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BrentinUtahsDixie wrote:
> The power of compounding would seem great until you adjust for inflation
> which I have no figures for but a head of beef sold for 2 to 3 dollars in
> the movies.
Inflation also has a strong bearing on the annualized return as well. For
instance, if inflation averaged 3% over this period, the return would be
seriously reduced. (You mean a side of beef right? <g>. I doubt the head is
worth all that much nowadays either unless you are fond of cow brains <g>).
The point of bringing up compounding here was to bring to light the illusion of
high return that compounding provides over this many periods.
> Some things are probably 100 times as expensive especially real
> estate. So divide 9500 by 100 you get 95. If this voodoo math is right we
> are only about 3.3 times as high as the all time low.
Aha - well that might be true that things are 100 times as expensive. This
would give us a mean inflation rate of 4.62% - that seems a little high - we'd
really need the actual figures here. Then, we'd subtract inflation from the
annualized rate to give us the real rate of return. It's going to be pretty
small in any case though - 2 or 3 percent range or so.
Fact is, I agree with you that seeing the Dow go from 28 to the 9300 range
isn't all that impressive given the long period it took to reach this,
especially if you account for inflation.
Regards,
A.J.
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