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Originally Posted by Claeren
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As for the other part of your post, historically the DOW, for example, moves through LONG multi-year periods where returns are somewhere between negative and close-to-flat:
http://www.bestmindsinc.com/document...2yearchart.pdf
As for other examples where prices did not simply recover, a number of historic price bubbles come to mind like with sugar or tulips, but most directly I guess the Great Depression is a good example of extended periods to earn back losses?
No two boom/bust cycles are going to be identical (obviously?) but with the Great Depression it took from 1929 until the mid-1950's to regain losses in the market (almost an entire working-life of average worker) and another many years to get much above that.
(As an aside, unemployment hit about 25% during the depression 5 YEARS after the initial decline in the markets and did not get below 10% until 1943, well into the WWII.)
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Claeren. |
I am mostly with you on this subject Claeren, but I think any parallels we draw to the Great Depression have to end at 1939. I think we would have seen markets recover a lot faster had it not been for the war. (Which I realize is somewhat contrary to common wisdom that believes that WWII was good for the economy.)
I prefer to draw analogies to the period of 1966 to 1980, which was also a period of extended economic shocks and uncertainties. Although we saw many good bull markets during that period, most gains were typically given up in subsequent bear markets. The market really didn't break out above it's 1966 peak until 1982. (You would certainly have profited had you bought during the down cycles and held beyond 1982, you just have to be sure you aren't the guy jumping on the bandwagon at the peak of each bull market and then panicing and selling at the bottom of the bear market.)
Simlarly, today, although we may very well break out of the credit crisis next year, we still have the outstanding debt bubble you cite to deal with, and the impact of layoffs has yet to materialize as has the impact on the emerging markets, namely China and India.