Are we in a similar 1932-37 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]

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]

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]

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]

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]

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]

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]

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.