Must be time to buy the ISEQ, right?

Hit the back button if you are of a nervous disposition.

Let’s look what the ISEQ General Price Index looks like in real terms (deflated by CPI) over the last 70 odd years. Looks like around 2000 is a fair historical benchmark, maybe 1000 if it undershoots. Only another 75% drop to go.


here is the log form, for the more pedantic among you:

I remember reading an argument (think it was one of the actuarial exams) that stock markets should grow at the same rate as GDP.

I’ll see can i dig it out later

Shares beat inflation me arse. :open_mouth:

Nothing beats inflation. That’s why it’s there.

(Nice charts, btw, thanks. I had been dipping my toes into considering looking at the remote possibility of setting up an account in anticipation of the possibility of being in a position to look at buying some shares in the remote circumstance of accidentally taking some uppers one day. Won’t bother me arse now.)

take the uppers anyway, it’s the only thing getting me through the day

oh boy, and it will possibly undershoot as well as it reverts to trend.

This is a measure of the average price of equities in real terms. Theory says it should be the discounted value of dividends (or earnings equivalently). Unless you are saying that we believe, in 2008, that on average companies will earn more per Euro of current share price over the future than the was likely in, say 1934, the ISEQ price should be the same when adjusted for changes in the general price level.

Found it (not saying i agree or disagree just that this is the argument put forward, take it up with the Institue of Actuaries if there’s a problem :smiley: ). From Subject ST5 ‘Finance and Investment’

Not my words so feel free to tear their logic apart :smiley:

The only thing that beats inflation is actual inflation.

Are we starting to talk about Sexy Sadie and Lovely Raquel here now?

The consolation is that it doesn’t represent returns, only current prices.

I wish. That’s an entirely different forum. Just making the point, with no evidence to back it up, that actual inflation is probably underestimated by CPI.

Gotcha. Certainly if they had included the cost of shelter, energy, medical, education, and food as a proportion of after-tax spend, rather than giving an absurdly high weighting to consumer electronics we’d have rather different CPI figures.

Tell me this guys - you have an index, lets say it’s around its historical level of 2000 points with an overall market cap of €2billion. A massive private company with a €1b valuation floats - index goes to 3000, right, because the overall market cap is now €3b.

Why should it revert to the historic benchmark level of 2000?

Take the aviation sector - historically, it has never been represented on the ISEQ. When you add an entire aviation sector to the index (i.e. Aer Lingus and Ryanair), you’d expect that the historic mean becomes, well, meaningless.

Granted, there’ll be comings *and goings *from the index, but a simple deflator of CPI doesn’t cut it for me I’m afraid.

ps don’t get me wrong guys, I’m not saying the ISEQ is value at current prices, I just disagree with this hypothesis that 2000 is where we’re headed just because that’s the way it’s always been.

That isn’t what a stock market price indx represents, nor how it is calculated.

I would have thought that the new company is added but the weightings of existing companies is reduced, leaving the index at 2000.

Warren Buffet beats inflation.

Unless you are talking only about things of this earth.
Apart from Aliens, nothing beats inflation.

-Rd

How sure are you about that? Have a look at BRK-A over the past decade, depending on your starting point, it has just about doubled. Not sure what the official rate of inflation over this timeframe (or how accurately it reflects real inflation) but I would suggest that Warren is not beating it by much, if at all.

Had just looked at this yesterday and BRK increased by 50% between 2003 and 2008; from c$80k p/s to c$120k p/s. Granted there may have been little movement prior to that - I don’t know the figs.

isn’t this called “chain linking” or am I thinking of something different?

From OECD glossary