1982 all over again?

[LakeTravis]

Thought this was interesting......

It's just about the most audaciously optimistic investment opinion one could utter, yet a relative handful of Wall Street voices is beginning to say it, out loud and assertively: This market has passed through a “1982 moment.”

That is to say, they believe the stock market has experienced the sort of decisive, powerful liftoff from a generational low that should last for years to come, making every setback to come a buying chance, and carrying the indexes to heights hardly any sober forecaster is now contemplating seriously.

Wall Street in 2013 Stokes Misty Memories of 1982 | Michael Santoli - Yahoo! Finance

 

[shasta]

yes please

 

[haha]

What are they smoking?

Ha

 

[bUU]

They're putting a stake in the ground with their name on it, just like the people predicting doom and gloom, so they can take credit for being correct after-the-fact. After all, the chances of them being so badly wrong that it gets thrown in their face is as small as the chances of them being correct enough to capitalize on the stake. It's a moderately risky investment, at worst.

 

[teejayevans]

They're putting a stake in the ground with their name on it, just like the people predicting doom and gloom, so they can take credit for being correct after-the-fact. After all, the chances of them being so badly wrong that it gets thrown in their face is as small as the chances of them being correct enough to capitalize on the stake. It's a moderately risky investment, at worst.

No its not, they probably made dire predictions as well, no matter what happens, they can claim they predicted it.
TJ

 

[bUU]

Heh... perhaps!

 

[W2R]

What are they smoking?

Ha

+1

Although I am more often wrong than not when I try to imagine the future, I do find it very hard to believe their prediction.

 

[MichaelB]

What are they smoking?

Ha

It's a no lose bet. Even if they are spectacularly wrong they will still be published as if nothing happened. If they are correct they get bragging rights and lots more exposure. The only losers are the poor souls that go invest based on this stuff.

 

[CCdaCE]

By the end of the article, at least they throw their own BS flag.

Indeed, the idea that we are somehow early in this cycle doesn’t fit with the above-average earnings multiples on stocks and the fact that profit margins are already near historic highs. In 1982, for example, the value of the U.S. stock market was 40% of the gross national product. At the 2009 bottom it was 60%, and now is above 100% – higher than any time outside the late-‘90s bubble years.

<snip>

It’s also doubtful, for what it’s worth, that many market forecasters in 1982 were walking around invoking the prior time a new secular bull market emerged, saying, “This feels just like 1949…”

-CC

 

[Lsbcal]

With bonds looking like a wasteland, I'm hoping that stocks will pick up the slack. Come on folks, we need this.

Holding my breath and somewhat optimistic. There will be some down months though for sure.

 

[gozer]

They're putting a stake in the ground with their name on it, just like the people predicting doom and gloom, so they can take credit for being correct after-the-fact. After all, the chances of them being so badly wrong that it gets thrown in their face is as small as the chances of them being correct enough to capitalize on the stake. It's a moderately risky investment, at worst.

I read a story about a guy that ran a website which dealt with small cap stock trading during the 90s. This guy basically cold called 1000 people telling they him had a "system" that would dramatically improve their chances in the market. He told the people he would prove to them his system worked. He told half of them a specific stock would increase or stay flat in the next 30 days, and the other half that it would go down. After 30 days he would contact the half he got right and do it again. And finally he did it a third time. So he ended up with 125 people for which he had made 3 correct calls in a row. Some fraction of them became true believers, that he then fleeced them for everything he could get his hands on.

Not sure if this was anecdotal or not, but I always liked the story.

 

[rbmrtn]

I think the only thing that looks like 82 is coming off a long term double top with an upside break ( 70s vs 2000s ). Thing like valuation ( PEs ), interest rate level and the direction of rates and inflation seem to be directly opposite.

 

[NW-Bound]

Bonds suck. Stocks suck. And we are here posting and not looking for a job?

 

[W2R]

Bonds suck. Stocks suck. And we are here posting and not looking for a job?

That's the way it should be for us, right? So far, so good. I am not looking for sales on dog food yet, anyway.

I love being retired.

 

[ejman]

Well, in support of the 1982 thesis here is an excerpt from an article in the NY Times "The Economy Is Bad, but 1982 Was Worse" :

"The recession of the early 1980s doesn’t have a catchy name, and almost half of Americans are too young to have any real memory of it. But it was terrible — qualitatively different from the mild recessions of 1990-91 and 2001.

The first big blow to the economy was the 1979 revolution in Iran, which sent oil prices skyrocketing. The bigger blow was a series of sharp interest-rate increases by the Federal Reserve, meant to snap inflation. Home sales plummeted. At their worst, they were 30 percent lower than they are even now (again, adjusted for population size). The industrial Midwest was hardest hit, and the term “Rust Belt” became ubiquitous. Many families fled south and west, helping to create the modern Sun Belt.

Nationwide, the unemployment rate rose above 10 percent in 1982..."
http://www.nytimes.com/2009/01/21/business/economy/21leonhardt.html?_r=0

 

[LOL!]

Bonds suck. Stocks suck. And we are here posting and not looking for a job?

Stocks suck? If a 20% return in 7 months means stocks suck, then what would it take to write that stocks don't suck?

Bonds are basically flat for the year. At least they have not lost money.

It sure seems to me that things are pretty dandy.

 

[ejman]

Stocks suck? If a 20% return in 7 months means stocks suck, then what would it take to write that stocks don't suck?

Bonds are basically flat for the year. At least they have not lost money.

It sure seems to me that things are pretty dandy.

Stop the nonsense. Don't you know that it is the end of the world? just in case your optimism gene kicks up here is a little Farrell to take care of any bonhomie that lingers Big Banks Conspiracy is destroying America - Paul B. Farrell - MarketWatch

 

[Lsbcal]

I won't bore others with a chart but the current SP500 recovery from March 2009 (54 months) has about the same gains in the same time span as the one that started in August 1982. Hence maybe the comparison to the 1980's.

We all know that economic history is not that simple. It does not repeat. Wish I knew the future but looking at 1987 will not really help ... exactly.

But I have noticed a few interesting points about the 1987 crash. It took place in mostly 4 trading days in October 1987, down 29%. That was after a huge 1987 ramp up that we have not yet experienced. Still the year ended with a net positive, about 5% up. Other things that are different at present:
1) No inflation rise like in 1987
2) SP500 12mo rolling returns not as high (1987 they were mostly >25% month to month)
3) Bonds not as competitive as in 1987
4) Treasury spreads (5yr - 3 month) rose dramatically in 1987 from 1.1 in January to 2.3 in September. Currently this is about only about 1.3 .

The above is probably more factual then people want to hear.

 

[David1961]

1982 all over again would mean that I'd be 21. Bring it on!

 

[Larro Darro]

1982 all over again would mean that I'd be 21. Bring it on!

I'm right there with you David. I could live with it, but maybe without the time in the Middle East during the Gulf War{what we call the Iran/Iraq War} When I was getting out of the Navy in 1983, they all told me things were so bad I wouldn't be able to get a job in the real world. I told them a job was the last thing I wanted. I had saved a little of my earnings and I tried my best to stay on the Chipola River eight hours a day for the first two years. Then when I got a job, it was at the golf course. There are not many bad days on the links, even if you are mowing the greens.

 

[GrayHare]

With continued central bank printing and cheaper energy, I can imagine nominal stock price increases on par with those of the 1980s.

 

[NW-Bound]

Stocks suck? If a 20% return in 7 months means stocks suck, then what would it take to write that stocks don't suck?

Bonds are basically flat for the year. At least they have not lost money.

It sure seems to me that things are pretty dandy.

Well, I will take my words back if the stock market stops taking that gain back. Or sets new high.

Call me greedy, but for me that what it takes to compensate for the past lousy decade (I more than doubled my money in the last 10 years, but it took wheeling-and-dealing, which people keep saying is not kosher, and dirty and all that).

And regarding bonds, I have only 5% at this point, but have been watching bond funds for their performance. Except for high-yield corporate bond funds that return 6% in the last 12 months, the short-term ones are flat, and the long-term ones are negative and as bad as -13% for long treasuries.

 

[LOL!]

Morningstar charts show that total US stock market and the EAFE index funds more than doubled their value in the past 10 years. So one could've slept through the 10 years and doubled their money. No wheeling and dealing required whatsoever.

 

[NW-Bound]

Eh, I have been dipping into my stash during that time too.

Wife retired in 2006. I worked on/off from 2003 to 2012, and part-time at that. Bought 2nd home, 2 kids in college, several foreign trips, RV trips, etc...

 

[2B]

Morningstar charts show that total US stock market and the EAFE index funds more than doubled their value in the past 10 years. So one could've slept through the 10 years and doubled their money. No wheeling and dealing required whatsoever.

+1

My portfolio is so flush I can't believe 2008 actually happened. I feel sorry for the people that pulled everything out during the panic. I just rebalanced. I will say it was very hard to do but I did it.