The Dow since 1915

I don't think anyone can just dismiss Harry's chart and theory by simply saying what has happened over the past 100 years should determine what happens in the future. 100 years is a small period of time in the history of the world. How long did the Roman Empire last? Wasn't it measured in centuries? The one thing that you can bank on in this world is change.

I'm not sure if the market will tank, but one should at least be open to the possibility.



Quote from pisspotpete:

Uh, Harry, you might want to set your chart scale to LOG. Then you get a nice gentle uptrend - sort of like the US GDP!

Sorry, but your crash theory just won't fly, or at least it would be but a fleeting moment in most investing lives.

For reference please see "Triumph of the Optimists: 101 Years of Global Investment Returns", Dimson and Marsh.

After 100 years of uptrend, I like the odds!
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Quote from formikatrading:

I don't think anyone can just dismiss Harry's chart and theory by simply saying what has happened over the past 100 years should determine what happens in the future. 100 years is a small period of time in the history of the world. How long did the Roman Empire last? Wasn't it measured in centuries? The one thing that you can bank on in this world is change.

I'm not sure if the market will tank, but one should at least be open to the possibility.
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I agree. The response to Harry's thread, so far, could be viewed as a contraian indicator; which, within itself gives validity to harry's point.
 
What about the U.S. economy? The debt is approaching something like 30 trillion right now, with deficit for 2003 around 1 trillion. 1 trillion you say? Yes, it's not 400-500 billion, or whatever number you've heard. We've actually borrowed about 500 billion to fuel this economy from social security and the chances of us being able to pay that back are about 0, so by the time the bite comes (in about 2008-2012) when more and more baby boomers start retiring, the US markets and economy will be in big trouble. The falling dollar will help somewhat, as soon as it stops falling you'll get a large flow of investment out of europe, that will help prop up stocks for a year or two (maybe more, who knows), but eventually that will dry up, we're too top heavy. When the markets finally keel over, the economy will go with it. Just my 2c :)
 
You don't make money in the market because it is a bull or bear market. You make money because you adapt to change faster than the rest of the market participants. You can take the money from their pockets in all kinds of markets. I am sure that Harry knows this so I wonder why did he post this chart :)
 
Quote from neutrino:

You don't make money in the market because it is a bull or bear market. You make money because you adapt to change faster than the rest of the market participants. You can take the money from their pockets in all kinds of markets. I am sure that Harry knows this so I wonder why did he post this chart :)
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neutino, maybe you should re-read your own subscript.
 
Quote from harrytrader:

Do you know what log scale means statistically ? Log scale is used to render the statistical curve as normal as possible to make statistical inference, after that it has to be converted back to the linear scale. The true thing is as it is : you can't change its nature by using log scale: it is a mathematical, virtual operation it doesn't change the physical thing haha !
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Harry you got busted on this one. And you understand quantum physics. Your chart basically says that unless the US of 2004 has the same economy as that of 1940 or so we are in a bubble. You need a chart that zeros out the normal year-to-year increases due to inflation, productivity growth, population growth and retained profits- hence the use of log chart.

That is why the doomers go for the charts of nominal prices and everyone else uses log prices. With the log chart, that scary, upward swooping shape you get with any normal (non-bubble) compounded growth become a straight, rising line. With the log chart, you can see 'real' bubbles apart from cases of normal growth. The Sornette book (Why Stock Markets Crash) gives valid statistical tests for bubble conditions.

You compatriot Didier Sornette says we are not longer in an anti-bubble regime. We are definitely not in a bubble any more either. The doomer case declines day by day.

"WE FIND FOR THE FIRST TIME A STRONG PROBABILITY THAT THE ANTIBUBBLE DOCUMENTED HERE MAY HAVE ENDED."

http://www.ess.ucla.edu/faculty/sornette/prediction/index.asp#prediction
 
Remember...things are always relative...what would be the comparison of other countries...at the time...

What is very strange is that true wealth is not rewarded at this time in terms of risk free options...such as in 1980...

The 90 day t-bill has fallen from over 20% to less than 1%...

The parents of the baby boomers are at this time...not rewarded...Counting on the $300,000 to add $21,000...now adds $2400.... They are simply exhausting their wealth...and their children's wealth...

The next move by the fed...which they have already begun to take action...is to cause inflation..to again create this reward...which also will bail out the housing value loan issues that are looming....

Indeed...what do the dollars chase...other countries such as Indonesia have watched their total system fail in 1998...interest rates 63%...currency 12,000....now 14%..currency 8,000....

Failure...then...deals with the percentage of those without adequacy with respect to time and the rate of devaluation...however when you combine that interest and currency on the 1998 to current time frame....wealth was rewarded many times over the US players...same for Brazil...Argentina...soon to be the Dominican Republic....

Calamities...volatility....provide the opportunities for wealth...staidness provides stale white bread...

The number of dollars being drastically increased in itself...will create grander opportunities for future larger index moves...
 
I don't really agree with Harry, but there are some wacky anomalies with the current Dow Jones and the Dow Jones from 1929-1933 that are hard to ignore. The thing that concerns me the most is something I just realized in the last couple months.


Look at the attached chart (bear in mind that I had to find a chart that showed the Great Depression up close, and the only chart I could find was this chart which compares the Dow of those years with interest rates. So please ignore the interest rate info, although I certainly agree that the slow change in interest rates is a huge difference between the 30's and today).

Notice the period of time that has the ellipse around it. On a different time scale this period looks very similar to what we've experienced over the past year.

Originally I did not notice this period. I always thought the Dow had a steady drop from the 9/29 high to the 7/32 low with several bear rallies. This is a time in which the the Dow had dropped from 386 to around 200 and rallied back to around 300 (a massive bear rally in percentage terms).

Could that be anything like dropping from a top of 11,900 to a low around 7200 and then rallying back to 10600?

I don't know, it's scary.
 

Attachments

Here is a detailed graph of the Dow of then and now side by side:

Zeal1929Big.gif



But I remember that the author of the above mentioned that he had to do something to the data to get them to align properly (timewise). I don't remember exactly what but it was basically to take out a distortion of some sort (perhaps it was that they traded partially on Sat or something like that).

Anyway, hope that helps.
 
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