Tuesday, February 24, 2009
Four Bears: Where we stand today
If this is like the Great Depression, the stock market can get a lot worse from here. If it is like the deep recessions of Dark Times, then now may be the time to buy. Regardless, if you bought during even the worst of these bears, even on the way down, you made a lot of money in the long run. Eventually. It really comes down to how long you expect to live, and how much work you want to do between now and then.
10 Comments:
By 
, at
Tue Feb 24, 11:59:00 AM:
Admittedly, drawing conclusions from a chart is always dangerous. But one interesting possible conclusion is that until Lehman went under the chart looked like a normal recession. After Lehman it looks worse, and the most severe rate of decline seems to have occurred right then. Lehman's collapse was a decision made by the Treasury and the NY Fed (Paulson and Geithner).
Since trading assets that can't be traded have to be written down, the collapse of trading seems to be forcing lots of capital erosion. We can end mark to market, but that seems a little less than transparent. Somehow, we have to devise a means of renewing trading in subprime/swaps/alt assets. Wouldn't that would be a better approach than simply propping up capital bases of banks alone, as we've done?
By , at
Tue Feb 24, 12:54:00 PM:
We need to be very careful about these analyses: one history does repeat itself, never quite in quite the same way. For the 1973-1975 correction remember the dollar depreciated at least 20+%. The S&P weighting relative to the total market is different for each period: tech was generally under weighted in the S& P versus full cap weighted indexes.
By , at
Tue Feb 24, 01:43:00 PM:
The "tech crash" gets off quite easy in this chart, which uses the S&P. The NASDAQ, a tech barometer if there ever was one, went from 5000+ in March, 2000 to around 1300 ... a haircut of 70%+.
And then there is the Nikkei - 39,000 twenty years ago, 7,300 today. Now THAT's a bear with legs.
By , at
Tue Feb 24, 02:05:00 PM:
Re Coach Paul: It is your last paragraph that has me wondering. What if it takes 20 years or longer for stocks to come back? What happens, not only to 401ks, but public employee and corporate pension funds under that scenario? Does a point come where the already retired are forced to take big cuts in pension income? Or can that simply not happen? Pension funds have had to have taken a huge hit in the last year.
By 
D.E. Cloutier, at
Tue Feb 24, 02:11:00 PM:
If you want to gamble, go to Las Vegas. It's more fun.
By D.E. Cloutier, at
Tue Feb 24, 02:16:00 PM:
P.S. Remember the words of Gordon Gekko: "I don't throw darts at a board. I bet on sure things. Read Sun-tzu, 'The Art of War.' Every battle is won before it is ever fought."
By Charlottesvillain, at
Tue Feb 24, 05:32:00 PM:
Feeblemind,
You've just put your finger on it. The reality is that many many promises have been made to a lot of people based on unrealistic expectations of continued bubble growth. We are at the beginning of an era when a lot of those promises will simply have to be broken. Municipal penions in California, where towns are going bankrupt, UAW retirement benefits, etc. Eventually it will end up where we knew it always would, Social Security. It will be ugly, and I predict it will result in very ugly politics and civil unrest.
By , at
Tue Feb 24, 10:02:00 PM:
If there were more time, I would try to write this up properly, but my take is basically this:
The amplitude of this particular contraction may not be significantly larger or smaller than those of times past, but the speed of it may be. The sheer amount of information and understanding (both good news and bad) being passed among citizenry and policy makers, domestically and internationally, must dwarf what has passed for "good information" in the great bear markets of the past (except the tech bubble of course). Now, it may be that the timing and duration of human emotional reactions to the bad market news is the same as before, but at some point Reason, based on information -- has to kick in as well. After all, we have the TigerHawk blog!
By , at
Wed Feb 25, 10:14:00 AM:
CV, I have also wondered what the effects of the market meltdown will have on insurance premiums. I realize that compared to pensions, rising insurance rates are but a pimple on the face of the moon. Still, I have to buy a lot of insurance, and if rates rocket up, then I have less money to spend on other things. I shudder to think what might happen to health insurance rates.
By , at
Wed Feb 25, 12:57:00 PM:
The best economic news of the day is this, "The government report said that crude inventories rose by 700,000 barrels to 351.3 million barrels. Analysts expected crude stocks would grow by 2.25 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Oil producers have been unable to cut production fast enough in the global downturn and U.S. storage capacity is near its limit."
Remember "peak oil"? What a laugh. Anyway, prices are decling and will probably stay low for awhile. That can only help.
