Nov 29, 2021 9:58 am I agree- was just thinking that actually, how negatives conceal the positive within. Any event has both elements and opportunity. I could put together a list of the great aspects of our era as well. Fair point, well said. remarkable group!!
Reversion to the mean

I think if one hold on long enough, there is a mean reversion:

https://www.investopedia.com/terms/m/meanreversion.asp

Random Walk theory works in life as well

Here is a good article which summarizes understanding: https://towardsdatascience.com/bean-mac ... 0b23d6e887
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