Comparing 1929 to 2000
Oct/25/08 09:33 AM Filed in: 7 Education
and Research
We
understand how tough it is to watch your portfolio go
down amidst this crisis. Our firm was founded by a
group of families and we invest side by side with our
clients. We're all experiencing a very difficult
situation together and, like you, we look forward to
its end. In the mean time we must remain disciplined
and diversified. The following analysis exemplifies
how the current events compare and contrast with
those of the past.
First, let's look at the roaring 20's and the 2000 tech bubble. Why is this analysis relevant today? The current bear market is remarkably similar to the sell-off that occurred from 1937 to 1938. In short, if 2008 is our version of 1937, this could could amount to one very bad year followed by a year of good returns.
The technology gains seen in the 1920’s and the euphoria after the end of World War I lead to an extremely speculative market that crashed in 1929. In similar fashion, the technology gains seen in the 1990’s and the euphoria after the end of the Cold War lead to an extremely speculative market that crashed with the bursting of the tech bubble.
Today we are facing a financial system that has outgrown a regulatory system created in the 1930’s. The regulation that was enacted in the 1930’s was critical to restoring market order and confidence. The same holds true today. Over the next few years we will see our regulatory and political leaders enact a series of new regulations that will bring our current rules and regulations up to date.
We saw the worst equity erosions from 2000 to 2002, which was very similar to the equity erosion from 1929 to 1931. In 1937 the S&P 500 fell 36%. We believe 2008 may be our version of 1937, which will hopefully amount to one year of poor market performance.
The following document shows how the market moved through the periods discussed (1929-1947 and 1998-present) and pinpoints important events along the way. For those of you who are not visual thinkers you might find the following document a bit confusing Click Here to see our work.
In doing our research we found that we're not the only one's with this belief. If you’d like to read a detailed comparison: Click Here
First, let's look at the roaring 20's and the 2000 tech bubble. Why is this analysis relevant today? The current bear market is remarkably similar to the sell-off that occurred from 1937 to 1938. In short, if 2008 is our version of 1937, this could could amount to one very bad year followed by a year of good returns.
The technology gains seen in the 1920’s and the euphoria after the end of World War I lead to an extremely speculative market that crashed in 1929. In similar fashion, the technology gains seen in the 1990’s and the euphoria after the end of the Cold War lead to an extremely speculative market that crashed with the bursting of the tech bubble.
Today we are facing a financial system that has outgrown a regulatory system created in the 1930’s. The regulation that was enacted in the 1930’s was critical to restoring market order and confidence. The same holds true today. Over the next few years we will see our regulatory and political leaders enact a series of new regulations that will bring our current rules and regulations up to date.
We saw the worst equity erosions from 2000 to 2002, which was very similar to the equity erosion from 1929 to 1931. In 1937 the S&P 500 fell 36%. We believe 2008 may be our version of 1937, which will hopefully amount to one year of poor market performance.
The following document shows how the market moved through the periods discussed (1929-1947 and 1998-present) and pinpoints important events along the way. For those of you who are not visual thinkers you might find the following document a bit confusing Click Here to see our work.
In doing our research we found that we're not the only one's with this belief. If you’d like to read a detailed comparison: Click Here
Podcast on rough markets
Jan/22/08 04:05 PM Filed in: 7 Education
and Research
My dad and I had a conversation about the market
conditions after a rough few weeks in the markets.
To listen click on the link: Slowing US Economy
Update 10-24-08: As it turned out we were incorrect in our analysis. Fortunately our investment style involves little to no market timing. While we will always opinions, our indexing and diversification assumes that investors (including ourselves) cannot accurately predict market movements.
To listen click on the link: Slowing US Economy
Update 10-24-08: As it turned out we were incorrect in our analysis. Fortunately our investment style involves little to no market timing. While we will always opinions, our indexing and diversification assumes that investors (including ourselves) cannot accurately predict market movements.