Yes, the market periodically goes down, some times very steeply. To take the 3 steepest pullbacks since WWII: In '73-'74 we had a 48% drop from peak-to-trough, and it took 7.5 years to recover from that and reach a new high. In the Dotcom bust we had a 49% drop and a 7.2 year recovery time. In the Housing Bubble bust it fell 57% and took 5.5 year to recover.

I guarantee plunges of this depth will happen again. Crashes happen and will continue to happen. I too will join you in telling anyone who doesn't think a crash will ever happen again, "I told you so".

I don't think predicting a crash is any more insightful than predicting that some day there will be a solar eclipse. I don't know anyone who thinks a crash will never happen. Everyone knows it will happen. Personally I think stock valuations are way high and we're plenty ripe for one.

But even after a 50% or 60% plunge, I will still have a bigger nest egg as a long-time buy and hold equity investor. Why? Because after 2 or 3 doublings (meaning a 4 fold or 8 fold increase), a 50% plunge still leaves me with a 2 fold or 4 fold increase.

Nothing holds up as well in the face of withdrawals and inflation than does equities, except perhaps real estate. In other words, it's an even bigger gamble to not have a sizable proportion in equities.



Over the past 20 years, it has grown 6.37 fold, an average annual increase of 9.7%/year
(had the market crashed 60% in 2022 -- a worst crash than any of the post WWII crashes -- then it would have still grown 3.11 fold, an increase of 5.8%/year)

Over the past 50 years, it has grown 131 fold, an average annual increase of 10.2%/year
(had the market crashed 60% in 2022, then it would have still grown 64 fold, an increase of 8.7%/year)

and so on. I'd go to Vegas a lot if I could average these kinds of returns.

This is from the below link, which also has similar for bonds, Treasury bills, and gold. These don't come close to matching the increase in equities.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

And I'm not just cherry-picking the boom periods. The above is inclusive of all periods, down, up, flat.

And when the market recovers and goes on to set yet more new all time highs, I will say "I told you so" to anyone who thinks it will never recover.

The market periodically sets new all time highs. It has never set an all-time low.

Yes it goes up and down and up and down and ... but the pattern is that new lows are higher than the previous lows and new highs are higher than the previous highs.

What really matters as far as risk is the risk of running out of money in retirement, and that risk is much higher for people who don't have any equities and only rely on "safe" fixed income investments, which don't even keep up with inflation. Innumerable historical simulations in innumerable studies have shown that. IOW its a bigger gamble not to be in the market. I don't wish to take that gamble.

I hate to see my fellow progressives misled by anti-equity JackPineRadicals-style "progressive" malarkey and end up having to live a very financially constrained old age, not to mention having very little or nothing to give to Democratic candidates or progressive causes. And by default having to accept the minuscule interest that the banks usually dole out in savings and CDs and so on.



Only a fool gambles with their retirement security -- And it makes DU investors out to be fools because only a fool would wager their retirement security on a Vegas slot machine. We are not fools. In the face of inflation and withdrawals, it's an even bigger gamble to NOT have a sizable proportion in equities.



Yes, a lot of people. 58% of American adults own stock according to a Gallup Survey, 3/5/23 https://www.msn.com/en-us/money/savingandinvesting/only-15-of-american-families-directly-own-stock-and-that-s-okay/ar-AA188NL7
pointing to the detailed report at https://www.fool.com/research/how-many-americans-own-stock/

And if the big crash happens on President Biden's watch, it will be super-painful for everyone to the left of Attila The Hun come the next election and the 4 years after.

Edited to add 1205pm ET: I wish someone could tell me which "Indian casino" gives its clients on average a 223% cumulative return over 10 years, a 537% cumulative return over 20 years, a 1,444% cumulative return over 30 years, a 6,759% cumulative return over 40 years, a 13,016% cumulative return over 50 years, a 33,400% cumulative return over 60 years, and a 120,090% cumulative return over 70 years, because I sure would like to "gamble" there. The equity market is AN INVESTMENT.

What drives the market is earnings (not "luck" or the pull of a slot machine handle ). This from Peter Lynch in 2001:

It all points to a Core PCE that is a bit more than double the Fed's target. Before January's number, one could argue there's been a very slow downward tilt over the last 6-8 months. With January's number, it's more like a flatlining.

Some may say that January is an anomalous "one off" on the high side. Others may say that December is an anomalous "one off" on the low side that January corrects.

There's a lot of chatter about the "no landing" scenario -- that inflation continues to stay elevated like in the graphs. I think with just a quarter percent rate hike on March 22, and another quarter point increase on May 3, that will likely continue to be the case for a long time.

With the hawkish noises from several FOMC members since the mid-month CPI and PPI reports, and more since yesterday, I think a half percent rate hike in March is a better bet. Note that before the March 22 FOMC meeting, new CPI and PPI reports will be released. (The next PCE report is March 31).

GRAPHS: The "x" axis is the month of the year, where the "1" is January 2022, "12" is December 2022, and "13" is January 2023.

All of the percentage increases are annualized numbers

On the rolling 3 month one can say its been flatlined since April 2022 at around 4.5%, with wiggles

The rolling 6 month - one can say its been flatlined since January 2022 at close to 5%, with wiggles

The rolling 12 month average has basically flatlined since July to about 4.7%.

I've always been a severe critic of 12 month inflation numbers when assessing RECENT or CURRENT inflation, but provide it for comparative purposes.



CORE PCE, which is shown in the above graphs: https://fred.stlouisfed.org/series/PCEPILFE

(PCE is at: https://fred.stlouisfed.org/series/PCEPI )

Percentages are calculated from the actual index numbers, not on averaging one-significant-digit numbers.

At 4.5% inflation, the value of a dollar drops to 50 cents in just 16 years.

MPR, February 24, 2023


MORE: https://www.mprnews.org/story/2023/02/24/extra-funding-does-little-to-increase-dental-care-for-ma-recipients

Reimbursement rates are still way low even after doubling, compared to regular commercial insurance reimbursement rates or prevailing rates

And there is a big shortage of dental assistants and hygienists.

See also:
More: https://www.mprnews.org/story/2018/11/28/low-income-minnesota-families-struggle-to-get-dental-care

From the news release, http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm


And they show the last 5 months. I found the latest 12 months (and way beyond) at FRED:

PCE: https://fred.stlouisfed.org/series/PCEPI
CORE PCE: https://fred.stlouisfed.org/series/PCEPILFE

PCE Inflation (just came out today, February 24):


PCE, rolling 3 month averages, annualized
7.2% 7.3% 7.4% 6.2% 4.8% 2.1% 4.2% 3.8% 3.2% 4.0%

CORE PCE, rolling 3 month averages, annualized
4.3% 4.3% 5.4% 4.4% 5.1% 4.5% 5.4% 4.0% 3.6% 4.7%


Consumer Price Index (CPI)

CPI - https://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
CORE CPI - http://data.bls.gov/timeseries/CUSR0000SA0L1E&output_view=pct_1mth
(Choose "More Formatting Options" at the upper right of the page for other views such as rolling averages of past 12 months, past 6 months, past 3 months)



Producer Price Index (PPI)

OLD CORE PPI - Producer Price Index, seasonally adjusted - Final demand goods less foods and energy -
http://data.bls.gov/timeseries/WPSFD413?output_view=pct_1mth

CORE PPI - Producer Price Index, seasonally adjusted - Final demand less foods. energy. and trade services - This is the core measure that the BLS features, so I will follow their lead
http://data.bls.gov/timeseries/WPSFD49116?output_view=pct_1mth
(Choose "More Formatting Options" at the upper right of the page for other views such as rolling averages of past 12 months, past 6 months, past 3 months)



Why the Fed thinks core is better for forecasting future inflation: https://www.democraticunderground.com/10143025190#post10

3 months annualized: Core CPI: 4.58%, Core PPI: 4.63%, Core PCE: 4.75%

I chose 3 months for its recency, but that it's still a longer period than one month, so less likely that one can dismiss it as a "one off", as some are trying to do.

To me, there's no way to look at any of these graphs without getting the impression that while inflation is down from the first half of 2022, the last 6 months are showing, at best, a consolidation at more than double the Fed's 2% target. Slightly less optimistically, inflation has been rewarming in the past 6 months.

The latest one-month numbers -- January numbers as reported mid-February (Feb 24 for PCE) -- aren't good either:
Core CPI: 5.06%, Core PPI: 7.27%, Core PCE: 7.07%
CPI: 6.38%, PPI: 8.18%, PCE: 7.69% annualized rates using the actual index numbers

Stocks, Treasury yields, and more (OMG!) : https://finance.yahoo.com/

Yahoo Finance, 2/22/23

This is in regard to the January 31 - February 1 Federal Open Market Committee (FOMC) meeting, whose meeting minutes came out today, Feb 22. These are the people that vote on interest rate hikes

https://finance.yahoo.com/news/fed-minutes-ongoing-rate-hikes-needed-2-officials-wanted-50-point-hike-195355428.html

And that was back when inflation looked like it was on a definite cool-down trend (I thought so too back then).

This January 31 - February 1 FOMC meeting (discussed above whose minutes came out today) was before:

* the very hot jobs report that came out February 3 with 517,000 new payroll jobs

* the hot CPI and PPI (wholesale prices) inflation reports below that came out in mid February

* the 3% (in just one month) retail sales sales increase in January (the report came out February 15).

Lately, particulary since the mid-February CPI and PPI and retail sales reports, all I have been reading are bullish (meaning pushing for larger interest rate increases) from various members of the Federal Open Market Committee (FOMC) that vote on rate hikes,

As for the meme that interest rate rises won't affect the current inflation, because it's is a global phenomenon caused by supply chain disruptions, Ukraine/Russia, etc., that may be true, but I should note that none of the FOMC or other Federal Reserve people talk that way, and neither, FWIW, does anyone in the administration that I've heard of. Paul Volcker would also disagree (however, the price we paid was a double-dip recession). As for globally, other central banks (except Turkey) have been pushing up their interest rates too.

So expect at least a 0.5% rate increase at the next FOMC meeting March 21-22. Don't be fooled by anything "dovish" that you read in the Jan 31 - Feb 1 meeting minutes above.


On the inflation front:

3 months annualized: Core CPI: 4.58%, Core PPI: 4.63%,

I chose 3 months for its recency, but that it's still a longer period than one month, so less likely that one can dismiss it as a "one off". (The latest one-month numbers -- January numbers as reported mid-February -- aren't good either: Core CPI: 5.06%, Core PPI: 7.27%, CPI: 6.38%, PPI: 8.18% annualized rates using the actual index numbers)

I thought they were on their way down before the mid-February reports of January inflation.





More on the graphs of monthly CPI, PPI, Core CPI, PPI, and why the Fed and I think core is better for predicting future inflation
https://www.democraticunderground.com/10143034894#post1

At 4.5% inflation, the purchasing power of the dollar drops by half in just 16 years.

I'm not looking for the stock market to bail me out either - its valuations are way way high on a historic basis. That was justified back when interest rates were trivial (so there was no real competition to stocks - "TINA - There Is No Alternative" ), but not so much anymore.

per IEA (International Energy Agency) report. More than double the 2021 amount, to more than $1 trillion in 2022.

usonian thread in General Discussion with big excerpt and link to the report -
https://www.democraticunderground.com/100217666383

and that each variant that gains dominance is more infectious than the last, both for the unvaxxed and for the vaxxed. I keep that in mind when I do have to go out grocery shopping or whatever -- being fully vaxxed/boosted I'm maybe 3X lower risk of infection than the unvaxxed, but OTOH this thing keeps getting more and more infectious, so I don't really know what my risk of infection is compared to the early (pre-vax) days, but my guess is that it's not much different. Only that the consequences of an infection are much less than in the early days.

As an over-65 year old with at least one additional risk factor, I do worry about the consequences. If I was middle-aged or younger and healthy, I'd probably be a lot less worried.

NY Times U.S. page, as viewed 1/28/23
https://www.nytimes.com/interactive/2021/us/covid-cases.html

Scroll to the "Rates for vaccinated and unvaccinated" section with the average daily cases and average daily deaths graph

CASES: latest is Dec 18-24: Unvaxxed has 3X (2.76X if one does the math with the incidence rates that pop up) the risk as fully vaxxed. (For much of 2022 it ranged from 2X to 3X in rounded numbers)

DEATHS: latest is Nov 27-Dec 3, unvaxxed have 5x (5.2X if one does the math) the risk as fully vaxxed

Number in ()'s are the ratios I calculated at the end point from the pop-up that pops up.



See below for the CDC covid-data-tracker page --

@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

CDC Covid tracker rates by vaccine status - https://covid.cdc.gov/covid-data-tracker/#rates-by-vaccine-status - as viewed 1/28/23

Scroll down to the graph. Realize that on the left side are two radio buttons where one can choose "deaths" or "cases"

The incidence rates below (CDC) are WEEKLY rates (i.e. cases per 100,000 per WEEK), in contrast to the NY Times numbers which are average DAILY rates. Whichever is used doesn't affect the relative risk of vaxxed vs. unvaxxed etc., but when looking at the incidence rates per 100k, the CDC numbers look much higher than the NY Times. This is why).

LATEST ON CASES (age 5 and older) is 12/18/22: Incidence per 100,000 population: Unvaxxed 271, Vaxxed w/o updated booster: 98, Vaxxed with updated booster: 82. So relative to vaxxed with updated booster: Unvaxxed: 3.30 X, Vaxxed w/o updated booster: 1.20 X.

LATEST ON DEATHS (age 5 and older) is 11/27/22: Incidence per 100,000 population Unvaxxed 1.79, Vaxxed w/o updated booster: 0.35, Vaxxed with updated booster: 0.16. So relative to vaxxed with updated booster: Unvaxxed: 11.2 X, Vaxxed w/o updated booster: 2.20 X (so get that bivalent booster -progree).

The box below the graph says: In November 2022, people ages 5 and older and vaccinated with an updated (bivalent) booster had:

12.7X lower risk of dying from COVID-19 compared to unvaxxed people and 2.4X lower risk of dying from COVID-19 compared to people vaxxed without the updated (bivalent) booster.

All emphasis mine. I was going through some news notes from August when it first got a no vote on its property tax millage. I wondered what the situation was currently. Unfortunately, this is what I found from a Google search.

Last 12 months ANNUALIZED: PCE: +5.5%, CORE PCE: +4.7%
Last 5 month ANNUALIZED: PCE: +2.42%, CORE PCE: +3.71%
Last 2 months ANNUALIZED: PCE: +2.90%, CORE PCE: +2.61%

I put this in the CPI and PPI and PCE Megapost, 12/23/22
https://www.democraticunderground.com/10143007428#post2

BEA report on incomes, outlays and PCE inflation:
https://www.bea.gov/news/2022/personal-income-and-outlays-november-2022

PCE Inflation
MONTHLY CHANGES, %
JUL AUG SEP OCT NOV
-0.1 0.3 0.3 0.4 0.1 PCE
0.1 0.6 0.5 0.3 0.2 Core PCE

12 MONTH CHANGES, %
JUL AUG SEP OCT NOV
6.4 6.3 6.3 6.1 5.5 PCE
4.7 4.9 5.2 5.0 4.7 CORE PCE

Detailed monthly PCE price indexes can be found on Table 2.3.4U.https://apps.bea.gov/iTable/?reqid=19&step=3&isuri=1&select_all_years=0&nipa_table_list=2015&series=m&first_year=2020&last_year=2022&scale=-99&categories=underlying&thetable=#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJuaXBhX3RhYmxlX2xpc3QiLCIyMDEzIl0sWyJjYXRlZ29yaWVzIiwiU3VydmV5Il1dfQ==

. . . . . . . JAN FEB MAR ... NOV
. . . . . PCE 119.469 120.178 121.321 121.563 122.300 123.512 123.397 123.728 124.154 124.617 124.747
CORE PCE 120.761 121.205 121.651 122.030 122.488 123.258 123.352 124.031 124.607 124.933 125.143

PCE 5 months annualized: (124.747/123.512)^(12/5)-1 = .0242 = 2.42%
CORE PCE 5 months annualized: (125.143/123.258)^(12/5)-1 = .0371 = 3.71%

PCE 2 months annualized: (124.747/124.154)^(12/2)-1 = .0290 = 2.90%
CORE PCE 2 months annualized: (125.143/124.607)^(12/2)-1 = .0261 = 2.61%

Siegel: "We need to get out of this year-over-year look at inflation. Remember, when we get year-over-year, we're getting 11 months of old, outdated data, and only 1 month of new data, and in fact that 1 month contains data that [Powell] admits, particularly in the housing sector, is extremely lagged,"



I've been yammering in post after post here that it is completely and thoroughly idiotic, stupid, and asinine for the media to report only on the last month's number and the 12 months number (i.e. year-over-year). And to call the 12 month number the inflation rate when so much of it is ancient history. So I'm tickled ecstatic and I am tickled pink that somebody other than some message board rando like me thinks this too.

For example by emphasizing the last 5 months, which are far less dire than the 12 month numbers: "Today's report: Last 5 months, ANNUALIZED: CPI: 2.47%, CORE CPI: 4.72%". (The 12 months numbers are 7.1% and 6.0% respectively).

Edited to add: Last 5 months ANNUALIZED: PPI: 1.05%, CORE PPI: 1.51%
I also put it with My latest CPI megapost that gets into shelter and rentals

Albeit there's been an increasing trend in the PPI in the last 4 months, though not so much in the CORE PPI though the last month came in at 0.3 (roughly 3.6% annualized)

Edited to add: Since the producer price index has come up, here is the same thing for the PPI for convenience of reference

Producer Price Index (PPI), seasonally adjusted
http://data.bls.gov/timeseries/WPSFD4
2022 133.538 134.957 137.241 137.954 139.072 140.361 139.796 139.748 140.119 140.558 140.975 (index)
2022 1.2 1.1 1.7 0.5 0.8 0.9 -0.4 0.0 0.3 0.3 0.3 (1 month)
2022 2.7 2.8 4.0 3.3 3.0 2.3 1.3 0.5 -0.2 0.5 0.9 (3 month)
2022 10.2 10.5 11.7 11.2 11.0 11.1 9.7 8.7 8.5 8.1 7.4 (12 months)

The last 4 months are preliminary

CORE PPI - Producer Price Index, seasonally adjusted - Final demand goods less foods and energy -
http://data.bls.gov/timeseries/WPSFD413
2022 132.218 133.285 134.742 136.238 137.209 137.849 138.022 138.308 138.329 138.280 138.714
2022 0.8 0.8 1.1 1.1 0.7 0.5 0.1 0.2 0.0 0.0 0.3 (1 month)
2022 2.1 2.1 2.8 3.0 2.9 2.3 1.3 0.8 0.3 0.2 0.3 (3 months)
2022 9.5 9.8 10.0 10.1 9.8 9.2 8.5 8.1 7.5 6.7 6.2 (12 months)

The last 4 months are preliminary