Monday, March 2, 2009
The Wheels on the Bus Fall Off and Off
"The wheels on the bus go round and round,
Round and round, round and round.
The wheels on the bus go round and round,
All through the town."
-The Bus Song; (by Unknown)
A fine children's song . . . we've got the adult, R-rated version now.
The image above, taken from http://www.dshort.com/, shows the current bear market as measured by the S&P 500 index compared to the Dow in the Great Depression and the S&P 500 for two other, more recent bad bear markets. Click on the chart to enlarge.
We are in month 17 of this bear. There have been several percentage points of price inflation over this period. In the 1929-31 period in gray, there was meaningful price deflation.
Thus, even without adjusting for the higher level of dividend payments in that era than now, this bear market is to date worse than that of the Great Depression from the market peak.
We are in uncharted waters. The literal point of the term "uncharted waters" is that especially if they are shallow, the risk of a shipwreck is high, and if they are on the high seas, the risk of getting lost is high.
Anyone looking for a bottom is just guessing.
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