Four Past Bad Bear Markets: Where Are We Now? 13 comments
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The graph below illustrates four bad bear markets over the last 80 years (from Doug Short, dshort.com, article), including the great depression (based on the Dow), as well as the 1973 oil crisis, 2000 technology crash, and the current 2008 credit/housing sell-off (each based on the S&P). Note: You should be able to click on each image to make them bigger.
Source: dshort.com
The second graph provides more specific return data for the current market, including the various rallies and sell-offs.
Source: dshort.comWhen looking over the graphs and comparing to the current downturn to the 1973 and 2000 crashes, some may conclude that we are approaching the end game of the correction. If on the other hand they were to compare to the 1929 crash (graph below), it might be speculated that we may have another correction in the cards before entering into the long climb back from the abyss. Either way, the market certainly seems to be at an interesting point.
Source: dshort.comOf course, this type of analysis often assumes some correlation/relation between the bear markets. Where it goes from here, and whether it follows the pattern of one of the other larger bear markets is just about any one's guess (even for most of those who claim to know otherwise). Yet, even without history being a perfect guide, it is interesting to see and learn about how things played out in the past.
Regardless of their predictive nature, I recommend that you check out the dshort.com site if you have not already done so. There is a lot of good visual data of historical moves, each of which is easy to understand, interesting to look at, and of course fun to speculate about - even if you are not a technician, or someone who trades on past patterns. Most of the charts are updated daily and weekly.
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so it's pretty much like saying that on november 23rd 1979 was sunny day; and that because of that on november 23rd 2009 must be a sunny day ... and that is false because the argument a, b,c i mentioned above ...
Like looking at a new companies business plan, which duplicates another companies successful business plan, hires a top notch team that came from that other business and implements its plan exactly the same as the other. There is no quarantine of the business succeeding because nothing is ever exactly the same so the results can vary dramatically. So basically the Market is like Vegas, a crap shoot because there are no absolutes
The SP500 GAAP earnings for 2009 (reported and estimated) is $29.98 as of 7/17/2009. That's a PE of 31, so another major down leg is coming.
enigmaman ... exactly ... i have maybe oversimplified my original post, but if we want to make a comparison of anything we have to look a the parameters of the S0a ( o stage of an event a ) and S0b ... that to say ... this comes into domain of determinist chaos no in the domain of chart analysis, because all the events the author is trying to compare had differently parameters of S0 .... look at it like this .... lets say you multiply pi to the 20th decimal point by itself 100 time and compare it to pi limited to the 21st decimal point multiplied also a hundred times whit itself ... they maybe LOOK the same but the result of exponentially multplying pi to the 20th decimal point and exponentially multiplying pi to the 21st decimal point have a delta ( difference ) which is very very very large ... so the similarity or even identity do not equal the number of components which are alike but the number of components, no matter who insignificant they may look, which are not alike ... so mathematically it makes no sense of of trying to predict how will this recession behave in comparison to other recession because we do not have total S0 of neither of those recession ... so yes ... it's ridiculous to make such comparisons because, as i said before, it does not matter what unites them in behavior, its what differentiates them, no matter how small or seemingly insignificant the difference is .... and that just talking S0 and not taking into observation events that come along after S0+x and the effect of time which makes any difference no matter how small it is exponentially larger whit each new event not that did not define S0 ... it grows very very very different until the point that S01 is not even in probabilistic percentages to be considered as even similar to S02, not matter that they might have APPEARED the same in S0s .... i hope you got that ... but yes ... studying charts and making comparisons is like watching tea leafs or coffee beans and try to figure out will you win a lottery or not ...
On Jul 24 09:33 AM enigmaman wrote:
> User- So then you are saying that when the Wall Street pundits make
> predictions for the market based on historical equivalents, technical
> and or fundamentals they are basically reading Tarot cards. Im not
> saying I agree with you or not just asking because as with anyting
> there is some truth in what you imply.
>
> Like looking at a new companies business plan, which duplicates another
> companies successful business plan, hires a top notch team that came
> from that other business and implements its plan exactly the same
> as the other. There is no quarantine of the business succeeding because
> nothing is ever exactly the same so the results can vary dramatically.
> So basically the Market is like Vegas, a crap shoot because there
> are no absolutes
In looking at the US and the hollowing out of our manufacturing base and the corruption and greed in Washington, I'm VERY inclined to agree with you.
But, that's now the consensus view, and Jim Rogers always says that it's dangerous to say "it's different this time."
My guess - the last big bear in stocks was 1966-82. My bet is that we won't hit new highs until, at best, 2015-2018. Maybe another leg down to 6500 or even 5000 on the Dow, or maybe just meandering between 7500 and 10000 for another 5-10 years.
Hard to tell, but it's hard to be optimistic, but I can't help but wonder if all the pessimism is THE reason to be optimistic.
On Jul 24 11:28 AM Larry House wrote:
> To answer the question in your title, I think we are in unchartered
> waters that are unlike any previous bear market. I don't think anything
> about the past is predictive of what is to come. I don't know how
> bad it will be; I just think it will be different and unforeseen
> by everyone.
History may not repeat, but offers many good guidelines. Averaging 1970's and 2000's bear market suggests +/- 10% trading range from here. Using 1929's super-bear cycle also suggests +/- 10% trading range for the next few years. Using 16-18 year super-cycle also gets us to same conclusion.
My takeaway is for SPY to be in +/- 10% trading range (800 to 1000) for the next few years, until the economy works off the consumer deleverage and FED finds a happy medium in their exit strategy to avoid double-dip recession.
Best strategy continues to be a covered call strategy on leading sector ETFs, with occassional market hedges on SPY.
Emerging markets is an entirely different story.
Research it a little bit and you will find a debt bubble, a deflationary spiral, stock market crash, government stimulus, high unemployment, etc. We are in Summer of 1930 so if you look at cartoons, articles, and headlines from Summer 1929 to Summer of 1930 the similarities are illuminating and surprising.
Our Grandparents and great-Grandparents have been here before, but we haven't.
On Jul 24 08:59 AM doctor of Chaos wrote:
> totally irrelevant article ... comparing two separate events and
> trying to find a pattern in-between those two does not work because
> a) the circumstance of the first event do not have to co-relate with
> the circumstances of the second event b) behavior of the components
> is not the same in those two separate events c) the environment in
> which components behave is not the same.
> so it's pretty much like saying that on november 23rd 1979 was sunny
> day; and that because of that on november 23rd 2009 must be a sunny
> day ... and that is false because the argument a, b,c i mentioned
> above ...
On Jul 24 01:18 PM ebworthen wrote:
> Actually, the conditions that created our current crisis are very
> similar to the Great Depression.
>
> Research it a little bit and you will find a debt bubble, a deflationary
> spiral, stock market crash, government stimulus, high unemployment,
> etc. We are in Summer of 1930 so if you look at cartoons, articles,
> and headlines from Summer 1929 to Summer of 1930 the similarities
> are illuminating and surprising.
>
> Our Grandparents and great-Grandparents have been here before, but
> we haven't.
However, contrary to opinions, I would say, "THIS TIME IS USUALLY DIFFRENT".
Why?
Well, some outcomes may seem similar, but there will usually be subtle or substantial differences in the original causes.
This current event has some of the usual players, including GREED, but it also has some UNIQUE FACTORS, including Peak Oil & once in history DEMOGRAPHICS (Total Population & Aging).
It seems there are many who are unaware, unable or unwilling, to step outside of the safety of what has been and enter into an unknown world of what MAY BE, by including in these unique factors, into their what is likely, scenario's.
On Jul 24 08:45 PM perceptions_now wrote:
> There is a well used phrase, "this time is different", which is usually
> dismissed.
>
> However, contrary to opinions, I would say, "THIS TIME IS USUALLY
> DIFFRENT".
>
> Why?
> Well, some outcomes may seem similar, but there will usually be
> subtle or substantial differences in the original causes.
>
> This current event has some of the usual players, including GREED,
> but it also has some UNIQUE FACTORS, including Peak Oil & once
> in history DEMOGRAPHICS (Total Population & Aging).
>
> It seems there are many who are unaware, unable or unwilling, to
> step outside of the safety of what has been and enter into an unknown
> world of what MAY BE, by including in these unique factors, into
> their what is likely, scenario's.