On Fri, 13 Mar 2009 19:03:00 -0500, Ignoramus32252
wrote:

S&P 500 in 1966: 93.3
S&P 500 in 2009: 756

CPI Deflator in 1966: 31
CPI Deflator in 2009: 211

S&P 500 annualized capital gain in the last 43 years, inflation adjusted: 0.44% per year.
-----------
Good point. The only nit to pick is 42 v 43 years, depending
where you start counting.

Just consider how well our athletes would appear to be doing if
the length of the foot had decreased by a factor of 6 in 42 or 43
years. We would now have people running the mile in under 40
seconds....

For table of CPI-U values
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
1966 annual average 32.4
2009 January 211.143 [latest available]

211.143/32.4 = 6.516759259

1966 S&P in Jan2009$ = 93.6 * 6.516759259
= 609.9686667

gain 1966 to 2009 in CV(Jan2009$)
= 756 - 610 = 146

2009 - 1966 = 42 years depending how/where you start

146 / 42 = 3.476936508 S&P units per year.
1966 base in 2009$ = 609.9686667

% gain/year = 3.476936508/609.9686667= 0.0057 = 0.57%/year

However this neglects the value of the dividends received and the
possible gains that an investor could have received with a DRIP
[dividend reinvestment program] over the 42 years.

Other factors not considered are the tax effects when the
companies in the "averages" or indexes, merge, liquidate, split,
etc.

Still, this does indicate the very serious skewing effect that
inflation has on the general impression of long-term "progress"
when using dollar denominated measures such as the S&P or Dow.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).