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"There's a New
Sheriff in Town. The Bull is Back." THE MARKETS
In Ancient China there was
a saying: "May you live in interesting times." It
was as much a curse as anything. But sometimes the most difficult
times are the most interesting and the most rewarding too.
Well, the Markets have been a little more interesting these
days.
History was made last week when the DJIA and S&P 500
took the biggest percentage weekly loss in almost 100 years.
The Crash of 1929, The Crash
of 1987 and now we’ve
witnessed the Crash of 2008. It was more like a slow motion
crash taking eight days to complete and took the Dow Jones
Industrial
Average down almost 2400 points!
On Friday there were over
2,500 new lows recorded on the NYSE, easily a new record.
To put this in some perspective,
The Wall Street Journal, on its website, showed over
3,400 issues traded Friday. That means that 3 out of every
4
stocks on the NYSE hit a new yearly low on Friday.
But what
a difference a day makes.
Wall Street stormed back from
last week's devastating losses, sending the Dow Jones industrials
soaring a nearly inconceivable
936 points after major governments' plans to support the
global banking system reassured distraught investors. All
the major indexes rose more than 11 percent.
Yesterday, The Dow Jones
Industrial average was up +11.08%; the S&P500 +11.58%; and the NASDAQ Composite +12.58%.
As I watched prices soar, The Financial Media was telling
their audience that the bond market is forewarning the worst
economic recession since the Great Depression. So what does
that mean for investors? Let’s look at how much profit
was available to equity traders throughout the Great Depression.
I doubt anyone is telling you about this!
S&P 500 RECORDS:
| Date Range |
Points Gained |
Percentage Gained |
| June 1, 1932 to Sept 7, 1932 |
4.40 to 9.31 |
+111.6% |
| Feb 27, 1933 to July 19, 1933 |
5.53 to 12.20 |
+120.6% |
| Oct 19, 1933 to Feb 4, 1934 |
8.61 to 11.82 |
+37.3% |
| Mar 14, 1935 to Mar 5, 1937 |
8.06 to 18.68 |
+131.8% |
| Mar 31, 1938 to Nov 14, 1938 |
8.50 to 13.78 |
+62.1% |
The
average gain for the five major intermediate-term Bull cycles
during the Great Depression was +92.7%.
The market was likely to rebound after eight days of precipitous
losses that took the Dow down nearly 2,400 points, but no
one expected this kind of advance, which saw the Dow by far
outstrip its previous record for a one-day point gain, 499.19,
set during the waning days of the dot-com boom.
Still, while the magnitude
of Monday's gains stunned investors and analysts, no one
was ready to say Wall Street had reached
a bottom. The market is likely to have back-and-forth trading
in the coming days and weeks -- and may well see a pullback
when trading resumes Tuesday -- as investors work through
their concerns about the banking sector, the stagnant credit
markets and the overall economy.
We remain optimistic about
the Stock Market’s Future.
It may be hard to look ahead to better times, but that is
exactly what the market is doing.
| Returns through 10/10/08 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
-18.2 |
-36.3 |
-40.0 |
-6.2 |
-2.7 |
0.5 |
| Nasdaq Composite |
-15.3 |
-37.8 |
-41.2 |
-7.4 |
-2.9 |
0.7 |
| Standard & Poor's 500 |
-18.2 |
-38.8 |
-42.4 |
-8.8 |
-2.8 |
-1.0 |
Source: Yahoo! Finance, Barrons
Past performance is no guarantee of future results. Indices
are unmanaged and cannot be invested into directly. Three-,
5-, and 10-year returns are annualized. Assumes dividends
are not reinvested.
According to John P. Hussman, Ph.D.,
stocks are now measurably undervalued. He says,
"Investors will berate themselves for the
panic they are now exhibiting. This, from an advisor that
has adamantly argued
for over a decade (with the exception of 2002-2003) that
the stock market was strenuously overpriced and likely to
deliver disappointing long-term returns. My impression is
that investors who abandon properly diversified and carefully
planned investments here, with the stock market already down
by nearly half, will regret it as the emotionally panicked
decision that wrecked their retirement prospects.
Stocks are now at the same valuations
that existed at the 1990 bear market low. Relative to 30-year
Treasury yields,
the S&P 500 is priced to deliver the highest excess
return since the early 1980's.”
Read
the full Hussman article here.
CHART OF THE DAY
Continued concerns regarding the credit
crisis, a slowdown in consumer spending, and a further weakening
of the US economy sent the Dow down more than 7% on October
9th, which also marked the one-year anniversary of the current
correction. The Dow put in its record high of 14,164.53 back
on October 9, 2007. On the one year anniversary, the Dow
closed at 8,579.19 -- down 39.4% from its one year old peak.
For some perspective on the magnitude of the current decline,
today's chart illustrates how the Dow performed during the
first year of all major corrections since 1900. As today's
chart illustrates, the first year of the current correction
has been more severe than the first year of any correction
since 1900 -- and that includes the correction that began
in 1929.
Putting "Panic" in Perspective: 6 Facts
- In January of 1970, a bear market started
that lasted until May of that year. The market during that
time fell 35.4%. In May, a bull market began that lasted
until January 1973 and brought a 124% gain in stock values.
- In April 1981, another bear market commenced that lasted
nearly a year and brought a 24.7% decline. Then in March
of 1982, the market began to rise and continued doing so
until June 1983, bringing an overall gain of 71.7%.
- July 1990 brought a downward market
that lasted three months, until October 1990, at which
point equity prices had fallen
22.4%. Then, in the same month, a new, now legendary, bull
market took hold and lasted nearly eight years until July
1998, delivering a 330.7% gain to the market.
- Dating back
to 1975, eight of the last 15 bull markets have started
in the autumn months of September, October,
and November.
- Since 1957, there have been 15 bear
markets, as measured from peak to troughs, and on average
they have
lasted
10 months
and brought an average decline of 29.4%.
- The duration
and degree of these bear markets were significantly
less than
the duration and magnitude of bull markets. During
the same period, there were also 15 bull markets, which
lasted,
on average,
30 months and brought average gains of 112.5%.
In these two anagram teasers, I have given
you a word or phrase. Your job is to break up this word
into
separate
letters and place them on the dashes to spell new words.
You can use each letter only once.
Debit card = B_ _ C_
_ _ _ _
Retirement = T _ _ _ R_
_ _ _ _
Click here for the answers.
Thanks for your trust & confidence,
P.S. DON'T KEEP US A SECRET! At Ford Wealth Management we know that referrals from your friends, family and colleagues are the sincerest form of flattery. We appreciate your business and hope that you will pass along our name and number to anyone who would benefit from our services.
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