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Doug Short  

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  • Just Your Average Bear Market [View article]
    Using the S&P 500 as the gauge and a 20% decline as the benchmark, Here's a PDF slide show that demonstrates the wide range of duration, depth and contour of the eight bear markets since 1950:

    Using the 20% decline benchmark, the S&P 500 remains above bear territory. Here's a table of stats on the eight bear markets since 1950:

    One additional stat not included in the table: The average length of time it took these eight bear markets to reach a 20% decline was 10 months following the previous high. At present the S&P 500 is about 8 months beyond the high set last October.

    Time will tell, probably soon, whether the current market turns bear. If it does, we may have to wait a while before we see how it compares to these other eight.
    Jun 12, 2008. 12:25 PM | Likes Like |Link to Comment
  • Fed vs. U.S. Consumer: Will Inflation Go Higher? [View article]
    "Will Inflation Go Higher?" asks James Hamilton.

    If the Bureau of Labor Statistics were using historically consistent metrics, we'd already be well above the 7.8% rate of inflation (headline CPI) posted in October 1973 at the beginning of the Arab Oil Embargo:
    Jun 2, 2008. 02:08 PM | Likes Like |Link to Comment
  • Capacity Utilization Figures Starting to Resemble a Recession [View article]
    Investor newbies and others with short memories may view the S&P 500 March 10 low as the market bottom, no recession. But anyone who remembers the 2000-2002 stock market is probably more skeptical:

    As the chart shows, there can be some dramatic rallies during an extended downturn. Hopefully we won't see anything like the 49.2% decline during the last bear market.

    Since 1950, recessionary S&P 500 market bottoms arrived, on average, about 14 months after the previous high. The March '08 low occurred 5.1 months after the October '07 high. That's mighty early for a bottom, although there is a precedent: The 1990 recession, which lasted 8 months, saw the market bottom out a mere 4 months after the preceding high.

    On the other hand, two recessions -- '73-'75 and '81-'82 -- were accompanied by a 21 month peak-to-trough timeline. Here's an overview of recession stat since 1950:

    Given the complexities of today's economic conditions and the elapsed time since previous market highs, both extreme optimism and pessimism are probably premature.
    May 19, 2008. 05:34 AM | Likes Like |Link to Comment
  • Follow-up on CPI [View article]
    Actually, if inflation were calculated using the same methods in place before 1982, the current rate is approaching 12%. The chart on the ShadowStats home page uses the BLS calculation methods from around 1990. For a look at inflation as calculated using the original method (pre-1982), see this ShadowStats chart (scroll down to the CPI Data Series):

    For the big picture of inflation going back to 1915, see this link:

    Frankly, I think the BLS was justified in some of the modifications to their inflation calculation algorithm. But the downside is that it obscures the degree to which today's economy is beginning to resemble the grim stagflation of the '70s and early '80s.
    May 14, 2008. 09:35 AM | Likes Like |Link to Comment
  • It's a Rally and It Feels So Good [View article]
    "Feel-good rallies are a normal part of the bear market landscape. This is either a run-of-the-mill feel-good rally or I am wrong and this whole financial crisis/housing price deflation/bond market distortion will turn out to be nowhere near as important as many people thought."

    I think you're right and share your perspective. Here's a comparison of a 2000-2002 bear rally with the current advance -- the S&P 500 with a VIX overlay:

    Perhaps we saw a long-term bottom in March. However, given the current economic climate, I remain wary.

    May 2, 2008. 10:57 AM | Likes Like |Link to Comment
  • Still No Light at the End of the Housing Tunnel [View article]
    "Home prices will likely fall throughout 2008. Before they can stop falling entirely, their declines have to slow down. Because the S&P data is almost two months old, there is hope this may already be happening."

    And what, beyond wishful thinking, is your basis for hope? For the big picture in home prices (literally) see this snapshot from last September:

    And to put that rathter symetrical '80s boom-bust cycle into a longer perspective, see this:

    In the '70s and '80s, the downtrend was fairly symmetrical with the uptrend. There's no reason the expect this bubble to behave any differently.

    I predict a lot more tunnel before any light appears.
    Apr 30, 2008. 05:22 AM | Likes Like |Link to Comment
  • The Fed’s Dilemma: Rescue the Housing Market or Feed the Poor? [View article]
    "Bail Out Homeowners (or) Feed the Poor" is a dilemma not likely to be acknowledged by the Fed. Have a look at the Fed's mission:

    The buck stops at the (virtual) US borders, which doesn't include world hunger. In fact, hunger within the US probably wouldn't merit a Fed footnote.

    I'm sure over cocktails and hors d' overs Bernanke would sigh sympathetically over the plight of the famished. But history will judge him based on the depth and duration of the current recession and forthcoming bear market.

    Besides, "thin is in" -- right?
    Apr 29, 2008. 04:03 PM | 1 Like Like |Link to Comment