Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 230.92

+3.1%

Nov 24 3:59 PM EST

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To: Sun Tzu who wrote (28755)	3/2/1999 11:22:00 PM
From: Clarksterh	Read Replies (1) of 70976

Sun Tzu - But those same litterature do not tell you that during the '70s with inflation in double digits and DJIA staying flat, in real terms you lost more than 3/4 of your assets. If you take the numbers for 1966 to 1982, then the loss is closer to 80+%. Sure and of course, but that is hardly representative of the last two centuries. Increasing inflation has a double whammy effect on stock investments. It means a dollar buys less, but increasing inflation implies increasing interest rates which implies decreasing P/E. Thus the stock markets will stay flat during a long term secular increase in inflation rate. But if you pick a period longer than about 25 years (long enough to average out inflation effects and macro economic effects) any time in the last 2 centuries you will find that there was no equal (much less better) investment over the same period. There is a chart of DJIA in real terms about 3/4 of the way into the book. Be vawy vawy careful. The DJIA adjusted for inflation and plotted over time is not a good measure since it leaves out dividends. Clark

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