ChartoftheDay.com had an update of their chart labeled "Depression-Era Bear
Market Rallies (Dow 1929-1932)" which is interesting in many, many ways,
starting with the fact that it only concerns one particular three-year span,
which implies that thereafter there were no more bear market rallies of note,
which is pretty much right, as everything economic continued going into the
toilet until finally being "saved" by the government's massive deficit-spending
to wage World War II, which we willingly backed as a vengeful patriotic duty,
thanks to Hollywood movies heroically exposing all foreigners as treacherous,
murderous backstabbers who speak English with foreign accents and who think we
Americans are powerful, omnipotent gods, like Peter Lorre in the movie Casablanca
fleeing from the police after emptying his pistol at them but missing every
shot, shouting, "Rick! Rick! Save me Rick!"
Or like James Coburn playing the role of Z.O.W.I.E. agent Derek
Flint, America's top secret agent in the '60s and who could easily kick James
Bond's butt, which could explain why beautiful women were always throwing
themselves at him, and while James Bond might score with one or two chicks the
whole film, Agent Flint was up to his ears in hot babes, literally having to
use karate to hack his way through throngs of adoring hard-body hotties in
bikinis lusting after him, many of whom may have had foreign accents but were
docile, so you can see what I am talking about.
Anyway, we were talking about the chart, and to get back to the point, the
chart has "number of calendar days" down along the horizontal, bottom, x-axis,
and "Stock Market Rally (% change)" vertically up along the y-axis. It is the
answer to the questions "How big (measured in percentages) and how long
(measured in days) were bear market rallies, what is the average percentage
gain and have it on my desk immediately!" which you gotta admit is pretty
handy!
Anyway, and again with the "anyway", the chart shows that we are about 100 days
into a rally, and looking at the chart it looks like a stock price rally of
about 34%, slightly higher than the statistical average of the
percentage-change/days for the six bear market rallies that occurred over the
three beginning years of the Great Depression.
In another couple of months, we'll be at about the record "longest rally"
155-day mark, where we also find the old record stock price gain of about 48%
that occurred in November 1929.
Another thing that occurs to me, looking at this chart, is that our current
little stock market rally of about 34% of the Dow Jones Industrials is already
higher than four of these rallies in terms of percentage gains, and is older
than all but the biggest and the best of the bear market rallies, and which
started in November 1929 and lasted about 155 days! Yikes!
In other words, if there was a third dimension on the graph to indicate time in
both Newtonian dimensions and in some weird time-warp where the starship
Enterprise, on her five-year mission to explore strange new worlds, seek out
new life and go where no man has gone before, is bearing down on the last
outpost of previous highs, Scotty would be yelling up to the bridge, "Captain!
We're coming to the edge of Previous Known Highs (PNH) at hyperspace speed, and
you know what happened the last time this kind of thing happened!" and Captain
Kirk says, "No, what happened?" whereupon Mr Spock, all calm and logical, would
say, "The whole thing collapsed, Jim, sort of like a Glornassian Crapworm when
you hit it with a hand phaser", which would be enough for Kirk to scream out,
"Captain's supplemental log! This is the captain! Abandon ship! We're going to
freaking crash and burn! All hands buy gold!" which, if you knew Captain Kirk
like I do, would end up being the smart thing to do by the end of the episode.
In short, all things end, including the phase where a national idiocy prevailed
where everyone "invests for the long term" by putting all their money into
stocks, bonds, houses, bigger government and an orgy of over-consumption, which
is proven to be the wrong thing to do, and where people did not put their money
in gold, which is the proven right thing to do, as even a Glornassian Crapworm
knows.
And if everybody from a starship captain to a stupid Glornassian Crapworm knows
this, then, "Whee! This investing stuff is easy!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2009, The Daily Reckoning.)
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