Gold Has Outperformed Stocks Over The Past 20 Years

[mathjak107]

yes ... we all actually have a weighted average over time as the market acts on more and more money ...the past become least important and the recent most important .

i was invested in the 1980's in the biggest bull in history .... but i had not much invested in those days compared to now ... its great the equities market averaged almost 14% from 1987 to 2003 ... but so what ... my big dollars did not happen and go in to the investments in a meaningful way until well after that .. so for me to quote an 11% return for 30 years is true but in reality my weighted average saw something very different and 1987 to 2003 was actually a moot point in the scheme of things , what counted more was the lost decade for stocks .

today whatever happens has the biggest effect on these kinds of dollars over shadowing much of the past

[Libertarian666]

My plan for world domination is working. Muhahaha!

More and more I think of you as the unassuming guy in the disaster movie who you find out was behind the incident all along.

I feel more like the guy who figured it out early and no one listened to him.

[Xan]

my point is as the time frame gets longer and longer the past returns become less meaningful in our calculation and what happens near term matters so much more .

so as an example it was all well and good we can look at returns on asset class the last 20 years but if i had 10k invested early on, the fact those 20- year returns are made up mostly of the better returns 10 and 15 years ago is a moot point when i put hundreds of thousands of dollars in the last 5 and 10 years ,

it is the now , 3, 5 and 10 year return that are going to matter not the fact returns were great 15 , 20 years ago . so even though i owned that asset 20 years ago the fact is the return is different the last 10 years then my numbers would reflect .

this is why averages don't work in retirement calculations and sequence rules your outcome.

averages became almost meaningless when we add money and spend money because it then becomes a weighted average .

Okay, but then, so what? As in, what chart of past performance WOULD be useful, and what would it be useful for?

[pp4me]

I started the PP about 12 years ago so I don't have a 20 year history to report.

Since 2008 however, my gold is up 26% but only after spending many years in the red. Stocks bought at the same time (VTI) - up 119%.

[Smith1776]

I feel more like the guy who figured it out early and no one listened to him.

I know exactly who you are then.

You’re Pierce Brosnan in Dante’s Peak — except even more dashing!

[mathjak107]

my point is as the time frame gets longer and longer the past returns become less meaningful in our calculation and what happens near term matters so much more .

so as an example it was all well and good we can look at returns on asset class the last 20 years but if i had 10k invested early on, the fact those 20- year returns are made up mostly of the better returns 10 and 15 years ago is a moot point when i put hundreds of thousands of dollars in the last 5 and 10 years ,

it is the now , 3, 5 and 10 year return that are going to matter not the fact returns were great 15 , 20 years ago . so even though i owned that asset 20 years ago the fact is the return is different the last 10 years then my numbers would reflect .

this is why averages don't work in retirement calculations and sequence rules your outcome.

averages became almost meaningless when we add money and spend money because it then becomes a weighted average .

Okay, but then, so what? As in, what chart of past performance WOULD be useful, and what would it be useful for?

No chart is really useful ....isn’t that why pp users use the portfolio? Because not always is the past a good indicator of the future but also in use you have to many variables to make it worth a darn On our personal levels ....all we need to know is assets go up and they go down .

In fact when the market sell off happened in equities for reasons not on the charts we had both Tlt and Gld take a nasty hit .


So driving and looking in the rear view mirror is not a great idea ...... market averages can be like yesterday’s weather.

We had the greatest bull market in history in stocks only to be followed up by the lost decade

[Xan]

Backtesting can't prove a theory correct, but it can disprove it, and if something occurs in history, it's at least possible for it to occur again.

I don't see the purpose in sniping at Smith's chart when he shows that gold can outperform stocks over a 20 year period. I don't understand saying "That's not useful because you don't know how much you have invested". If you want to say "Charts are useless and nobody should ever look at them because the future is unpredictable" then that's at least coherent, but probably nobody will agree with you that charts are useless.

[mathjak107]

Backtesting can't prove a theory correct, but it can disprove it, and if something occurs in history, it's at least possible for it to occur again.

I don't see the purpose in sniping at Smith's chart when he shows that gold can outperform stocks over a 20 year period. I don't understand saying "That's not useful because you don't know how much you have invested". If you want to say "Charts are useless and nobody should ever look at them because the future is unpredictable" then that's at least coherent, but probably nobody will agree with you that charts are useless.

History never repeats itself ..only historians repeat themselves ....each time things play out just different enough that what happened last time is not the trigger or reason the next time ....

First Iraq war We plunged , 2nd Iraq war we soared .

So while the business cycles are with us , the triggers ,the reasons and what we thought ,generally do us no good the next time it happens..... the fact if I bought gold 15 or 20 years that because that price point beat equities today has zero to do with anyone who bought within that 20 year period but bought the last 10 years of that 20 year period .....equities Blew gold away over the last 10 years of the twenty year period so that is my point.

It would be like having an amazing year for an asset , and then stating for 20 years that asset beat xyz .....except for the other 19 years it did not beat it ......does that make sense?

[jhogue]

mathjak uses charts when they suit his purpose.

His favorite is a chart showing the decline of 30 year T-bond interest rates that is supposed to prove that interest rates have nowhere to go but up.

[mathjak107]

mathjak uses charts when they suit his purpose.

His favorite is a chart showing the decline of 30 year T-bond interest rates that is supposed to prove that interest rates have nowhere to go but up.

That assumption is wrong ...it merely shows we have not had a true bear market in bonds in 40 years ....it says nothing about rates have to go up ,big difference between the two .... it does not say bonds beat stocks for 40 years either..
There may be segments in the 40 year period where someone beat equities but that does not mean for 40 years bonds beat stocks

[Libertarian666]

I feel more like the guy who figured it out early and no one listened to him.

I know exactly who you are then.

You’re Pierce Brosnan in Dante’s Peak — except even more dashing!

I can neither confirm nor deny that.

[Xan]

mathjak uses charts when they suit his purpose.

His favorite is a chart showing the decline of 30 year T-bond interest rates that is supposed to prove that interest rates have nowhere to go but up.

That assumption is wrong ...it merely shows we have not had a true bear market in bonds in 40 years ....it says nothing about rates have to go up ,big difference between the two .... it does not say bonds beat stocks for 40 years either..
There may be segments in the 40 year period where someone beat equities but that does not mean for 40 years bonds beat stocks

Just a lot of words rationalizing an incoherent position. Are historical charts meaningful or not?

[mathjak107]

mathjak uses charts when they suit his purpose.

His favorite is a chart showing the decline of 30 year T-bond interest rates that is supposed to prove that interest rates have nowhere to go but up.

That assumption is wrong ...it merely shows we have not had a true bear market in bonds in 40 years ....it says nothing about rates have to go up ,big difference between the two .... it does not say bonds beat stocks for 40 years either..
There may be segments in the 40 year period where someone beat equities but that does not mean for 40 years bonds beat stocks

Just a lot of words rationalizing an incoherent position. Are historical charts meaningful or not?

Depends for what purpose ........for saying a particular asset beat another over a long period of time ? Nooooo , not unless you limit it to just starting that year .......is it useful for seeing how something reacted to events in a certain period ? Sure but that does not mean they will repeat.

If you started a year later results over the remaining 19 years may be quite different when comparing to another asset.

You know how long golds one peak at 850 influenced its trailing returns making it look better going forward then it was .

[Smith1776]

Guys, let's just chill out a bit. Charts can be useful, but they just need to be taken with a grain of salt. I think that's something we can all agree on.

And yes, people attack charts that don't support their position and tout charts that do. Usually it's because they've interpreted the underlying performance factors differently from other people. I think the majority of people argue with good intent in that sense.

As for the people who don't argue in good faith. I just move on to other threads -- usually ones that involve kats.

[pp4me]

Guys, let's just chill out a bit. Charts can be useful, but they just need to be taken with a grain of salt. I think that's something we can all agree on.

And yes, people attack charts that don't support their position and tout charts that do. Usually it's because they've interpreted the underlying performance factors differently from other people. I think the majority of people argue with good intent in that sense.

As for the people who don't argue in good faith. I just move on to other threads -- usually ones that involve kats.

Charts can tell you what occurred in the past with 100% accuracy.

But we need to follow Yogi Berra's advice when he said "it's tough to make predictions, especially about the future".

[pmward]

Obvious biased opinion incoming. Charts have valuable information. It is folly for anyone to dismiss them entirely when speculating (obviously, for a buy & rebalance portfolio like the PP this does not apply). They can show you information that you otherwise would not see. They also have the uncanny ability to confirm or refute your opinions. Charts prove my opinions wrong all the time; through that I have learned to trust the charts more than I trust my own opinion, and the charts continue to steer me true. Trends also tend to last for years or even decades at a time. Just because a trend has lasted a long time, does that mean it has to continue? Absolutely not. BUT it does mean that it is highly likely that it will. Dismissing a long term trend because it is "looking in the rearview" and betting against it is a good way to go broke. Jumping on the train and following an established and strong trend is a good way to make lots of money (obviously, using some risk and money management strategies since nothing is ever 100%). I highly encourage anyone that doubts the ability of charts to give hints into the future to follow my thread down in the VP section. The analysis I've been freely providing down there has been proving in real time all of my above points for months now... and my portfolio performance recently also backs that up. I'm trying my best down there to present these interesting things I see in a way that teaches others how to be able to do the same analysis on their own.

One thing I will agree with mathjak however is that charts are fractal. Different fractals on the same asset can give different information. Different start dates and end dates can create different absolute return differences. But when I look at charts I ignore the absolute numbers and focus mostly on the trend. Is the trend going up or down right now? And when different fractals do have conflicting signals, it is tricky and you have to look deeply to resolve this. Usually, the higher timeframe is stronger (weekly chart trend going back to 2009 is stronger than an hourly chart trend going back to last week), but obviously the tradeoff is that these higher timeframes have more lag in the data, so they are slower at catching changes in trend. But when trying to follow a trend nobody is ever trying to pick the exact top or bottom. They are trying to catch like 80% of a big move. You're always going to get in higher than the bottom and sell below the peak if you are following a trend properly. This is a feature, not a bug.

[mathjak107]

Obvious biased opinion incoming. Charts have valuable information. It is folly for anyone to dismiss them entirely when speculating (obviously, for a buy & rebalance portfolio like the PP this does not apply). They can show you information that you otherwise would not see. They also have the uncanny ability to confirm or refute your opinions. Charts prove my opinions wrong all the time; through that I have learned to trust the charts more than I trust my own opinion, and the charts continue to steer me true. Trends also tend to last for years or even decades at a time. Just because a trend has lasted a long time, does that mean it has to continue? Absolutely not. BUT it does mean that it is highly likely that it will. Dismissing a long term trend because it is "looking in the rearview" and betting against it is a good way to go broke. Jumping on the train and following an established and strong trend is a good way to make lots of money (obviously, using some risk and money management strategies since nothing is ever 100%). I highly encourage anyone that doubts the ability of charts to give hints into the future to follow my thread down in the VP section. The analysis I've been freely providing down there has been proving in real time all of my above points for months now... and my portfolio performance recently also backs that up. I'm trying my best down there to present these interesting things I see in a way that teaches others how to be able to do the same analysis on their own.

One thing I will agree with mathjak however is that charts are fractal. Different fractals on the same asset can give different information. Different start dates and end dates can create different absolute return differences. But when I look at charts I ignore the absolute numbers and focus mostly on the trend. Is the trend going up or down right now? And when different fractals do have conflicting signals, it is tricky and you have to look deeply to resolve this. Usually, the higher timeframe is stronger (weekly chart trend going back to 2009 is stronger than an hourly chart trend going back to last week), but obviously the tradeoff is that these higher timeframes have more lag in the data, so they are slower at catching changes in trend. But when trying to follow a trend nobody is ever trying to pick the exact top or bottom. They are trying to catch like 80% of a big move. You're always going to get in higher than the bottom and sell below the peak if you are following a trend properly. This is a feature, not a bug.

We will have to just agree to disagree ... I find charts for trading one of those times they are near useless in today’s fast acting market and rarely beat just buy and hold especially in diversified funds..if only it was that easy.

Anyone remember Fabian ? And after Fabian came his son ...their system worked well ..well that was until it didn’t

[pmward]

We will have to just agree to disagree ... I find charts for trading one of those times they are near useless in today’s fast acting market and rarely beat just buy and hold especially in diversified funds..if only it was that easy.

Anyone remember Fabian ? And after Fabian came his son ...their system worked well ..well that was until it didn’t

I'm definitely not saying it is easy. But could it be that the problem isn't with charts and maybe that it's that you do not know how to properly read and trade a chart? Also it is foolish for traders like the ones you mentioned to be stiff and resistant to change. Things work until they don't, and when they don't you need to be flexible enough to drop that and instead use another tool in your toolbox. One trick ponies never survive in trading. Markets do change, and it requires change in behavior. During volatile times like this for instance I have to greatly lower my target timeframe. In a strongly trending market my target sweet spot for a trade is a couple months to a couple years. In a volatile market like this I have to take things one day and one week at a time. Hence, the different fractals above. Instead of sticking to daily and weekly charts I now have to also spend time analyzing 2 hour, 1 hour, and 15 minute charts because things just move that fast. I can be super bullish and long on something this week, and super bearish and shorting it next week. It all depends on what the charts do. I am flexible, and because of that I'm able to find a way to navigate these really difficult times and turn a profit. And eventually one day these volatile times will come to an end and things will get easy and boring again.

[vnatale]

Anyone remember Fabian ? And after Fabian came his son ...their system worked well ..well that was until it didn’t

Definitely remember Dick Fabian and his Telephone Switch Newsletter! It was my first investing "scheme". Followed it faithfully for three years from about 1987 to 1990.

I ever created my own Lotus 1-2-3 worksheet with macros that would generate its own signal by his formula so I would not have go call his phone number. I probably did call it, though, just to confirm all was working properly on my end.

Vinny

[Cortopassi]

Charting. I believe the definition would be "trying to predict the future by looking at the past, in various timeframes, and with various indicators, averages and statistics."

Fair enough?

Ok, then, what would the next five trading days of this chart look like, with pretty much any kind of charting software and indicators? Probably still up and to the right, right?



But no. Coronavirus happened.

Unless you do this for a living, have stops and a minute by minute watchfulness, I personally (MY opinion) think charts are useless.



And then good luck with charting telling you this was going to reverse here (pmward, I am betting there are some Fibonacci related things, resistance areas, etc, sure, but all can be violated)

[Smith1776]

Yes, I've always found much about charting and technical analysis to be rather curious. At least in terms of practitioners' claims of being able to apparently see where the market is going before it happens.

Consider the following.

In 2011, the Japanese Nikkei index fell double digits in two days following the massive earthquake that caused the Fukushima disaster. If you're telling me that technical analysis could have saved you from that precipitous fall, you are essentially telling me you think you can predict earthquakes by looking at stock charts. Baloney.

Okay, fine, maybe you might claim something less crazy by saying that technical analysis and charting could have saved you from some of those losses after the disaster hit, by getting you out before the bottom. But you run into similar problems of not knowing where the market will go because facts on the ground in Japan were changing so fast. The whole thing still smells like wild goose to me.

[vnatale]

Yes, I've always found much about charting and technical analysis to be rather curious. At least in terms of practitioners' claims of being able to apparently see where the market is going before it happens.

Consider the following.

In 2011, the Japanese Nikkei index fell double digits in two days following the massive earthquake that caused the Fukushima disaster. If you're telling me that technical analysis could have saved you from that precipitous fall, you are essentially telling me you think you can predict earthquakes by looking at stock charts. Baloney.

Okay, fine, maybe you might claim something less crazy by saying that technical analysis and charting could have saved you from some of those losses after the disaster hit, by getting you out before the bottom. But you run into similar problems of not knowing where the market will go because facts on the ground in Japan were changing so fast. The whole thing still smells like wild goose to me.

Which then, of course, brings us back to the opposite: https://en.wikipedia.org/wiki/Random_walk_hypothesis

Vinny

[mathjak107]

no one will ever convince me that chart reading and tea leave reading are not in the same boat .

it is investors who are looking for the holy grail of investing in some trading system ... the systems come and go after they fail to live up to what it is they do ... in days of 2500-3000 point swings in a day they only work until they dont ...

never would i base my investing on charts , squiggles ,lines or moving averages

[mathjak107]

Anyone remember Fabian ? And after Fabian came his son ...their system worked well ..well that was until it didn’t

Definitely remember Dick Fabian and his Telephone Switch Newsletter! It was my first investing "scheme". Followed it faithfully for three years from about 1987 to 1990.

I ever created my own Lotus 1-2-3 worksheet with macros that would generate its own signal by his formula so I would not have go call his phone number. I probably did call it, though, just to confirm all was working properly on my end.

Vinny

fabian ..he had a big following ... his system of moving averages was supposed to give up the 10% at the top and bottom and leave you with the 80% in the middle .

it worked very well until it didnt ...

he lost subscribers like crazy ...then his son took over , said the system needed some tweaking to cope with fast moving markets .

he was sure he fixed the problem ... he publicly put his own money in and let subscribers track how he did .

well he too performed quite dismally over time . not only did he get whipped sawed in the volatile markets but by the time things reacted the damage was done ..

they became the poster children for these systems failing to deliver the goods .

[Libertarian666]

no one will ever convince me that chart reading and tea leave reading are not in the same boat .

it is investors who are looking for the holy grail of investing in some trading system ... the systems come and go after they fail to live up to what it is they do ... in days of 2500-3000 point swings in a day they only work until they dont ...

never would i base my investing on charts , squiggles ,lines or moving averages

Whenever someone tries to tell me about an infallible system, I say "Why is the inventor of this system telling you about it rather than becoming the richest person in the world by using it himself?"

Of course that ends the conversation.