Mark Hulbert reminds everyone here that the DOW quadrupled between July 1932 and March 1937.
He thinks analogists should think about that when drawing doomsday scenario parallels. He's surely correct that smart investors could make a lot of money if today's market replays the DOW from that period in The Great Depression.
But that's one hell of a big "if".
I don't buy the analogy.
For one thing, the Shiller p/e ratio then had fallen way below 10 to the near rock bottom levels near 5 once seen in 1920-1921. Today we're still around 19.
He thinks analogists should think about that when drawing doomsday scenario parallels. He's surely correct that smart investors could make a lot of money if today's market replays the DOW from that period in The Great Depression.
But that's one hell of a big "if".
I don't buy the analogy.
For one thing, the Shiller p/e ratio then had fallen way below 10 to the near rock bottom levels near 5 once seen in 1920-1921. Today we're still around 19.
And then there's the little matter of GDP.
Having fallen from $103.6 billion in 1929 to $58.7 billion at the end of 1932, GDP began to rise again in 1934, reaching $91.9 billion by the close of 1937. From the GDP low of $56.4 billion in 1933, GDP rose nearly 63 percent in just four years of the DOW's five year cyclical bull recovery in that secular bear during the 1930s. Today growth is mired in the vicinity of 1 percent, after a decade of average annual growth of 1.67 percent. That was a raging fire then. We've only lit a match.
The depression of 2008-2009 was much too small by comparison to 1929-1940 to draw any meaningful parallels: a 46 percent drop in GDP over four years today would mean reducing our $15 trillion economy by nearly $7 trillion. We didn't drop even a half trillion dollars from GDP in 2009. And the last time the p/e ratio got close to the low 1921 and 1932 levels was in 1982.
We've had a little depression. A little growth and a little gain in the markets would seem to follow.
But since government can screw up a two-car funeral, anything is possible.
Having fallen from $103.6 billion in 1929 to $58.7 billion at the end of 1932, GDP began to rise again in 1934, reaching $91.9 billion by the close of 1937. From the GDP low of $56.4 billion in 1933, GDP rose nearly 63 percent in just four years of the DOW's five year cyclical bull recovery in that secular bear during the 1930s. Today growth is mired in the vicinity of 1 percent, after a decade of average annual growth of 1.67 percent. That was a raging fire then. We've only lit a match.
The depression of 2008-2009 was much too small by comparison to 1929-1940 to draw any meaningful parallels: a 46 percent drop in GDP over four years today would mean reducing our $15 trillion economy by nearly $7 trillion. We didn't drop even a half trillion dollars from GDP in 2009. And the last time the p/e ratio got close to the low 1921 and 1932 levels was in 1982.
We've had a little depression. A little growth and a little gain in the markets would seem to follow.
But since government can screw up a two-car funeral, anything is possible.
