Wednesday, 26 December 2012

Investors going nowhere fast, while losing money.........................from Rico

A new century and a new normal for investors.
- Going nowhere fast, while losing money.

The SPY tracks the S&P 500.
- It's below where it was in 2007.
- It's below where it was in 2000.

In 12 years stock prices have done nothing.
- And this is in the context of more fiat money that purchases less and less.

Adjust this 'nominal' chart for inflation.
- Anyone who bought and held the S&P 500 has made NO PROFIT this century. They wasted their time, and anyone who put their money under the mattress did just as well (or equally badly). Neither of them kept up with inflation, both generating negative 'real' returns.

So what does this mean for investors?
- They have to ask if the companies they hold shares in will be better off tomorrow than today?
- They have to understand, for this to happen the economy has to be better off tomorrow than today.

With ZIRP to 2015 and QE to eternity and beyond, I'm frankly dubious...

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