Anatomy of the bear: Lessons from Wall Street's Four Great Bottoms | stockbee

2/20/2009

Anatomy of the bear: Lessons from Wall Street's Four Great Bottoms

  • We are in a once in a lifetime bear market. Since 1825 this is the only second time market has fallen so much. You can look at it as a big problem or big opportunity. If you hold your nerves and preserve capital, you may have one of the biggest booms coming few years down the line. 
  • I have been reading the book Anatomy of the Bear: Lessons from Wall Street's Four Great Bottoms. In 1931  the market dropped 43%. 1932 was a very interesting year with  stomach churning moves. 
  • YearReturn
    192611.62%
    192737.49%
    192843.61%
    1929-8.42%
    1930-24.90%
    1931-43.34%
    1932-8.19%
    193353.99%
    1934-1.44%
    193547.67%
    193633.92%
    1937-35.03%
    193831.12%
      
  • The 8 % drop in 1932 does not show you the drama behind the move. The market dropped 57% before recovering complete move. Everyone talks about the 1932 drop of 43%, but no one talks about the 33% plus gains in 1933, 1935 and 1936. It is human nature to focus on bearish periods and misery. 

1 comment:

Charts and Coffee said...

good point. In a lot of ways, the surest bet is on volatility. It would not be surprising if this is a multi-year bear market to see a positive move this year or next year only to see it to collapse again a few years from now.

Sunday Night Coffee post is up - Analysis of the Market for the Coming Week - http://chartsandcoffee.blogspot.com/2009/02/sunday-night-coffee-22209.html