Another appearance on Kudlow & Co. tonite, from 7ish to 7:30pm (ish).
Also on the show tonight are Jim Awad, chairman of WP Stewart Asset Management, Jeremy Siegel, Wharton finance
professor & author of "Stocks for the Long Run", and Stefan Abrams,
Bryden-Abrams Investment Management managing partner.
Topics for discussion:
– Disappointing Existing and New Home Sales, and Durable Goods;
– Oil’s run to ~$106, up $4.77 today;
– Oracle’s top line revenue miss;
If you haven’t seen the front page WSJ article, that is scheduled to come up for discussion. Stocks Tarnished By ‘Lost Decade’ — U.S. Shares in Longest Funk Since 1970s.
Here’s the WSJ graphic:
See the 100 year chart I posted a few years ago about this exact subject:
click for larger version
And the ’99-’08 chart looks far worse if you price it in just about anything besides US dollars (i.e., Euros, gold, oil, wheat, copper, etc.)
Lost “decade”? The last couple secular bear markets lasted a few years longer than a decade. That comparison they use from 1929-1942 is also understating that secular bear market by 2-3 years. It wasn’t until 1944-45 when that bear market finally started to break out into a long-term bull market.
Tell Larry, I agree with his wanting the scavenger funds to pick up the pieces in the forecloser market, but lets ditto the CDS, CDO’s, etc…get these things down to a value that everyone knows there is value.
Okay, I’ve seen that last 100 year chart a few times now, and the thing that drives me crazy about it is the 17 year period between 1929 and 1946. It’s treated as one long bear market, but when I look at it, I see at least two markets in it: a short-term bear market between 1929 and 1931, and a longer-term bull market between 1931 and 1946. Or you could argue three markets: a short-term bear market between 1929 and 1931, a short-term bull market between 1932 and 1937, and a longer-term bear market between 1937 and 1946.
Whenever people try to argue that the entire 17-year period was one long bear market, I always think that they’re trying to make the case that you have secular bull and bear markets by pulling a fast one.
But I’m willing to be proven wrong, if someone will just explain to me why we should treat the entire period as a bear market. Because the rest of the chart does, at least to my untrained eye, make the case that there are secular cycles.
~~~
BR: That’s pretty reasonable — I’ll play around with that.
Damn!!!! Did Larry just point out that
The 70’s and were Worse, than the Great Depression?
could one draw the conclusion that
Inflation is worse Than Deflation?
Before someone nails me… I think they both are both (net-net) meaningless… Unless you want people to save money.
… but I hear we can just print money for free instead.
Score one for Larry BTW!
Anonymous 37,
Your analysis is correct. Even in the 1966-1982 flat market, money was made trading the swings. It also helped to be in the right sectors.
I think what people should be aware of is that there are some market periods where ‘buy and hold’ is foolish. I think we’re in one now.
If financial assets are the preferred retirement vehicle and if the owner is not a financial expert, then dollar cost averaging is the best route to take.
Dollar cost averaging is the best route to take, so long as your time horizon is greater than 20 years. (Remember, that 100 year chart isn’t inflation adjusted. If it was, it would tell a far more chilling picture.)
That’s very, very few people in the real world who actually have a 401k, though. Most 30 year olds haven’t really started a retirement fund in earnest.
Good appearance for Barry…good point about market not being cheap.
Two “Big Picture” points…nobody mentions the demographics of the baby boomers retiring en masse, ending their 401k contributions and selling stocks and buying bonds. That could have massive effects on “buy for the long term.”
Second, Kudlow should be studied by psychologists at the university level. He is Mr. Right on America, Goldilocks, Optimist. Yet he is hinting at turning bearish, you know why? If the Democrats win the presidency, you are going to see Bizarro Kudlow for 4 years…the bigest pessimist you ever saw, blaming the Dems all the way.
We RUVE YOU BARRY. I get all tingly when you talk my BOOK!!!
I know a lot of ‘Boomers’ like moi who are not doing the traditional shuffle of selling stocks and buying bonds. Anybody looked at yields in the safe part of the bond market lately? Yields don’t even give you an inflation return.
Nah, we boomers are going to join a commune and have a truck garden. Just kidding ;-)
We techies would suggest the 100 year chart is on log paper.
Why the 10 factors jump from 1000 to 10000 in Reagan-Clinton Bull Mkt?
Barry, I was dumbfounded by your pundit friends not realizing that the trans are doing so good because of agri, and coal…what? do they want to think that the over-all ultra-negative, (historical numbers) that are being produced at, this time, which is just the beginnings of a downturn, is actually the beginning of an upturn, because “other” upturns have happend, “just so?.” Ah! the disadvantage of viewing the forest through the trees…
Much better group of guests to be with tonight, BR. No Dennis Kneale, Jerry Bowyer, or Don Luskind present to parrot Larry’s bible.
But Larry now seems to spinning the economic problems at present towards a Democratic sweep in the fall; that’s how Larry arrives at “depression”.
Strange how Larry never delves into the topic of derivatives and whether we’re at risk of a meltdown due to them. Am I correct they were at the heart of the rushed Fed-orchestrated deal of Bear Stearns to JPMorgan for a song, so that we don’t find out what happens to counterparty risk when one of the parties goes belly up?
Ross, thanks. I honestly couldn’t tell if I was missing something.
I am fully out of equities, by the way, as I agree that the next few years will be bad for the broader stock market.
I think the increase in transportation is due to the increase in exports which is due to a decrease in the dollar.
Also….. BIG PROPS to you BR for sliding Volker in on the sly in the “credit for the bull market” of the 80’s-90s Reagan bull$%!^ market.
and REMEMBER Barry. It’s YOUR fault the market is down and it’s all because you are a PESSIMIST!
Sir, maybe I read to many economic blogs, along with my annual “The Economist” magazine, but it just don’t look good for the home team no matter how, or why you spin it…(and this comes from a guy who takes the spin out of it…as best I can. WHICH I’LL PUT MY ANTI-SPIN ALGORITHEM UP AGAINST ANYBODIES. :-)
“I know a lot of ‘Boomers’ like moi who are not doing the traditional shuffle of selling stocks and buying bonds. Anybody looked at yields in the safe part of the bond market lately? Yields don’t even give you an inflation return.”
>>you could’ve made the same argument 1 yr ago and you would’ve missed out on a huge bond rally that trumped equities by about 14%, yield ain’t everything-
I have seen that chart many times and I believe that ia a case of data mining. Sorry. I could argue that bull markets started in 1913 and 1932, dramaticly reducing the bear market period.
Fascinating charts. It hasn’t felt that bad.
Here’s another chart:
http://i30.tinypic.com/2v0oaiu.jpg
There are hundreds just like them.
Go ahead. 6m any stock, any index.
Find out what happened 11/01/2007,
and you’ll unlock the secrets to
the greatest profit potential ever.
And this last chart:
http://i32.tinypic.com/11id9x0.jpg
What your morning newspaper will look
like one of these days … Mommy!!!!
11/01/2007, a Day That Will Live in Infamy
On May 24, 2007, the PCAOB adopted Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements, to replace Auditing Standard No. 2. The new standard was approved by the SEC on July 25, 2007 and will be effective for all audits of internal control for fiscal years ending on or after ***November 15, 2007***. Earlier application will be permitted. Auditing Standard No. 5 is principles-based. It is designed to increase the likelihood that material weaknesses in internal control will be found before they result in material misstatement of a company’s financial statements, and, at the same time, eliminate procedures that are unnecessary. The final standard also focuses the auditor on the procedures necessary to perform a high quality audit that is tailored to the company’s facts and circumstances. This version of the guide has not been updated for Auditing Standard No. 5. Readers should refer to the PCAOB Web site at http://www.pcaob.org for more information.
Major Existing Differences Between GAAS and PCAOB Standards
The major differences between GAAS and PCAOB standards are described in both Part I of volume one of the AICPA Professional Standards and in Part I of the AICPA publication titled, PCAOB Standards and Related Rules. See also Appendix P –Major Differences Between AICPA Standards and PCAOB Standards.
Other Requirements
The Act contains requirements in a number of other important areas, and the SEC has issued implementing regulations in certain of those areas as well. For example,
* The Act prohibits auditors from performing certain non-audit or non-attest services. The SEC adopted amendments to its existing requirements regarding auditor independence to enhance the independence of accountants that audit and review financial statements and prepare attestation reports filed with the SEC. This rule conforms the SEC’s regulations to Section 208(a) of the Act and, importantly, addresses the performance of non-audit services.
* The Act requires the lead audit or coordinating partner and the reviewing partner to rotate off of the audit every five years. (See SEC Releases 33-8183 and 33-8183A for SEC implementing rules.)
* The Act directs the PCAOB to require a second partner review and approval of audit reports (concurring review).
* The Act states that an accounting firm will not be able to provide audit services to an issuer if one of that issuer’s top officials (CEO, Controller, CFO, Chief Accounting Officer, etc.) was employed by the firm and worked on the issuer’s audit during the previous year.
Lost Decade? Many actively managed mutual funds compounded at over 9% the same time the S&P returned 1.3%.
Index fund investing, which was part ponzi, and all the rage in the ’90’s has been proven to be a failure. Momentum for the masses always ends badly. Why hasn’t Jack Bogle been called out on this?
Invest in actively managed funds, unconstrained by “style boxes”, keep debt at a minimum, and have the ability to add periodically to your investments. Boring, but it works for me.
keep debt at a minimum,
With low interest rates and all signs that the Fed plans to inflate away all that bad debt, only suckers save in this country.
The WSJ chart is particularly misleading; each of those periods contains episodes of great wealth building. The fact is that, in spite of all caution to the contrary, market timing is the best way to make money. Even Buffett does it… he just calls it by a different name. “Buy at the right price”, he says. Same thing.
Funny how we don’t here anyone talking about everyone putting their Social Security into the Stock Market any more.
Like others have mentioned, I would like to see the stock market index plotted against some inflation adjusted value. How about using an average of industrial commodities or industrial manhours or both. If that has been done, at least post a link or two.
BR: That’s pretty reasonable — I’ll play around with that.
Thanks — perhaps a good metric would be a comparison of dividend-reinvested S&P or Dow Jones versus returns from the 30-year treasury (or rough equivalent in years where the 30-year wasn’t issued)? As I said, I’m pretty ignorant when it comes to things like this, so this might be a terrible idea. Just thought I would throw it out there.
“Funny how we don’t here anyone talking about everyone putting their Social Security into the Stock Market any more.”
I would take that bet all day long.