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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Sun Tzu who wrote (28758)	3/3/1999 2:48:00 AM
From: Clarksterh	Read Replies (1) \| Respond to of 70976

Sun Tzu - But, between 1966 and 1982 when DJIA broke 1000 again, you lost about 85% of the asses value to inflation. First, the total inflation between the beginning of 1966 and the end of 1982 was only 206% (I have the CPI numbers and will list them if you want). Thus if the DJIA was 1000 in 1966 and again in 1982 that was only a loss of 67% not 85%. Since the end of 82 the inflation has been about another 75% (not 100% as you assume) for a total of 435% inflation since the beginning of 1966. In the same time the DJIA has gone up from 1000 (your number - I did not check that) to 9400 which is an increase of 840%. Viola. That equates to an adjusted rate of return of 1.7% per year above inflation over those 33 years which is pretty good since that doesn't even include the dividends. Some unsolicited advice - if the math is simple and everyone is saying the same thing, it's a good bet they are correct. Statistics can lie, but only when they get complicated, which this is not. Number one is that the Dow stocks all survived this time period and many smaller companies did not. True, but smaller companies tend to have correspondingly higher rates of return on average to 'adjust' for that risk. Third Dow stocks pay a higher dividend amount than most and they have appreciated a lot more during this bull market than the average stock. Higher dividends, yes. Appreciated more, no. In general smaller stocks grow faster even when you include all of the small companies that fail. (The last 3 or 4 years have been an exception, just as the early 70's and the nifty fifty was. Over time I would expect that to be corrected.) Clark