Dow Breaks Record of 1929 Crash and Closes Week Down 18.1%!
October 10, 2008 by Thomas Jones
Filed under Bear Markets, Government Surveillance, Mexico, Privacy, Stock Crash, Uncategorized
The Dow closed down 18.1% for the week — the greatest one-week wipeout in history!
It’s actually worse than the Great Crash of Black Monday, October 28, 1929, when the Dow closed the week “only” down 14.4%.
It’s worse than the 1987 crash when the Dow, after plunging 22% in a single day, closed the week down 13.1%. In the past 12 months, the Dow has lost 40% of its value while the S&P 500 has lost 42.5%. Markets in Asia, Europe and the Middle East are losing just as much, if not more.
The last time the S&P 500 crashed like this, in the aftermath of 9/11, it took FIVE YEARS to finally recover and only with the help of $400 trillion worth of bank-created derivatives.
That money is now gone forever and will never be created again.
We’re now back to where we were a decade ago – only this time, we’re facing MASSIVE government debts… two unresolved wars… a sinking global economy… a global banking system that is collapsing… and the likelihood of a president with ZERO financial or executive experience.
The market will come back. Historically, it always has. But we’re in for a prolonged period of economic uncertainty. Early retirees should use their “off the grid” skills to simplify their lives, relocate to less expensive areas (preferably outside the U.S.) and buckle down.
Dow Drops Another 678 Points! Investors Worry About Retirement Investment Income, Money!
October 9, 2008 by Thomas Jones
Filed under Bear Markets
It’s been a rough month for the stock market, no doubt about it! In just the past week, the Dow has plummeted nearly 2,000 points or 18.1%. The S&P has lost 41.8% of its value since its recent high a year ago of 1565.15 on October 9, 2007. More than half of that loss, 25.7%, has come in just the past month!
The question everyone is asking is the same one investors ask after every big market crash: Is it different this time? Is this the time the market will not come back? Are these credit problems so huge that this time the market will go down, and stay down, for a decade or more?
One thing is clear: The bear market decline we’re seeing is, so far at least, about par for the course. There have been five major market declines in the past forty years of 20% or more. We’re near the high end of those declines and we can’t know, right now, how long the market decline will last. Here they are:
1. March 24, 2000, to Oct. 9, 2002. Decline of 49.1%. 5 years to fully recover from bottom of market.
2. July 16, 1990, to Oct. 11, 1990, Decline of 20%. 6 months to fully recover from bottom of market.
3. Aug. 25, 1987, to Dec. 4, 1987. Decline of 33.5%. 18 months to fully recover from bottom.
4. Nov. 28, 1980, to Aug. 12, 1982. Decline of 27.1%. 3 months to fully recover from bottom.
5. Jan. 11, 1973, to Oct. 3, 1974. Decline of 48.2%. Nearly 6 years to fully recover from bottom.
As you can see, a market decline of nearly 50% is hardly unprecedented — and both times it took two years, give or take, to recover. But recover the market did: Following the nearly 50% wipeout after the Oil Crisis of 1973, the market went on to gain 2168% over the next 27 years. Every $10,000 invested in the S&P 500 would have grown to approximately $216,800.
The same thing happened after the Tech Wreck and the 9/11 attacks: People wondered if this time it might be different. After all, the market was absurdly overvalued with all those worthless dot.com stocks. Surely we were headed for Dow 2,000, as many “gurus” told us.
What actually happened? The market did not continue plunging, as the doom and gloomers told us, but it took a very long time to recover, nearly 5 years in fact. After hitting a peak of 1,527 on March 20, 2000, the S&P began plunging lower and lower and then lower still: finally bottoming out at 800.58 on September 20, 2002. The market then began climbing back, eventually recovering its old high just last year (in October 2007). That’s a pretty long recovery period.
The same thing happened with the 1973 Oil Crisis. The market hit a peak in January 1973 and then began plunging over a period of 19 months, hitting bottom on September 30, 1974. Then, it began climbing steadily… but it didn’t fully recover its January 1973 highs until July 28, 1980 — or nearly SIX YEARS later.
So: What can we early retire folks learn from all this? Historically, the market does always come back — but it can take five or six years to do so, not months. A drop of 50% is not historically unprecedented. However, drops of this magnitude tend (at least twice!) to require a longer recovery period that stretches over at least 5 years.
Bottom line: We could be in for a long recovery. It’s definitely time to play things safe. If you can avoid selling out right now, you’ll probably end up better off as the market will probably recover (unless “this time it’s different”). If you need money to live on or for big expenses like college, however, you may have to wait quite a while before the market recovers.
The only comfort we can take from all this is that this recent continuing bloodbath is about as bad as it has gotten in the recent past. We haven’t seen a decline in the market of more than 49% since the Great Depression. But anything is possible.
