Posted on 02/11/2014 1:36:19 PM PST by Kartographer
That at least is the conclusion reached by a frightening chart that has been making the rounds on Wall Street. The chart superimposes the market’s recent performance on top of a plot of its gyrations in 1928 and 1929.
The picture isn’t pretty. And it’s not as easy as you might think to wriggle out from underneath the bearish significance of this chart.
(Excerpt) Read more at marketwatch.com ...
No, but the ultimate market bottom was a few years later, around DJIA 41.
I have a little less than 20% of my portfolio in stocks. But, I turn 63 this year, so my investments have grown quite conservative.
When the DJIA hit $41, you could buy a house for $500 about a 12.5 ratio.
Now the DJIA is about $16,000 and a house at 12.5 ratio would be $200,000.
When the DJIA was at $41, an ounce of gold was about $33, about a 80% ratio.
With the DJIA at about $16,000, an ounce of gold comparably priced would be about $12,800.
You’re correct the chart needs to be aligned as a percentage gain/loss. The first two days of the 1929 crash saw the market drop over 24%. That’s a drop!
While the movements have some degree of match (interesting, actually), the chart is quite misleading, because the relative changes in the two graphs are quite different.
The modern chart has a range of 12,500 to 16,400, about a 33% rise, and if it dropped back, a 25% fall.
The 1929 chart goes from 200 to 380, almost a 100% rise, and the fall back was 50%.
A 25% drop would be a severe correction, not a crash like a 50% drop would be. I still hope it doesn’t happen, I’ve lived through two of those already in my life.
We all know the market is going down. The sooner, the better.
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