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Xmas eve 1999 FTSE 100 6806

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redsturgeon
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Xmas eve 1999 FTSE 100 6806

#185241

Postby redsturgeon » December 7th, 2018, 6:16 am

Yesterday FTSE 6704...that's nowhere in 18 years!

So where does the next 18 years lead us?

John

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Re: Xmas eve 1999 FTSE 100 6806

#185243

Postby JohnB » December 7th, 2018, 7:04 am

Over those 18 years inflation < dividends, so you'd still be ahead in total return terms.

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Re: Xmas eve 1999 FTSE 100 6806

#185245

Postby Dod101 » December 7th, 2018, 7:17 am

Well it is not yet Christmas Eve 2018 so the comments are a bit premature but I agree the general thrust of the argument. I guess in 1999 we had what might loosely be termed tech shares doing particularly well. Cable & Wireless and Marconi for two were riding very high then and of course both fell spectacularly. I know they are not the index and some with better records or memory than me will no doubt be able to fill this out.

But we all know that the UK market has been shunned by many international investors it would seem, for very obvious reasons. Anyone who would like to have a go at a prediction for the next 18 years is welcome to it but as I am unlikely to be around I do not really care. I would like to know though where it might be in a tear's time.

Dod

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Re: Xmas eve 1999 FTSE 100 6806

#185284

Postby tjh290633 » December 7th, 2018, 10:08 am

Just look at the composition of the FTSE100 then and now. Then compare the performance of the survivors over the same period.

That may tell you more than the value of the index, which peaked on New Year's Eve, by the way.

TJH

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Re: Xmas eve 1999 FTSE 100 6806

#185302

Postby OhNoNotimAgain » December 7th, 2018, 10:47 am

redsturgeon wrote:Yesterday FTSE 6704...that's nowhere in 18 years!

So where does the next 18 years lead us?

John


I despair, I really do.

As the table below shows, if you invested in the FTSE 100 you could have almost doubled your returns by reinvesting dividends.

https://www.schroders.com/en/uk/private ... -25-years/

And these boards are populated by people that at least have an interest in capital markets.

God help the rest of the population.

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Re: Xmas eve 1999 FTSE 100 6806

#185304

Postby monabri » December 7th, 2018, 10:52 am

This article was from 2014 ...comparing to 1999.
https://www.telegraph.co.uk/finance/per ... -1999.html

Some snippets

"if inflation needs to be taken into account the index needs to be significantly higher than 10,000 to break even in real terms."

"the only technology survivors in the blue-chip index are ARM Holdings (and Sage)"

"Marconi went into administration in 2006"

"EMI, which was bought by Guy Hands’ private-equity group Terra Firms in 2007 before it collapsed and was broken up."


The case for just buying a tracker?
Last edited by monabri on December 7th, 2018, 11:00 am, edited 1 time in total.

monabri
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Re: Xmas eve 1999 FTSE 100 6806

#185306

Postby monabri » December 7th, 2018, 10:55 am

OhNoNotimAgain wrote:
redsturgeon wrote:Yesterday FTSE 6704...that's nowhere in 18 years!

So where does the next 18 years lead us?

John


I despair, I really do.

As the table below shows, if you invested in the FTSE 100 you could have almost doubled your returns by reinvesting dividends.

https://www.schroders.com/en/uk/private ... -25-years/

And these boards are populated by people that at least have an interest in capital markets.

God help the rest of the population.


In the same vein.

https://brownshipley.com/the-power-of-c ... dividends/

redsturgeon
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Re: Xmas eve 1999 FTSE 100 6806

#185308

Postby redsturgeon » December 7th, 2018, 11:00 am

I fully understand that dividends have been payable on some shares in that time and if reinvested would have helped the situation. And of course some of those dividends have been at reasonably high rates. I also understand that some of those high yield have completely disappeared off the map.

Your chart looks at a 4.1% annual return over the last 25 years, excluding dividends...my simple maths shows a negative return in the last 18 years...so those reinvested dividends would have done what to that return?

Just pointing out a simple fact, no need to despair, don't shoot the messenger.

John

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Re: Xmas eve 1999 FTSE 100 6806

#185321

Postby JohnB » December 7th, 2018, 11:26 am

Have a play with http://www.johnbray.org.uk/ftse100totalreturn.html, which I wrote to remind myself how important total return is

monabri
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Re: Xmas eve 1999 FTSE 100 6806

#185399

Postby monabri » December 7th, 2018, 2:52 pm

JohnB wrote:Have a play with http://www.johnbray.org.uk/ftse100totalreturn.html, which I wrote to remind myself how important total return is


Well,I used 2016 to 2018..if accurate it has completely marmalised my HYP at 15% compound.

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Re: Xmas eve 1999 FTSE 100 6806

#185421

Postby JohnB » December 7th, 2018, 3:33 pm

er, it has figures to the end of the year, so 2017 is as far as it goes. Its a little tool for me, no error checking is in place. I've remembered its also all share, not ftse 100, as the latter had the longer sequence in the data source I found. I've renamed it http://www.johnbray.org.uk/ftseallsharetotalreturn.html

If anyone knows a FTSE 100 total return table that goes back 30 years, I can code that up trivially.

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Re: Xmas eve 1999 FTSE 100 6806

#185448

Postby TUK020 » December 7th, 2018, 5:14 pm

what would be really great is a graph of the FTSE100 giving real (i.e. inflation adjusted) total return (dividends reinvested).
I splutter whenever I hear of 30 investment returns calculation. We had really quite different monetary conditions pre- and post-1997.

If you take the following chart from yahoo:
https://finance.yahoo.com/quote/%5EFTSE?p=^FTSE
select 'max' period, which will show back to 1984 (when the FTSE100 index was created).
If you take an arbitrary breakpoint at 1997.
Pre-1997, you have a strongly rising line of capital value (mostly inflation) with a small amount of market cycle noise superimposed.
Post 1997, inflation is much reduced, giving the impression of a much more volatile market.

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Re: Xmas eve 1999 FTSE 100 6806

#185505

Postby GoSeigen » December 8th, 2018, 12:07 am

OhNoNotimAgain wrote:
As the table below shows, if you invested in the FTSE 100 you could have almost doubled your returns by reinvesting dividends.


So what? Everyone knows its better to reinvest dividends.


Besides, if you reinvest then you don't get to spend divis. So how did you account for the missed utility of whatever you would have spent them on? A: you didn't, you only considered one side of the story.

And these boards are populated by so-called fund managers!


GS

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Re: Xmas eve 1999 FTSE 100 6806

#185532

Postby OhNoNotimAgain » December 8th, 2018, 9:45 am

GoSeigen wrote:
OhNoNotimAgain wrote:
As the table below shows, if you invested in the FTSE 100 you could have almost doubled your returns by reinvesting dividends.


So what? Everyone knows its better to reinvest dividends.


Besides, if you reinvest then you don't get to spend divis. So how did you account for the missed utility of whatever you would have spent them on? A: you didn't, you only considered one side of the story.

And these boards are populated by so-called fund managers!


GS


In the same way that you account for the missed utility of investing the original capital and not spending it.

Fortunately, the last 3 years of more "normal" economic conditions instead of the abnormal QE distorted prior 6 years are bringing some common sense back to the market.

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Re: Xmas eve 1999 FTSE 100 6806

#185657

Postby GoSeigen » December 8th, 2018, 8:19 pm

OhNoNotimAgain wrote:
GoSeigen wrote:
Besides, if you reinvest then you don't get to spend divis. So how did you account for the missed utility of whatever you would have spent them on? A: you didn't, you only considered one side of the story.



GS


In the same way that you account for the missed utility of investing the original capital and not spending it.


So you're pronouncing that if there is a positive investment return then you gain more by investing than not investing. That sure is profound!

Fortunately, the last 3 years of more "normal" economic conditions instead of the abnormal QE distorted prior 6 years are bringing some common sense back to the market.


Very strategic weasel quotes around the word normal there. So one can wriggle out of any objection by saying actually conditions are not normal, they are just "normal". I defy anyone to justify their idea of a normal, undistorted market. As far as I am concerned the market is always normal, QE or not. Distortions are always present. One has to take the market as it is. The presence or absence of QE is completely artificial in defining normality of markets. Why the obsession with QE anyway? QE has been barely a scratch on the surface of the UK market... is it your excuse for the poor performance of your funds?


GS

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Re: Xmas eve 1999 FTSE 100 6806

#185723

Postby toofast2live » December 9th, 2018, 11:59 am

I think you will find that QE has indeed raised risk asset prices by pumping liquidity into the system. Arguably even more distorted in Europe where the ecb is buying good old Italian bonds and crappy corporate bonds that no one else will touch. And if we swing over to the land of the rising sun why, their CB is hoovering up shares as well. IIRC it owns 20% of the Nikkei.

QE has lead to massive distortions. QT will let us see who’s been swimming naked now the tide is going out.

MunroMan May talk cr*p, but it’s not 100% cr*p...

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Re: Xmas eve 1999 FTSE 100 6806

#185761

Postby GoSeigen » December 9th, 2018, 3:32 pm

toofast2live wrote:I think you will find that QE has indeed raised risk asset prices by pumping liquidity into the system. Arguably even more distorted in Europe where the ecb is buying good old Italian bonds and crappy corporate bonds that no one else will touch. And if we swing over to the land of the rising sun why, their CB is hoovering up shares as well. IIRC it owns 20% of the Nikkei.

QE has lead to massive distortions. QT will let us see who’s been swimming naked now the tide is going out.

MunroMan May talk cr*p, but it’s not 100% cr*p...


You and MunroMan offer not the slightest empirical evidence or logical justification for your claims. That's te problem. MM doesn't even define the terms he uses.

By my estimation QE in the uk has made a marginal difference if any difference at all. Why? Because the BoE is a tiny player tinkering around the edges. They swapped a few hundred billion pounds of gilt-edged securities paying 0-2% fixed interest for other assets offering 0.5% variable. That's it. Perhaps 1.5% of half a trillion which is a one-off £7.5bn of actual stimulus in an economy generating £2tr of GDP every year. I'd like to know how that has any material effect whatsoever on asset prices.

GS

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Re: Xmas eve 1999 FTSE 100 6806

#185791

Postby toofast2live » December 9th, 2018, 6:41 pm

https://www.ft.com/content/9a323490-f20 ... 144feabdc0

But you can find more on any financial website.

Anyhow, and anyway you cut it, the last 18 years even including dividends, when adjusted for inflation is appalling. Luckily only the mad few were invested in the FTSE100. Hopefully most had a smattering of the All Share, FTSE250 and Small Caps - all of which did somewhat better. Oh, and HYP 1 of course!!!!!

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Re: Xmas eve 1999 FTSE 100 6806

#185800

Postby Lootman » December 9th, 2018, 7:26 pm

redsturgeon wrote:I fully understand that dividends have been payable on some shares in that time and if reinvested would have helped the situation. And of course some of those dividends have been at reasonably high rates. I also understand that some of those high yield have completely disappeared off the map.

Your chart looks at a 4.1% annual return over the last 25 years, excluding dividends...my simple maths shows a negative return in the last 18 years...so those reinvested dividends would have done what to that return?

You are quite correct to point out the returns have been dismal. If you're not going to get any growth for 20 years then why be in equities at all? You might as well have bought bonds.

The depressingly predictable response was "but what about the dividends?". But it's entirely possible to argue that it is precisely this peculiar obsession that UK investors have with dividends which is the cause of the abject capital performance. If investors demand high dividends then companies will disgorge themselves to pay them, to the point of paying out more than they earn, or even borrowing to maintain a dividend. And what Ohno will never admit is that dividend cover is abysmal at the moment with huge dividend payers like Glaxo and Royal Dutch barely managing to maintain their dividend and going ex-growth.

As an alternative take a look at the S&P 500. It too peaked around the same time 20 years ago. But it is now at a capital level of twice its value then. And its dividend payouts have increased at a higher rate, whilst dividend cover remains significantly higher than the UK. UK investors would have been much better off buying a US index fund than a UK index fund for the last 20 years. Here is a chart of an investable version of the S&P 500 over the last 20 years:

https://finance.yahoo.com/chart/SPY#eyJ ... 1dfQ%3D%3D

The UK market has gone ex-growth because UK investors over-rate dividends. You only have to look at the UK TMF articles to see that obsession with dividends and yield. The US TMF is not like that at all. Its focus is on growth, opportunity and managing risk - things you never hear from our resident yield hogs.

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Re: Xmas eve 1999 FTSE 100 6806

#185817

Postby ADrunkenMarcus » December 9th, 2018, 8:48 pm

Lootman wrote:If investors demand high dividends then companies will disgorge themselves to pay them, to the point of paying out more than they earn, or even borrowing to maintain a dividend.


Sad but true. And shortsighted.

Best wishes

Mark.


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