Perspectives – Focus on the Long Term

August 21, 2012

On July 31st, 1992, approximately 20 years ago, The TSX (our Canadian index of stock market performance) closed at 3443.42. The S&P 500, (a US index of 500 companies) closed at 423.92.

As of August 20th of this month the closing numbers were:

The TSX is at 12134.21 an increase of 352.4%

The S&P 500 is at 1418.13 – an increase of 334.5%.

The growth of these indexes represent the cumulative growth in the economy, in our wealth and standard of living.

During the last 20 years we have experienced:
– 1990 – Swedish and Finnish Banking crisis
– 1992 – Black Wednesday – European speculative currency attack
– 1994 – Mexican economic crisis
– 1995 – Real Estate decline – Canada
– 1997 – Asian Financial Crisis
– 1998 – Russian Ruble crisis
– 1998 – Long Term Capital Hedge fund – risk of global financial collapse
– 2000 – Dot Com bubble
– 2001 – World Trade Centre Collapse
– 2001 – Technology bust
– 2002 – Argentine Crisis
– 2003 – Iraq war
– 2007 – US Housing and mortgage bubble.
– 2008 – Global Financial Collapse
– 2009 – Recession

What is clear about the last 20 years (or 30 or 40!) is in the short term we will continually be moving from one crisis to another but over the long term, (20 yrs ) the global economy will continue to improve.

What History Suggests about the Future of Stocks

Financial Planning is based on long term probablities. Those that suggest “This time is different” are simply basing their opinions on recent history. The negative view of equities now is based on the same kind of thinking in the late 90’s when “everyone” thought Nortel and JDS were going to keep going up.

This article reviews 10 yr periods of equity performance and considers what happened after an underperforming 10 year period.

Article

The Fundamental case for Dow 20,000

This author makes a thorough and analytical analysis of the stock market returns we could expect based on different degrees of company earnings, margins, inflation, productivity etc. His analysis suggests a probable 6% average return over the next 5-10 years.

Article

The Death of Equities – again?

“The prediction of my death has been great exaggerated”

Article

Recession Generation turns to Rental Generation

Our youth think differently about housing and vehicles then we did.

Article

Do You Have an End of Life Plan?

Given the choice we would all want to go peacefully and not have the inevitable prolonged. The only way to be certain of that is to have a Power of Attorney of Personal Care appointed and our wishes described.

Article

Maya Angelou:
“Success is liking yourself, liking what you do and liking how you do it.”