The Mauling of the Dow

Officially a bear market folks (in the Dow). Before you panic, it is worth taking a look at the historical data. A -20% decline happens every 3 or 4 years so it is not that unusual. The Dow ETF is DIA.

Since 1900:

There have been 31, now 32, declines of -20% or more in the Dow (it takes 3 years at 10% returns to get back to even)
There have been 17 declines of over -30% (4 years to even)
There have been 10 declines of over -40% (6 years)
There has been one decline of over -50% (8 years)

Now that the market is down -20% from the highs, the better question is: "How bad is it going to get?"

While not for everyone, a tactical approach certainly looks like the right choice right now (just like it always looks like the wrong choice in bull markets).

Comments

[User 79926:]

I thought this little article had very little to offer. It defined a Dow bear and said the best way to deal with it is tactical. Wooooweeee.

2008 Jun 29 12:34 PM

[User 100866:]

If someone went through and described the economic/global circumstances associated with each decline, this might be more useful.

2008 Jun 29 03:02 PM

[ArtfulDodger:]

Forget about the history of this nation; it doesn't apply. You can, however, look at the two ancient Greek Empires, the two Roman Empires, Troy, Egypt, Assyria, Israel, Babylon, Holland, and the Austrian. Very similar things are happening to America.

No hope in the long run to save our nation, as we've known it.

For as long as so many people want to keep leftists in power so that they can create more government to combat the problems and disasters that their government programs and legislation caused in the first place, we are eventually doomed economically.

And government bureaucrats do this over and over, but always wiggle out of what they've done by blaming private industry (Big Oil, Big Pharma, and the like, and of course a bogeyman such as Bush or Cheney or Rove), and the people for what they have brought about.

With the help of the Marxist media, the people then yell for the government to do even more, thus causing problems that will have to be faced in the future—and that means more government rules, regulation, and legislation that brainwashed parrots scream for.

And clearly, it doesn't help sending our forces around the world to carry out other nation's wars for them. You can't blame Bush for all of this either. The Dumborats in Congress voted to go get the Toy Tiger in Iraq (except for the members of the Black Caucus, which only votes for bills to punish American businesses and individuals); and Bush didn't put troops and bases in over 140 nations around the world. They were there when he took office.

Meanwhile, America has an invasion from the south, crashing stock markets and the dollar, along with hyper-inflation, declining property values, and energy and food prices nearly equalling Germany's in the 1920s.

Enjoy the ride, especially those of you who're calling for even more leftists to take over so they can create more government to punish businesses and anyone else who is succeeding in the private sector.

Parasites engender more parasites of different types, because when one begins its feeding, it weakens the host, which invites even more suckers to the party. The host soon withers to nothing. Consider the American people the host.

2008 Jun 29 03:51 PM

[Dusty:]

Great introduction! Where is the rest of the article?

"How bad is it going to get?" is easy. Repeat the 1st and 2nd quarters of this year except start from our current lows instead of the levels of last October and part of November. We have a "Hindenburg" indicator and several other things telling of a serious drop. Mortgage Resets (Credit Suisse) by Alt-A and Agency Resets will generate as many or more foreclosures in the Fall as in the Spring. Job layoffs and business bankruptcies and small businesses just closing doors should skyrocket because of inflation and consumers with no money or afraid to spend on more than minimum essentials. Look for the January equivalent drop in August, then that long bumpy downhill slide to somewhere in the late winter. Should be very interesting about Election Day time.

Sell stocks? Maybe do whatever Mr Faber had in mind by his use of the word "Tactical." I am trying to move into securities that have a global footprint and preferably are based in other countries and other currencies and hopefully that pay some dividends. Worst case, those dividend payments might be the only real money available to hand. Check out Zimbabwe.

2008 Jun 30 01:37 AM