Quote:
Originally Posted by Cowperson
The TSX was 6,552 in Feb, 2003 and its 12,765 right now . . . . . if you include dividends, the Canadian market has doubled in the last 10 years.
If you measure from March/April, 2000, of course, that's a different thing. Returns are more tepid in that time frame but most people have moved forward for sure in the last 13 years in spite of two very unusual 50% market declines in that period.
The TSX was 3,551 in February, 1993 . . . . . . with dividends, that's basically a quadruple in the last 20 years, in spite of lengthy bear markets in there periodically.
An article in the Globe & Mail a few weeks ago was titled "The End Of Fear," saying the psychological damage of the events of 2008 is finally starting to abate, noting increased traffic into equities, four years after the bear market ended.
Since March 2009, this has been one of the longest and highest gain bull markets in history . . . . and one of the least respected or recognized. Templeton last week sent around survey results showing the majority of investors think markets have declined in the last bunch of years, although that impression is lessening in the last few years.
Markets start to rise in the middle of recessions, not the end and they start their decline in the middle of the good times, not the end. They're anticipating the future, not confirming the past or the present.
Pschologically, of course, people find it hard to get aggressive when the news is at its worst.
On my desk in Calgary, I have a Globe & Mail I bought on Oct. 20, 1987. The market had fallen about 22% in a single day on Oct. 19. The newspaper headline is "Panic Sweeps Financial Markets, Smashing Records Of 1929 Crash" with a secondary headline of "Ticker Tape Tells Tale Of Enormous Losses To Stunned Investors."
Of course, those were the headlines on the cheapest day to buy equities in the last 25.5 years.
I have a Newsweek from October 1982 as well . . . . the headline is "Will The Dow Cross 1,000?" It had spent about 16 years trying and failing to do so.
Psychology is everything. What's the reality?
Fear and greed.
Cowperson
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Certainly. I sort of derailed the thread answering the question, "why are people paying down their mortgage instead of buying equities when interest rates are low?"
The answer to that question is basically fear. Those two large crashes you mentioned were both very recent, and recency bias is very real. They also seem like a huge percentage of stock market history to someone who has been paying attention to the markets for ~15 years, and mortgage paydown vs RRSP applies especially to those in their late 20s/30s, imo.
People are picking the security of a guaranteed after tax return from mortgage prepayment over the risk but likely higher return from the stock market. It's not necessarily the right choice, but it's what people are doing.
Personally, I think a couple of big crashes make another one less likely, as their recent memory makes people less likely to drive the market ahead of itself. (aka greed)