DOW: October 30, 1998 - October 27, 2008

JoeyDVivre Wrote: ------------------------------------------------------- > Nah, the new buy-and-hold strategy is to get your > gf breast implants. funny

I believe growth over the long-term is much lower than we believe it will be today. Has anyone looked at the market returns over the past 200 years versus 100 years? The only data I can find is the FTSE Allshare index that dates back to 1800. This index, using a geometric mean, only returned 2.5% annually, with 4.5% in the last hundred years and nearly 0% for the first 100 years. Using data from where the DJIA starts, 1896, is data that began right after a 30 year period of deflation and constant deep recession/depression. DJIA had an annual 5.7% return since then. But it probably would’ve been 4%ish considering the 30 years before it started. I personally think that the max value for the long-term return on equity is closer to 5% than the 7-10% proposed in the past and now. I believe the reasons why returns were small in the 1800s were because money was being spent on infrastructure that wouldn’t bring returns until much later. Same happened with the auto industry and roads, infrastructure was built for only the rich, but the true gains came when the poor could drive and buy products that were shipped across the country. Another infrastructure build is digital infrastructure… satellites, cable, fibre-optic, wireless. I think the '00 bubble hasn’t burst as much as it can and it will come back to haunt us when telecom and digital airwave companies can’t make much money on their huge investments. So long as we need infrastructure for product use, we will have depressions. This can be reduced should we be able to drive hovercrafts. End of thesis, hehe.

MattLikesAnalysis Wrote: ------------------------------------------------------- > I believe growth over the long-term is much lower > than we believe it will be today. > > Has anyone looked at the market returns over the > past 200 years versus 100 years? > > The only data I can find is the FTSE Allshare > index that dates back to 1800. > > This index, using a geometric mean, only returned > 2.5% annually, with 4.5% in the last hundred years > and nearly 0% for the first 100 years. > > Using data from where the DJIA starts, 1896, is > data that began right after a 30 year period of > deflation and constant deep recession/depression. > DJIA had an annual 5.7% return since then. But it > probably would’ve been 4%ish considering the 30 > years before it started. > > I personally think that the max value for the > long-term return on equity is closer to 5% than > the 7-10% proposed in the past and now. > > I believe the reasons why returns were small in > the 1800s were because money was being spent on > infrastructure that wouldn’t bring returns until > much later. Same happened with the auto industry > and roads, infrastructure was built for only the > rich, but the true gains came when the poor could > drive and buy products that were shipped across > the country. > > Another infrastructure build is digital > infrastructure… satellites, cable, fibre-optic, > wireless. I think the '00 bubble hasn’t burst as > much as it can and it will come back to haunt us > when telecom and digital airwave companies can’t > make much money on their huge investments. So long > as we need infrastructure for product use, we will > have depressions. This can be reduced should we be > able to drive hovercrafts. End of thesis, hehe. That’s actually pretty interesting.

Thanks, thought of it all myself. Its funny to think that we can’t get depressions anymore. But they were as common as nightfall in the 1800s. Oh and another thing I’d like to add is the fact that there is no way Moore’s Law (technology speed/size doubles every 18 months) is sustainable yet most of our assumptions in valuing tech companies is that that law will be maintained. Do you understand how quickly things could be processed should that law be fulfilled in perpetuity. I’ll tell you, it will be so fast that nobody will need it to be any faster and that speed of information exchange no longer benefits our productivity as a nation. ie. investment in R&D would be useless in that department. That day will come eventually, but calling that one is difficult.

MattLikesAnalysis Wrote: ------------------------------------------------------- > Thanks, thought of it all myself. > > Its funny to think that we can’t get depressions > anymore. But they were as common as nightfall in > the 1800s. > > Oh and another thing I’d like to add is the fact > that there is no way Moore’s Law (technology > speed/size doubles every 18 months) is sustainable > yet most of our assumptions in valuing tech > companies is that that law will be maintained. Do > you understand how quickly things could be > processed should that law be fulfilled in > perpetuity. I’ll tell you, it will be so fast that > nobody will need it to be any faster and that > speed of information exchange no longer benefits > our productivity as a nation. ie. investment in > R&D would be useless in that department. That day > will come eventually, but calling that one is > difficult. Kind of like the aerodynamics of an F16. An F16 can maneuver faster than a human can handle (you will black out or white out dependent on the direction of the turn). So the aerodynamic mechanical advances have slowed as the current technologies oustrips our current needs. Instead the shift in focus for technological research has turned to focus on targeting and electronic flight systems. Not sure if that makes sense compared to current Moore’s law expectations.

You’re an ex-fighter pilot aren’t you?

MattLikesAnalysis Wrote: ------------------------------------------------------- > Thanks, thought of it all myself. > > Its funny to think that we can’t get depressions > anymore. But they were as common as nightfall in > the 1800s. > > Oh and another thing I’d like to add is the fact > that there is no way Moore’s Law (technology > speed/size doubles every 18 months) is sustainable > yet most of our assumptions in valuing tech > companies is that that law will be maintained. Do > you understand how quickly things could be > processed should that law be fulfilled in > perpetuity. I’ll tell you, it will be so fast that > nobody will need it to be any faster and that > speed of information exchange no longer benefits > our productivity as a nation. ie. investment in > R&D would be useless in that department. That day > will come eventually, but calling that one is > difficult. That’s quite a stretch of Moore’s Law.

How is it a stretch? I guess Moore’s second law may void the first law as costs become too great. But I’m sure there would still be decisions made that are uneconomic at that inflection point.

First of all, Moore is insistent his original prediction was every 2 years, not 18 months. Regardless, “technology speed/size” casts an extremely broad net, and Moore’s law is much more focused, albeit with expanded applications recently. Plenty of aspects of technology don’t follow Moore’s law. Already software performance is well behind Moore’s law, limiting our use of new hardware. As to “our assumptions in valuing tech companies” being based upon this, that’s just absurd.

Are you Moore? hehe. I learned in my programming classes that it was every 18 months, so I blame my teachers and my lack of due diligence for that. But I believe it is not fully absurd… Further developments are expected by the company you are valuing or its competitors. If one is on the curve, but the other is not, it is nearly impossible to catch up to the further developed technology without trying to fully skip a step which requires heavy capital spending. This is my understanding in the Intel-AMD situation. There are portions of AMD’s technology that is falling behind the curve due to less funding, ie. business spending on Intel technology provides it with loads of R&D cash. I’m not saying that in every tech company, Moore’s law is directly applied, but it is a consideration in expectation of future earnings and competitiveness.