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S&P 500 Then and Now

Beach Fanatic
1,638 views1
Comparing 2008 and 2010
Taking a closer look at socialism and the S&P

www.waltonsun.com

A couple of years ago, reviewing portfolios with clients presented slight problems. Lest we forget in October of 2008 every asset class went down. The entire financial system was being battered by a Category 5 hurricane. Remembering how portfolio values plummeted, fast-forward two years and meetings are more enjoyable.


We use Principia from Morningstar, and a report generated last week brought to mind a few salient points. Morningstar analyzes portfolios by choosing the best/worst threemonth, one-year and three-year returns over the last 10 years. What fascinated me was the best three-year return for this portfolio (April 2003 to March 2006) was immediately followed by the worst three-year return (March 2006 to February 2009). Conversely the best one-year return (March 2009 to February 2010) came on the heels of the worst one-year return (March 2008 to February 2009). If you wanted a perfect illustration of market-timing foolishness, you could not have picked a better example.


This portfolio?s emerging market allocation rose sharply. Investors chase returns ? the data is irrefutable. The dramatic inflow to bond mutual funds keeps pundits and prognosticators busy warning about the pending ?bubble? in bonds. Even Warren Buffett opined that the bubble in government bonds would be next to sear investors, but folks keep piling money into bond funds. Investors are also shoveling cash into emerging market equity funds because of their rapid growth. Financial bell-weather Barrons reported over 85 percent of all international mutual fund inflows during September went to two broad market indexes ?Vanguard Emerging Market and iShares Emerging Market ETF.

Investors have seen the light regarding exchange traded funds like VWO and EEM versus higher cost mutual funds, but that light could be a train barreling down the line.


It makes sense to have emerging market stocks and government bonds in your portfolio but make sure your allocation is appropriate for your age, risk tolerance, and needs. If you don?t have a strategy or a plan before you invest, then keep your money in your pocket, because it is human nature to follow the crowd.


The time frame intrigued me, so I dug a bit more. This portfolio?s best return on any one-year period over the last ten years was during President Obama?s term. Huh? President Obama?s opponents label him a socialist bent on taking over government, ending free markets and other dastardly deeds. Historically speaking, when socialist regimes seize power stock prices collapse. For the first 18 months of President Obama?s term, the S&P 500 rose almost 32 percent. Through August 2002, under President George W. Bush?s tutelage, the S&P 500 lost over 17 percent. These numbers suggest Obama needs to revisit his socialist agenda because socialists and the investor class are blood opposites think Auburn/Alabama. Of course, this could be a ruse, remember, his grandmother put a fake birth announcement in the Honolulu newspaper.


Warren Buffett and I share two things, each of us owns a few shares of Berkshire Hathaway and we both are bullish on America. America will get through this crisis; our nation fought a civil war and gamblers once fixed the World Series but we still endured. Jingoistic hyperbole and over-the-top rhetoric solves no problems.


Intense political struggles are as American as apple pie; our third vice president killed Alexander Hamilton in a duel. After the 1787 Constitutional Convention, Benjamin Franklin told an audience that America was a republic ?if you can keep it.? Remember that quote.


In full disclosure, my wife and I own VWO.


Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@ LivingstonFinancial.net? .

BUZ LIVINGSTON
Just Plain Talk

Replies

32
TNJed avatar
Beach Fanatic
#2
It is mathematically impossible for us to pay down our debts without crushing the dollar. In the history of mankind, no fiat currency has every survived. The average lifespan of any fiat currency is 40 years. Nixon took us off the gold standard in 1971. Math never lies, but people and especially governments, do.

Buy physical gold/silver. It won't make you rich but it just may save your wealth when the dollar goes away.
Bob avatar
SoWal Insider
#3
who sells gold on fox news? oh yes, g gordon and glenn bbbbeck. great duo!
Bob avatar
SoWal Insider
#4
Comparing 2008 and 2010
Taking a closer look at socialism and the S&P

www.waltonsun.com

A couple of years ago, reviewing portfolios with clients presented slight problems. Lest we forget in October of 2008 every asset class went down. The entire financial system was being battered by a Category 5 hurricane. Remembering how portfolio values plummeted, fast-forward two years and meetings are more enjoyable.


We use Principia from Morningstar, and a report generated last week brought to mind a few salient points. Morningstar analyzes portfolios by choosing the best/worst threemonth, one-year and three-year returns over the last 10 years. What fascinated me was the best three-year return for this portfolio (April 2003 to March 2006) was immediately followed by the worst three-year return (March 2006 to February 2009). Conversely the best one-year return (March 2009 to February 2010) came on the heels of the worst one-year return (March 2008 to February 2009). If you wanted a perfect illustration of market-timing foolishness, you could not have picked a better example.


This portfolio?s emerging market allocation rose sharply. Investors chase returns ? the data is irrefutable. The dramatic inflow to bond mutual funds keeps pundits and prognosticators busy warning about the pending ?bubble? in bonds. Even Warren Buffett opined that the bubble in government bonds would be next to sear investors, but folks keep piling money into bond funds. Investors are also shoveling cash into emerging market equity funds because of their rapid growth. Financial bell-weather Barrons reported over 85 percent of all international mutual fund inflows during September went to two broad market indexes ?Vanguard Emerging Market and iShares Emerging Market ETF.

Investors have seen the light regarding exchange traded funds like VWO and EEM versus higher cost mutual funds, but that light could be a train barreling down the line.


It makes sense to have emerging market stocks and government bonds in your portfolio but make sure your allocation is appropriate for your age, risk tolerance, and needs. If you don?t have a strategy or a plan before you invest, then keep your money in your pocket, because it is human nature to follow the crowd.


The time frame intrigued me, so I dug a bit more. This portfolio?s best return on any one-year period over the last ten years was during President Obama?s term. Huh? President Obama?s opponents label him a socialist bent on taking over government, ending free markets and other dastardly deeds. Historically speaking, when socialist regimes seize power stock prices collapse. For the first 18 months of President Obama?s term, the S&P 500 rose almost 32 percent. Through August 2002, under President George W. Bush?s tutelage, the S&P 500 lost over 17 percent. These numbers suggest Obama needs to revisit his socialist agenda because socialists and the investor class are blood opposites think Auburn/Alabama. Of course, this could be a ruse, remember, his grandmother put a fake birth announcement in the Honolulu newspaper.


Warren Buffett and I share two things, each of us owns a few shares of Berkshire Hathaway and we both are bullish on America. America will get through this crisis; our nation fought a civil war and gamblers once fixed the World Series but we still endured. Jingoistic hyperbole and over-the-top rhetoric solves no problems.


Intense political struggles are as American as apple pie; our third vice president killed Alexander Hamilton in a duel. After the 1787 Constitutional Convention, Benjamin Franklin told an audience that America was a republic ?if you can keep it.? Remember that quote.


In full disclosure, my wife and I own VWO.


Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@ LivingstonFinancial.net? .

BUZ LIVINGSTON
Just Plain Talk
we are in a bernanke fueled market
Beach FanaticAuthor
#5
we are in a bernanke fueled market

The FED is keeping rates low to stimulate demand for loans primarily for housing. There is a HUGE slug of inventory.

The FED's strategy helps the market but the stock market is a leading indicator.

We are coming out of a recession so markets rise.

Plus profits are rising for many companies...unfortunately companies have found out that fewer employees mean higher profits.
Kurt avatar
Admin
#6
It is mathematically impossible for us to pay down our debts without crushing the dollar. In the history of mankind, no fiat currency has every survived. The average lifespan of any fiat currency is 40 years. Nixon took us off the gold standard in 1971. Math never lies, but people and especially governments, do.

Buy physical gold/silver. It won't make you rich but it just may save your wealth when the dollar goes away.

Buz says: Jingoistic hyperbole and over-the-top rhetoric solves no problems.
Matt J avatar
SWGB
#7
The FED is keeping rates low to stimulate demand for loans primarily for housing. There is a HUGE slug of inventory.

The FED's strategy helps the market but the stock market is a leading indicator.

We are coming out of a recession so markets rise.

Plus profits are rising for many companies...unfortunately companies have found out that fewer employees mean higher profits.

I don't think we're allowed to say we are coming out of the recession until the Tea Baggers have taken over congress and declared victory. :sarc:
TNJed avatar
Beach Fanatic
#8
Buz says: Jingoistic hyperbole and over-the-top rhetoric solves no problems.

Exactly. Talk is cheap and the dollar is getting cheaper. I'll try to be more direct. The dollar is on an exponential growth curve that cannot recover. It is done. Nobody's fault per se, it's just what fiat currency is destined to do. Inflate to infinity and then it resets, corruption, secrets, lies and all. I'm trying to get people ready for the reset and a better tomorrow.

Talking about IRAs or 401k's to me is the hyperbole and rhetoric.

I gave a solution or at least one of those golden parachutes we hear so much about. We each need to be our own bank with real money which is gold and silver. A dollar is currency. It is not wealth. Huge difference. We value everything in dollars when gold has and will always be the true wealth holder. Has been for 6000 years.

Wealth is never destroyed, only transferred; and it is being transferred from our bank accounts at the rate of 12% in the last 5 months alone, straight to commodities. Gold is not in a bubble. It is, for lack of a better word, absorbing all the wealth the western dollar has created. That wealth doesn't get lost it just gets valued in a true mark to market fashion via gold. It's been a while but it's importance is back. Cycles and all.

I was given an American Silver Eagle 1 oz coin for graduation in 1989. It cost $10. If I had put that $10 silver coin and a ten dollar bill in a safe, today I would have a ten dollar bill and a $25 coin. In two years that coin could be many multiples of that.

The world has had it with us. China holds 1 trillion of our dollars and is not happy about losing $120 billion these past 5 months. They know exactly what's going to happen anyway. China urged their 1.3 billion citizens to start buying silver a year ago. I think silver might become important.

China Urges Citizens to Buy Gold and Silver -- Seeking Alpha


YouTube - China encouraging citizens to buy Silver and Gold



This isn't a popular position for me to be in. It's been difficult for me to fully appreciate the enormity of what we are about to experience. I don't say these things to merely be contrarian. They are absolute and I feel I must, in all sincerity, warn my neighbors. My style can be alarmist because this is enormous. It deserves alarm, but I understand; we hear a lot of alarms. I am not a revolutionist nor a bunker type.

I think the transfer will be very bumpy but I have faith in everyone and we will be in it together to see new, better, smarter systems emerge. I am a realist and we all have a chance to transfer some of our wealth by hopping off the dollar slide and getting on the gold elevator. Physical gold/silver. 20% of your worth, minimum. This should be done at anytime as a true diversification anyway. Today it's more important than ever.

Gold is a hedge. If your gold loses value, your bank account's dollars will gain theirs back. But....if those dollars keep sliding, gold will look cheap at $1300. I mentioned 2 years ago to buy at $700 - $800. It will be a buy all the way to $10,000+. A dollar is worth 77 cents.

I strongly urge you to read this very long but easy to follow guide in understanding past economies up to the present regarding gold and it's derivative, the dollar. If you don't start from the beginning it's difficult to fully appreciate the present. It is the story of how we have come to this. The anonymous authors wrote this in 2000 so note those dates with our current situation and how it is playing out exactly as written. The authors pseudonym's are "Another" and "Friend of Another" (FOA).

The Gold Trail -- a new gold market begins to evolve

If anyone is interested in buying coins or bullion I would recommend the following:

Silver, Silver Bar, Silver Bars, Silver Bullion, Gold and More - APMEX.com

https://store.scottsdalesilver.com/storefront.php

Kitco - Gold Precious Metals - Buy Gold Sell Gold, Silver, Platinum - Charts, Graphs, Prices, Quotes, Gold Stocks, Mining Stocks, bullion dealers

If I'm wrong and you don't need precious metals as described, then sell them and get your 'money' back. Though I would hold for several years at least. If you do need them, then you'll be glad you have them.

I mean nothing but the best for everyone.
Beach Lover
#9
Bud you and your clients returns are basically "stolen" from the american saver. the retiree who depended on cd's has been raped by madman helicpoter ben bernanke. The fed has stolen over $200 billion a year from savers and given it to wall street to speculate in risk assets wether it be stocks,gold or oil.the fed is trying to weaken the $ to force inflation up. they are desperate to get people to believe " if prices will be higher tommorrow then i better buy today". you speak of the stock market being a leading indicator and we're coming out fo a recession? the market bottomed a full 20 months ago yet we still have 450k weekly unemployment claims which is still near equal to the top of the recession of 2001-2003.as a previous poster said we're now at the gates of not being able to service the interest of our debts.its well known that the gov't has targeted the stock market to try to control the economy for 2 decades now. since over 50 million people have 401k's that are tied to the market its the policy of choice to try to keep asset prices high to influence spending decisions.IN THE END NOTHING HAS CHANGED ITS CHECK MATE.ALL THE GOV'T HAS DONE IS SAVED THE DAY SHORT TERM.THEY BASICALLY REFUSED TO MAKE THE HARD DECISION AND LET CAPITALISM WORK AND BANKRUPT THE INEFFICIENT CO'S AND REWARD THE STRONG. THEY COULDN'T STOMACH THE SHORT TERM PAIN THUS THEY MISALLOCATED CAPITAL TO WEAK CO'S JUST AS JAPAN DID TO KEEP THEM ALIVE. now we're seeing the end result and that is slow to little growth for years or decades. insider selling of stocks is at record levels as of the past few weeks. cash levels of mutual funds are at all time lows. over $80 billion of outflows has occured this year as the "little guy" is sick of the fraud and wants little to do with stocks. as far as you having a better sit down with your cleints this year and saying people trying to time the market getting out in 2008 look stupid now plese quote me some 10 yr returns which are flat. i assure you sharp postion traders have killed buy and hold the last 10 yrs.. look at japan down 80% from 1989. thats us in the years to come

Edited

TNJed avatar
Beach Fanatic
#10
Just found this speech by Ron Paul before Congress in 1996. He pretty much says the same thing expect taking action personally by buying gold because he was trying to introduce policy change to Congress and not a market tip. He's fighting the right fight but everyone is in the game and won't change until the game is over.

What the Price of Gold Is Telling Us by Ron Paul
Beach Fanatic
#11
Exactly. Talk is cheap and the dollar is getting cheaper. I'll try to be more direct. The dollar is on an exponential growth curve that cannot recover. It is done. Nobody's fault per se, it's just what fiat currency is destined to do. Inflate to infinity and then it resets, corruption, secrets, lies and all. I'm trying to get people ready for the reset and a better tomorrow.

Talking about IRAs or 401k's to me is the hyperbole and rhetoric.

I gave a solution or at least one of those golden parachutes we hear so much about. We each need to be our own bank with real money which is gold and silver. A dollar is currency. It is not wealth. Huge difference. We value everything in dollars when gold has and will always be the true wealth holder. Has been for 6000 years.

Wealth is never destroyed, only transferred; and it is being transferred from our bank accounts at the rate of 12% in the last 5 months alone, straight to commodities. Gold is not in a bubble. It is, for lack of a better word, absorbing all the wealth the western dollar has created. That wealth doesn't get lost it just gets valued in a true mark to market fashion via gold. It's been a while but it's importance is back. Cycles and all.

I was given an American Silver Eagle 1 oz coin for graduation in 1989. It cost $10. If I had put that $10 silver coin and a ten dollar bill in a safe, today I would have a ten dollar bill and a $25 coin. In two years that coin could be many multiples of that.

The world has had it with us. China holds 1 trillion of our dollars and is not happy about losing $120 billion these past 5 months. They know exactly what's going to happen anyway. China urged their 1.3 billion citizens to start buying silver a year ago. I think silver might become important.

China Urges Citizens to Buy Gold and Silver -- Seeking Alpha


YouTube - China encouraging citizens to buy Silver and Gold



This isn't a popular position for me to be in. It's been difficult for me to fully appreciate the enormity of what we are about to experience. I don't say these things to merely be contrarian. They are absolute and I feel I must, in all sincerity, warn my neighbors. My style can be alarmist because this is enormous. It deserves alarm, but I understand; we hear a lot of alarms. I am not a revolutionist nor a bunker type.

I think the transfer will be very bumpy but I have faith in everyone and we will be in it together to see new, better, smarter systems emerge. I am a realist and we all have a chance to transfer some of our wealth by hopping off the dollar slide and getting on the gold elevator. Physical gold/silver. 20% of your worth, minimum. This should be done at anytime as a true diversification anyway. Today it's more important than ever.

Gold is a hedge. If your gold loses value, your bank account's dollars will gain theirs back. But....if those dollars keep sliding, gold will look cheap at $1300. I mentioned 2 years ago to buy at $700 - $800. It will be a buy all the way to $10,000+. A dollar is worth 77 cents.

I strongly urge you to read this very long but easy to follow guide in understanding past economies up to the present regarding gold and it's derivative, the dollar. If you don't start from the beginning it's difficult to fully appreciate the present. It is the story of how we have come to this. The anonymous authors wrote this in 2000 so note those dates with our current situation and how it is playing out exactly as written. The authors pseudonym's are "Another" and "Friend of Another" (FOA).

The Gold Trail -- a new gold market begins to evolve

If anyone is interested in buying coins or bullion I would recommend the following:

Silver, Silver Bar, Silver Bars, Silver Bullion, Gold and More - APMEX.com

https://store.scottsdalesilver.com/storefront.php

Kitco - Gold Precious Metals - Buy Gold Sell Gold, Silver, Platinum - Charts, Graphs, Prices, Quotes, Gold Stocks, Mining Stocks, bullion dealers

If I'm wrong and you don't need precious metals as described, then sell them and get your 'money' back. Though I would hold for several years at least. If you do need them, then you'll be glad you have them.

I mean nothing but the best for everyone.

Thanks for your post.

I started buying gold as a hedge after reading the book Aftershock - Amazon.com: Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown (9780470481561): David Wiedemer, Robert Wiedemer, Cindy Spitzer: Books@@AMEPARAM@@http://ecx.images-amazon.com/images/I/51VnjMbKyQL.@@AMEPARAM@@51VnjMbKyQL. If you haven't read this book, I think you would find it very interesting.
Matt J avatar
SWGB
#12
So the world's going to end tomorrow is really what I'm getting out of this.
Matt J avatar
SWGB
#13
Also I'm curious, if wealth can never be destroyed (which I seriously doubt), then much like energy it's a fixed amount and cannot be created either?
LuciferSam avatar
Banned
#14
You know the gold craze is just another pump and dump scheme much like the technology bubble in the 90s or the more recent real estate bubble (and crash).
Lynnie avatar
SoWal Insider
#15
Now is probably not the best time to buy gold. Although, many are still buying based up historical data. Gold is projected to be a long bubble this time.
Beach Fanatic
#16
You know the gold craze is just another pump and dump scheme much like the technology bubble in the 90s or the more recent real estate bubble (and crash).

Yep - it's my opinion that gold is also a bubble and will eventually pop - just like the stock market bubble, real estate bubble, dollar bubble and debt bubble.
scooterbug44 avatar
SoWal Expert
#17
I don't see anything wrong with diversifying a bit and having some gold or other assets, but I don't think the dollar is becoming worthless anytime soon...................and if it does, I will have MUCH bigger issues than not having gold.

I think gold is currently overpriced and the fact that Glenn Beck is advocating buying it (along w/ stockpiles of freeze dried food and seeds to grow your own food) makes me feel pretty good about not jumping on that bandwagon. :roll:
Matt J avatar
SWGB
#18
Gold is overpriced now and it's probably going to take a lot of people down with it when someone finally sells their giant cache at around $2,000.00/oz.
Miss Kitty avatar
Meow
#19
So the world's going to end tomorrow is really what I'm getting out of this.

Sounds like it is time for kitty kocktails! :wave:
Matt J avatar
SWGB
#20
Sounds like it is time for kitty kocktails! :wave:

Probably shots of Goldschlager, we can strain the gold out and save for the apocalypse.
LuciferSam avatar
Banned
#21
Before long this will be really cheap:


TNJed avatar
Beach Fanatic
#22
Also I'm curious, if wealth can never be destroyed (which I seriously doubt), then much like energy it's a fixed amount and cannot be created either?

You are correct with respect to the law of conservation of energy in that it ultimately cannot be created nor destroyed. However, for the purpose of our lifetime and until the world population starts to decline instead of rising against a fixed set of commodities, wealth will not decrease. It will only decrease once the supply can keep up with demand and that is a much larger supercycle that will not come into play until long after we are gone. In fact I doubt any of our grandkids will even live to see world population decline.

With regards to wealth, it is hard tangible assets. Oil, wheat, corn, cotton, coffee, gold, silver, copper, real estate, eventually potable water...etc. Currency is used as a means to acquire wealth, it is not wealth in and of itself. As demand for these resources grow exponentially, so does the value of this limited set of commodities.

This is why for the sake of our discussion I chose to say wealth can never be destroyed, because it wont in our lifetime. "Never" was too strong of a word you are correct. We just wont live to see supply outstrip demand.

As for everything ending tomorrow, I never said that. The de-leveraging process has been happening for years. They are slowly releasing the air in our collective bubble instead of popping it. This is great for society obviously and why banks are "too big too fail." Fail they will, but not overnight. I suspect from here on out the process will only speed up but should take 2-5 years.

I'm not saying to go out tomorrow and buy all the metal you can afford, because there will be dips and drops along the way. De-leveraging the world is tricky business. There will be better buying opportunities along the way. Just accumulate slowly, by buying a little today and creating a baseline cost for yourself. As the price decreases, if it does from this level, you can average down your total cost by buying a little more and wait. If it goes up, great. If not, consider it on sale. It is money after all. Just a different form than our generation is used to.

Bubbles are only created by mania. There is no gold buying mania yet, but there has been a lot of selling to Cash4Gold and the like. Those boys aren't buying because they think gold has topped I can assure you. A mania is what we saw here with RE in '05. Flipping lots for double profit before the ink had dried. If gold was in a mania I wouldn't have to defend my point of view. You'll know a gold and silver mania when everyone on the street knows its spot price and there is a line around the corner at the coin shop. That's when you sell, some.

This graph doesn't strike me as a bubble. As I said, wealth is being de-leveraged from the dollar and housing into commodities.



You know the parable about how you cannot throw a frog into boiling water without him jumping out but you can boil one alive if the water is heated slowly. Well brother, I'm starting to prune and these bubbles are starting to bother me.
Bob avatar
SoWal Insider
#23
The FED is keeping rates low to stimulate demand for loans primarily for housing. There is a HUGE slug of inventory.

The FED's strategy helps the market but the stock market is a leading indicator.

We are coming out of a recession so markets rise.

Plus profits are rising for many companies...unfortunately companies have found out that fewer employees mean higher profits.
can the market be a leading indicator sans retail investors? can the banks be compelled to clear bad assets and lend? can gdp growth happen with high unemployment?
Beach FanaticAuthor
#26
Hear it from Robert Kiyosaki author of Rich Dad, Poor Dad.


YouTube - Silver is the best hedge against inflation! | Robert Kiyosaki



And if you're having a hard time picturing actually owning PMs, here's a very nice collection. There are other videos on youtube. They are worthy of your time.

YouTube - Gold and Silver Private Treasury

My crystal ball is in the shop for repairs but I do know the most dangerous words for investors are "it's different this time".

Kiyosaki is in the book selling business. If you want to buy his books, it's your money and you can give it away if you like.

Using commodities to diversify a portfolio has merit but gold is still trading below it's 1980 high and SPY is about three times higher.

If the world is coming to an end the best metal to own is lead. ;-)

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