I was just thinking about this today and was going to look for something like this later on today. I remember in my learnings on the great depression about the huge fall, relative bump back up, then long term decline past that point.
And that's why we have Tim around!
Here's a better direct comparison of 1929-1932 vs. the present, courtesy of Yahoo! Finance's feature that lets you download historic data to a spreadsheet.
I, too, plan to get contributing bi-weekly to my 403(b)(7). So, okay, I probably will not see any increase in stock value, per share, over the next handful of years, but I am hoping that by the time I am in my early retirement years--a dozen years or so from now--I can then start "cashing out" at a modest profit. Am I being financially ignorant?
I meant "continue to contribute," not "get to..." I just started contributing late last year, 2007, so it's not like I was in the market years ago and have seen most of that value wiped out in the past year since the Oct. 2007 stock market "high."
Oof! The Dow is down another 250 points today -- to the lowest since 1997. My 401k has lost at least 40% so far. All my Microsoft stock awards are underwater.
I still hold to the Dow 2000 prediction, but it will take some time for us to get there. In fact, I think we will see a pretty heady rally begin sometime in the next few weeks that will last for months. The Dow could even climb above 9000 before this rally peters out.
Unfortunately, I think that the deflationary forces will grip the economy again (maybe towards the end of 2009) and take us even lower. 5000 in the Dow by year-end is not out of the question.
The current decline might get the Dow into the lower 6000 range before the big rally starts, but I don't think it will stay there for long.
OK that time the link to the historical Dow chart worked.
Look at the run up in the Dow between 1988 to 2007. There is no comparison to the Great Depression according to the chart.
The shear volume of dollars connected to the stock market is staggering and yes it could go to 2000 and still be on track for future economic growth. That's where it was in 1989.
Total drop from the peak (503 days ago) as of today's close: 49.8%
Total drop from the peak the same # of days after the 1929 peak: 57.6%
Just more proof that this crash is nothing like the great depression. At least, unless it becomes so.
One last thing, even if we see 20% unemployment and a market crash to equal the great depression, in a very real sense this depression still won't be that bad. Crashes of that scale tend to set consumption back to 20 year ago levels. During the great depression, that meant no electricity of plumbing. Today, it means no cell phones, one car per household, antenna TV, and probably a really ancient computer (internet?). At least, that's the most likely worst case scenario.
Going back twenty years was a great thought. One thing that is much different today is the internet, computers, and computer software to run any type of business, or government.
Once the genie was out of the bottle everything, and anything became possible.
OK that time the link to the historical Dow chart worked.
Look at the run up in the Dow between 1988 to 2007. There is no comparison to the Great Depression according to the chart.
The shear volume of dollars connected to the stock market is staggering and yes it could go to 2000 and still be on track for future economic growth. That's where it was in 1989.
Looking at long term support from back in the 20's to when it finally rallied off the late 70's, that puts support around 4000 today. But there's no guarantee that we're going to plummet until we hit that support line -- we could rally into a new multi-year bull market back into the 10,000-14,000 area before falling back to that support line 5 to 10 years later. But it will take something truly apocalyptic (far beyond the great depression) for the dow to fall below 4,000 though.
it will take something truly apocalyptic (far beyond the great depression) for the dow to fall below 4,000 though.
Even a year ago most people would have considered that a decline of the Dow to 7000 would only occur under "apocalyptic" circumstances. I don't see any reason we can't see the Dow fall a LOT more. Many other nations have seen their stock markets fall by 70% or more in the last year. The Japanese Nikkei is more than 80% lower than it was in 1989, and they haven't seen an "apocalypse".
I still stand behind my prediction of a Dow 2000 within the next 5 years.
That said, I fully expect there to be some MAJOR rallies in the Dow along the way. In fact, I think we will see a rally this spring and summer that could have the Dow rise soem 20% to 30%, only to lose it all (and then some) in the fall and next year.
Sniglet. I always wonder after reading your posts... where are you putting your money? Are you stashing it under a mattress? Maybe shorting stocks? Just curious.
Sniglet. I always wonder after reading your posts... where are you putting your money? Are you stashing it under a mattress? Maybe shorting stocks? Just curious.
My money has been almost exclusively in a variety inverse-correlated stock index funds for the last year. My emerging market reverse index funds have just been going gang busters (who says I don't love the BRICS?)!
However, I am getting pretty tense about holding them since I feel a big rally coming. I think I will likely sell out my inverse funds and go to cash in the next few weeks, and then get back into the short game when the markets turn down again late in the year.
The secular bear market will empirically bring all short or mid-term speculators to their knees, most likely also including sniglet. I've contemplated the inverses and futures, but the problem is that you can't predict the next huge rally, which happen unpredictably during secular bears. Pretty much the equivalent of gambling. Let us know how your strategy works over the next couple years.
and long term investors as well. They just might ignore the pain like the mighty Ent.
I disagree. If you just let your long term savings (money you won't need until retirement) sit in a diversified mix of stocks, bonds, CD's/cash, property, and commodities your much better off because your not trying to guess markets. Secular bulls are great because they go up and up, so everybody wins. Secular bears are awful because they shoot up and down; by the end all the gamblers are hosed and the P/E ratio resets.
Comparing the current market action to that of the 1929 Dow Crash, some interesting correlations may be playing out. The '29 to '32 collapse could be seen as an A-B-C. A(381-200) B(200-295) C(295-41).
If you flip that A-B-C over and match the 41 to the 14,000+/- high of this market, then the current leg(A) should bottom @ 4600-4800 with a retrace to 8000-8200(B) then a final leg to 1400-1600(C).
If the time period required plays out then the final bottom should be in by mid to late 2010.(intervention may extend)
Some other interesting tidbits. The 2007 high is roughly 37X the 1929 high. A low of 1500+/- would be 37X the 1932 low. Using the A-B-C described above, each leg in this market would be roughly 37X each leg of the '29 to '32 market. Who knows what effect printing, etc. may have on the final outcome.
I really don't think you can use stock market action during the great depression as an exact play-by-play for 2009. The lesson you can take is that bear market rallies can be breathtaking, and yet they can still be erased in the blink of an eye.
In general, I think this recession will be less bad than the Great Depression in almost every way: lower unemployment, less stock market losses, and generally less pain. The one way this crash will be worse - housing prices will plummet more peak to trough than they did during the depression.
In general, I think this recession will be less bad than the Great Depression in almost every way: lower unemployment, less stock market losses, and generally less pain. The one way this crash will be worse - housing prices will plummet more peak to trough than they did during the depression.
WRT unemployment, are we calculating it the same way as the GD? U3 vs u6? Just curious...I have no idea of how they came up with their figures then compared with now.
WRT stock market losses. My only concern is that more people are "invested" (401k/IRA), and potentially depending on their investment for future living expenses. I've heard people say that it "wasn't that bad then" as so few people owned stocks.
Not arguing with you or challenging your point (because I like the points you make)...just thinking out loud.
Your point about unemployment calculations changing is probably spot on. That more people own stocks is just another reason we can't expect identical stock action.
Sharp rallies (such as we saw on 3/10) are the hallmark of bear markets. Dramatic, swift, rallies ONLY occur during bear markets. Moreover, the more dramatic the uptick in stocks the more likely new lows will be reached in short order.
If we were going to have a long sustained rally (of a month or more, say), then we should really be witnessing a slower increase in stock prices, spread out across many days.
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Total drop from the peak (503 days ago) as of today's close: 49.8%
Total drop from the peak the same # of days after the 1929 peak: 57.6%
Unfortunately, I think that the deflationary forces will grip the economy again (maybe towards the end of 2009) and take us even lower. 5000 in the Dow by year-end is not out of the question.
The current decline might get the Dow into the lower 6000 range before the big rally starts, but I don't think it will stay there for long.
Look at the run up in the Dow between 1988 to 2007. There is no comparison to the Great Depression according to the chart.
The shear volume of dollars connected to the stock market is staggering and yes it could go to 2000 and still be on track for future economic growth. That's where it was in 1989.
Just more proof that this crash is nothing like the great depression. At least, unless it becomes so.
One last thing, even if we see 20% unemployment and a market crash to equal the great depression, in a very real sense this depression still won't be that bad. Crashes of that scale tend to set consumption back to 20 year ago levels. During the great depression, that meant no electricity of plumbing. Today, it means no cell phones, one car per household, antenna TV, and probably a really ancient computer (internet?). At least, that's the most likely worst case scenario.
Once the genie was out of the bottle everything, and anything became possible.
Looking at long term support from back in the 20's to when it finally rallied off the late 70's, that puts support around 4000 today. But there's no guarantee that we're going to plummet until we hit that support line -- we could rally into a new multi-year bull market back into the 10,000-14,000 area before falling back to that support line 5 to 10 years later. But it will take something truly apocalyptic (far beyond the great depression) for the dow to fall below 4,000 though.
Even a year ago most people would have considered that a decline of the Dow to 7000 would only occur under "apocalyptic" circumstances. I don't see any reason we can't see the Dow fall a LOT more. Many other nations have seen their stock markets fall by 70% or more in the last year. The Japanese Nikkei is more than 80% lower than it was in 1989, and they haven't seen an "apocalypse".
I still stand behind my prediction of a Dow 2000 within the next 5 years.
That said, I fully expect there to be some MAJOR rallies in the Dow along the way. In fact, I think we will see a rally this spring and summer that could have the Dow rise soem 20% to 30%, only to lose it all (and then some) in the fall and next year.
My money has been almost exclusively in a variety inverse-correlated stock index funds for the last year. My emerging market reverse index funds have just been going gang busters (who says I don't love the BRICS?)!
However, I am getting pretty tense about holding them since I feel a big rally coming. I think I will likely sell out my inverse funds and go to cash in the next few weeks, and then get back into the short game when the markets turn down again late in the year.
By the way, I am NOT giving investment advice!
and long term investors as well. They just might ignore the pain like the mighty Ent.
I disagree. If you just let your long term savings (money you won't need until retirement) sit in a diversified mix of stocks, bonds, CD's/cash, property, and commodities your much better off because your not trying to guess markets. Secular bulls are great because they go up and up, so everybody wins. Secular bears are awful because they shoot up and down; by the end all the gamblers are hosed and the P/E ratio resets.
Comparing the current market action to that of the 1929 Dow Crash, some interesting correlations may be playing out. The '29 to '32 collapse could be seen as an A-B-C. A(381-200) B(200-295) C(295-41).
If you flip that A-B-C over and match the 41 to the 14,000+/- high of this market, then the current leg(A) should bottom @ 4600-4800 with a retrace to 8000-8200(B) then a final leg to 1400-1600(C).
If the time period required plays out then the final bottom should be in by mid to late 2010.(intervention may extend)
Some other interesting tidbits. The 2007 high is roughly 37X the 1929 high. A low of 1500+/- would be 37X the 1932 low. Using the A-B-C described above, each leg in this market would be roughly 37X each leg of the '29 to '32 market. Who knows what effect printing, etc. may have on the final outcome.
In general, I think this recession will be less bad than the Great Depression in almost every way: lower unemployment, less stock market losses, and generally less pain. The one way this crash will be worse - housing prices will plummet more peak to trough than they did during the depression.
WRT unemployment, are we calculating it the same way as the GD? U3 vs u6? Just curious...I have no idea of how they came up with their figures then compared with now.
WRT stock market losses. My only concern is that more people are "invested" (401k/IRA), and potentially depending on their investment for future living expenses. I've heard people say that it "wasn't that bad then" as so few people owned stocks.
Not arguing with you or challenging your point (because I like the points you make)...just thinking out loud.
Yes, I'm being sarcastic.
If we were going to have a long sustained rally (of a month or more, say), then we should really be witnessing a slower increase in stock prices, spread out across many days.
In short, sharp rallies just scream SELL!!!