Twelve Year Lows Are Extremely Rare

Chart via JPMorgan

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Thomas Lee, US Equity Strategy at JPMorgan writes: “Believe or not, retracing 12-year lows for the Dow is an incredibly rare event. Besides the retest of 1997 lows seen on Monday, this has only happened two other times, on April 8, 1932, and December 6, 1974.”

Given the rarity of the event, it is worth taking a closer look at the past instances: The 12 year low in 1932 was ~three months before the end of the bear market. In 1974, it was exactly the low for that bear market.

Dan Greenhaus of Miller Tabak adds, in both cases, “the economy continued contracting beyond the bear market bottoms; this is typical of rrecessions. Unemployment continued rising and GDP remained weak. The 1974 Bear market ended in December, but GDP contracted even in the Q1 1975 at a 4.7% clip — the worst GDP Q of that entire recession. Despite this, the Dow managed to rally 24.65%.”

Hitting a twelve year low is by no means is proof the bear market is over. And, two prior examples does not a sufficient sample make. Financial and housing sectors remain in a state of paralysis, and while substantial levels of stimulus are coming, eveer larger deficits are coming too.

Regardless, the oversold nature of the market, as well as the virtual straight down drop that brought us here, does present a real possibility of a strong market rally.

~~~

Dow up 150 so far. Will it have any legs? Discuss . . .

Category: Markets, Technical Analysis, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

110 Responses to “Twelve Year Lows ?”

  1. Byno says:

    I’m sure someone will correct me if I’m wrong in my reasoning, so:

    This is the worst bear market in the last 100 years save for the Great Depression. And, unless one believes GD2.o is upon us, long term investors might be wise to put more than just a toe in the water. As corporate earnings rebound down the road, is it thatunreasonable to think that we could still be at S&P 900-ish in a few years – representing a 30% gain – with earnings approaching $100/share in an index that will look nothing like it does today?

    BTW, Doug Kass called a bottom yesterday; doesn’t make it one, but that’s a long-time bear flipping:
    http://www.thestreet.com/_rms/s/kass-bottoms-up-mr-%20market/newsanalysis/investing/10467351.html

  2. Andy Tabbo says:

    How do these analysts have jobs?

    Talk about “seeing” what you want to “see.”

    The 1932 is example is extremely poor because it looks like the market actually retraced 30+ years of prices, not 12 years. The 1974 example is also poor because it looks like the 1974 was double bottoming against the low from ~4 years earlier…

    Panzer’s chart from yesterday was a better use of charting to show “oversold-ness”.

    This seems like shoddy work.

  3. karen says:

    TALK BACK: Analysts Caused Permanent Exodus From Market
    12:17 PM ET 3/4/09 | Dow Jones
    A reader comments on analysts:

    Is it any wonder that most individual investors left the market and will never return? Wall Street should have gotten rid of all analysts and started over with kids that made it through third-grade math. General Electric Co. is the biggest joke yet. When analysts are done killing the market, where do they work? At a butcher shop?

  4. DL says:

    A brief rally back up to 800 (SPX) wouldn’t surprise anyone. But I’d like to see a spike in the VIX to at least 70, and for QQQQ to retest its November lows, before betting on a rally in excess of 20%.

  5. wally says:

    I was wondering just what Andy commented on: what is the longest low ever retraced and, if we match that, where would it put us? It looks like the answers are somewhere around 30+ years and DOW 800 or so.

  6. gordo365 says:

    isn’t it a better risk/reward situation to wait for a higher low as entry point, instead of a lower low?

  7. 10 cc says:

    Wouldn’t it be nice for beleaguered home sellers if home prices, like stocks, had dead cat bounces for no other reason then they got “oversold”? They could sell (their homes) into the rallies.

    Conversely, it might also be nice if stocks actually did go down in a straight line like home prices. Then we wouldn’t have to wait so long until they actually become an investable asset class again.

  8. GameOver says:

    Andy said “…The 1974 example is also poor because it looks like the 1974 was double bottoming against the low from ~4 years earlier…”

    Doesn’t the current level look like a similar retest from the 2003 level?

    I’m not saying that now its the time to buy and hold for the next decade but it does seem to be worth looking at more closely for a trade…

  9. harold hecuba says:

    LOL!!!! what data mining nonsense.

  10. Marcus Aurelius says:

    The causes of our current predicament are unprecedented. That said, we could see a substantial bounce, but it won’t necessarily be a good thing. “Fundamentals”, for lack of a better word, point to a systemic social/economic breakdown as, or more, severe than the GD. The wheels have fallen off. Tuning the engine will not put us back on the road, although we can drive the vehicle on the rims – for a while.

  11. moconn says:

    Although the market is clearly oversold on a technical level I don’t think the pool of committed buyers is large enough to sustain a significant rally from the current lows. At the same time I get the sense that short sellers are tired and covering positions at the moment.

  12. SanFranHobo says:

    Whats wrong with data mining nonsense? Nobody says it works 100% of the time but it really helps get a handle (sometimes) on what’s going on.

  13. Avl Dao says:

    It is amazing how chartist as well as ‘chartists-lite’ refuse to examine any of the underlying economics for data points cherry-picked from historic times. So a 12-yr low is a 12-yr low with no distinctions made between the domestic & global economic conditions in play in 2009 or 1974 or 1932? We’re supposed to assume they are simply inter-changeable data points on an intriguing chart.

    Rubbish indeed.

    Ironically, its just more evidence that chartism is closer to Astrology than folks like to admit. Astrologists defend their ‘science’ on many grounds including predictable herd-behavior of homo-sapiens.

    In essence, chartists and chartists-lite do the same.

  14. jbruso says:

    Don’t you have to assume the data is normalized for trends in data to be relevant? Obviously, the data isn’t normalized at all. I agree, “technicians” really need to be carefull that they don’t become modern day snake-oil salesman.

  15. Ethel-to-Tilly says:

    there’s some pretty hefty overhead resistance to be overcome and nothing on the bull side seems to have the “oomph” to attack it. I don’t see what is happening today as having any legs at all.

  16. dsimmons says:

    When we “used to” looked for growth, we looked for companies and sectors. What I find fascinating is that the analysis of sector-by-sector growth seems to be thrown out with the bath water. Everything looks bad so… what?! let’s just look at the DJIA, SPX cliff diving, GDP, and NFP. The MSM is leading the analysis by the rat brain.

    If you look for companies or sectors and you see emptiness, it surely means that tough times are ahead. Does that mean we should start looking at the DJIA as the bellweather. Hell no! Sure, there are a variety of lights that will go off that tell us we should pay attention and start looking again. The next step is to look back into the emptiness to find something.

    Nothing to see right now, time to go back to my (bear) cave.

  17. wally says:

    Harold: of course it is; but it is fun.

  18. Mike C says:

    Irrevelant!!! THIS TIME IS DIFFERENT!!! American capitalism is in a state of total implosion. Earnings are going and staying at ZERO and no company is worth anything. Dow 1000 is coming in the next 6 months!!!

    Does that get me a card in the sky is falling crowd?

    I don’t know where the ultimate bottom is, but we gotta be close when you see a chart like that juxtaposed against the absolutely gloomy sentiment, nonstop media coverage of 12-year lows, and the absolute self-congratulatory party many commenters here are having. The only thing that gives me pause is the 2000 peak was well in excess of the 1929 and 1966 peaks so maybe an overshoot to the downside is very possible. Still, whatever this is, we are likely much closer to the end then the beginning.

  19. impermanence says:

    It certainly should be apparent to most that the entire financial system is corrupted. Why would anybody wish to place their hard earned money in the hands of these crooks before this system is re-regulated (at least to some degree)?

    It’s so interesting how the human drive to get ‘something for nothing’ makes reasonably intelligent people seem like blithering fools.

  20. DL says:

    10 cc @ 12:32

    “Then we wouldn’t have to wait so long until …”

    Take a look at Japan.

  21. call me ahab says:

    so . . . that the last 25 years was possible due to credit expansion doesn’t mean anything? It cracks me up every time I hear about a new credit facility- the latest is TALF- you can supply all the credit you want but people aren’t biting. The hamster will has come to a stop. If car dealers could give loans to folks with horrendous credit or with recent bankruptcies or foreclosures- that might get the old ball rolling again. I mean, really, don’t we just need more credit??? Come on people borrow- go buy that car or furniture or boat- oh you don’t want more credit and you are saving more? Oh, never mind then.

  22. fenner says:

    The problem now is that no matter how much confidence past Dow statistics engender, the fact that the Japanese market is experiencing 25 year lows (not sure of exact time span) will continue to gnaw away at investors. How can one put your money in an index and hope for the best when you know that the Japanese have suffered life-long losses? Most people are going to go for fixed income. If you told somebody that there is a 25% chance that you will lose your retirement, I believe that 85% of investors would stay away. If the Nikkei had not continually disintegrated since the top, I would be buying stocks right now. But I fear what happened to the Japanese. I am 51 years old. I got out by the skin of my teeth due to people like Barry who were the naysayers while the rest of the world was singing. Thank you, Barry.

  23. Clem Stone says:

    I believe the DJIA hit a 12 year low in approx Sep’74 and then continued down another 10% before hitting bottom in Dec’74. Still, i like this chart better than yesterday’s.

    And i recall a guy (some French dude) in 2003, referring to Japan, when he said “How often in your life do you get the opportunity to buy a major world stock market at a 13 year low?” I don’t know the answer but i know it was a good time to buy Japan.

  24. call me ahab says:

    isn’t the Nikkei at a 25 year low????

  25. CNBC Sucks says:

    Dennis Kneale said that if China cannot pull us out of the global recession, maybe it can pull us out of the bear market anyway. This is about 60 seconds after saying the Chinese save too much money.

    I kid you not.

  26. Clem Stone says:

    Yeah, i think it might be, but 2003 was still a good time to buy it…. assuming you’re not still holding it. Easier said than done maybe. Plus, now that i think about it, 2003 was 13 yrs after the top so i’m not sure why that would be a 13 yr low…maybe i’m just a little confused…haha.

  27. call me ahab says:

    China is an export driven economy- who are they going to sell all their great wares to??? Last I checked the US was the largest economy in the world followed by the EU- if we aren’t buying then who is? What would be the dynamic for China to pull us out of a bear market- did Dennis Kneale offer a reasoned explanation. No?? I didn’t think so.

  28. Andy Tabbo says:

    @CNBC Sucks…

    I took the “pledge” today….

    I’m off of CNBC now. I listen to BloombergTV on my computer now. It’s actually been a pleasing experience. Having CNBC on in the background was distracting from my trading. It’s quieter in my office now….I think I’ll be better off in the long run….It was just becoming too silly….

    I challenge all to take the “pledge” for at least a few days…see how your life might change.

    I’ll still catch Fast Money in the afternoon….I like Macke and Najarian can be a terrific FADE….

  29. larster says:

    Byno

    Did Kass go long and then declare a bottom so that his Real Money lemmings would follow him and buy his longs for a quick profit? I trust Kass about as much as Cramer, i.e. very little.

  30. donna says:

    That chart actually makes me feel pretty good since most of my investments were made in the 80s and 90s (although hubby’s contributions have continued all along).

    So I’m still up, overall. ;^)

  31. dead hobo says:

    BR asked:

    Dow up 150 so far. Will it have any legs? Discuss . .

    discussion:
    ———————————-
    Eventually. Maybe real soon. Maybe not. Fortunately, the real wealth of the world was not impacted significantly in this downtime. Factories may be be showing some slack, but they still exist. Natural resources are available and ready for extraction when the word is given. Productive capacity is ready and able to go to work, and a lot of it is working now quite well. People have money, they just are afraid to spend it.

    Therefore, this is only a slowdown and a media sensation to a large degree. When banks lend and people borrow again, the markets will respond.

    It’s only a matter of time.

  32. SanFranHobo says:

    “Eventually. Maybe real soon. Maybe not.”

    Nice!

    “Fortunately, the real wealth of the world was not impacted significantly in this downtime. ”

    It wasnt?

  33. cvp says:

    “Twelve Year Lows Are Extremely Rare”

    But we are in extremely rare times.

  34. CNBC Sucks says:

    Sorry, I keep getting off “the pledge” myself. I swear I was a true functioning Republican before I started watching CNBC. Sometimes, you get lucky and they have a great guest, like Smooth Scott Sperling, Peter “The Libertarian” Thurk, or even my page view hero, Republican Ritholtz. I think it is because I love business, finance, and capitalism so dearly that I absolutely despise the corruption of those institutions, which is what CNBC is. I am just glad people are a lot smarter than I give them credit for.

  35. dps says:

    @CNBC Sucks
    I think we’re starting to see CNBC’s finest hours. They are now officially off the reservation. Kudlow ranting for offshore tax havens, Kramer absolutely ranting about Geithner (it’s maybe justified but I think he popped a vein) and those two are the more sane ones. Please don’t even start on DK or MCC. I literally can’t watch for more than five minutes. Vinny and Billy are the only regulars who know how money is made.

  36. Bruce N Tennessee says:

    Well, ok…let’s look at the charts again…how long did it take when the 12 year lows were reached to get back to the highs in that period…21-32 and 62-74…?

    Just eyeballing it..it appears >20 years and >10 years or an average of >15 years…

    So, if these two previous 12 lows are a guide (otherwise why would you have brought it up) and today is the market low…we will only gain about 6% a year for the next 15 years in equities…(assumes we have a 50% haircut today)

    Worth the risk of further weakness?……

  37. mlomker says:

    @DL, exactly. We are due for a wave 4 rally but it’s the intermission before the final act.

  38. jmay says:

    As DL said, talk to the Japanese about 12 year lows.

    I haven’t seen anything to dissuade me that the Nikkei is the road map for what is ahead.

  39. DC says:

    Dennis Kneale — please, somebody tell me why he has a job, much less a job in financial television. My hope is that he is the first dumped (funny how CNBC is almost completely ignoring the meltdown of GE) and winds up working the third shift on a loading dock in Minnesota.

    Buy and hold? That myth has been busted. This market blew the lid off volatility and who’s willing to bet we’ll never see a triple-digit VIX?

    The big winners may be regional and community banks. As interest rates rise so will CD payouts, and many average folks will take that route for their IRAs if not their cash stash. For a lot of retail investors even the relative safety of bonds will not be attractive since the Wall Street stink won’t wash off for quite some time.

  40. Unfortunately, history doesn’t repeat itself because the parameters governing today’s issue has never been encountered before. Sadly, everything is connected to everything else and that’s on the downside. Expect more pain, but monitor the usual indicators: VIX, USD, gold, housing.

  41. JohnnyVee says:

    RARE! Over a one hundred year period they have occurred 3 times totalling 36 years. How is that rare? It’s practically impossible for it to happen at a greater frequency.

  42. cvp says:

    I have a theory about CNBC’s increasing virulence against Obama. They’re trolling for for publicity esp after the Santelli thing helped them. And…they’re doing this to increase audience share->advertising revenues. After all, their parent company is tanking and if GE were to file chapter 11, CNBC’s talking heads would have their contracts subject to renegotiation – and not to their liking.

  43. Myr says:

    Ouch! I would think that you, BR, would be the first to poke the massive holes in this selective data mining exercise.

    I don’t have all the data in front of me, but the ’32 low goes *at least* as far back as 1897…that’s 35 years at a minimum. The JP Morgan “analysis” also disregards how the market performed up to the starting points that are being used. The 1997 starting date for the current time period was actually preceded by the biggest bull market of all time whereas the 1921 starting point was truly a low point for the market. In fact, this type of analysis implies that we can go MUCH lower…DOW 600 anyone? 1974 is 35 years from today and the DOW got down to 600 then.

    I do think we are setting up for an excellent trading opportunity. I have been scaling in for the past few days and I expect the market to continue grinding lower so I’m scaling in slowly. After the inevitable rally that lasts a few months and carries us anywhere from 25% – 50% from the lows we will turn down once again as the deflationary forces of the Depression grab hold once again.

  44. JohnnyVee says:

    And when these incredibly RARE events occur, the market actually continues to go down (1932-1933) to wipe out gains for the last 30 years or goes sideways for another 10 years 1974-1984. Holy Shit!

  45. dead hobo says:

    SanFranHobo Said
    March 4th, 2009 at 2:14 pm

    “Fortunately, the real wealth of the world was not impacted significantly in this downtime. ”

    It wasnt?

    reply:

    No, not really. You are confusing stocks and bonds with productive capacity. A factory is wealth if it is running or can be made to run. The ability to make things is wealth. No commodities disappeared from the ground. Assets available for sale are wealth. Houses may have been hit, but those who sold them got off ok … remember it’s a zero sum game. All gains always equal all losses. Losses are a lot more fun to talk about.

    People have money. Most are afraid to spend or lend because of uncertainty.

    A lot of people got hurt in their investments, but a lot of people made off quite well when they sold at the top. People who lost jobs will get new ones eventually.

    Just as it always stops raining, this too shall pass. Whether it ends today, tomorrow, or next year is only a guess. But ti will end. And whe people feel more secure, those with cash will spend and lend.

  46. leftback says:

    Interesting about Japan’s 12 year low, I was buying Japan (and later Europe) steadily all the way through the early-mid 2000s until I sold last year, and it worked out very well.

    Nobody knows where we go from here but events like this can frequently serve as inflection points. I am more inclined to err on the long side right now, more as an inflation hedge than a growth story, at least in the US – so obviously I favor the energy sector. In a few years, people will kick themselves when they look at where energy prices in early 2009. Paul Kedrosky calls oil a “lay-up” trade today and another is shorting the 10-year.

  47. karen says:

    uco under $6 recently??? definitely the buy of 2009…

  48. dead hobo says:

    SanFranHobo,

    Berlin in 1945 as the Russians entered was a destruction of wealth. Nothing was left. A stock being valued at $10 instead of $50 is not a destruction of wealth since the initial value was only based on an idea of value. Technically speaking, a stock certificate has no value, except as paper, intrinsically. It’s only worth what someone else will pay for it. Emotions affect stock value as much as the book value of assets supporting it. 15x multiples are an agreed upon idea, but not based on anything intrinsic.

    A copper deposit can be used to create wire or pipe. All of these items have intrinsic value. All are representations of wealth. Your ability to do something is a measure of potential wealth. Hard assets that have a use are wealth. Everything else is only something everyone agrees upon at this moment.

  49. It’s all predicated on growth. If there is no growth, all rallies fizzle. Where is the growth to come from? At bottom, it has to be from population growth. 70% of the economy is consumer spending. If we don’t grow new consumers, we won’t get new economic growth. Natives in the US are barely making enough babies to replace the codgers when they die. Our growth depends almost entirely on immigration.

    Japan is instructive in that regard. No immigration, and a declining population explain what has happened there over the last two decades. Unless trends reverse, Japan will halve its population in a hundred years. It’s economy has been performing accordingly.

    If immigration stalls or even slows significantly here, expect the “twelve year low” to fade into memory as the last of the good times.

    Yes, this too shall pass, but not necessarily in the ever-upward manner that a whole hundred years of history has lead us to expect.

  50. call me ahab says:

    @ dead hobo

    I disagree. Being in the lending business- most of the people I have met over the years do not have savings (outside of a 401K) but have 2 car loans and many credit cards. That is not “money on the sidelines”. We are looking at a period (long overdue) of contraction. The credit and spend bonanza is over for a while.

  51. Andy Tabbo says:

    chrispycrunch Says:
    March 4th, 2009 at 2:41 pm
    Unfortunately, history doesn’t repeat itself because the parameters governing today’s issue has never been encountered before.

    Chrisycrunch….don’t mean to go biblical here:

    “What has been will be again, what has been done will be done again; there is nothing new under the sun.”

    We’ve seen it all before….history has taught us many lessons, yet we never learn….

  52. DC says:

    Couple of guys on CNBC just now talking up China…well-known growth story, self-sustainability, greatly improved infrastructure.

    Which points out another issue with the 100 year chart. That is a chart of the “American Century.” We led the universe in virtually every category and literally reinvented the planet after World War 2.

    Not now. If FXI is the best place to “earn” a great return for the long run, what does that do to the American psyche? We know the guys on the trading floor don’t give a fat shit about where the money comes from (diamond mines, sweatshops, Egyptian prisons) as long as the money comes. But I’m not convinced that “invest your future in China” will play in Peoria.

  53. Mannwich says:

    My call was breaching DOW 7,000 and S&P 700. Since that finally happened (karen, where are you?), am getting tempted to get more bullish but not yet. We were clearly oversold and had to have a rally at some point so this is no surprise. Market can’t go down every day, right?

    Still not ready to get my bull horns on yet but we’re getting closer.

  54. With the credit card of the world maxed out it is hard to draw a comparison

  55. danm says:

    remember it’s a zero sum game. All gains always equal all losses. Losses are a lot more fun to talk about.
    —————
    What are you talking about? I think you are mixing these up with derivatives. Derivatives are a zero sum game, not stock markets.

    Over the long term the sum of equity market should follow gdp growth. That’s not a zero sum game. Nor is real estate.

  56. MacroMeister says:

    While seemingly insightful, and possibly decent general perspective, in actual active trend analysis terms this is a bit less than really useful.

    In the first instance, the comparison with the 1974 low is significantly specious. It was not a 12 year low from 1962, which was still a pretty fair degree below it. That 1974 low was also more so part of a broad consolidation based upon an energy shock, whereas 1929-1932 was a major retracement of the previous bull market. The latter was driven by the sort of general slide in housing values creating a crisis of confidence, implosion of inflation and weak labor markets far more consistent with the current secular bear trend.

    Also, based on R.N. Elliott’s Rule of Alternation, it won’t happen the same way twice in a row.

    Even applying the loosest standards of conformation, if it is at all more so like 1932 at present, the ostensibly minor violation in absolute terms comapred to the subsequent massive secular bull still left the summer 1932 DJIA low (40.50) 35% below the 1921 low (63.90.) On present form even if we are very much closer to some extreme bargains than back in OCT 2008, that may still mean a slide toward 4,700 if that applies here. Of course, all of the stimulation applied currently that was lacking into 1930 may mitigate that. My personal prefernce is for a test of the 5,800-5,400 area broad channel and Fibonacci support from the 1932 low. http://bit.ly/ft10 @MacroMeister

  57. Dunno if this got noticed, but:
    Should Short ETFs be Banned?
    http://biz.yahoo.com/etfguide/090303/192_id.html

    Before you believe the propaganda of agenda pushers who argue that short ETFs are harmful to the stock market, look at the facts. Fund providers like ProShares, DirexionShares, and Rydex Investments each offer ETFs that play both bull and bear markets, not just bear.

    Critics who complain that the UltraShort Financial ProShares (NYSEArca: SKF – News) is exerting downward pressure on financial stocks fail to mention the Ultra Financials Fund (NYSEArca: UYG – News), a long leveraged financial ETF, has an asset base more than double SKF! Currently, this pair of ProShares financial ETFs is overwhelming net long financial stocks.

    Interesting stuff, and yet another reason to worry about sudden rule-changing (even if you agree with the rule change!)…

  58. leftback says:

    Mannwich says: “Market can’t go down every day, right?”

    I wish you wouldn’t say that before the close when I am long….

    More jobs numbers tomorrow and Friday. Volatility is likely.
    Those of a bullish disposition would note we breezed through 715.
    SPX 745 seems likely to be a tougher obstacle for now.

    Jeff, I think Karen just slipped out to the liquor store for some Thunderbird for you.

  59. forgot what an up market looks like, I’ll take it…

    guys, let me know if I missed any obvious ones….

    http://thereformedbroker.com/2009/03/04/cnbc-separated-at-birth/

  60. Andy Tabbo says:

    Nice rally….at this rate we may get back to where we were three days ago….bear markets are vicious that way……if you fall 15% one day then gain 15% the next day, you’ll lose all your money in one year….

    To the wave model we go:

    Under the bearish case, 735 should provide resistance on the cash S&P, as the 23.6% retrace of what I think is the Wave 3 down from 875 to 692. It’s also a small gap on the charts from the Friday to Monday trading…so I would expect 735 to be some resistance. More like final resistance will be 762 or 783. Unfortunately, we fallen so far that it will take quite a rally to negate this shorter bearish case…would need to get above 804 and even then it would open up another longer term bearish case.

    For the record, I’m hoping for the shorter term bearish case….not because I’m short….but because the sooner we can complete a Wave pattern, the sooner we can get a MAJOR, blow your mind away, type bear market rally…one that I want to partake in.

    I just don’t think this is it….you don’t start major bear rallies on “postive developments out of China.”

  61. Terry says:

    “Twelve Year Lows Are Extremely Rare”

    Hmmmm! There seems to be a strong corellation, oh, wait, it’s 100%, between 12 year lows and severe recessions and depressions.

    The question is: Which one are we in–a years long deep recession or a decade-plus long depression?

  62. texasradio says:

    A chart from JP Morgan…are they really too big to fail? JP Morgan, that is.

    Twain had a quotable quote about history…we’ve all heard it endlessly over the last two years…but Twain was a wordsmith, not a historian. How many nuclear weapons were used in warfare prior to 1945? One might characterize such an event as a “historical rhyme” – differing from the past only in order of magnitude – but I’m not so sure of that.

  63. SanFranHobo says:

    I second that; stocks are not a zero sum game.

  64. call me ahab says:

    zero-sum game Definition

    Situation or interaction in which one participant’s gains result only from another’s equivalent losses

  65. Mannwich says:

    Didn’t like that close. Very tepid. More pain coming……

  66. kingtone says:

    “China is an export driven economy- who are they going to sell all their great wares to??? Last I checked the US was the largest economy in the world followed by the EU- if we aren’t buying then who is? What would be the dynamic for China to pull us out of a bear market- did Dennis Kneale offer a reasoned explanation. No?? I didn’t think so.”

    China’s got cash and China’s gonna spend it on itself. Seems like they are perfectly cabable of reinventing themselves (remember that Olympic Opening Ceremony? Amazing) as did the US did mid/late 19th century.

    At some point they’re gonna create alot of demand for raw materials, technology and know-how. They’re already going on an oil/energy buying spree and we have plenty of the skllls and tech that they’ll need, which will also help. so they’ve got a vested interest in the rest of us making it thru this mess together. I suspect we’ll see some kind of massive coordinated deal with Chinese if all else fails.

  67. Bob A says:

    to many lies and coverups still to be exposed

    600,000 job loss a month for the next six months?

    S&P 600-650 ish still seems at least a 50% probability to this cowboy

    and on that same chart.. it would still look like it fit the pattern

  68. NJlou says:

    Every morning at 6 a.m. I tune into CNBC which now has a funeral look to it .
    The CNBC set looks depressing like a funeral home set in a gambling hall in Las Vegas.
    The place is too bright for the mourners stopping by to pay their respects and offer a glimmer of ‘hope’ to the functional illiterates in the audience. There is always a bull market someplace in the world, if only CNBC can find it. The morons at CNBC can no longer exploit the law of averages as both companies and industries are collapsing at the same time. There is no new asset bubble (even with the latest massive liquidly pumped into the system) to hype to gamblers in the audience

    It is now blame Obama and the government 24/7.

    It is my first laugh of the day as I watch the antics of Joe Kernen, a complete moron, as the reads the overnight obituaries. The Germans have a word for taking pleasure at someone’s distress and I can’t remember the word.
    I call him my death-announcer as I tune to see which zombie bank died during the night and the US Govt. was still trying to resuscitate with even more (useless) blood transfusions.
    It like the government doctors keep prescribing more and more heroin as a cure for an already overdosed heroin addict on life support.

    Poor Joe. It is obvious he is presiding over the death of capitalism (the boom and bust asset variety type that couldn’t be sustained with more credit (debt) ), and he is not sure what is going to replace the boom and bust economy. I think he calls it ‘socialism’ where it is ok for the government to socialize the losses of insolvent banks and risky investors, but profits are a private affair. Kernen is one sad joke.

    What idiotic Joe calls ‘socialism’ is nothing more than government deficit spending (G) when both consumption (C) and investment spending (I) have imploded—
    GDP = C+I+G+deficit.

    What else can Obama really do but to keep pumping up deficit spending until the economy resuscitates itself, if ever. America has always done this in every other boom and bust cycle and why it wasn’t called ‘socialism’ then is a mystery. This time it is different however. We now have the excess debt and excess inventory from both the dot.com and housing bubbles that have compounded the problem. With all the free-market nonsense you wonder why the people at CNBC are waiting around for government action?

    The morons at CNBC don’t have any institutional memory and they treat every stock market event as though it is independent rather than cumulative. Nothing is ever put in
    a historical context for the functional illiterates who tune to get ‘investment’ advice.

    Why don’t they take the ‘bull’ (pun intended) by the horns, create and inflate the next asset bubble that they can hype and amplify all day in the CNBC casino? Where have all the gamblers gone?

    The debt bubble took years to build up, ever since evil Allan Greenscam (who should be executed in front of a firing squad to set an example) in 1987 started pumping massive liquidity into the market at the first sign of distress in the economy. The massive liquidity all fueled the boom followed by a bust. Yet morons like Joe with an instant gratification mindset want a quick resolution to a problem that took decades to build up.

    The US govt. has tried everything to refloat its collapsed economy and all the measures have failed:
    1. Massive liquidity- the fuel for the dot.com and housing bubbles.
    2. Massive tax cuts for the wealthy who saved and bought bonds forcing the govt. to
    finance the tax cuts and the interest on bonds worsening the deficit.
    3. Massive deficit spending- the failed wars in Iraq and Afghanistan.
    4. Forty-year low interest rates that created the housing asset bubble.

    I tune into see what phase of Kuebler-Ross grieving process Joe is in. Sometimes it is anger then denial, then denial then anger. Then I start giggling. I have had my fill of the morons for the day.

  69. call me ahab says:

    @ Mannwich

    I think folks are wary of unemployment claims tomorrow and payrolls on Friday- got out today with what gains they had.

  70. spigzone says:

    Until declining oil supplies sp*t on demand destruction and sh*t on the markets.

  71. leftback says:

    @Hobo said: I second that; stocks are not a zero sum game.

    They were if you were a buy-and-hold type for the last ten years. Unless you are looking at different data..

    @AT: Agreed. This is not THE BOTTOM, there is still a lot of overpriced crap in the market. But there are a few things that do seem to be carving out a base or hit bottom ages ago and likely will not make new lows: oil, gasoline, gold/silver miners, JNK, shippers. Somehow in this age of sector ETFs I doubt if we would see everything hit the floor at the same moment. We are seeing a massive shakeout – destructive capitalism at work – and many financials, retailers, and a few industrials are not going to be part of the new S&P 500. Still, I don’t trade the S&P futures, so I don’t care quite so much about the bottom, Hogan’s or otherwise.

  72. Mannwich says:

    Agreed ahab. Think we’ll see mostly weaker rallies ahead and selling into any strength whatsoever, which means we’re still headed lower. Never thought I’d be too optimistic with my original prediction but it looks like DOW 6,000 and S&P 600 will be a reality at some point. Batten down the hatches if we get to 5,000 and 500 or below.

  73. Mannwich says:

    How can we be at THE bottom with Apple and Google trading at these absurdly inflated levels? Me-thinks Apple is going to eventually get clobbered as the fad fades and people begin to question paying top dollar for its products in these frugal times.

    Of course I’m talking my book with my large QID position here. Want to add more to SRS too but am hoping it gets hit a bit so that I can get in at a better price. Can’t see how CRE is going to escape the carnage in the coming 2-3 years. Might take some time but SRS going to eventually run again.

  74. @TheReformedBroker Says:March 4th, 2009 at 3:42 pm

    guys, let me know if I missed any obvious ones….

    Cramer and Kramer from Sienfeld. They don’t look alike. They are more like fraternal twins

  75. call me ahab says:

    @kingtone

    I disagree- As a totalitarian government people do not have the abilty to freely exchange ideas. This is critial stumbling block to their “coming out party” as the next big thing since Japan of the 1980′s.

  76. Today’s chart reminds me of yesterday’s chart – it’s interesting but I just don’t find it useful. Can someone please give me a nice list of FUNDAMENTAL reasons why a new bull market will start? So far I have (1) commodities are cheap and (2) interest rates are low. Anything else?

  77. @leftback Says:March 4th, 2009 at 4:09 pm

    @Hobo said: I second that; stocks are not a zero sum game.

    They were if you were a buy-and-hold type for the last ten years. Unless you are looking at different data..

    Even still those companies paid out a dividend over that time.

    I always tell people the one factor that makes the shares in a business not a zero sum game is time. Adding time to the equation can allow for both the buyer and seller to actually make a profit off the same shares. If a 70 year old man cashes out and sells to a 20 year old man both have an equal opportunity to make the same profit from the stock

    Of course, in today’s market what we have is the 20 year old men selling to the 70 year old men and that is definitely a formula for a negative sum game

  78. dead hobo says:

    How The Common Man Sees It said

    “Adding time to the equation can allow for both the buyer and seller to actually make a profit off the same shares. ”

    reply

    No. That is a deferred gain on paper. Eventually someone will sell at a loss. The total amount of cash in the system has not changed. It may be split among more than two people. The initial seller got a profit or a loss. The current seller received a gain or a loss. The current owner has the difference. It’s a three sided deal. Commodities are a two sided deal. The two sided aspect makes the zero sum aspect obvious. Stocks are a three sided deal and time adds an abstract dimension. The only way stocks can not be a zero sum game is in a ponzi scheme before the collapse.

  79. dead hobo says:

    To those who don’t know what a zero sum gain is …. All profits and losses zero out over time among buyers and sellers. Actually, taking bankruptcy into consideration over the very long run, it can be a negative sum game. I was thinking about a more realistic time frame and normal transactions in an active market over a reasonable time period. For those purists who know of a stock that their grandpa bought in 1950 for $5 and it’s now worth $30, you win. Eventually, once that share starts trading, profits and losses will approach zero over time among all players.

  80. going broke says:

    Looking at the chart, buying at the market top of year 29-30, you would have to hold for 25+ years to have gains.
    Buying at the top of year 67-68, you’d have to hold out for 20+ years to break even.

    How many bought at the highs of 2000? They’ve already been holding for 9 years.

    I’m not going long soon, I wanna keep what I have in my 401.1K. I’ll take the easy 2-3%/YR gain and not try to guess “when” the market might turn up.

    Until the unemployment gets better, housing Bazagillion $ losses have cleared, market’s ain’t going to have a great rally.

  81. jwc says:

    CNBC sucks, agree agree. I have finally given up, switched to Bloomberg and and my blood pressure is better for it. Anti Obama screed, every day, just got old. Sure there is valid criticism to be had. But they seem to be doing more than just “reporting”… they are activly participating in an attempt to bring down Obama’s plans. Not make it better. But to stop it. Like the last eight years of tax cuts worked so well. All they can talk about is more tax cuts, or stop the the tax increases. Sick of it.

    Fast Money is a little better. I’ll miss Faber. Lissman can be thoughtful. But the main folks, sucks is too kind a word.

  82. DL,

    those flows are always key info..nice link.

  83. sinomania says:

    @kingtone, @call me ahab

    Beijing is using this period to consolidate major economic sectors to create an American style business oligarchy with “Chinese characteristics” (i.e., substantial to majority state ownership). This is policy for years but accelerating now. China is truly a “socialist market economy” in that regard and just as Germany is (both countries are officially defined that way). It is true exports account for well over a third of China’s revenues but the major input of China’s economy is investment. On the whole China usually breaks even or runs a small surplus in its current account. Some analysts believe exports actually amount to 10% or less of Chinese GDP.

    China is not just a big sweatshop for Wal-Mart. All the talk about totalitarian dictatorship is outdated propaganda. If you have spent any time in China you know that it is nothing like we think. If you haven’t been to China – you really need to go – it will open your eyes and really make you realize where we are going versus the rest of the world.

    When this period is over – 2012? 2025? 2050? – China will have nationwide high speed rail, a highway system – modeled on our own but 1 hundred years newer – subways in every major to medium size city – you get the picture. This is all part of the big cycle of capital relocating around the world. It took 500 years to drain China of all its silver and now they once again on the upswing. Just as the approach to every Chinese city circa 1900 was a ruin and full of odd anachronistic sights, many part of the US now have that appearance. A Chinese friends pointed this out to me when he took the train from DC to New York and was amazed at the bombed out appearance of Baltimore, Wilmington, Philadelphia outskirts, etc.

  84. Bentrider-MI says:

    My grandfather and father lived through GD1 and made money. They thought I was crazy investing in stocks. They preferred real estate, but when they needed their money they couldn’t easily get it out. True the last year has been horrible, but I try to follow my grandfather’s advice. He was a farmer and said that he decided what to plant by what his fellow farmers were buying at the co-op each spring. If they were buying seed corn, he’d buy seed pototoes; if they were buying wheat seed, he’d buy bean seed; if they were buying rye seed, he’d buy oat seed; etc. He said that in the fall the price for what he had grown was always better than that which the “in crowd” bought. Seems to me that since the “in-crowd” of analysists, the business press, the pundants, etc. are predicting GD2 and advising against buying stock it is time to start buying high quality stocks of diversified companies who are still paying dividends out of profits. But, always remember to use real money, not credit, that you can afford to loose. I have been debt free since 1975 and so far this mess hasn’t effected my life style in the least.

    What we are watching is the “get rich quick folks” taking it on the chin. Now it is time that they take their lumps.

  85. “With the credit card of the world maxed out it is hard to draw a comparison”

    HTCMSI,

    the field of ‘Fractal Economics’ addresses just that observation..

    http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=%22fractal+economics%22

    see clusters on left-side of page, as well

  86. JustinTheSkeptic says:

    I’ve been having diarria all day! But the view from the toilet is soooo inviting!

  87. jacobsk says:

    CNBC people are acting weird these days is because GE stock is down big and going down even in an up market.
    Why don’t they blame the GE board , Jack Welch and Immelt for the GE stock going down and leave others alone. Since GE is in DOW and S&P , it is part of the problem why the market is down big.

    GE really got baked for baking CDOs and other cookies in their oven. Even their dishwasher cannot clean up the mess on their cookie sheet.

  88. davja25 says:

    Interesting comparison. However, one should note that the 1974 12 year low was naerly 10% lower than the 1962 low (570 vs. 627.50) and that the 1932 low was more than slightly more than 1/3 less than 1921 (40.6 vs. 64.90)

    If one desires to draw a statistical inference, and one charts the future based upon the past, then the two periods average around a 20% absolute decline low to low, which gives one a target in the area of 5700 on the Dow.

    Now, one could note that there is a reduction in the amount of the overshot, which could argue for a
    a more immediate target in the Dow, somewhere in the mid- to upper 6k area.

  89. rktbrkr says:

    CNBC is entertainment and Dennis Kneale is their answer to Alfred E Newman. It was heart rending hearing Bob Pisani talking about GE like a family member with a terminal disease.

    CNBC should be forced to register as a Republican party lobbyist. It will be interesting to watch their TARP coverage shift after parent GE takes as big a helping as they can stuff in their maw.

  90. royrogers says:

    “”"Andy Tabbo Says:
    March 4th, 2009 at 12:13 pm

    How do these analysts have jobs?

    Talk about “seeing” what you want to “see.”

    The 1932 is example is extremely poor because it looks like the market actually retraced 30+ years of prices, not 12 years. The 1974 example is also poor because it looks like the 1974 was double bottoming against the low from ~4 years earlier…

    Panzer’s chart from yesterday was a better use of charting to show “oversold-ness”.

    This seems like shoddy work.”"

    AGREED, the dow dropped more than 50% in 32 , while we are around the 50% range today.

  91. rktbrkr says:

    Kudlow should do his show dressed as an elephant, as least he’s had to swallow his mustard seed babble. The chicks are all attractive, I wonder what percentage of CNBC’s market is male, I figure 80%

  92. TG Randini says:

    Homo sapiens are DNA-wired to look for patterns amidst the chaos, even when they do not exist. If you look at tea leaves long enough, a homo sapien will see a pattern.

    Only two data points are supposed to mean something?

    Even if it were 5 or 6 or 7 data points… THE SAMPLE SIZE IS TOO SMALL.

    And even if the sample size was bigger, there are always ‘outliers’.

    This analyst is a joke.

    But most people want to believe… as they use their animal-brains to ‘divine’ patterns. Makes as much sense as burning witches, doesn’t it?

    But then again, what do I know? I lost money last year. My portfolio was down 3 and a half percent!

  93. TG Randini says:

    AND… as Albert Einstein might have said… and I’ve been saying for 25 years…

    “Linear programming makes no sense in a curved universe!”

  94. ben22 says:

    @ going broke:
    How many bought at the highs of 2000? They’ve already been holding for 9 years.

    I’m not going long soon, I wanna keep what I have in my 401.1K. I’ll take the easy 2-3%/YR gain and not try to guess “when” the market might turn up.

    That’s true but also pretty misleading. XOM, for example, was a pretty good buy in 2000.

    But to my point, on the long side, based on what you are saying it would make sense, thinking you must still be contributing, to be putting new money into equity at this point no? Hard to argue that chart after going long on a 50% drop. I don’t disagree with protecting what’s in there but you can still “get long” without going all in.

  95. Optionstrader says:

    Markets are oversold , I keep hearing about these TD exhaustion Buy signals on Daily weekly and monthly charts converging .
    Also no one is calling for a bottom after 740 was breached ( ok no one meaning no one on the major media networks) and there is no catalyst to take us higher.
    So I guess we can rally, is this “the” bottom , who knows .
    Using conventional TA, stocks like AAPL QCOM etc. which kept meandering near the 50 DMA finally broke through today. They did not fall apart like the S&P or Dow .
    All in all I see opportunities on the long side , Tech looks good but I have reason to believe Tech will not keep chugging along, example GOOG was weak today and MSFT , well….
    GLD and general markets trading inverse to each other is great, USO should really bounce a lot if the rally is at least a few weeks.

    I am taking this one trade at a time. No point wondering if its a bottom or the bottom or whatever.
    Of course I do understand Barry and others need to make calls and answers questions of A bottom vs THE bottom on TV and radio.
    Well it does not look like THE bottom but certainly A bottom.
    Just IMHO , FWIW.

  96. miamiocean says:

    What to do. What to do. In just about every case, the share prices in my “former” 403b mutual funds are close to their lowest price since the funds’ inception. These funds are anywhere from 9-24 years old. Talk about being in uncharted territory.

    At this point I would be purchasing shares at 30-50% below the value at which I sold them…it is very tempting. With a 15 year time line I am almost at that point. I just don’t know how much longer I should wait on the sidelines if I believe that the market will climb above my sell point over 15 years.

    Would I be waiting because I really believed that the market bottom is not even close and that these funds could really fall significantly below their historical values, or because I am getting greedy and counting chickens on the way up from some unknown bottom ? Isn’t staying out of the market to catch the low almost as boneheaded a move at times as is staying in because you don’t want to miss the top ? What to do. I know you are all far more sophisticated and knowledgeable than I am — I am just thinking that the time may have arrived to start dipping more than a toe or two back in for the long haul.

  97. plantseeds says:

    “Dow up 150 so far. Will it have any legs? Discuss . . .”

    What is it that will increase earnings in the near or long term? We probably won’t know until we’re looking at it in the rear view mirror.

    Hopefully complaining about CNBC is another bubble that is soon to burst.
    I think BR needs to do a CNBC thread so we can let those that want to lynch CNBC get it over with.

    I would remind everyone once again that it’s only entertainment or lack of, depending on how you look at it. Either way, if you can look over or under the slant there is quite a bit of info to be had. Bloomberg just the same. Who cares about opinions anymore anyway?

  98. ben22 says:

    @miamiocean,

    two things

    1. mutual fund “price” isn’t like stock, that’s NAV for the mf, so I’d be careful looking at that history to gain any perspective on performance or to draw conclusions, especially if they are managed funds.\

    2. If you sold out 30-50% ago you don’t need the market to climb back to where it was to make 30-50% from here and if you don’t think that happens in the next 15 years then you must be in the Japan camp.

    3. the goal should be to buy low and sell high, not buy lowest and sell highest so if you are “investing” then I wouldn’t worry about missing the top.

    If you don’t know and can’t stomach the risk find a stable value fund or some solid bond funds or a vanguard bond index and leave it alone, my guess is most of those equity funds in your qualified plan are fully of financials and other equally toxic garbage and more importantly, if things do in fact get worse, or much worse from a price perspective, none of those “managers” in the funds are going to do anything to protect your capital.

  99. ben22 says:

    sorry, I meant three things and then some rambling.