Bear markets - nominal and inflation corrected

[bart]

Three new charts showing various bear markets and their percentage drops, displayed as nominal, CPI adjusted and CPI without lies adjusted. One probably surprising fact - the loss in the Nasdaq since 2000 was almost identical to the maximum loss in the Dow during the Great Depression - after a full inflation correction is done. Even just using CPI corrections alone, they're much closer than most realize.

Also note the very large differences between nominal and fully CPI corrected values, as well as the implied path of US stock markets if they follow either the Nikkei's or the depression Dow paths.



http://www.nowandfutures.com/images/bear_markets.png




http://www.nowandfutures.com/images/bear_markets_cpi_adj.png



http://www.nowandfutures.com/images/bear_markets_cpi_wo_lies_adj.png

[Chomsky]

Holy crap.

[metalman]

you realize your analysis/graphs are 10x better than this (http://www.gold-eagle.com/editorials_08/oberholster052309.html) belated ripoff of this (http://www.itulip.com/forums/showthread.php?t=2774).

you da man! (understated)

[bart]

you realize your analysis/graphs are 10x better than this (http://www.gold-eagle.com/editorials_08/oberholster052309.html) belated ripoff of this (http://www.itulip.com/forums/showthread.php?t=2774).

you da man! (understated)

Thanks metalman. :)
The actual chart they're based on is this one that I first published around mid 2007, and which has been added to since then with the Nikkei (concept from EJ) and the 1937 bear market from a suggestion from a friend in Canada, etc.



http://www.nowandfutures.com/images/sp500_2007vs2000.png




Add in the concept from my long term inflation page of CPI & CPI w/o lies adjustments, plus some edookashun in chart design & presentation (some of which came from D. Short) -- and that's its history. Bottom line, I can only take credit for some of it since I do stand on the shoulders of those before me.

[jimmygu3]

http://www.nowandfutures.com/images/bear_markets_cpi_wo_lies_adj.png


Love it, Bart! Would be great to see the 1973 bear in there too. I'm thinking it ends up in a much different place than Dow '29 and NIKKEI '90. THANKS!

Jimmy

[bart]

Love it, Bart! Would be great to see the 1973 bear in there too. I'm thinking it ends up in a much different place than Dow '29 and NIKKEI '90. THANKS!

Jimmy


Here's another version that adds in the general '70s bear, but starting in the late '60s. If it starts when the last Dow/gold ratio bottomed in early 1966, the current pattern is eerily similar.


http://www.nowandfutures.com/images/bear_markets_cpi_adj2.png



http://www.nowandfutures.com/images/bear_markets_cpi_wo_lies_adj2.png

[WDCRob]

You're a treasure Bart.

Though the CPI lies charts would suggest there's not a ton or room left to fall, would they not?

[bart]

Though the CPI lies charts would suggest there's not a ton or room left to fall, would they not?

I think it depends on one's time frame. Shorter term (and only using this one chart, which is dangerous), yes - but longer term all three prior bear markets have lower lows ahead.

[jimmygu3]

Here's another version that adds in the general '70s bear, but starting in the late '60s. If it starts when the last Dow/gold ratio bottomed in early 1966, the current pattern is eerily similar.


http://www.nowandfutures.com/images/bear_markets_cpi_adj2.png



http://www.nowandfutures.com/images/bear_markets_cpi_wo_lies_adj2.png

Thanks, Bart! I think both charts are CPI w/o lies, but that's what I wanted to see anyway. :)

Jimmy

[jimmygu3]

I think it depends on one's time frame. Shorter term (and only using this one chart, which is dangerous), yes - but longer term all three prior bear markets have lower lows ahead.

Also note that this linear chart makes it easy to underestimate the magnitude of drops from this point forward. For example, eyeballing the NIKKEI line (worst performing one), it bottoms at about -78%. We look like we are currently at about -69%, which sounds like it's 9% from a worst-case bottom. But in fact it is another 29% drop from current levels that takes us to an overall -78% of peak.

We could retest the recent nominal lows or just go nominally horizontal for years as inflation erodes the currency another 20, 30, 40 percent. Either way there is significant downside risk to holding stocks right now.

Jimmy

[bart]

Thanks, Bart! I think both charts are CPI w/o lies, but that's what I wanted to see anyway. :)

Jimmy

Yep, you were right - just corrected it.




Also note that this linear chart makes it easy to underestimate the magnitude of drops from this point forward. For example, eyeballing the NIKKEI line (worst performing one), it bottoms at about -78%. We look like we are currently at about -69%, which sounds like it's 9% from a worst-case bottom. But in fact it is another 29% drop from current levels that takes us to an overall -78% of peak.


Indeed - and I'd add a new chart in log mode to show it, but log charts can't have values below zero.

[BiscayneSunrise]

Longer term the trend is still down but compared to previous bear market rallies, it looks as though this rally could continue until spring 2010.

[Lukester]

Biscayne - that gives a sense of the gargantuan scale of the global economic corrections that are taking place - a "bear market rally" that runs a year, describes bracketing downlegs that are massive. Big, tectonic market events unfolding. I have a notion of it as even bigger. I am thinking we are in for a "bear market rally" that runs as much as FIVE years, and then a real, serious, no kidding crash, after that which makes 2008 look like a walk in the park.

Dow running up to 32K over five years, then collapsing to 5K in the space of maybe 8 months.

After that? Everything is still and quite dark for a long time. 2015 feels to me like a good time to really, seriously, go hide someplace. And I'm one of the ones for whom the instinct to go hide in a bunker this time around just did not materialize. I can't work up the conviction to brace myself for a mad max world in 2011 or 2012. But I can, for 2015. I think 2011-2012 are actually going to be fairly up-beat years. AKA "Poomy" years where everything is acting like an inflatable inner tube.

Longer term the trend is still down but compared to previous bear market rallies, it looks as though this rally could continue until spring 2010.

[BiscayneSunrise]

Biscayne - that gives a sense of the gargantuan scale of the global economic corrections that are taking place - a "bear market rally" that runs a year, describes bracketing downlegs that are massive. Big, tectonic market events unfolding. I have a notion of it as even bigger. I am thinking we are in for a "bear market rally" that runs as much as FIVE years, and then a real, serious, no kidding crash, after that which makes 2008 look like a walk in the park.

Dow running up to 32K over five years, then collapsing to 5K in the space of maybe 8 months.

After that? Everything is still and quite dark for a long time. 2015 feels to me like a good time to really, seriously, go hide someplace. And I'm one of the ones for whom the instinct to go hide in a bunker this time around just did not materialize. I can't work up the conviction to brace myself for a mad max world in 2011 or 2012. But I can, for 2015. I think 2011-2012 are actually going to be fairly up-beat years. AKA "Poomy" years where everything is acting like an inflatable inner tube.

given the trillions being tossed around your view is plausible.