The American Economy Enters Its “Lost Decade”

So first up, what's a lost decade? I mean, it's pretty self-explanatory, right? It's 10-ish years where as- a specific asset class or maybe the whole economy delivers flat or negative real returns.

I always call this out, but, quote-unquote, "real return", when I say that, that means inflation-adjusted.

And so if you earned 8% on your stock portfolio, but inflation was 3%, you would get a 5% real return.

You take your nominal return, you subtract inflation, that's a real return.

And that's what we're talking about today because I think one of the big risks in a lost decade is that inflation eats away at your profit.

We're already seeing this in residential housing, right? Nominal prices are going up, but inflation's eating away the benefit of that.

That's why we have negative real returns.

So keep that in mind.

That's what I'm gonna be talking about today.

And again, you know, it's not exactly 10 years.

It could be seven years, it could be 12 years, it could be 13 years, but history shows us that when you have long bull runs, things slow down, right? I do not like when people say what goes up must go down in assets and investing.

Historically, that is not true.

Just look at the housing market.

Look at the stock market.

Yes, there is variation.

There are cycles.

But does it go up generally over time? Yes, of course.

Like, we have absolutely seen that in the United States.

But does that mean your rate of return, your rate of growth needs to stay at these all-time highs or stay at some consistent level? Definitely not.

Just as an example, if you look at 1999 to 2009, that 10-year period, the S&P 500 averaged roughly 0.9%, right? So it actually averaged negative 1% for the year, right? You held on to the world's most popular investment, and you lost money over those 10 years.

Now, if you held on and you kept going for the last 15 years, you're probably pretty happy with yourself.

But if you're gonna have these down times, you might choose to do something different with your investing strategy.

Now, that is not the only example.

There are plenty of other examples in history.

I mean, the famous one is from 1929 to 1939.