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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (12957)	1/11/1998 1:59:00 PM
From: tekgk	Read Replies (1) \| Respond to of 18056

>> Every bear market that I know about provided wonderful opportunities for reinvestment within three years of the onset and often sooner ... Markets always bottom out except when a country suffers military defeat. In nominal currency terms you are correct. In constant currency units the decline often last 12 years or longer and recovery to the peak takes 25 years or more(US). An example to consider is France: "In real terms, the stock market index for ... France is 45% below its 1916 peak" globalfindata.com The raw data to support the statement is available. Here's another one Italy: " What would have happened if you had been an American investing in Italy during this century? If you had put $56 into the Italian stock market in 1905, your investment would have been worth $6 by 1920. The largest increase in the value of your portfolio would have occurred in the1950s when the portfolio would have risen to $33 by 1961 before declining again to $7 in 1977. The rally of the 1980s would have increased the value of your portfolio to $53 in 1987, but it would be worth only $45 by 1995. And here is the most startling fact. All these data are in NOMINAL, not real dollars. While consumer prices rose almost 20-fold in the United States between 1905 and 1995, your Italian Mutual Fund would have declined in value. But wait, let's try a buy and hold strategy and reinvest all of our dividends! Even if you measure the Italian stock market on a total return basis, it has barely kept up with inflation. If you had put 100 Lira in the Italian stock market in January 1925, and reinvested every dividend you received, you would have ended up with 2795 liras at the end of 1995. In real terms, however, your 100 liras would have increased to only 259 real liras, an annual real return of 1.37%. However, all of your gain would have come between 1925 and 1943. By December 1943, your 100 liras would have grown to 265 real liras. Even after investing all of your dividends, your investment would have been unable to beat inflation for the next 50 years! The peak value of your portfolio would have occurred in September 1960 when it was worth 657 real liras. In the past 35 years you would have lost 60% of the value of your portfolio in real terms, even if you had reinvested every single lira in dividends. And this assumes you didn't have to pay any taxes. Include taxes and your real losses would have been substantial. The lesson for Italy? Don't. " Same reference. >> Very few people are going to make money getting in and out Absolutely True!