I really do not think this is right. Sweden, like basically all of Europe, did have a rough going in 1916-1918, but it was better off than all of the non-neutral countries during that time frame. It also had very strong growth during the beginning of the War in 1914 and 1915 and was starting a nice recovery coming out of the War in 1919-1920. The real problem was that this recovery was cut short in 1921 by a very rough and basically unrelated financial crisis.HomerJ wrote: ↑Thu Jun 23, 2022 10:39 pmMoral: World War on your doorstep means all bets are off.McQ wrote: ↑Thu Jun 23, 2022 10:19 pmSorry again that the paper did not repay your effort to read.nigel_ht wrote: ↑Tue Jun 21, 2022 7:33 pm ...
Part of my job is peer reviewing journals. ...
Sweden in 1912. Still within that WWI timeframe.
Sweden's economy was deeply impacted by WWI when German subs targeted neutral shipping in 1917 (280 Swedish merchant ships were lost in the war) and by unrestricted Allied blockade starting in 1915 and allied embargoes of neutrals to keep Germany from getting food and war material. Sweden went from having an export surplus to dramatically less trade overall (both import and export). Trade as a percentage of GDP was halved after 1915 becoming more regional and less global. Given that about 30% of government revenue was from taxes on import/export, which cratered, and increased military spending (because there's a global war going on not too far away) and its not surprising that even neutral countries struggled. Poor harvests in 1917 and Allied blockades lead to food shortages in Sweden and there were large food riots. Toward the end of the war coal could no longer be imported from Germany so there were also fuel shortages on top of that.
So your 77 year old Swedish retiree was hungry and cold in 1917 because of the war and, if hale enough, was possibly protesting in the streets.
To recap...a country that depended a lot on foreign imports lost a sizable portion of their merchant marine (17% of their tonnage) to war, suffered from diminished trade because of blockade (from war) and had a famine/poor harvest.
Yep...that leads to a bad scenario including high sustained inflation. Neutrality mitigated a portion of repercussions of the war but WWI still had very large detrimental effects on Sweden. This isn't normal SORR...and not very applicable to the US.
But I found value in the detail you added about the vicissitudes suffered by Sweden around WW I. Do you have a source that I can cite? I may want to add some of those details if I revise the paper.
In the meantime, Sweden presents a particularly interesting case for this thread. Based on the Credit Suisse Global Investment Returns Yearbook 2022, for the balanced fund investor (50-50), Sweden recorded almost the very best returns since 1900 for any market in the world, a hair behind South Africa and measurably ahead of the US. [4.555 v 4.5% v. 4.35% annualized real].
And yet, the Swede who retired in 1912 with a 60-40 or 30-70 balanced mix ran out of money in 16 or 20 years respectively. (For the paper I applied the RMD schedule, 3.65% initially, adjusted for inflation—not 4%). It was the worst outcome of any of the edge cases I considered.
Moral: winning the race over 122 years does not imply a successful withdrawal course at every juncture. Were something like the projected returns in my spreadsheet to transpire in the US (I am not saying they will), then the US might one day be the inverse of Sweden 1900-2021, with all the great returns coming up front instead of later; and those historical returns not guaranteed of continuance, just as Sweden after 1922 was not condemned to limp along at the rear of the pack forever.
Pity none of us has a 122 year investing horizon.
Thanks for the insight.
It seems like a great example of McQ's thesis. The problem is not necessarily having a big crash, which happens everywhere from time to time. The problem is having a big crash and then missing out on the rip roaring recovery, for whatever reason. Mostly it's just bad luck.
This is the problem of just writing off huge swaths of the relatively small amount of data we have, like ignoring all of Europe during the whole first half of the 20th century, which people constantly do. Lots of different kinds of unusual things can happen, and you won't learn about them if you assume the answer is just a war.