Comments on: Speaking of the Great Depression . . .

By: Mike in Nola

Mike in Nola — Tue, 18 Nov 2008 04:52:07 +0000

Hussman has a different take in his weekly newsletter which was distributed by Mauldin:

The Stock Market is Not in “Uncharted Territory”

http://www.hussmanfunds.com/wmc/wmc081117.htm

By: mark mchugh

mark mchugh — Tue, 18 Nov 2008 01:09:13 +0000

Funny how articles like this, that preach learning from history, always fail to mention the Nikkei 1990-present. Hows about a list of now-defunct stock exchanges? Since we’re reviewing history and all.

By: Myr

Myr — Mon, 17 Nov 2008 22:13:14 +0000

Simon, the answer is simple: Barry employs short term trading strategies in addition to long term strategies. I’m actually doing some of the same stuff myself, but I’m looking for an even bigger near term fall wherein I will do some buying(for the same short term pop of 20% that Barry talks about) because even in a depression there are opportunities to buy although we are playing with nitroglycerine. There’s also the possibility that we are wrong and we are actually near a long term bottom which I don’t want to completely miss out on.

By: Simon

Simon — Mon, 17 Nov 2008 21:50:53 +0000

If the market will fall further and it will we all think it will why is anyone buying???? If you know it will fall further there is no need to buy and every need to save since there will be better buying ahead.

Only a broker would recomend buying when he knows there will be better buying ahead.

By: Myr

Myr — Mon, 17 Nov 2008 21:13:49 +0000

Barry, you should also mention that if you bought when the market was down 50%, then *19* years later you still hadn’t made any money(dividends aside). Making no money over 19 years is an eternity and there was a lot of volatility to boot. This is one of the arguments against buying now(down 46% from the top). It’s nice to think that you’ll have a job in a depression and therefore have excess money to continue to invest at very low prices, but this seems like wishful thinking. Also, the market plunged(50% or so) in the second year after the top in 1929. If we are headed into a depression like environment, then we’ll probably know in a years time for sure because the market will be much lower.

I do think that there’s an argument for investing 50% of your money in the S+P 500(not the leveraged ETF’s) and the other 50% in short term treasuries so that you are somewhat covered in either case(depression or simple recession), but then you should avoid rebalancing if the market continues to fall.

By: ironman

ironman — Mon, 17 Nov 2008 19:34:58 +0000

Here's a little different perspective on the stock market and the Great Depression: First, this post provides a chart that maps the different phases of the Great Depression against the backdrop of S&P 500 trailing year dividends per share during the 25 years from January 1925 up through December 1949. Second, here's a follow-up post that addresses some of the history of what directly sparked the initial market plunge and why it didn't let up for years. This post also confirms the beginning and end dates for the Great Depression indicated in the original chart. On a side note, this post featuring a ranking of U.S. presidents provides some background into the period identified as the "dead zone" in the discussion below the ranking table. Finally, here's a tool you can use to see what kind of returns a hypothetical investor would have had during the worst part of the Great Depression, based on actual historic, inflation-adjusted data.