A Birthday for the Bull Market

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Welcome to today’s very special “Birthday Party Edition” of The Daily Reckoning! Our little bull market is two years old today… They grow up so fast! To begin the festivities, please put on your party hats and click on the following link:

Two years old and just as cute a button!… Yessirree, that’s our little bull market!

As of today, the S&P 500 Index has produced a dazzling total return of 103% during the last 24 months. The NASDAQ, for its part, has delivered a total return of 121%. Those are some great, big numbers for an itty- bitty bull market.

In fact, as The Wall Street Journal recently observed, the S&P 500 Index doubled from its March 2009 low in just 707 days – the fastest doubling of the S&P since 1936. Back then, it took a mere 501 days. The Dow Jones Industrial Average has not quite doubled, but almost:

“The chart above looks eerily similar to a chart of the Dow from September 1934 through October 1936,” our colleagues at The 5-Minute Forecast relate. “In just over two years, the Dow doubled from 87 to 174:

“What the Journal failed to note was what happened after that 100% climb in 1936. Let’s widen the scope a bit.

“Ugh… After reaching that double in October 1936, the Dow topped out in March 1937 at 194…pulled back…came within about 5% of that top again in August 1937…and then plunged by March 1938 back to where it was three years before.

“This was the infamous ‘Depression within the Depression.’ As went the stock market, so went the economy. Whatever gains had been goosed by New Deal spending evaporated. By 1939, Treasury Secretary Henry Morgenthau conceded to Congress: ‘We are spending more money than we have ever spent before, and it does not work… After eight years of this administration, we have just as much unemployment as when we started…and an enormous debt, to boot.'”

But the stock market’s tale of woe did not end in 1939. By April of 1942, the Dow had surrendered more than half its value from the 1937 top. Shortly after World War II ended, the Dow briefly revisited its 1937 high, before slumping anew and languishing for several more years.

Bottom line: The Dow did not break above its 1937 high, for good, until December 1949! We’re not saying history is destined to repeat itself. But the parallels are pretty obvious, and ominous.

Happy Birthday, Bull Market!

Regards,

Eric Fry
For Daily Reckoning Australia

Eric J. Fry
Eric J. Fry has been a specialist in international equities since the early 1980s. He was a professional portfolio manager for more than 10 years, specializing in international investment strategies and short- selling. Mr. Fry launched the sometimes-abrasive, mostly entertaining and always insightful Rude Awakening.
Eric J. Fry

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Comments

  1. Hmm. Looks like a black Friday looming. I’m not gonna look.

    Reply
  2. Comment by Lachlan on 11 March 2011:

    Hmm. Looks like a black Friday looming. I’m not gonna look.

    Hope your wrong… I am expecting it but not until later in the year…

    Stillgotshoeson
    March 11, 2011
    Reply
  3. You might recall about a month ago I said if I was a stock market trader (and I’m not) I’d probably be taking some profits right about now. Hope I’m wrong.

    Reply
  4. Comment by Ned S on 11 March 2011:

    You might recall about a month ago I said if I was a stock market trader (and I’m not) I’d probably be taking some profits right about now. Hope I’m wrong.

    Glad I sold of Oz a while back like I did at $1.80, they are in the $1.40’s now
    Should have followed Lachlans lead on our F’s though, whilst still in front on my purchase price, profit is nearly halved.
    My Bolivian Gold Miner is holding steady at purchase price

    My watchlist is a see of red arrows.. A couple of them have hit my buy price.

    Stillgotshoeson
    March 11, 2011
    Reply
  5. From the Financial Review.

    Market Today
    Shares drop 1.2pc on global growth concerns

    The local sharemarket fell over 1 per cent at the open on Friday, as concerns about global growth knocked equities around the world, with US stocks falling almost 2 per cent.

    I have been on the “no growth concerns” wagon for a while now, it was all about the numbers and the numbers did not add up.. Thought we had a little more time though, we still might.. hopefully this is just a dip, one of many in a series of rises and falls we will see on our way to a new low.

    Stillgotshoeson
    March 11, 2011
    Reply
  6. Lots of ways they could spin it Shoes – I’m half tempted to look at the ‘good news’ (US foreclosures down 27% yoy in Feb) and conclude the speculators are speculating that Bubbles Bernanke just could take some of their cheap money off them soon. (QEII is set to expire at the end of June I gather?) Anyway, some unsettling times for the Oz buck and our stock market whichever way one looks at it maybe?

    Reply
  7. ” hopefully this is just a dip”
    Me too Shoe :)
    I’m in the no new low camp Shoes but either way it goes I’m sticking with inflation, the Fed to print or die, the markets too important for them not to manipulate. Commods and PMs should make nominal and real returns in the early/mid phase of a melt up. If someone doesn’t stop the Fed before it goes completely hyper I would guess stocks in the later phase will make negative real returns. I think there is plenty of time to do well on stocks though.
    Made a silly mistake last week talking to someone on the phone as I sold my portion of FML….suffice to say I have none now. Had a minor spew. I wanted to hold those for a double or triple so I could brag :)
    Plenty other fish in the sea I guess.

    Reply
  8. Fair technical support below the AUD Ned although these currencies are prone to violent big moves :( ….if a sell off occurs a resumption of the AUD nominal bull market will remain in tact though for mine. Commods are better than paper though at some future stage it may dawn that the AUD is…still…paper and it can be abused.

    Reply
  9. Bought into Alchemy and Westgold last week shoes with ALY retesting support. Figured if it went through there was little downside left anyhow and could trigger a nice rally. Suffice to say it broke down.

    Reply
  10. Comment by Lachlan on 11 March 2011:

    ” hopefully this is just a dip”
    Me too Shoe :)
    I’m in the no new low camp Shoes but either way it goes I’m sticking with inflation, the Fed to print or die

    Don’t get me wrong, I see money to be made still in shares (the right ones of course ;) ) but I still forsee a big mark down in the future.. I fully expect a <5000 DOW and <3000 All Ords

    Comment by Lachlan on 11 March 2011:

    Commods are better than paper though at some future stage it may dawn that the AUD is…still…paper and it can be abused.

    I agree and at some point the Aussie is going to be dumped.. This will be great for Gold in AUD tho :)
    Not good for importers and our local fuel price, good for exporters if there is any country buying at that stage…

    FML have had a big drop, tempted to increase holding.
    AVB hit my buy price. Bought 200000.

    Stillgotshoeson
    March 11, 2011
    Reply
  11. “This will be great for Gold in AUD tho ”
    Paper vs gold…no contest. Give it all time though since AUD has superior qualities in this world of relative/floating valuation. Give it time. I’ll be waiting patiently to convert into land. I do have to be patient though, grrrr.

    Crystal ball could be way off but at least one scenario for FML would be a bounce off approx 8ish which is a decent support and then on through maybe past your 12 target Shoes. Very tempted to buy myself. Looking at cycles last high spikes were 00, 03 and 07….its now 2011. Could be another here but no guarantees. Your fundamentals based targets seemed to agree…
    Anyhow I reckon you’ll be a winner for holding at very least. If I’m wrong then, “I know nothink” :)

    Reply
  12. Lachlan: “I’ll be waiting patiently to convert into land.”

    Good move. Good luck, Lachlan!-

    Reply
  13. Comment by Lachlan on 11 March 2011:

    I wanted to hold those for a double or triple so I could brag

    Doubles are good going, triples are for sure worth a brag ;)

    Stillgotshoeson
    March 11, 2011
    Reply
  14. http://www.heraldsun.com.au/business/job-slump-puts-a-lid-on-rates/story-e6frfh4f-1226019345428

    “There are clear signs the Australian economy is losing momentum,” he said.

    “Jobs are now falling, adding to data showing stagnant retail spending, weak housing market and contracting activity in (the) manufacturing, services and construction sectors.

    Start of sidebar. Skip to end of sidebar.

    End of sidebar. Return to start of sidebar.

    “The rapid-fire rate hikes and sluggish consumer activity is starting to show cracks in the labour market data.”

    Stillgotshoeson
    March 11, 2011
    Reply
  15. I’d have been disappointed if you didn’t say that BP ;) It’s a long road but maybe more satisfying the hard way.

    Bought back FML @ 8c and also a bid on a South American silver explorer which I’ll tell you later Shoes. I’m not sure if the Diggers may be tipping it although I think they have a producer anyhow so it probably cant be. They sent me an email this morning advertising their secret. I did some research on that area though to come up with my explorer. Very rich silver that part of the world and other benefits also.

    Reply
  16. Seems to be a solid support level around 8 for FML… On a fundamentals basis I put a maximum price of 32 cents on FML.. There is just too many shares on the books
    for them to go any higher unless they hit some signifacant gold reserves on the other tenements or the Gold price goes balistic* at some point
    *possible, even likely into the future but my FML holdings will be long sold by then I am sure.
    12 cents is still my short term target… good results from Treasure Island drilling should give them a boost, gold holding above $1400 is good as well.

    AYN were on my watchlist as a silver play at around 4 cents… they had a big move up ( I had none) trading around 6 cents at present 50 million ounce reserve

    Stillgotshoeson
    March 11, 2011
    Reply
  17. @Ned

    Gladstone may be a go.. We have been shortlisted, Boss is going up for a meet and greet.

    Stillgotshoeson
    March 11, 2011
    Reply
  18. Looking hopeful then Shoes. Keep us posted. If you should happen to lob in Brissie for any reason we can arrange a grog and a yak! Cheers.

    Reply
  19. Lachlan: “Fair technical support below the AUD Ned although these currencies are prone to violent big moves :( ”

    At the moment I’d like to think 0.85 USD will hold it Lachlan – If it goes below 0.80 I’ll probably be tempted to start thinking the ‘end of the world’ is coming again! :)

    Reply
  20. Comment by Ned S on 12 March 2011:

    Lachlan: “Fair technical support below the AUD Ned although these currencies are prone to violent big moves :( ”

    At the moment I’d like to think 0.85 USD will hold it Lachlan – If it goes below 0.80 I’ll probably be tempted to start thinking the ‘end of the world’ is coming again! :)

    When China implodes, think 60’s maybe even 50’s for the AUD

    Stillgotshoeson
    March 12, 2011
    Reply
  21. QE cannot stop and tax receipts will never be enough.
    Monetising debt and a host of other data fudges and cover ups is modern Weimar. Is anyone likely to stop this?.

    “speculation that the Fed had achieved its goal of stimulating an organic reflation in the shadow banking system at which point it would be able to end QE and hand off releveraging over to the private sector were premature”

    http://www.zerohedge.com/article/440-billion-drop-shadow-and-conventional-banking-system-liabilities-q3-gives-bernanke-carte-

    If human nature were not what it is then maybe this could stop tomorrow. The losers could calmly take their loss. We’d accept the suffering and rebuilding for a time. But we’re terrified of the prospect. We firm our grip until calamity takes over.

    Reply
  22. My markets 10cents.
    In round figures, sp200 @ 4600 may be support for a bounce to 4800 before short sellers take up or add positions. Not my game since last May.
    Next stop down would be 4500. If it gives out then a sharper falls to around 4000 and 3700.
    Otherwise above mentioned shorts may get squeezed and a close above 5000 would be bullish.
    3700 giving way, odds will be to go to a lower than Mar 09 low. In this corrective phase now under way I guess 3700 or thereabouts will hold if the upper supports give out. Maybe a flash crash to this point before turning.

    The Dow to hold above 11000 approx. Once again maybe to arrive there rather quickly.

    Reply
  23. should be dow above 11500

    Reply

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