Five Things Podcast, The Transcript: Hyperinflation vs. Deflation

Kevin Depew  Oct 24, 2008 4:10 pm

Five Things Podcast, The Transcript: Hyperinflation vs. Deflation
 
It's just like the Five Things You Need to Know Podcast, only quieter.
 

 
Cory Bortnicker:  Okay.  So let’s move on to number 4 today.  What is the return of the S&P 500, including dividends over the past eight years?

Kevin Depew:  Well, I wanted to bring this up because I think it might be shocking to a lot of people, because we’re told over and over again that stocks for the long term are what we’re supposed to be focused on.

Well, over the past 8 years, the S&P 500, including dividends, has actually lost 26%. So that means if you put $100 away on
December 31, 1999, and looked at that value today, you would have $26 less.

Meanwhile, over that same period, cash is up over 31%.  And the proxy for cash would be the three-month Treasury bill, which is almost the safest place to park your cash, except for under a mattress.  Only, in this case, a mattress doesn’t pay you anything, and the Treasury bill does.

Cory Bortnicker:  Right.

Kevin Depew:  But that’s up 31%. 

So to me, this shows us that we’ve been in a bear market for eight years now.  And when you have days like we had today, with the DOW down another 500 points, it’s sort of hammering that home that, hey, this bear has not gone away.

Cory Bortnicker:  Right.

Kevin Depew:  And I think that it’s probably going to be another four or maybe six years before we get to a point where stocks are going to be attractive as investments again.

Cory Bortnicker:  So given that, I mean, why should I or anyone invest as opposed to just saving?  What is the difference between saving and investing?
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Comments (13) See All Comments »
10-25-2008, 10:38 am
With the distinction of savings and investment being blurred ( craziness like FDIC guarantees of MM funds), how do we know if the money we put in the bank isn't being invested- I.e. we are taking the same risk as buying investments like comerc
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10-25-2008, 10:18 pm
Take the S&P highs from years when things were 'normal', before inflation and financial shenanigans, 1965 to 1983 and extrapolate them: S&P 576.
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10-26-2008, 5:58 am
As I understand it, you can reach a point where the helicopter approach doesn't work because you give people money and they don't spend it, they save it. If you think prices are going to be lower tomorrow you won't spend or invest t
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10-26-2008, 11:53 pm
Great educational article!

I just got a Credit Union loan for a car. They have strict rules of lending and seem very prudent. Keeping my money with them feels secure vs. under the mattress. I closed the Wells Fargo accounts as the per
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10-27-2008, 11:12 am
Kevin shows again that he is one of the finest commentators on the web, with a tremendous knowledge of history, philosophy, economics, and the “real world†of today. I have some questions for Kevin and any commentators, and while I h
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