Recovery times after the Great Depression

[Rich_by_the_Bay]

Interesting article on this topic.

A 60:40 investor needed 10 years to reach the previous starting line. A full stock investor had only recovered 60% by then.

 

[73ss454]

Rich, is that an investor that's retired? I'm not sure I'll ever recover while living off of my port. at this point.

 

[Rich_by_the_Bay]

Rich, is that an investor that's retired? I'm not sure I'll ever recover while living off of my port. at this point.

Retired or not, that was the recovery time of a given investment, no additional contributions.

The article points out that we are not in a depression, so that scenario may not be applicable other than as a worst case scenario.

 

[73ss454]

So I would guess withdrawls wouldn't help. (heh)

 

[MasterBlaster]

It took 25 years to hit the 1929 peak again for a stock investor.

 

[REWahoo]

It took 25 years to hit the 1929 peak again for a stock investor.

Not if dividends were reinvested - that cut it to 15 years I think. See this thread: http://www.early-retirement.org/for...during-great-depression-39531.html#post728302

 

[73ss454]

That's always good to hear. So if I don't take any money out I might be back to where I was last year before I hit my expiration date. Hmmmm!

 

[Bikerdude]

Not if dividends were reinvested - that cut it to 15 years I think. See this thread: http://www.early-retirement.org/for...during-great-depression-39531.html#post728302

Anyone know of information on how well dividends held up (were paid) during the Great depression? Any info on how many companies failed?

 

[Lakedog]

Interesting article on this topic.

A 60:40 investor needed 10 years to reach the previous starting line. A full stock investor had only recovered 60% by then.

The article does not specify whether rebalancing was done, but I gather that it was not (so the numbers are based on an initial allocation and letting it ride for the duration). Rebalancing would make a significant difference in the recovery period for a 60/40 investor.

 

[Rich_by_the_Bay]

Not if dividends were reinvested - that cut it to 15 years I think. See this thread: http://www.early-retirement.org/for...during-great-depression-39531.html#post728302

Right - 13.5 years per the article cited in my OP.

 

[Rich_by_the_Bay]

That's always good to hear. So if I don't take any money out I might be back to where I was last year before I hit my expiration date. Hmmmm!

If you were 100% in stocks that could have happened.

But you're probably not, and this is not the great depression. Live your life.

 

[al_bundy]

Anyone know of information on how well dividends held up (were paid) during the Great depression? Any info on how many companies failed?

gdp was down by 20% so my guess is half the banks and more than half the companies failed.

 

[Gotadimple]

And inflation was running -25% with unemployment at a 25%. See this table in the article at the Schwab website entitled 10/8: Depression Fears Overblown.

At this link Depression Fears Overblown

 

[CuppaJoe]

My grandfather worked in a bank that didn't fail but apparently all his savings were in that bank's stock. He and Grandma planned a trip to Europe for Nov. of '29. The story always ended with, "they never went."

 

[cute fuzzy bunny]

If you were 100% in stocks that could have happened.

But you're probably not, and this is not the great depression. Live your life.

You saved me a post, Rich.

Whoops...

My earlier post regarding mutual funds from the 1920's, most of which were 'balanced', shows that depression era investors lost a lot less with a good asset allocation, and didnt take long to recover.

Anyone primarily US equities took a beating then and they're taking a beating now. Learn the lesson.

 

[Hamlet]

One thing to keep in mind is that someone looking back on the market fifty years from now is going to see the start of this as the 2000 tech bubble.

So we're really already 8 years into this downturn. So just 7 more to go

Not if dividends were reinvested - that cut it to 15 years I think. See this thread: http://www.early-retirement.org/for...during-great-depression-39531.html#post728302

 

[cute fuzzy bunny]

The people 50 years from now will look on this as a nearly insignificant blip on the radar, like we see the depression and the 87 crash today when viewed on a long term chart...

Now the good question is to look at this chart and see two long term trend lines...one up until the early 80's when the 'financial leverage funny business' started and another steeper one from then until the first tech bubble.

If the first trend line is true, then we're still a little overpriced. If the second one is true, then we're a little underpriced.

Dont make me post more pictures of Captain Quint by making irrelevant comments about log charts or inflation adjustments...

 

[Gardnr]

And inflation was running -25% with unemployment at a 25%. See this table in the article at the Schwab website entitled 10/8: Depression Fears Overblown.

At this link Depression Fears Overblown

Now I'm not a doomsday pessimist, but for the sake of intellectual honesty I've got to point out that comparisons between the GD and now really will have to wait a year or two at least. A more accurate comp would be between 1929 pre-crash and the latest figures we have for present time.

I appreciate their attempt to try to calm fears and cool down the panic but you really have to compare comparable data to comparable time periods.

See my point? Or point out to me what I've got wrong.

 

[cute fuzzy bunny]

Seriously. During the great depression the US was barely on the far side of an emerging market. Most people, if they had jobs, lived a hardscrabble life. At least 10 countries could have kicked our asses on a moments notice. Scraping the top 2-3% of peoples lives away, if you had a watertight roof and some non rotten food in your belly since yesterday you were living a pretty good life.

Is that what we've had for the last year or two? Is that what anyone thinks we're facing?

Have I successfully compared comparables to comparables?

Do I have to get to the "slap/slap...snap OUT of it man!!" level?

 

[Gardnr]

Seriously. During the great depression the US was barely on the far side of an emerging market. Most people, if they had jobs, lived a hardscrabble life. At least 10 countries could have kicked our asses on a moments notice. Scraping the top 2-3% of peoples lives away, if you had a watertight roof and some non rotten food in your belly since yesterday you were living a pretty good life.

Is that what we've had for the last year or two? Is that what anyone thinks we're facing?

Have I successfully compared comparables to comparables?

Do I have to get to the "slap/slap...snap OUT of it man!!" level?

I probably didn't convey what I wanted to say very well. I completely understand what you're saying and I basically agree. I just don't like to see such errors in logic and poor data comparisons. It weakens the argument and makes it look like they're reaching. I later went and read the article and they've got some good points but it is still guess work. And most people are rather jaded after the constant assurances we've gotten from talking heads and the Bush Admin that all is fine. Their credibility is shot and that makes it hard for the general public to believe anything now.

Hey, I wish like heck that I had more cash on hand because we're clearly in a panicked market that just has to be overshooting on the downside as Average Joe/Jane clicks on "sell" across this country. They just can't stand it anymore. We've been speculating on capitulation points here for a while but this frenzy sure looks like it may here finally - maybe tomorrow.

BTW Remember that stock I mentioned a while back in a thread - LG, Laclede Gas? It cratered 15% today. It's down 22% since Monday! Still holding up nicely YTD, but holy cr@p.

 

[chinaco]

And inflation was running -25% with unemployment at a 25%. See this table in the article at the Schwab website entitled 10/8: Depression Fears Overblown.

At this link Depression Fears Overblown

I do not know if we are in a situation that compares to the great depression or not... But the Great Depression took a while to get GREAT! I am not sure if we have had time to really know yet what the full impact of this will be.

Of course this time we are having much more proactive government intervention (early). I have no doubt that if that did not occur, we would likely have massive business failure because of the credit crisis (money crunch).

It is looking like many companies will fail anyway. The crisis is creeping out of the financial industry into other industries right now.

I am a little worried that we could be at the beginning of a chain reaction that may not stabilize for a couple of years. and over that couple of years many many businesses could fail. Read much of your wealth (in stocks and bonds) could be wiped out permanently.

 

[Texarkandy]

....

I am a little worried that we could be at the beginning of a chain reaction that may not stabilize for a couple of years. and over that couple of years many many businesses could fail. Read much of your wealth (in stocks and bonds) could be wiped out permanently.

Perhaps that's why when I was a little kid the old folks who lived through the depression used to advise:

"buy land, boy, 'cause they ain't making any more of it"

(& they meant farm land).

 

[al_bundy]

I do not know if we are in a situation that compares to the great depression or not... But the Great Depression took a while to get GREAT! I am not sure if we have had time to really know yet what the full impact of this will be.

Of course this time we are having much more proactive government intervention (early). I have no doubt that if that did not occur, we would likely have massive business failure because of the credit crisis (money crunch).

It is looking like many companies will fail anyway. The crisis is creeping out of the financial industry into other industries right now.

I am a little worried that we could be at the beginning of a chain reaction that may not stabilize for a couple of years. and over that couple of years many many businesses could fail. Read much of your wealth (in stocks and bonds) could be wiped out permanently.

part of the problem then was the gold standard, which is deflationary by design

 

[harley]

Perhaps that's why when I was a little kid the old folks who lived through the depression used to advise:

"buy land, boy, 'cause they ain't making any more of it"

(& they meant farm land).

I agree, but I interpreted it as water front.