SPX Comparison: 1982-87 vs 2002-08
At last night's podcast, I mentioned the differences between 1987 and 2007, given the net gains pre- and post- crashes. I specifically mentioned that an SPX buyer in 1982 was better off six years later than an SPX buyer in 2002 six years later.
Several people have challenged me on this (why?). A quick look at he charts shows the difference between the two eras:
>
SPX 1982 - 1987
>
SPX 2002 - 2008
Charts via FusionIQ, Bloomberg
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The relative gains are quite different:
1982-87: trough to peak gains were 228%, followed by a 33% selloff. At the low point in 1987, our 1982 SPX buyer was ahead 119%.
2002-08: trough to peak gains were 101%, followed by a 29% selloff. At the low point in 2008, our 2002 SPX buyer was ahead just 43%.
The primary distinction between the two eras is that the year 1982 followed a 16 year bear market; 2002 was a mere 2 years after an 18 year Bull market.
Friday, October 03, 2008 | 12:28 PM | Permalink
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And another one people refuse to believe is the S&P is over 10% lower than when Bush was elected, the DOW is a few points lower, and
Larry Kudlow admitted that we're in a recession, sort of.
Posted by: VennData | Oct 3, 2008 12:39:00 PM
I would also add that I don't think we're done dropping, not even close, so let's review this chart again 9-12 months from now.
Posted by: Jeff M. | Oct 3, 2008 12:43:51 PM
So...you would be a buyer here?
Posted by: John Navin | Oct 3, 2008 1:17:20 PM
So those retirement calculators that assume 8% compounded return are a bit off.
Lets see - after 8 years - should be up 85%. No - down 10%. (or more after 9 years)
Ouch.
Posted by: kurtmilne | Oct 3, 2008 1:22:10 PM
kurtmilne @ 1:22:10 PM
Yes, but if you can save your money over a 70 year period (and not just a 20 year period), you can count on “regression to the mean”.
Posted by: DL | Oct 3, 2008 1:28:07 PM
why in the world do you think its done dropping? expect further declines for quite a while
Posted by: fresno dan | Oct 3, 2008 1:30:12 PM
any half brain could look at market performance and realize that a calculator that assume's 8% compound growth is wrong.
Btwn 1950 and 2007 the market returned between 8 and 10% only 4 times.
59, 65, 68, and 04.
BR,
Why would anyone challenge this?, the numbers are the numbers, look at the return if you bought it in Euro's. Maybe that would be more compelling for those saying you are wrong.
Here is a forward looking question since everyone is so caught up with the day to day panic that is going on right now:
If we have a real expansion when this is finally all over, one that is not based on credit/paper. What sectors perform well? Can you buy companies today in these sectors at bargain prices? IMHO I like these sectors moving forward:
Energy and Alt. Energy
Healthcare
Infrastructure both tech and physical
I don't like
Financials
Consumer Disc.
anyone else have any thoughts on this?
I'm thinking that stocks like CHK, or FCX, which have just gotten killed in the last couple of months are starting to look attractive at these levels if you can hold for a couple years.
Finally, how are people reading the market reaction to the bailout getting done and then a big drop off from the highs. I'm with Jeff M. I think we go down further and lots of pain until late next year, 8k on the DOW looks almost certain now.
Posted by: ben | Oct 3, 2008 2:13:12 PM
Yes, but if you can save your money over a 70 year period (and not just a 20 year period), you can count on “regression to the mean”.
A seventy year period? I was hoping to retire a bit earlier than that implies.
Posted by: daveNYC | Oct 3, 2008 2:19:26 PM
prayer beads should do very well
Posted by: Bob A | Oct 3, 2008 2:26:11 PM
BR>> Several people have challenged me on this (why?)
Cannot be... evidence is undeniable. Even after discounting for inflation in those periods:
Aug.82 - Oct.87: +82%
Oct.02 - Sep.08: +19%
Posted by: PaoloP | Oct 3, 2008 2:52:44 PM
The Bush Boom lives on!!!
Posted by: Jerry Bowyer | Oct 3, 2008 3:13:08 PM
Viva - its all Bush's fault!!!! From the dot.com bust, 9-11, Katrina, now the Credit Crises, this has got to be the most destructive human force in the history of the world.
As a lifelong Rebulican, I simply can not wait for BHO to be annointed. I have never been so depressed in my life with the constant, never ending drumbeat of bad news day after day, month after month, year after year....
I guarantee you this, come January 14th, we will see the glass half full big time from the MSM and the market will then be poised to benefit from the Obamabounce! Long live the Messiah!!! You win, we lose - gay marriage horray!!
Posted by: jdamon | Oct 3, 2008 3:47:41 PM
A graph comparing a few bear markets from the S&P index high to low. Link:Compare the Bear
Posted by: wood | Oct 3, 2008 5:29:03 PM
Unfortunately, I think that regardless of who gets elected, we are in for a long hard slog.
Posted by: Barry Ritholtz | Oct 3, 2008 6:11:06 PM
jdamon
wrote:
Viva - its all Bush's fault!!!! From the dot.com bust, 9-11, Katrina, now the Credit Crises, this has got to be the most destructive human force in the history of the world.
As a lifelong Rebulican, I simply can not wait for BHO to be annointed. I have never been so depressed in my life with the constant, never ending drumbeat of bad news day after day, month after month, year after year....
I guarantee you this, come January 14th, we will see the glass half full big time from the MSM and the market will then be poised to benefit from the Obamabounce! Long live the Messiah!!! You win, we lose - gay marriage horray!!
Is this called CAPITULATION? Man, you should better get your bible and guns.
Posted by: alah | Oct 3, 2008 9:14:02 PM
I see others have said what I was thinking, but I'll say it a different way:
4 years from now, you will be able to say the same thing with 10 year returns instead of 6
9 years from now you will be able to say the same thing with 15 year returns instead of 10
12 years from now you will be able to say the same thing with 18 year returns instead of 15
Posted by: VoiceFromTheWilderness | Oct 4, 2008 7:05:41 AM
