“Anything is possible on the stock market. Even the opposite.”
– André Kostolany
arvy’s Teaser: Welcome to the year-end edition and a financial rollercoaster ride – a wild trip full of curiosities and amazing statistics that will make you question everything you thought you knew about investing. So grab your financial safety goggles and let’s dive into this market merry-go-round of madness! Based on the article from “The Irrelevant Investor” by Michael Batnick from March 2019, updated by arvy with current data and charts.
The stock market writes the most incredible stories. Here are 20 of them:
1. Since 1916, the Dow Jones has made new all-time highs less than 5% of all days, but over that time it is up 279,000%, including dividends.
95% of the time you are underwater. The less you look the better off you will be.
2. The Dow Jones has compounded at less than 4 basis points a day since 1970. Since then, it is up more than 27,000%, including dividends.
Compounding really is magic. CHF 1,000 became CHF 270,000.
3. The Dow Jones has only been positive 52% of all days. The average daily return is 0.73% when it is up and -0.76% when it is Dow Jonesn.
See #2.
4. The Dow Jones has spent more time 40% or more below the highs than within 2% of the highs (20.6% of days vs. 18.4% of days)
No pain no gain.
5. The Dow Jones gained 38 points in the 1970s
See #4.
Chart 1: Dow Jones Jones in the 1970s and beyond
Source: TradingView
6. Why am I using the Dow Jones instead of the S&P 500? They are effectively the same thing. The rolling one-year correlation since 1970 is .95.
Stop wasting your time on this.
7. At the low in 2009, US stocks were back to where they were in 1996.
Stocks for the long-run. The very long-run.
8. At the low in 2009, Japanese stocks were back to where they were in 1980.
See #7.
Chart 2: Nikkei 225, excluding Dividends, since 1962
Source: TradingView
9. US one-month treasury bills went 68 years with a negative real return.
What is safe in the short-run can be risky in the long-run.
10. At the bottom in 2009, long-term US government bonds outperformed the stock market over the previous 40 years
Stocks generally outperform bonds, but there are no guarantees.
11. Gold and the Dow Jones were both 800 in 1980. Today Gold is $2,618/ounce, the Dow Jones is near 43k.
Cash flows > commodities.
12. Since the Dotcom peak, Gold is up 620%. Stocks are up 470%, including dividends.
You can support any argument by changing the start and end dates.
13. Since 1980, Gold is up 307%. Inflation is up 384%.
See #12.
14. CTAs gained 14% in 2008 when stocks lost 37%. Since 2009 they are up 29%. Stocks are up 520%.
Non-correlation cuts both ways.
15. If you had invested from 1960-1980 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-2000 and underperformed the market by 5% a year
The time at which you were born has a major influence. Obviously.
16. The Dow Jones lost 17% in 1929, 34% in 1930, 53% in 1931 and 23% in 1932.
Be grateful.
Chart 3: Dow Jones during the Great Depression and the subsequent recovery
Source: TradingView
17. Only 47.7% of stocks generated a life-time return that match one-month treasury bills.
The reason why so many mutual funds fail to beat the market is because too many stocks fail to beat the market.
18. Dow Jones earnings were cut in half in 1908. The index gained 46%.
The stock market ≠ the economy.
19. In 1949 the stock market was trading at 6.8x earnings and had a 7.5% dividend yield. 50 years later it reached a high of 30x earnings and carried just a 1% dividend yield.
You can calculate everything yet still not know how investors are going to feel.
20. Warren Buffett is one of the greatest investors of all-time. In the 20 months leading up to the Dotcom peak, Berkshire Hathaway lost 45% of its value. The NASDAQ 100 gained 290% over the same time.
No pain no premium.
Chart 4: Berkshire Hathaway vs Nasdaq during Dotcom
Source: TradingView
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