If one believes the economy is similar to the S&P tech crash of 2000-02 or the 1973 oil crisis crash then the equities market might have bottomed already in November.
If one believes the economy it not just a recession, but a major correction, like the corrections/depression in the graph, then don't expect the market to be heading north fast. 
This graph also suggests little northward movement anytime soon.(Via dshort.com)
4 comments:
Should compare S&P 500 now to S&P 500 in 1929, not the Dow in 1929. Dow is not as robust index so distorts.
Japan is a scary scenario; however Japanese had other places in world to invest. There was a flight of the yen during 1990s. Now, there is no markets to go in the world for better returns.
Also, show the S&P 500 from 1999until end of 2008. That is worst 10 yrs in history of S&P 500. The size of economic creation and then destruction we have been through is only comparable to 1920s - 1930s. I'm sure it's happened in economic history before then but don't have as good of measurements to compare.
If S&P 500 has another poor 2 years or so, get out your hard hats and rifles. Another difference between Japan then and U.S. now is that Japanese did not have a military in the 1990s to go get what they probably wished was theirs. We do.
How can you compare the S&P500 now to the S&P500 in 1929? The S&P500 didn't exist in 1929. It started in 1957. Who's money are you managing?
My gut says we are going to see the Japan scenario. Two years + of a lot of up and down. Then inflation is going to hit BIG time.
Look at the increase in money supply since September. It's on page 3 of the pdf. It's incredible.
There is a NYSE composite index that is very similar to S&P 500 that did exist in 1920s - 1930s and is much better representation than Dow. Check out Ibbotson/Morningstar data.
I think you have been watching too many foreign films. Japan scenario is still going on so has lasted 20 years. We don't have 20 years to flounder. That was a deflation problem so saying we will have inflation down the road does not jibe. This country won't stand for 20 years of no economic growth, job losses. We're too aggressive.
Currently the stock market seems to be appropriately priced. The only way for it to increase in value is if companies to increase (expectations of) earnings. Near term earnings don't look good for many companies.
As for American being too aggressive. Well they are going to have to go back to the old way of making money - working for it. Developing new products and technologies, and creating efficiencies. In the near term things will be different. In the long term everything will go back to the same.
Post a Comment