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DJIA 1966 – 1982

Posted By Barry Ritholtz On September 9, 2005 @ 8:30 am In Investing,Markets,Psychology,Technical Analysis | Comments Disabled

The previous chart [1] reveals the long standing secular moves of the markets; What’s an investor to do during one of the long periods of weakness?

One answer is to learn to be more nimble, and trade the cyclical markets.

Dow Jones Industrial Average, 1966 – 1982
click for larger chart

Rydex 66-82 [2]

data for chart courtesy of Bloomberg


During this period, we see rallies as much as strong as 75% and sell offs as brutal as 45%.

This is not a goo9d environment for the Buy and Hold approach. It works well ONLY during secular — not cyclical — Bull phases. You can hold stock for decades if you buy into the early stages of a secular period. Think of the years right after 1935, 1946 or 1982. But if you by at the wrong end of a secular run — 1929, 1966, or 2000 — and it took many years to get back to breakeven; and thats before inflation:

1929 purchase breakeven = 1954 (25 years)
1966 purchase breakeven = 1982 (16 years)
2000>(breakeven = ?)

History suggests that a top ticking Nasdaq holder will not return to breakeven — 5100 — until between 2015-25


Investing —More of a Challenge [3]
Rydex Funds


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/09/djia-1966-1982/

URLs in this post:

[1] previous chart: http://bigpicture.typepad.com/comments/2005/09/market_cycles_1.html

[2] Image: http://www.ritholtz.com/blog/wp-content/uploads/2005/09/Rydex-66-82.jpg

[3] Investing —More of a Challenge: http://www.rydexfundsfp.com/pdf/ium_6pager.pdf

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