Meanwhile for those of you who missed the early part of this decade you can see all the carnage those of us "lucky enough" to be around enjoyed aka tuition aka death spiral. You can see how dramatic the drops were in such a short period of time in 00 (when we were still in denial stage - we had a big bounce in summer 00, before a 2nd free fall that year), and then in 01 when we broke down completely, and then the 278 days of 2002 that just killed whomever was left who was a 'growth investor'. Let me frame it for you:
- After the biggest bubble in decades we had 37% drop in 74 days in early spring 00.
- The market then put in a mini spike off that low, drawing back in the bulls (I'm raising my hand very high - guilty as charged) Correction over! Not so much. Over the next 169 days we lost 46%
- Then we had the January effect in 2001 (yee haw) Correction over! Not so much. Over the next 70 days we lost 43%.
- Then we had another late spring rally in 2001 (is this the end?) Correction over? No. Not over. We lost 38% over 122 days
- Then the market sucked us in with a 3 month + Santa Claus rally. Finally the bottom was reached... party time. Oops.
- Over the first 10 months of 2002 we lost 46%
So if this is another era we are entering, expect nice counter rallies of some serious magnitude within the greater context of a lot of dips. And on each counter rally we will wonder "was that the bottom?" And we won't know... until we look back 6 months later. By 2003 no one was expecting the market to ever go up again. But it did... and then its been straight up for 5 years. Easy street! Until now. And yes there were stocks that went up, during that time believe it or not (probably not on NASDAQ though). But it is as I've stated like a trout swimming upstream; some tough work to make any progress.
I do want to say... keep in mind, the action early this decade was in reflex to a much much more expensive market - the average NASDAQ stock had PE ratio >50 in early '00. We were nowhere near that valuation in this era. But certainly we could only be halfway through a correction? Or for all we know done. (I doubt that). I do also still think the small cap stocks will (when all is said and done), be the worse off, (this era's NASDAQ) - remember, if you are tied just to the US consumer without any international exposure... your situation is a lot more precarious.
2 comments:
Oh yes, i remember those times!!! well, double bottom give you a slight bounce, third time 1370, it slice through like butter. Like you said, it 's not always failed, but it did most of the time. So here we are, if i remember correctly, i wish i went on a 2 years vacation back in 2001, if your fundemental analysis is correct, i should take a long vacation again and not even attempt to play the bounce. Guilty as charge, i attempt to play the bounce this week, and get cut by thousand swords (fslr, spwr...)the layer in, and layer out is a death sentence. With a confirmed bear market cross, your whole strategy going out the windows, you should close the fund and give the money back to your investor, since you are 80% long, and focus fund, you will suffer the most, i remember very well, the best stock in 2000, fell the most, and yes, it will repeat this time. They will find reason to dump all the Agr, the oil, the infrastructure stock. The reason is easy, fund withdraw.
allright allright you convinced me! Nothing will ever go up for another half decade. Sell everything! :) Dive! Dive! Dive! Thankfully some macro trends won't end even if US consumers need to live within their means for the first time in 3 decades and our financial institutions are sold off piece meal to foreign markets. Anyhow it is not the destination, but the journey.
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