50 Years of Market Swings

Cool interactive graph, via Fortune

50_years_of_market_swings

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  1. cinefoz commented on Feb 18

    GREAT chart of history. Please note the trend line is not logarithmic. Thus, the line takes on the appearance of trending straight up as gains compound.

    Had a log chart been presented, the line would have appeared solid and predictable, except for 1987 and 1990-y2k where it trended significantly ABOVE trend.

    The bottoms are all rock solid since 1985, except for 1987, 1992, and y2k. Two of the slightly deeper dips were in response to way out of control market rises .. much higher than the one just past, in comparison.

    The 1992 dip coincided with the 1st Iraq invasion. The market also dipped excessively before and around the 2nd invasion. That is explainable variance, as far as I am concerned.

    Thus, predictions about falls below the current level are out of sync with history. Why is this dip different? Answer .. it’s not. Thus, we are at a bottom and up is the next direction. This will eventually be followed by another dip for a new reason and another recovery. And so on. And so on. And so on.

  2. Ross commented on Feb 18

    Interesting chart but it has no meaning even in semilog.

    It would be better in semilog adjusted for inflation.

    In Dow terms, 1966 thru 1982 you lost 2/3rds of what you thought was money.

  3. cinefoz commented on Feb 18

    Remember,

    The stock market is a mostly closed system with regards to what is traded, and an open system with regard to the money supply. Since the money supply grows constantly and the trading supply remains mostly constant, the net effect is a rising stock market over time.

    Excessive monetary growth, usually in the form of out of control credit, causes big upward spikes. New, overseas investors also add cash to the money supply side. Downward corrections appear to have a safety valve that prevents a new floor from being created.

    Wall street types, economists, pundits, and the like need to make is appear more complicated and mysterious because their jobs would not exist if everyone saw it as an extremely simple supply and demand equation.

    Cash need somewhere to go and stability invites risk. Cash can temporarily disappear in a flash, but will always reappear when it looks safe because of the need for people to seek higher returns. These people bring in more people, causing markets to go up. More people enter after that. Each wave brings in higher prices for equities.

    A general increase in the money supply raises the floor for equities, creating the long term upward trend of the market, in general.

    Eventually, equities rise in value too high for the reason of the day, causing prices to fall to the floor, or there about.

    And so it goes.

  4. DavidB commented on Feb 18

    I just discovered I was born in a bear market…..that explains a lot

  5. DavidB commented on Feb 18

    I just discovered I was born in a bear market…..that explains a lot

  6. Ross commented on Feb 18

    I hereby dub Cinofoz nominalman. Convert your dollars into Zimbabwe whatevers and watch them double next week.

    Grandpap was a baker in Munchen during Weimar. He was a trillionaire.

    “timing isn’t everything, it’s the only thing.”

  7. cinefoz commented on Feb 18

    Ross,

    Thank you for being proof positive of someone enamored with complicated mumbo jumbo. In spite of being presented with a simple explanation for the stock market, you would rather reject it in favor of mysterious and complicated influences … all of which are different each time.

    When I sell at a top, it is people like you who probably buy from me.

    Thank you for your support, dumbass.

  8. Carmen commented on Feb 18

    It’s said above:

    Thus, predictions about falls below the current level are out of sync with history. Why is this dip different? Answer .. it’s not. Thus, we are at a bottom and up is the next direction.

    I don’t follow. But I’m not sure I really care.

  9. cinefoz commented on Feb 18

    Carmen,

    If you are an investor who does not understand what I wrote, then I am sorry for you. You are at the mercy of whoever makes sense to you at the time. Since this decision will probably be based on how comfortable you feel with that person, good luck. A lot of predators are very likable when you have something they want. Maybe you should seriously consider Bank CDs for your savings.

    If you are an investment manager who prefers a financial market filled with complication and contrary explanations, then this level of clarity would be very bad for business. Attacking my model is an understandable option since it offers the potential for removing sheep to fleece from the investment customer lists.

  10. Al Czervik commented on Feb 18

    Stupidity isn’t a crime. But stupidity coupled with pretentiousness must be at least a misdemeanor.

  11. Mr. Obvious commented on Feb 18

    cinefoz, I can’t decide if you are delusional or an attention whore.

    Or both.

    You’ve already used “idiot,” “dumbass,” and “sheep” today, so please do try to be creative with your namecalling.

  12. cinefoz commented on Feb 18

    Mr Obvious,

    OK, dipshit. Since you asked.

    I have decided about you, and I did it long ago. And I am sure of what I decided. You’re just an abrasive person who doesn’t know shit, and feels the need to advertise both.

  13. HaHaHerman commented on Feb 18

    To paraphrase crispyandcole at Calculated Risk:

    cinefoz has called more bottoms than Brittney and Paris combined.

  14. Ross commented on Feb 18

    Cinefoz,

    Being called a dumbass by you I take as a compliment.

    You are either Ben Stein with potty mouth or Kudlow off his meds.

    I too am currently long but you’re starting to scare me son.

    I’m long and could be wrong but at least I’ll admit the possibility.

  15. Mr. Obvious commented on Feb 18

    cinefoz,

    I am upset that you won’t be my anonymous internet friend. I was wondering, though, if you would manage my money, since you continually tout how “simple” the market really is and, like I mentioned before, have an uncanny knack for selling every top and buying every bottom.

    Abrasive and unknowledgable and advertises both…hmmm…who does that sound like?

  16. donna commented on Feb 18

    Cinefoz is Liebniz….

  17. cinefoz commented on Feb 18

    Obvious, you are pretty good at making up facts that don’t exist anywhere else. You’re partly complimentary and partly challenging me to ‘prove myself’. And maybe you want to be my friend or business partner. But you’re still the expert because the market isn’t ‘simple’. You’re glib. You have quite a profile there, boy.

  18. Marcus Aurelius commented on Feb 18

    Stupidity isn’t a crime. But stupidity coupled with pretentiousness must be at least a misdemeanor.

    Posted by: Al Czervik | Feb 18, 2008 11:53:22 AM
    ___________

    I believe the actual charge would be Pretentious Intellectual Buggery.

  19. Francois commented on Feb 18

    cinefoz,

    Whatever we think, however detailed is our analysis and planning before trading, it pays to heed J.P. Morgan admonition about the market:

    “It will fluctuate”

    Since the direction of the fluctuation CANNOT be known in advance, being long only or short only isn’t a convincing position.

    Call me a coward, but since the market is much bigger than moi, I’ll always entertain (and plan for) the possibility of a brutal change in direction.

    Stuff happens…and the big fan is always pointed in OUR direction.

  20. Francois commented on Feb 18

    cinefoz,

    Whatever we think, however detailed is our analysis and planning before trading, it pays to heed J.P. Morgan admonition about the market:

    “It will fluctuate”

    Since the direction of the fluctuation CANNOT be known in advance, being long only or short only isn’t a convincing position.

    Call me a coward, but since the market is much bigger than moi, I’ll always entertain (and plan for) the possibility of a brutal change in direction.

    Stuff happens…and the big fan is always pointed in OUR direction.

  21. Steelduck commented on Feb 18

    Why start in 1950? If you want to have the big picture of the stock market, you ought to start before 1929.

  22. JustinTheSkeptic commented on Feb 18

    I’m still a bear at this point in time: the consumer is not going to come out of this downturn for awhile, the dollare will likely get a stronger rather than weaker (there goes our export advantage), and banks and other corporations are going to be writing-off still more bad debt… How can the fed really do anything but inflate? Which means terrible markets – not unless my memory serves me wrong and the market didn’t suck back in the late 70’s when inflation was on a tear…?

  23. Stormrunner commented on Feb 18

    Cinefoz

    We are navigating uncharted waters, your theorum of nominal equity increase based on monetary debasement only applies in an inflationary environment, monetary inflation by all indications has reached saturation based on the ability to force new money into the economy, even the stim-u-less package is merely an advance on next years tax rebate as determined by some new code. There is a distinct possibility of deflation moving forward that the prudent may wish to not ignore.

  24. techy commented on Feb 18

    justin.

    higher inflation but terrible markets?

    i thought inflation will also increase the profits of companies…..leading to higher price of stocks..

    and also lower interest rate, but high inflation will encourage risky investment like stock market, leading to new highs??

    i think japan had deflation problem, right?

  25. bitteroldcoot commented on Feb 18

    Hard not to notice that fortunes graph makes the current situation seem trivial, while the same data, and the same time frame, displayed on google and yahoo makes it look much more significant.

  26. ken h commented on Feb 18

    Hey techy,

    You may be long gone, who knows?
    Your scenario is only part of th problem IMO.

    The main problem for me is 2 fold: High Energy and low wages. Now throw in collapsing credit. The consumer is getting crushed. This does not induce spending. Kind of Biflation in my mind.

    inflation in energy and deflation in discretionaries. I think most commodities have peaked and service/discretionaries are on a downward trend.

    So I think there is pain going forward for most companies. Mine is definitely seeing changes in people’s ability to come up with cash and are having to cut back. That makes me cut back. As for investments, I’ll buy on the way up and not try and time the market. Way too much noise right now.

    I guess for you, It’s a question of doing some research on the companies you like and see how they fit your portfolio going forward. How are they going to be effected by the elephants in the room?

    Good luck.

  27. JustinTheSkeptic commented on Feb 18

    Techy, under normal circumstances with all other things equal, your correct. But we are headed for another “stagflation period,” like the 70’s. Markets cannot go up when corporations have no one to sell their products to. The consumer leads everything. With inflation eating into his/her real wages what’s left to buy except the bare essentials. Why people seem to think that we are just going to keep going up, up, and up is beyond me. My guess is that they have been programmed by the last 20 years of unprecedented growth, (some would argue psydo-growth)… jmho

  28. ef commented on Feb 18

    S&P 500: Total and Inflation-Adjusted Historical Returns at ETF Investing.

    Quoting past returns is usually done in a fantasy fashion. They usually don’t mention:

    • Inflation
    • Dividends (decline of)
    • Trading expenses
    • Taxes

    Other noticeables impacting future returns:

    • Privatization of public corporations
    • Increase in private equity firms
    • Impact of stock options
    • Excessive executive compensation
    • Shareholder dilution
    • Increased risks and decline of our financial institutions
  29. Ross commented on Feb 18

    ef,
    Thanks for the link. The period I pointed out earlier (1968-1984) was a true nightmare. The only redeeming value during that period was real estate. This time around, even that asset class looks dicey.

    OT interesting how the FTSE traded today. Perhaps the takeover of the Rock is a blueprint to be followed? I don’t like it on philosophical terms but when the boat threatens to capsize, you bail and get rid of ballast.

  30. jj commented on Feb 18

    Cinefoz ,

    don’t take the insults too personally , being the only Bull on this site is lonely and difficult

  31. techy commented on Feb 18

    jj..

    be a bull….back it by facts…and accept that its hard to know market directions in the short term…

    instead of simply repeating over and over that we are at bottom..

  32. philip commented on Feb 18

    cinefoz,
    Don’t listen to jj. Really do take the insults personally. There are other bulls on this site, just none as smug or cocksure. Do you realize you are just as shrill as MS?

  33. rickrude commented on Feb 18

    50 Years of Market(MOOD) Swings….
    I never realised that a bunch of males calling themselves investors would behave like
    women undergoing hormonal cycles.

  34. emmi commented on Feb 19

    Thus, predictions about falls below the current level are out of sync with history. Why is this dip different? Answer .. it’s not. Thus, we are at a bottom and up is the next direction.
    ——

    Okay, I’m going to simplify things even more than that. I took a bent ruler (to account for inflation and other effects) and laid it on the chart before deregulation made things crazy greedy and wealth concentrating (1995) and looked at where that number should be when the adults arrive to chastise and leash up the children running amok in the markets, putting their gooey fingers all over the furniture and in each other’s hair and stuff. It looks like 800 or so, give or take. And the current number is a lot higher than that. So, I’ll go short, just to keep the pot interesting. (Not on energy, tho… until we show global long-term recessionary signs)

    Our current economic system is one where the skinny kids at the table are borrowing money to buy candy for the fat kid at the end of the table. How much longer will that last? China and India are building their own tables and won’t need to sit at ours much longer.

  35. rickrude commented on Feb 19

    Cinefoz ,

    don’t take the insults too personally , being the only Bull on this site is lonely and difficult

    Posted by: jj | Feb 18, 2008 7:10:03 PM
    ???????

    what do you mean by that ??
    I am REALLY BULLISH , ON OIL, GOLD, CHINA

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