Are we in a similar 1932-37 period?

[dumpster56]

Quote:

Originally Posted by innova -1000? Bring it on. Do you HONESTLY think that your house was really worth $520k? Real estate, just like the stock market experiences RTM (reversion to mean). Here's an illustrative exercise: Get your home price in.. lets say 1995. Then, add in a figure each year consistent with long-term home price inflation. Project out to 2007. Thats what your house is really 'worth'. Who knows, maybe $385k is overpriced

At the time I never thought we would get an offer over 490. when they came in and offered 505, I said well how about 520 and they said yes, we pinched ourselves and said how fast do you need to close? 3 weeks later I had cash in hand.

[Bigritchie]

I just hope we are not in a September 1929 period............

[al_bundy]

can't be since we already had an 80% crash in the nasdaq. only difference is that in 1929 the Fed didn't do anything and in 2001 till the present the government pumped a lot of money into the economy causing inflation just as they did in the 1930's and late 1960's to early 1970's.

[Orchidflower]

Let me answer my own question about the period 1932-37, since my personal investing professor layed this on me when I asked him:

1932 down -8.19%
1933 up +53.99%
1934 down -1.44%
1935 up +47.67%
1936 up +33.92%
1937 down -35.03%

Guess all the lady meant is we are in for a wild ride of ups and downs in the near future. Fun....maybe.

[FIREd]

Quote:

Originally Posted by Orchidflower Let me answer my own question about the period 1932-37, since my personal investing professor layed this on me when I asked him: 1932 down -8.19% 1933 up +53.99% 1934 down -1.44% 1935 up +47.67% 1936 up +33.92% 1937 down -35.03% Guess all the lady meant is we are in for a wild ride of ups and downs in the near future. Fun....maybe.

Whoa! Huge volatility probably requiring a titanium-lined stomach (especially if you start including the numbers for 1931)! But still a very decent +10.2% annualized return over that 6 year period!

[Buku]

I realize past history is now guarantee of future performance, but if economic conditions were similar in the 30s, wouldn't studying what sectors did poorly and which ones faired well, and more importantly why that was,... wouldnt that be beneficial?

not sure why the historians are getting beat up for looking at patterns.

[Retire Soon]

The New York Stock Exchange reached its high prior to this conveniently selected time period of 1932 to 1937. In September 1929, the Dow Jones reached a high of 386.10. On Black Tuesday (October 29, 1929), the market lost 13% in a single day's trading, which marked the beginning of The Great Depression. From early September to the end of October the market had already lost 40% of its value. Finally, on July 29, 1932, the Dow bottomed out at 40.60 with a total loss of 89%! The stock market did not recover from the lows of 1929 until 1954, long after World War II was over. That must have been a very long 25 years for a buy and hold investor who patiently waited for portfolio recovery!

[Notmuchlonger]

Wow I just got back from vacation and scanning the various threads it appears the end of world is coming.


Looks like a good time to buy to me

[FinanceDude]

Quote:

Originally Posted by Notmuchlonger Wow I just got back from vacation and scanning the various threads it appears the end of world is coming. Looks like a good time to buy to me

No "blood in the streets yet"..........................maybe I'll pick up the red phone and call the Oracle of Omaha for an update............

How are railroad stocks doing??

[teejayevans]

Quote:

Originally Posted by Retire Soon The New York Stock Exchange reached its high prior to this conveniently selected time period of 1932 to 1937. In September 1929, the Dow Jones reached a high of 386.10. On Black Tuesday (October 29, 1929), the market lost 13% in a single day's trading, which marked the beginning of The Great Depression. From early September to the end of October the market had already lost 40% of its value. Finally, on July 29, 1932, the Dow bottomed out at 40.60 with a total loss of 89%! The stock market did not recover from the lows of 1929 until 1954, long after World War II was over. That must have been a very long 25 years for a buy and hold investor who patiently waited for portfolio recovery!

Are you sure it's not 1944, ie 15 years, I've heard/read various FPs
state that stocks have never lost money in any 15 year period
TJ

[Retire Soon]

Quote:

Originally Posted by teejayevans Are you sure it's not 1944, ie 15 years, I've heard/read various FPs state that stocks have never lost money in any 15 year period TJ

You can see for yourself by clicking on the link below which will take you to a Dow Jones Industrial Average historical graph:

Closing milestones of the Dow Jones Industrial Average - Wikipedia, the free encyclopedia

[clifp]

I think you are forgetting dividends. If you are just looking at the DJIA index you are forgeting an important component. Dividends were 3.2% at the top of the market 1029 and 15% at bottom of 1932. They were generally 5-7% range until after 1950s... I think if you reinvest dividends the statement of never a losing period in 15 years is true. For instance Siegels Stocks for the Long Run on page 27 has the worse case of a real return of stocks being 1.0% in contrast the real returns of bonds or T-bills can still be negative after a 30 year period.

[Spanky]

Quote:

Originally Posted by Orchidflower Let me answer my own question about the period 1932-37, since my personal investing professor layed this on me when I asked him: 1932 down -8.19% 1933 up +53.99% 1934 down -1.44% 1935 up +47.67% 1936 up +33.92% 1937 down -35.03% Guess all the lady meant is we are in for a wild ride of ups and downs in the near future. Fun....maybe.

Okay -- stay in the market and get out before 2013.

[Retire Soon]

Quote:

Originally Posted by clifp I think you are forgetting dividends. If you are just looking at the DJIA index you are forgeting an important component. Dividends were 3.2% at the top of the market 1029 and 15% at bottom of 1932. They were generally 5-7% range until after 1950s... I think if you reinvest dividends the statement of never a losing period in 15 years is true. For instance Siegels Stocks for the Long Run on page 27 has the worse case of a real return of stocks being 1.0% in contrast the real returns of bonds or T-bills can still be negative after a 30 year period.

The chart you are referring to includes "real returns" for holding periods of 1, 2, 5, 10, and 25 year periods. Figure 2-1 on page 27, but does not include a 15 year holding period. I am a fan of Jeremy Siegel too and agree that nominal return and real return are important concepts. However I was merely pointing out that the DJIA bottomed out in 1929 and did not reach its high of 386.10 again until 1954. Unfortunately the DJIA factors in neither dividends nor inflation. It may not be the best tool to measure progress in our financial markets, but it is the most often cited index in the United States. Personally, I think the Dow Jones Wilshire 5000 is far superior, because it includes not only large caps, but mid-caps and small-caps as well. For the time being, we'll just have to accept the DJIA the way it is and has been since the 19th century--without dividends and inflation.


BLACK TUESDAY OCTOBER 29th 1929 REVISITED

[kowski]

Thank you Retire Soon for the great link very good information. BLACK TUESDAY OCTOBER 29th 1929 REVISITED

[Spanky]

Quote:

Originally Posted by kowski Thank you Retire Soon for the great link very good information. BLACK TUESDAY OCTOBER 29th 1929 REVISITED

Does this info change your allocation? Are you on the side-line in anticipation that the market will decline significantly?

[armor99]

A very wise man once said (and forgive my ignorance of who it was) "If you want to predict the future, look to the past." I believe this holds true for the stock market as well. If you take ANY 30 year period in the stock market it does much better than ANY other investment you can make. Including gold, real estate, etc. It does not bother me the market is going down, just annoying hearing the media begging for it to crash everyday....

[clifp]

Quote:

Originally Posted by Retire Soon The chart you are referring to includes "real returns" for holding periods of 1, 2, 5, 10, and 25 year periods. Figure 2-1 on page 27, but does not include a 15 year holding period. I am a fan of Jeremy Siegel too and agree that nominal return and real return are important concepts. BLACK TUESDAY OCTOBER 29th 1929 REVISITED

You are right it doesn't include 15 year returns. It just looks like it does if you go by the X axis legend. I should have read the text.

My point is that ignoring dividends is a minor distortation of returns in todays markets, but significantly understates total returns for periods before 1980.