Conspiracy theory or legitimate explanation?

Username999

We never bought stuff on the "never, never", credit.
HP was frowned upon when I was a young-un.
You had to save up to buy most things.
Most people didn't buy TV's, they rented them from the likes of Radio Rentals.

grumiofoundation

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Prism said:

CreditCardChris said:

dunstonh said:

But the way people have always saved for retirement has been in savings accounts, bonds or the stock market but savings and bonds are a no go with 0% interest rates and this leaves us with just the stock market, which is 10.7 times more expensive relative to income.

Most people do not use savings for retirement.   The typical spread is gilts, bonds and equities.  All three of which remain viable.  So, its not just equities.

In 1950 the average salary in the US was $3,300 and the S&P500 was trading at $18. Now the average salary is $48,672 and the S&P500 is trading at $2836. This means in 1950 your annual salary could buy you 183 units of the S&P but now your annual salary can buy you only 17 units, that means 1 unit is now 10.7 times more expensive relative to income!

That is not a way to compare.    Look at the size of the size of the companies and markets they transact in 1950 compared to today.   You cannot link it to salary as there is causal link.   There is broad link to company earnings though.

What you should look at is PE ratio.  Historically, it spends most of its time under 20.  The median is just under 15.  Two times in its history it got above 40.  The dot.com period and AFTER the credit crunch.  PE Ratio, like most stats, is not reliable by itself.   For example, if you did rely on PE Ratio alone, you would have the period after the credit crunch falls as being the worst time in history to invest. Whereas it was the best time.   The PE ratio was heading to 25 just prior to the recent falls.  Estimates have it back to around 20 at the moment.  Although with earnings expected to fall, the PE ratio is likely to increase (just as it did after the credit crunch).

Thank you. 
So if the P/E ratio is around 20 like it is now, does this mean the price of the S&P is healthy? This of course doesn't mean it can't go down but what I'm asking is if 20 is normal and 15 is the median then the S&P from a pure price perspective is actually pretty normal?

Whether or not the S&P is expensive based on P/E also has to factor in the alternatives - as in is it relatively expensive to other options like cash and bonds. P/E can be manipulated by share buy backs which reduces the number of shares and therefore increases earnings per share, which in turn reduces the P/E. Also something might have a high P/E when it has a high expected growth rate which is a good thing rather than a bad thing. You need to look way deeper at company fundamentals to make your decision than simply P/E - or not worry about it and buy an index.

This thread was mostly to discuss what the former Goldman Sachs fund manager thinks is going on, basically the younger generation don't have many places to put their money to make any meaningful return aside from equity markets that are at / near record highs. I just wanted to see what other peoples thoughts were.

Has there ever been a place?  Generally people are far less risk adverse than in the past. Previous generations were more cautious with their money. 

What about 6%+ interest rate savings accounts? 

Which ones in particular? 

You can just Google it, the bank of england base rate was bouncing between 6% and 16% between 1955 and 1991. No look at it, 0.1% it's pathetic! 

No need. My mortgage interest rate was in double digits for many years............
Remember getting a 21% pay rise once. Trouble was that inflation wasn't far behind. Not really any better off. 

Oh I kinda forgot about that. So you were getting good savings rates but the price of goods and services was rising a lot faster than what they are now is what you're saying.

Hmm interesting. So without allowing your age to influence your option, do you honestly believe the younger generation (under 30's) have it better in terms of housing, price of goods and services and the stock market than under 30's in the 1970's or whatever?

Housing quality has improved - I'm pretty sure you would turn your nose up at a terrace in inner city Manchester in the 1970s. 

Services have improved - the selection on Netflix was a lot more limited, iPhones would have been the size of a block of flats.

P. S. aged 28 - but fed up of hearing the whinging well-paid millennials who buy luxuries, holiday, eat out all the time and run cars and complain how 'impossible' it is to buy a house and complain about how easy it used to be. 

P. P. S You still don't seem to understand how inflation works and still seem to be obsessed with the 'value' of the stock market as a representative for the whole economy.  

Thrugelmir

grumiofoundation said:

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Prism said:

CreditCardChris said:

dunstonh said:

But the way people have always saved for retirement has been in savings accounts, bonds or the stock market but savings and bonds are a no go with 0% interest rates and this leaves us with just the stock market, which is 10.7 times more expensive relative to income.

Most people do not use savings for retirement.   The typical spread is gilts, bonds and equities.  All three of which remain viable.  So, its not just equities.

In 1950 the average salary in the US was $3,300 and the S&P500 was trading at $18. Now the average salary is $48,672 and the S&P500 is trading at $2836. This means in 1950 your annual salary could buy you 183 units of the S&P but now your annual salary can buy you only 17 units, that means 1 unit is now 10.7 times more expensive relative to income!

That is not a way to compare.    Look at the size of the size of the companies and markets they transact in 1950 compared to today.   You cannot link it to salary as there is causal link.   There is broad link to company earnings though.

What you should look at is PE ratio.  Historically, it spends most of its time under 20.  The median is just under 15.  Two times in its history it got above 40.  The dot.com period and AFTER the credit crunch.  PE Ratio, like most stats, is not reliable by itself.   For example, if you did rely on PE Ratio alone, you would have the period after the credit crunch falls as being the worst time in history to invest. Whereas it was the best time.   The PE ratio was heading to 25 just prior to the recent falls.  Estimates have it back to around 20 at the moment.  Although with earnings expected to fall, the PE ratio is likely to increase (just as it did after the credit crunch).

Thank you. 
So if the P/E ratio is around 20 like it is now, does this mean the price of the S&P is healthy? This of course doesn't mean it can't go down but what I'm asking is if 20 is normal and 15 is the median then the S&P from a pure price perspective is actually pretty normal?

Whether or not the S&P is expensive based on P/E also has to factor in the alternatives - as in is it relatively expensive to other options like cash and bonds. P/E can be manipulated by share buy backs which reduces the number of shares and therefore increases earnings per share, which in turn reduces the P/E. Also something might have a high P/E when it has a high expected growth rate which is a good thing rather than a bad thing. You need to look way deeper at company fundamentals to make your decision than simply P/E - or not worry about it and buy an index.

This thread was mostly to discuss what the former Goldman Sachs fund manager thinks is going on, basically the younger generation don't have many places to put their money to make any meaningful return aside from equity markets that are at / near record highs. I just wanted to see what other peoples thoughts were.

Has there ever been a place?  Generally people are far less risk adverse than in the past. Previous generations were more cautious with their money. 

What about 6%+ interest rate savings accounts? 

Which ones in particular? 

You can just Google it, the bank of england base rate was bouncing between 6% and 16% between 1955 and 1991. No look at it, 0.1% it's pathetic! 

No need. My mortgage interest rate was in double digits for many years............
Remember getting a 21% pay rise once. Trouble was that inflation wasn't far behind. Not really any better off. 

Oh I kinda forgot about that. So you were getting good savings rates but the price of goods and services was rising a lot faster than what they are now is what you're saying.

Hmm interesting. So without allowing your age to influence your option, do you honestly believe the younger generation (under 30's) have it better in terms of housing, price of goods and services and the stock market than under 30's in the 1970's or whatever?

Housing quality has improved - I'm pretty sure you would turn your nose up at a terrace in inner city Manchester in the 1970s. 

Remember going to my grandparents as a child. A two up, two down terrace house in Wandsworth. No bathroom, outside toilet in back yard. Only heating was a fireplace in downstairs front room. That was the sum of a lifetime of hard work.  Long demolished. 

afis1904

I can't say I expected anything else from this forum on this subject but this thread really is full of anecdotal evidence rather than actual analysis.

John_

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

Prism said:

CreditCardChris said:

dunstonh said:

But the way people have always saved for retirement has been in savings accounts, bonds or the stock market but savings and bonds are a no go with 0% interest rates and this leaves us with just the stock market, which is 10.7 times more expensive relative to income.

Most people do not use savings for retirement.   The typical spread is gilts, bonds and equities.  All three of which remain viable.  So, its not just equities.

In 1950 the average salary in the US was $3,300 and the S&P500 was trading at $18. Now the average salary is $48,672 and the S&P500 is trading at $2836. This means in 1950 your annual salary could buy you 183 units of the S&P but now your annual salary can buy you only 17 units, that means 1 unit is now 10.7 times more expensive relative to income!

That is not a way to compare.    Look at the size of the size of the companies and markets they transact in 1950 compared to today.   You cannot link it to salary as there is causal link.   There is broad link to company earnings though.

What you should look at is PE ratio.  Historically, it spends most of its time under 20.  The median is just under 15.  Two times in its history it got above 40.  The dot.com period and AFTER the credit crunch.  PE Ratio, like most stats, is not reliable by itself.   For example, if you did rely on PE Ratio alone, you would have the period after the credit crunch falls as being the worst time in history to invest. Whereas it was the best time.   The PE ratio was heading to 25 just prior to the recent falls.  Estimates have it back to around 20 at the moment.  Although with earnings expected to fall, the PE ratio is likely to increase (just as it did after the credit crunch).

Thank you. 
So if the P/E ratio is around 20 like it is now, does this mean the price of the S&P is healthy? This of course doesn't mean it can't go down but what I'm asking is if 20 is normal and 15 is the median then the S&P from a pure price perspective is actually pretty normal?

Whether or not the S&P is expensive based on P/E also has to factor in the alternatives - as in is it relatively expensive to other options like cash and bonds. P/E can be manipulated by share buy backs which reduces the number of shares and therefore increases earnings per share, which in turn reduces the P/E. Also something might have a high P/E when it has a high expected growth rate which is a good thing rather than a bad thing. You need to look way deeper at company fundamentals to make your decision than simply P/E - or not worry about it and buy an index.

This thread was mostly to discuss what the former Goldman Sachs fund manager thinks is going on, basically the younger generation don't have many places to put their money to make any meaningful return aside from equity markets that are at / near record highs. I just wanted to see what other peoples thoughts were.

Has there ever been a place?  Generally people are far less risk adverse than in the past. Previous generations were more cautious with their money. 

What about 6%+ interest rate savings accounts? 

Which ones in particular? 

You can just Google it, the bank of england base rate was bouncing between 6% and 16% between 1955 and 1991. No look at it, 0.1% it's pathetic! 

No need. My mortgage interest rate was in double digits for many years............
Remember getting a 21% pay rise once. Trouble was that inflation wasn't far behind. Not really any better off. 

Oh I kinda forgot about that. So you were getting good savings rates but the price of goods and services was rising a lot faster than what they are now is what you're saying.

Hmm interesting. So without allowing your age to influence your option, do you honestly believe the younger generation (under 30's) have it better in terms of housing, price of goods and services and the stock market than under 30's in the 1970's or whatever?

Yes, they do. Their lifestyle was unimaginable to people like me from Generation X when we left school, as are their opportunities.

quirkydeptless

Thrugelmir said:

Remember going to my grandparents as a child. A two up, two down terrace house in Wandsworth. No bathroom, outside toilet in back yard. Only heating was a fireplace in downstairs front room. That was the sum of a lifetime of hard work.  Long demolished. 

You were lucky! 

https://www.youtube.com/watch?v=ue7wM0QC5LE

DiggerUK

afis1904 said: I can't say I expected anything else from this forum on this subject but this thread really is full of anecdotal evidence rather than actual analysis.

A tad blunt, but on topic.

The former employee of GS is quoted by the OP  "The millennial generation are stuck...........just nowhere for this generation to put their money" 
Well, it's not that there aren't choices, it's more what is the most viable choice. 

We paid the last of our mortgage in 2000. Post 2000, an examination of our equity type investments showed me that there was a declining real return on monies invested. Long story short, it's what economists refer to as the declining rate of profit.

So we decided  to put our savings, in whatever form we had them, into non equity 'cash' homes. NSI Index Linked, Premium Bonds, Building Societies and Gold, that balance has changed since, but nothing new.
At least we had those choices, now some of those choices are not available with the same merits and many posters are stuck in the headlights. They can't really be expected to offer much beyond anecdote. 

The OP offers up a valid thread topic for discussion, your contribution makes a valid point, but not much by way of analysis..._

afis1904

DiggerUK said:

afis1904 said: I can't say I expected anything else from this forum on this subject but this thread really is full of anecdotal evidence rather than actual analysis.

A tad blunt, but on topic.

The former employee of GS is quoted by the OP  "The millennial generation are stuck...........just nowhere for this generation to put their money" 
Well, it's not that there aren't choices, it's more what is the most viable choice. 

We paid the last of our mortgage in 2000. Post 2000, an examination of our equity type investments showed me that there was a declining real return on monies invested. Long story short, it's what economists refer to as the declining rate of profit.

So we decided  to put our savings, in whatever form we had them, into non equity 'cash' homes. NSI Index Linked, Premium Bonds, Building Societies and Gold, that balance has changed since, but nothing new.
At least we had those choices, now some of those choices are not available with the same merits and many posters are stuck in the headlights. They can't really be expected to offer much beyond anecdote. 

The OP offers up a valid thread topic for discussion, your contribution makes a valid point, but not much by way of analysis..._

I did post something on the last page about the steep rise of housing costs compared to wages and the lack of suitable housing being built but everyone else was just busy saying how bad they had it 20 years ago with no actual experience or evidence from people who entered the workforce in the last 10-15 years.

The_Green_Hornet

https://youtu.be/VKHFZBUTA4k

DiggerUK

Yes, I read your previous post. 

We are well up to date on problems of those entering the workforce over the last twenty years.  Bank of 'Mum 'n Dad' has been raided on four occasions, in laws have also found out that the first eighteen years of parenthood are expensive, the second eighteen bankrupt you.
All we keep banging on about with them is one thing, forget savings and emergency funds, pay down the mortgage. After all, what real value are they in the current economic situation. To one degree or another, it's what they 'claim' to have done..._