Earlier this morning, I asked whether the Market Rally was more reminscent of 1974 or 1982.

Courtesy of Ron Geiss of The Chart Store, here are 3 comparos that are worth looking at: 1973 sell off vs 2007, the 1974 rally 2009, and the 1982 bottom lows vs 2009.


1973 versus 2007-08


1974 Rally versus 2009

1982 Rally versus 2009


Thanks, Ron!

Category: Markets, Technical Analysis

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.

97 Responses to “Charting 1973, 1982 and 2009”

  1. Transor Z says:

    I’m going to have to go with 1973, because the color scheme makes me of the Miami Dolphins and they won the Superbowl that year.

  2. dead hobo says:

    Instead of using magic charts, is it even just a little bit possible that the events of today will present a new chart pattern that doesn’t look much like the charts of yore? Except for the jaggedy lines?

    BTW, what were the economics of those past little downdraft and each recovery? I bet the goings on of today are a tad different from either. Of course, it is possible that magic charts control our destiny.

    But wait! What were the old charts above based on? Which cycle did they imitate? Since magic charts appear to control our destiny and these charts repeat over and over again, then what period was period zero? And why did so many people get this little event wrong. Wasn’t it in the charts?

  3. Marcus Aurelius says:

    What about (bad) debt moving forward? These charts should show the relative debt, both public and private, as a ratio of debt to GDP before they can have any significance. What happened upstream is no indicator of what will happen downstream, especially when there’s a waterfall dead ahead.

  4. Marcus Aurelius says:

    MISH has some interesting charts on debt up right now:


  5. Hondo says:

    taking bits and pieces…….there was a 10 to 12 year bear market before the turn in 1982……this isn’t even comparable………….I was there.

  6. CNBC Sucks says:

    Ritholtz, I love your analytical persistence. Unfortunately, both technical and fundamental analysis have gone out the window. Your and anyone else’s analyses and dogged insistence on driving into the data are no match to the US government’s ability to kick the can far into the next decade and beyond. I have become so despondent over the long-term future that has been PRINTED for us that I am now bullish on stocks. Sure, why not Dow 15,000…we are only going to print $3 trillion or more to make it happen, so why not?

    The good people on this blog who day-in, day-out recognize the structural problems of what is happening will only regret that they know. Nobody else cares. Sure, you will have the insight to prepare for the ultimate reckoning of the debt- and deficit-driven economy that has not only been continued but double- and triple-downed upon, but it will be a lonely endeavor.

  7. DL says:

    I’d be a little more open to the idea of a new bull market if the S&P would retest the March low, or at least come close to it (e.g., 705). On 10/4/74 the SPX got down to 62; on 12/6/74, it almost retested, getting to 65.

    At this point, I might be open to the bull case if a pullback ensued that retraced 60% of the recent rally.

  8. slappy says:

    “history does not always repeat exactly”

    does it ever repeat exactly? isn’t the fallacious extrapolation from historical “data” to future results one of the reasons people’s “models” break down?

  9. Mr Objective says:

    Another time period you may want to compare to is after Sept. 11/01. The market bottomed and then went up 25% over 2 months. My recollection of that time was that all the way up, most assumed the rally would die on the next terriorist attack and were very skeptical of the rally. The market held up through the start of Enron collapse in December and then went sideways for several months. Even though it went sideways, I will never forget the euphoria people were feeling by March/02. People were certain that the bear market was over.

    Also, although I’m no chartist, it’s interesting to note how the mid 900′s have played out on the S&P500. The bull market stalled for a while at that level in 1997 and it was also the level the market fell to in the ’98 and Sept/01 falls. Seems like an important level

    A sideways move right noe for a few months would seem to be the thing that would stymie the bears for awhile.

  10. call me ahab says:

    CNBC Sucks Says:

    “The good people on this blog who day-in, day-out recognize the structural problems of what is happening will only regret that they know. Nobody else cares. Sure, you will have the insight to prepare for the ultimate reckoning of the debt- and deficit-driven economy that has not only been continued but double- and triple-downed upon, but it will be a lonely endeavor.”

    depressing thought- possibly a valid argument- I would think that the “smart minds” would understand that we need industry and high paying jobs- not retail space and low paying jobs- the light bulb has to flickering on over someone’s head.

  11. Transor Z says:

    Just checked and War’s “The World is a Ghetto” was the #1 album of 1973.

    So that clinches it for me. Miami Dolphins and a ghetto world. Has to be 1973.

    Seriously, though, how much has the composition of the S&P 500 changed in 36 years? I have to defer to technical analysis of the general characteristics of bull/bear cycles, but as DH says, there are SO many other variables floating around different eras…

  12. Mike C says:

    Over the past month, I have heard quite a few people declare this to be the start of a new bull market. The kindest thing I can say in response to that is the jury is still out, but the weight of the evidence is inconclusive.

    In terms of historical analogies, investors should be asking themselves: Is this move more like 1982 or 1974?

    Earlier this morning, I asked whether the Market Rally was more reminscent of 1974 or 1982.

    None of the above.

    I continue to believe that comparisons to the 70s whether the 74 bottom or 82 bottom are not applicable. What did you have then? Sky-rocketing inflation, high interest rates, and a wage-price upward spiral. Does that sound like the present? Nope.

    What do we have? Low interest rates. Deflation. And a massive debt overhang that is being unwound through this deflationary spiral. What time period does that sound like? The 1930s.

    Now where I think the uber-bears go wrong is thinking a replay of 1929-1932 is in the cards. Clearly, the government is doing the exact opposite. So where are we?

    For some time, I’ve followed Louise Yamada who in my opinion is the best technical analyst out there in terms of accuracy. For some time, she has been advocating the “alternate cycle” hypothesis. To summarize, the 2000-2002 crash was your 1929-1932, the 03-07 bull market was your 1933-37 bull market, and the next step is that the 2007-2009 bear parallels the 1937-38 bear and coincidentally they are both around 50%ish declines. And whether you believe chart cycle comparisons are just voodoo or not, that bear market lines up pretty well with this one.

    If history repeats, the bottom is in but we are in for a multi-year choppy, sideways, grinding repair phase that frustrates both bulls and bears. See the 1938-1942 range. The market retested the 1938 low in 1942 which likely created the sentiment of just giving up on stocks, and then it was up, up, and away from there for the next 25 years.

    I suspect we’ve got another 3-4 years to unwind this debt and get healthy structurally just in time for some new technology or capital investment to fuel the next growth cycle.

  13. Mike C says:

    I’ll quickly add that if you’ve spent some time studying the Kondratieff supercycle stuff and believe it (and I do) we are presently in a Kondratieff winter which also parallels the 1930s and not the 1970s.

    Check out stuff from Michael Alexander and Bronson (which is posted on this site somewhere). The Bronson research is quite exhaustive and compelling and IIRC he also figures the next secular bottom occurs in 2014 which becomes the launching pad for the next bull market.

  14. ben22 says:

    @ dead hobo,

    If I were you I’d let it go when it comes to bashing TA or charts. Clearly it bothers the hell out of you and I understand why, but I’m not so quick to dismiss it as you seem to be.

    TA always gains in popularity as bear markets go on, when fundamentals fall flat on their face as they have over the last several years.

    I think you are older so you should know, in 1982 after 16 years of sideways markets most of the people being interviewed on the Financial News Network were technicians, by the late 90′s after so many years of great markets the majority of commentors on CNBC are economists and money managers, which is still true right now. These are the same people that get killed on this board daily b/c they told you to buy all the way down.

    In Nov 1998 there was a WSJ article “Timing is NOTHING”

    The timing of that article was interesting, that’s something.

    These are social trends I’d try to get used to. TA is making a return.

  15. leftback says:

    @Mike C: I agree that 2000 was the analog of 1929. In which case this is indeed 1938. The problem with the analogy is that something very important happened in 1939 which prevented the process of debt unwinding.

    Every single day I wake up and think about the sheer scale of the debt overhang. Private, local, state, and national. Unless they are willing to court hyperinflation, this debt has to be ground down or written off, and sideways would be the best possible outcome for equities.

    Now, watch the 10-year yield creeping up steadily here and think about the eventual effects of that on corporate and personal borrowing – then ask yourself: which market matters most to Bernanke: equities or Treasuries?

  16. ben22 says:

    everyone, myself included, would do better to stop using deflation as the term and to start calling it what it is.

    Credit deflation.

  17. DL says:

    ben22 @ 1:20

    Yes. The terms “inflation” and “deflation” are way too inexact to be useful. Commodity prices, credit price and availability, wages, real estate prices, and finished goods prices are not all going to move in the same direction.

  18. Mannwich says:

    Bingo ben22. Take a look at those charts from Mish’s post that Marcus and I both posted a short time ago and the influence that credit had on everything contained in those charts (including I would argue, depressed wages) is stunning. The feds know the only way they can stave off a meltdown is to do everything they can to keep it going. Otherwise it all falls apart and may do so anyway. We shall see.

  19. DL says:

    Mannwich @ 1:27

    Consumer credit outstanding should decline modestly over the next few years (IMO). But an increase in the federal debt will probably more than make up for it.

  20. HCF says:

    The total leverage in the system has been sky high, especially as compared to anytime previously. As such, I would assume that there is a reasonable chance that this market (in inflation adjusted terms) will be much worse than many other bear markets. What keeps the markets going right now is good old fashioned money injections and American cheerleading. Where is the change I can believe in?


  21. Mannwich says:

    @DL: So we’ll be just moving it from the consumer to the government, which in the end is us anyway (the taxpayer)? One big shell game.

  22. ben22 says:


    Nice chart.

    I’m starting to believe, in fact very much so, that there is NOTHING the Fed can do to stop what is coming.

    I gave myself a goal at the beginning of this year which was to figure out why my reflation thesis was wrong. The harder I look, the more I’m coming to the conclusion that I am wrong about reflation.

    Credit deflation already seems to be in full effect. I see it in everything from the continued slide in home prices and the huge decline in profits at companies like GE, MSFT or 3M., and recent data from Deutsche Bank of CRE is downright scary over the last six weeks as it has fallen off a cliff.

    Even the social aspects are becoming more common. My wife bought me Time magazine as a Christmas gift, not sure why, but she did. One recent cover was The New Frugality. And then in that article it showed 61% (a fibbo # no less) of Americans think they will spend less, even when prosperity returns. Seriously, they aren’t all shopping at COST by franklin.

    Most economists, and people want to dismiss the idea of even getting deflation which also goes to show just how powerful it can become as each last holdout gets on board. Think about how that looked with the early denial of subprime, now just think of it on a much, much larger scale.

  23. call me ahab says:


    “Now, watch the 10-year yield creeping up steadily here and think about the eventual effects of that on corporate and personal borrowing – then ask yourself: which market matters most to Bernanke: equities or Treasuries?”

    please elaborate-

    are you saying that there is a bias to let interest rates increase- regardless of how it effects business and personal borrowing- to make treasurys more attractive to investors/foreign goverments

  24. karen says:

    I unequivocally agree with Mike C and Leftback in these statements:

    If history repeats, the bottom is in but we are in for a multi-year choppy, sideways, grinding repair phase that frustrates both bulls and bears. (mike)

    Unless they are willing to court hyperinflation, this debt has to be ground down or written off, and sideways would be the best possible outcome for equities. (lb)

    Also feel you two have it really right on the 1938 analogy and 50% retrace… still, i won’t wed any preconceived trend whether up or down. Meaning no buy and hold strategy and, contrary to my trading style, I may have to embrace mental stops.

  25. Mr Objective says:

    Ben 22,
    Great comments on FNN in the early 80′s. I was too young back then to watch, but I think that’s a great reference point. The ‘Buy & Hold Equities’ theme has to eventually die before the bear market ends and we are no where near that.

    On credit deflation, Clarium Capital wrote an interesting piece on the “inflation vs. deflation” debate and the potential forces at play that you may be interested in:


  26. ben22 says:


    I’ve sort of come to that same conclusion when it comes to managing capital the next few years (no buy and hold and don’t get too attached to any one strategy or thesis). I have been net long since November 08, and it has been the best 5 month stretch I’ve ever even come close to having. That doesn’t mean I don’t think it can crash again at any time.

    I wouldn’t be surprised if Mike and LB were correct on those calls. It will be a great environment for people that can stay flexible and stay with it.

  27. ben22 says:

    @ Mr. Objective,

    Thanks for that link, I’ll have to read that tonight. The more info I can get and more perspective on that the better.

    I was too young in 80 as well, in fact, that’s the year I was born, but the wonderful web allows me to see those interviews like they just happened. This is what I do for a lot of my research, go back and look at trends, especially social trends. I’ve been told by a lot of people I’m wasting my time doing that but I disagree.

    It seems there are two great ways to learn the market, trade through lots of different cycles and study history to gain a perspective on today’s events and trends. Since the former will just occur in the fullness of time I spend lots of time going back to other market periods to get a sense of behaivor then. As others often say the “conditions” were different back then but people typically respond the same ways to things over and over again. I’m not so sure the debt/gdc % or any other stat for that matter changes the average persons emotions all that much when it comes to money.

    Watch the news media in the coming weeks push the DOW + for the year. The S&P is positive YTD through yesterday, I saw that headline (S&P in the black for the year, or some variation of that) at least 12 times last night, right after the market closed it was on the Yahoo front page, not the finance page, the main page.

    Crazy Karl on CNBC started the cheerleading for positive DOW for the year just this morning. “get it up there with the S&P” I would expected that to start there but it will be everywhere soon enough along with more optimism and a stronger sense of second half recovery.

    If credit deflation persists this would be the ideal bearish scenario in the coming months.

  28. call me ahab says:


    that Total Consumer Credit chart is ‘cringe” inducing- especially interesting to note that it really explodes upward during out “supposed” boom years- makes you wonder how everyone got by before “the good times”

  29. I-Man says:

    Wow… That little plunge should knock some sense into the late to the party bulls…

  30. Mannwich says:

    @ahab: This whole era of so-called “prosperity” (last 25-30 years or so) wouldn’t have been possible without this credit bubble continuing to expand the way it has. Now it’s either pay the piper time or kick the can time to see if we can delay the reckoning. Neither option is all that appealing.

  31. ben22 says:

    Anyone a little suprised by the action in CAT? I didn’t expect that to trade to almost $40 this quick.

    That’s all China getting baked into that it seems. I’m selling the shares I bought at $22 today. That’s good enough.

  32. [...] see if I can dig up a few relevant charts [...]

  33. batmando says:

    Jeff -
    any minute now, the pump up to, what?, just shy of 910?, than ease back to close just above 900?

  34. leftback says:

    @call me ahab at 1:47 pm

    What I intended to convey with my question: “which market matters most to Bernanke: equities or Treasuries?” is that all the credit markets including mortgage rates depend indirectly on Treasury rates or LIBOR. In addition, BB has the China problem to think about and other important bond investors to protect (PIMCO, SWFs and pension funds). So there is no way that he will allow Treasury yields to blow out because the entire bond market would collapse and corporate default rate would soar to the moon. They will do even more QE if they have to.

    In comparison, the participants in the equity market are GS executing govt orders, hedge funds, speculators and Johnny Retail, none of which matter to BB or Tiny Tim. At some point Tiny Tim will pick up the phone and tell GS to sell the SPOOS and buy Treasuries. The $ will firm and the markets will follow in the way that one would expect. Longs will be slaughtered and GS will make money on the short side. Keep watching the 10-year, this will probably be telegraphed. Ask yourself, what are yields on JGBs? Did they blow out or did the Nikkei fall?

  35. Mannwich says:

    @batmando: Started a bit just a short time ago. Just a little warm up pump to get the juices flowing. Combo of short-covering and PPT? After all, the shorts shitting their shorts these days and don’t want to stay short into the close anymore. Can you blame them?

  36. Mr Objective says:

    I totally agree on studying history. Most people study history on a summarized basis and knowing the final outcome. If you really want to profit from history, you need to see how people lived it day to day when they didn’t know the outcome. Reading newspaper’s from the early 80′s, you could not find a single article about “buy & hold” … it was not a concept that was accepted by the public.

  37. Mannwich says:

    @batmando: Today will probably be one of those slightly down days but still technically down nevertheless to embolden the bulls, frustrate the bears and give the appearnce that this market isn’t manipulated to go straight up every day. Tomorrow we’ll resume our regularly schedule market pump.

  38. Mike C says:


    What I intended to convey with my question: “which market matters most to Bernanke: equities or Treasuries?” is that all the credit markets including mortgage rates depend indirectly on Treasury rates or LIBOR. In addition, BB has the China problem to think about and other important bond investors to protect (PIMCO, SWFs and pension funds). So there is no way that he will allow Treasury yields to blow out because the entire bond market would collapse and corporate default rate would soar to the moon. They will do even more QE if they have to.

    I posted a comment about an hour ago directed towards you that is related to what you say here. I don’t know why, but it has been stuck in moderation limbo. Hopefully, you can make a note and address when you get a chance.

  39. I-Man says:

    Not so sure there will be a pump today Jeff…

  40. call me ahab says:


    thanks for the feedback

  41. leftback says:

    @ben22: Enjoyed reading your thoughtful posts. I have been through the same kind of personal education about the reflation/deflation argument and arrived at the same point. I know that the consumer debt mountain has declined very little, maybe 5% or so. In addition there is an enormous amount of corporate and CRE debt that will come due in the next 1-2 years. So debt deflation and the continued decline of credit seems inevitable.

    There is no reason at all that we cannot experience several years of simultaneous credit deflation and moderate commodity inflation. Japan had several years of this but was somewhat protected by the national savings rate so that the JPY did not get destroyed. Of all the charts to look at surely the Nikkei bubble is the most relevant, since it was driven by real estate on the way up. In the end it was a battle between the JGB market and the Nikkei. Guess who won? As DL has stated many times, it will be a zig-zag path from here to the bottom, Nikkei style.

  42. ben22 says:


    I agree, the credit markets are what’s most important right now. Comments from Gross like “stocks are dead” seem pretty telling to me. You have to listen when a guy like B. Gross makes comments now b/c he is right in the middle of it all.

    On another note, curious to see the gold price action the rest of this week, especially with the “stress test” stuff on Thursday it seems like an opportunity for it to break above if we have some market pullback. If it doesn’t break above $920 I’m sticking with my call for it to move to $680.

  43. ben22 says:

    @ LB,

    Thanks man.

    As for your thoughts on credit deflation and commodity inflation, I was thinking almost the exact same thing. At one point not many months ago I thought the $ would be the greatest short in the coming years, I’m not sure that would be wise at all as I look harder.

    This is my main focus right now is what to do with those stocks in that space that I’m long. Comps such as FCX, VLO or PBR, even DBA for that matter, which I also own.

    On another note, anyone here bold enough to play with KOL the last few weeks? China certainly gave that a major boost if you didn’t want to play directly in the coal names.

  44. DL says:

    Mannwich Says: @ 2:52

    The SPX still hasn’t seen three consecutive down days since about March 2nd. There’s something odd about that, particularly given the tepid volume.

  45. Mannwich says:

    @DL: You think? ;-)

    Glad you noticed that as well. There are a lot of oddities to this market right now.

  46. DL says:

    ben22 @ 3:14

    “You have to listen when a guy like B. Gross makes comments…”

    I don’t particularly trust the guy. It seems to me that he tries to influence public opinion to support whatever investment cause will benefit his bond portfolio the most.

  47. leftback says:

    @ben 22: I also own DBA, VLO and PBR. I plan to keep a few longs for dividends but I am expecting a downturn in commodities again before too long. The materials and mining stocks have had an unbelievable run but the XLB is already on its 200DMA now.

    @Mike C: Try posting again. WP eats ‘em up sometimes.

    Anyone watching the market? I am not. We’ll see what happens after T4 – Tiny Tim’s Treadmill Test™.

  48. Mannwich says:

    There it is, there’s my late day pump. Never fails. Every single day no matter what. We could go green today!

  49. I-Man says:

    Sneaky bastids…

  50. karen says:

    Guys, the institutions must be buying the dips… put the foil hats away. : )

  51. Mannwich says:

    @karen: Dips? What dips? You mean when the S&P goes down 2 points?

  52. Transor Z says:

    From the charts at Mish’s blog I’m curious about something. Total Consumer Credit has risen greatly — tripled — since 1990, but debt servicing as a % of disposable income has only risen by about 3% from around 11% to 14%. For a household with $100,000 in income, that would be going from roughly $600 a month in debt payments (11% of $65,000) to $760 a month in debt payments.

    Note also that education loans are included in consumer credit.

    My question is, how significant is that 3% increase?

  53. karen says:

    anyone watching the $bdi… check a weekly chart and see that cup and handle… just like copper. my prgn is up over 18% today… i’m just waiting for dht with it’s 50 cent a share dividend to triple… i checked maersk’s website last week or so, the insiders were buying in march…

  54. Mike C says:

    @Mike C: Try posting again. WP eats ‘em up sometimes.

    I can see the comment posted, but it says:

    Your comment is awaiting moderation.

    I don’t know why. Maybe because I have some links in there?

  55. leftback says:

    @Karen: I bow in your general direction (that would be West) and acknowledge your market intuition and trading superiority. You have been absolutely smoking hot lately. (In the trading sense, I mean, obviously…. )

  56. I-Man says:

    ya know… a year or two ago I would be throwing every movable object in site against the wall of my office… but I’m tame now and just have to chuckle at this..

  57. karen says:

    Jeff, the euro recovered from it’s lows… and the yen is red… that’s all you need to know.

  58. Mike C says:

    I agree, the credit markets are what’s most important right now.

    @ ben 22

    You might find this commentary interesting. These guys are at the top of my must read list, and they put out a monthly note:


    We’ve been talking a lot about the equity market as of late. Time to take a much needed and very important detour in this discussion. Right to the point, we want to review the character of the credit market as we currently see it. Certainly a general sense of optimism has risen as the equity market has levitated as of late. And that sense of optimism engenders the thinking that the economy and general financial markets conditions MUST be getting better because rising equities are simply foreshadowing such as outcome. In other words, history has taught us that equities lead and so if equities are rising, the implication is better days lie ahead. But in the current cycle, we all know that credit market issues have been the locus of distress and the exact cause for a dramatic loss of wealth in financial assets really globally. So although it’s certainly fun to watch the equity markets romp higher, it’s the credit markets that deserve a really big piece of our attention. As we see it, better days lie ahead as a generic comment when both the equity and credit markets are healing in simultaneous fashion.

    Before jumping into some data and historical relationships one more quick comment. A very cursory and superficial glance at a number of key credit market relationships could indeed lead one to believe that the healing process for the credit markets has also begun. But as we look at the facts underlying a number of headline credit market indicators a different picture emerges entirely. A much different picture.


    Alternatively, we believe equity investors caught up in the momentum of the moment need to keep a sharp eye on exactly what is happening in the credit markets. After all, the Fed/Treasury/Administration is compelling us to do so as they constantly focus on “unfreezing” the credit markets. Absent the influence of the Fed, these markets are not yet recovering. Absent the Fed, the credit market patient is unable to get out of bed and walk on his/her own. Let’s just hope equity investors have it dead right in their happy anticipation in recent months. For if what they are discounting is correct, especially in financial sector issues, the US credit markets should very soon be involved in a Lazarus event – an immediate rising from the dead. But for now, it’s really the Fed holding up the credit markets, from which they cannot have a current exit plan by any stretch of the imagination. The credit markets ARE the issue for the current cycle. We need to keep this firmly in mind. We’ll be updating this analysis intermittently as we move through 2009.

  59. constantnormal says:

    I know this isn’t really kosher in the TA crowd (looking at the underlying root causes and fundamental-ish thinking), but if one looks back at the 73-74 and 80-82 periods, to see what was similar then to now, it is a little interesting.

    IMHO, the 70′s excitement was spawned by a 4X (more or less) step change in the price of oil, at a time when the economy was pretty winded from the Viet Nam war expense at the same time as Johnson’s Great Society programs. That calamity was then accentuated by the Nixon administration imposing a state-controlled economy on the nation, with nationwide wage and price controls (and you kiddies think there is gummint meddling now …), and was eventually allowed to resolve itself after it became crystal clear that the administration was going to destroy the nation if they kept it up much longer.

    The excitement in the early 80′s came from the (for all practical purposes) complete collapse of the Savings & Loan industry (imagine that — a mortgage finance related problem!) due to incompetence and a mess ‘o good-ole-fashioned corruption and greed. That one had the economy shoveling losses for a number of years, as we spread/smeared, the losses out over the next decade or so.

    Plenty of similarities in each case, although I suspect that the collapse of our overblown debt bubble significantly exceeds either of the shocks that brought about the calamitous periods in question — and is still a problem, as no substantive actions have been undertaken to zero out the mountain of worthless debt, only to disguise it in one manner or another.

    As to which of the two prior periods offers a better road map to the future, I rather think that neither does — we are cutting a new (for us) path through the briar patch, one that is apt to be a lot longer, with more than a few turns and twists along the way …

  60. DL says:

    constantnormal @ 3:51

    I don’t think that anyone here is purely a technical analyst (except maybe Andy T).

  61. Mannwich says:

    There’s our token “down” day for the week. Now back to green shoots.

  62. danm says:

    Reading newspaper’s from the early 80’s, you could not find a single article about “buy & hold” … it was not a concept that was accepted by the public.
    Of course not. They still had not lived through the Greenspan put!

    Everytime I ask someone if their big mortgage worries them, the answer is the same: “They can’t increase rates, they’ll create a recession.”

    As if we’ve never lost control in the past.

  63. Mannwich says:

    @danm: That mentality is borne out of the steadfast belief in American exceptionalism, meaning we can control more than we think we can.

  64. DL says:

    danm @ 4:04

    “They” cannot control the rate on the 30 year T bond.

    And the only way that “they” can maintain the rate on a 30 year mortgage at a lower level than the rate on a 30 yr T bond is via a massive taxpayer-funded subsidy.

  65. Onlooker from Troy says:

    danm: “Everytime I ask someone if their big mortgage worries them, the answer is the same: “They can’t increase rates, they’ll create a recession.”

    As if we’ve never lost control in the past.”

    Yep, we’re hooked on the easy money drug, that’s for sure. It’s all really pathetic when you think of it. We’ve gone so soft that we just can’t stand the idea of a little recession to shake out the bugs and keep people/businesses on their toes. Of course we’re 20 yrs past being able to let things go and get just a regular recession. The camel’s back finally broke.

  66. leftback says:

    DL Says: May 5th, 2009 at 4:22 pm
    “They” cannot control the rate on the 30 year T bond.

    I respectfully disagree – they can, and they must, and they will, lest the inevitable debt deflation be accelerated. The way they plan to muddle through this is to alternately support different asset classes through a variety of maneuvers such as QE (in the case of bonds) and um… lies (in the case of equities). Very much in the Japanese style.

    As someone wrote here recently, if Bernanke loses the Treasury market, then it is game over.

  67. DL says:

    leftback Says:

    “they can, …they must, and they will…”

    You running for Office?

    As for controlling the rate on the 30 yr T bond, I would say that, as long as credit is contracting, and at the same time, commodity prices are not increasing rapidly, the Fed can print money and do whatever it wants with that money, including buying T bonds. But if credit stops contracting, or if commodity prices (particularly crude oil) start really taking off, then I think that “banana Ben” is going to have to turn off the printing press, or face the inevitability of hyperinflation.

  68. Mike C says:

    Try again (2nd post):

    Now, watch the 10-year yield creeping up steadily here and think about the eventual effects of that on corporate and personal borrowing – then ask yourself: which market matters most to Bernanke: equities or Treasuries?


    First, let me say you are one of my fav commenters as you bring compelling analysis and reasoning to your comments rather then just spout the standard talking points of either permabulls OR PERMABEARS.

    Have you read this?


    I’m still waiting for someone to give me a really persuasive argument WHY THEY ARE WRONG especially with respect to the velocity variable


    “The yield of the ten year US Treasury bond has moved back to the 2003 low. Based on this chart, yield could move up to around 4% without doing anything out of the ordinary. Keep in mind that the trend has been down since 1984 and has given absolutely no sign that this trend is changing (or even weakening). As a matter of fact, all counter trend thrusts have been relatively weak for over 20 years.

    Believe me, I’m predisposed to the view that it is just a matter of time that long-term yields move up substantially. Smart guys like Buffett and Rogers agree, but it just seems TOO EASY. The conventional wisdom is that the golden FOR SURE trade is to short long-term treasuries. It’s never that easy or obvious. The Fed kept long-term yields low for a decade+ in the 30s and 40s.

  69. Onlooker from Troy says:

    ben22, LB:

    I’m with you on the deflation vs. inflation argument. I’m not an economist so it’s been tough making sure I understand this correctly. But it’s certainly key to investment outlook and stance. I started out with most others thinking that inflation was a cinch with the debt and spending the Fed govt is piling up and the QE printing of money. But then my contrarian antenna started twitching. It’s just too easy a bet. If “everybody” is thinking one way, it will almost undoubtedly turn out differently, at least in terms of the timeline. Kind of like the oil trade. It was a” sure thing” in the fall that we’d be rocketing back up. How could it not? There’s been plenty of money lost in that trade.

    Deflation is a very foreign concept to us Americans of late. We’ve been trained to watch out for inflation from our ’80s experience. And assured that it couldn’t happen by our “esteemed” economists like Bernanke. And our arrogance and sense of exceptionalism (as Mannwich points out) made us feel invulnerable to anything like the GD.

    The Fed’s arrogance in thinking they could completely control the money supply and spare us from economic downturns will be our undoing. The debt burden is bigger than all of us and will crush us for a while.

  70. leftback says:

    @DL: Ha. Sorry about the oratory.

    I have formed a high opinion of the intelligence of Bernanke and Obama, but not Geithner. However misguided certain US government policies have been, I believe they will choose Japan over Zimbabwe. This is me talking the Brad Setser and Gary Shilling philosophy, and not talking my book. I am short the long bond in case I am wrong.

    As you say, once crude and the 10-year yield escape, we are in deep trouble. Better to take some of our medicine here this summer in the form of another round of deleveraging in order to safeguard the Treasury market. I think this is what they will choose. Looking at gold and TIPS, we are not yet in imminent danger of escape, and oil supplies are still plentiful. The game-breaker would be rapidly declining oil supplies. That’s the black swan – again.

  71. karen says:

    Leftback, (sighing not in pleasure), i must demur as i am holding more red than green at the moment, inclusive of this year’s realized gains. i’ll let you know when my head is above water, lol, and curtsy to your bow.

  72. JasRas says:

    Show a ’29-32 compare… While the move off the bottom appears similar (assuming this is a move off the bottom), the decline is vastly different. I don’t think this is a good compare–or it is too early for this compare.

    I am amazed at how convinced some are that we’ve experience “the” bottom. Time is a factor that everyone seems to want to fast forward. Events and circumstances that have occurred do not just *boing* and get fixed. The level of hope expressed that “this was the bottom” and the substantiation via second derivative mumbo jumbo doesn’t indicate to me “THE” bottom has been made. People cared way too much. Look, I hate to tell you, but the psychology of a bottom probably hasn’t changed ever… because people and how they handle loss, despair, anger, the extinguishment of hope, hasn’t changed ever.

    I really would like to see a bottom/recovery this year. People I know and like have been hurt by the bad economy, the bad market, and it is hard not being able to do anything about it. But it seems people are so desperate for a recovery that they are willing to give up our capitalistic ways just as easily as they gave away personal freedoms after 9/11. It saddens me to see all that we as a country have given up in the name of short term fixes. The long term ramifications could be quite negative…

    When people don’t care enough to leave 82 comments on Barry’s posts, we will probably hit a bottom.

  73. DL says:

    karen @ 5:06

    As the (new) fearless leader of the pack, you have to display confidence at all times.

  74. karen says:

    Since 2007, while the market continued its maddening climb, really big smart money has been attempting to short the long bond (realize it was fluctuating between 4.5-5.4% then!) rationalizing that foreign money would not, could not sustain an appetite for US borrowing. Quoting George Soros from January 6, 2008 (“The New Paradigm for Financial Markets” p. 135-136):

    “Only our short position in the ten-year U.S. government bonds is working against us, but this was to be expected; bonds and stocks tend to move in opposite directions. I took the position knowing that I may be early, but with a depreciating dollar* I believe it will eventually prove to be right… I started thinking about when to cover my short positions. Certainly not yet…”

    We all know how that trade worked out… remember the yields this December 2008? My point is I wouldn’t bet on runaway yields anytime soon, just a trading range.. It does not serve the financial powerhouses of the world to let that happen.

    Further, I would like to add, as far as equities go, dividends will matter. In the old, old days, yields on stocks were greater than bonds because they were considered riskier investments. In the new new Financial Paradigm, some of the old, old rules may be back.

    *my note, it was precisely the falling dollar that prompted even more asian buying in an effort to support the dollar!

  75. karen says:

    DL, lol, i’m confident believe me; my rule of thumb is that i make double what i sit underwater. just let history keep repeating. : )

  76. leftback says:

    @Karen: Very elegantly stated. But then I would expect nothing less.

    Don’t remind me of December 2008. I suppose broker-dealers had been tipped off about the Fed’s QE policy…… . we all know that the $ will depreciate eventually, and that rates must rise. But what we don’t know, of course, is how many $ rallies we must endure in the meantime – and how steep they might be.

  77. jimcos42 says:

    I don’t trade, so I remain hunkered down and wait for CAPE (cyclically adjusted PE) to fall into single digits. Maybe that’s too much to ask for. Then again, maybe we’ll see who’s patient and who isn’t.
    Chart at http://www.businessinsider.com/shiller-stocks-not-yet-cheap-enough-for-me-2009-2

  78. ben22 says:


    I think that is a smart take you have on the long bonds. I’ve said it here a bunch, that’s a 28 year bubble, you aren’t going to make your money all at once. Trade in and out with stops, the trends should be pretty clear on those, I think the resistance lines are easier to see on the long bonds, just my opinion.

    BTW, I’m not sure if you remember but you almost called the exact low on TBT at the tail end of last year.

    I also agree with your take on dividends. Capital gains were the name of the game since 82, return to equity holders via dividend may be the new trend. Along those lines, I’m almost certain the div on the S&P was far higher in 1982 than it is today for whatever that is worth.

    All that said, you and I seem to be moving in different directions on the investment strategy, thats a little scary, you seem to have a very good track record, at least what I’ve seen you mention on here.

  79. ben22 says:


    You don’t need to be an economist to figure this out, seriously, you’ll be able to identify trends better than any Brian Wesbury type because they get blinded by ideas that they constantly try to prove “must” be correct. As I said earlier, the fact that so many people seem to be in denial about this only shows how powerful it could become if it really takes hold. Slowly but surely everyone will switch.

    What triggered this for me was my experience during the holiday this year. All the family I talked to, they are all completely clueless about the economy or stock market, were talking about the coming inflation. This was a major red flag for me.

  80. ben22 says:

    It’s really bothering me now because I can’t remember where I saw it, it was here, Zero Hedge, or somewhere else in the last week or so but the article I read had a nice chart, looked just like a spreadsheet with side by side comparisons of now and 74 and 82, it had everything from debt/gdp to the div on the S&P.

    Did anyone else see this? I thought it was put together well as a quick snapshot btwn then and now. I thought it was Mauldin but I checked all the most recent OTB letters from him and it wasn’t in there.

  81. ben22 says:


    I certainly don’t trust Bill Gross. LOL. I like him better than El Erian but I don’t trust either. They are both important so I’m not so much saying pay attention to what he says and take it at face value instead Pay attention and then try to figure out what he really means.

    Listening to him the last 8 months or so tipped you off to a lot of action that followed in the bonds.

  82. karen says:

    Constant! I posted that link to Cassandra yesterday. I can’t believe you are not hanging on my every word : )

    Ben22, I’m not really aware of our ‘moving in other directions’ other than on gold. I gave you my price points, basically that 880 should hold, i’d allow for 860, and throw in the towel at 840… on another note, you are a lot younger than I thot from your posts! you get a lot more leeway now. lol.

    I have been raising cash as the market has climbed, btw. I don’t normally have ALL my money in equities and I did for a bit to take advantage of some outrageous valuations..

  83. Onlooker from Troy says:


    Re: dividends. I agree. But that along with truly low P/Es (i.e. good old fashioned great valuation) will have to wait a bit it seems. You probably agree but it seems that the investment crowd has been trained on high P/Es for much too long now. Only the grinding up and down of another 5-7 years of a secular bear will finally get us there.

    In the mean time they’re willing to flip stocks around in a frothy frenzy right now. Of course that’s also why I’m not convinced we’re in any kind of bull market. The real smart money is watching this show with trepidation.

    Are you turning bearish short term? Just thinking that you have a different tone tonight.

  84. Onlooker from Troy says:

    News flash. BAC actually isn’t a strong business entity. And I really trusted Ken Lewis! ;)


  85. guru says:

    Sorry, Barry, you’re too late to the game even though it’s worth reiterating.

    I first started comparing the Financial Crises Bear Market Crash to the 1973-4 Crash on March 1, 2008 – over a year ago – in “1973 and 2001 Market Crashes and Today’s S&P 500 Index” which can be found by clicking on http://tinyurl.com/1973Crash

  86. karen says:

    Onlooker, problem is PEs are cooked. I think they all decided to be ugly together this quarter; just as they all attempt to keep up with the Joneses in the good times. The earnings downturn should have begun in 2007, but they had carry over to book so everything looked too good for too long..

    I’m not bearish, i’m into the bifurcation or trifurcation scenario… now is the time to look for value, meanwhile trade what the hot money trades. if the world doesn’t end in nuclear holocaust; those of us that are paying attention should do well enough…

  87. Onlooker from Troy says:

    Oh no doubt P/Es are cooked. And the bloody market in it’s all knowing ways is just too stupid to do it’s own math and value companies appropriately. Just like the banks and their bogus “earnings.”

    I know the market’s always been a speculative affair, but the momentum crowd has made it practically impossible for anybody to be just a good “investor” instead of a trader. We’ll see what the rest of the secular bear does in that regard.

  88. karen says:

    On looker, we agree completely. I appreciate the sanity, too.

  89. ben22 says:


    I was thinking you were more bullish for some reason, sounds like we are doing same thing, but yeah, not on gold, I’m out of there for now, just watching. not shorting, lol.

    glad I get some more leeway on my rants now

  90. for yon’ Investors: http://www.onn.tv/HomePage


    some simple math and a good calculator (I’ll recommend an HP-41 CV/CX) goes a long way toward keeping one in one piece, in these infested ‘waters’..

  91. ben22 says:


    I rock an HP 12-C, it’s the only one I like to use.

  92. ben22,

    the 12C is good one, too. as RPN shows “Nothing equals Anything!~”

    what’s cool about the 41s is that they’re fully Programmable, and, thereby, can go beyond Finance.
    see, as intro: http://www.hpmuseum.org/hp41.htm

    many as still unsure why the 41-series was terminated as early as it was..
    still an active ‘underground’ support network for them..
    needless to say, HP has changed a lot..

  93. karen says:

    The HP 12-C, is my weapon of choice as well.

  94. [...] Charting 1973 1982 and 2009 The Big Picture Posted by root 1 hour 34 minutes ago (http://www.ritholtz.com) Anyone watching the bdi check a weekly chart and see that cup and handle just like as we see it better days lie ahead as a generic comment when both the equity and credit we 39 ve gone so soft that we just can 39 t stand the idea of a little recession to Discuss  |  Bury |  News | Charting 1973 1982 and 2009 The Big Picture [...]