Goldilocks Dow and the Three Bears

Today's WSJ had an interesting, stunning, disturbing or frightening (depending on your mood or interpretation) graphic comparing the last three major market slumps of the past 100 years:

Graphic courtesy of the WSJ

 

The thing I found most interesting about the above is the fact that there were often multi-year bull runs during the past two protracted bear markets prior to this one, because when we look back on history we often think of past bear markets a one big slump, and assume that if we're in the midst of a multi-year bull market than we simply can't be in bear one. A theory that is blown out of the water when we look back and see that the markets went on a bull run from '34 - '37 (similar trends were seen in the 70s and during the early part of the depression), despite the fact that the country was in the midst of the great depression. The obvious implication is that we may look back on the current era and realize that the bull run of '03 - '07 was nothing more than a brief "bull-blip" during what was primarily a bear market.

The thing is: It's hard to make those kinds of calls while the situation is unfolding; it's something you can only really determine via looking back. It's rather difficult to look at the big picture while you're in the middle of it.

You can read more on the topic from the WSJ here.

Comments

[whidbey:]

And what if there is no big picture? Or a dark picture? I mean there are macroeconomic trends which might affect things, but we don't want to talk about them. For example, the current miss pricing of energy which will one day to come blow the world out of the water (I used to be Navy), then we can mention politics and political economic trends in society (I used to be a socialist, but not any more). The cycles seem to be swinging toward populism, egalitarianism and socialism. This means the probable lowering of productivity and inflexibility (healing capacity) and innovation (the mother's milk of growth). If that is the big picture we need to eat, drink and play with Mary since the end comes sooner than you think. These were the days my friend.

2008 Oct 10 01:35 PM

[wagman:]

If you look at a chart of the dow priced in real money (ounces of gold) the bull run is exactly that – a blip along a steep slope down from start of the bear market in 1999. The bear market in terms of the nominal dow has only just begun and has a long way to go. Elliottwave International has been featuring this chart in their various publications for quite awhile. (elliottwave.com)

2008 Oct 12 02:22 PM