You are so CORRECT with this observation, IMHO: *Before this full cycle ends, will the March 2009 lows hold? *

Ron Griess of The Chart Store fame makes the following observation:

“[Its possible that] the current phase swoon ends 1,010 to 1,100, year end stabilization/rally (right shoulder builds) and the final wipeout commences sometime next year.

It is amazing how many long-term bottoms are made in years ending in 2. 1932, 1942, 1962, 1982 and 2002 come to mind.”

Great stuff, Ron.

Category: Cycles, Investing, Valuation

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.

A THIRD 50-percent-plus S&P decline in a dozen years?

That seems like a pretty long-shot probability — on the order of 5 or 10% likelihood. Doesn’t appeal to my betting instincts.

Meanwhile, VIX is above 40 again, and I’ve been buying all morning. Don’t miss the train! Toot, toot!

Yes, a long shot… how in the world could that ever happen.

http://yhoo.it/pRoQzp

jmay … don’t make me do the math!

I see three 50% declines in

twentyyears in your Nikkei chart. But I’ll spot you that one.And even more generously, although I can’t think of any similar examples, let’s say such events have happened in a handful of the world’s 20 major markets during the last 50 years.

That makes five examples of three back-to-back 50% declines, in 1,0o0 market-years … or a probability of 0.5%.

So my initial estimate of a 5 to 10% probability was rash, committing the common intellectual error of overestimating the probability of rare events. I hereby revise the probability to 1-2%. Thanks for the heads up!

@machinehead: you’re assuming a normal distribution of events, and that each event is independent of the rest.

I agree it’s very unlikely to see the S&P500 at 668 (50% of April 2011 high), but I’m not sure there’s only a 1% chance of that.

Keep in mind there have been many 3-7 sigma events in the past several years. That had the foresight probability of never occurring before the heat death of the universe. It did occur.

Enough of the Japan comparisons — did the US stock market triple? Well the Nasdaq did…

But Japan has had long running deflation vs the US’s inflation and an aging population with little to no immigration.

It takes 3 good body blows to kill a secular bear. We’ve had two so far.

If it happens in 2012, it will come at the end of the year … prolly after the first week in November …

machinehead,

you know, w/the Weekend coming up, for starters..

General

The gaussian function, error function and complementary error function are frequently used in probability theory since the normalized gaussian curve represents the probability distribution with standard deviation s relative to the average of a random distribution. The error function represents the probability that the parameter of interest is within a range between -x/sÖ2 and x/sÖ2, while the complementary error function provides the probability that the parameter is outside that range. All three functions are shown in the figure below:

http://ecee.colorado.edu/~bart/book/gaussian.htm

+

http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Gaussian+distribution+Financial+Engineering+mistake

Have Fun!~ (this is something that should have been covered Last Century! :) , but, Hey~ “Better Late, than Never!”, right?

machinehead, if you don’t believe that 50% declines can happen with increasing frequency, then you need to head on over to ECRI and get a better understand of what has been happening to US economic growth over the very long term. I’ll give you a summary. Our growth has been slowing down. With mean GDP growth slowing, every down portion of the business cycle has a larger probability of having growth dip below zero. When GDP growth dips below zero more frequently, stock markets start to price this in. So is it surprising that we’re starting to see more wild swings in our stock markets, as recessions become more frequent due to much slower mean growth trends? NO. It is to be expected. Get used to it.

boden11

Once again the magic elixir of immigration! The RE market can’t fall, let alone have a historic crash, because of this magic fairy dust! All we need is more. Noticed anything about the stability of the Western World markets and immigration since 2000?