Where Are We In The Big Picture?

Of course we won't know the answer to the question of "where are we today in the big picture of this bear market" until it's over and we can look back at it. We can estimate where things will go. But every estimate is nothing more than a guess. The best gauge we probably have is to look at past recessions and bear markets.

Remember one of my favorite sayings especially as it pertains to the stock market... History doesn't necessarily repeat itself, but it often rhymes.

Take a look at this chart. http://www.stocktock.com/wp-content/uploads/2008/12/djia29crash1.gif

It's a month chart of the Dow from the 1921 thru 1940. Notice the big runup to the peak and then the big falloff? Well look closely at 1929. The peak and then the first dropoff point. Look familiar? Looks VERY much like our peak in October 2007 and the plunge we took this past October and November. In the chart, the Dow went from 400 to 200. A 50% haircut. From Oct 2007 to Nov 2008 we went from 14,100 to 7,500. Just shy of 50%.

Now, what I want you to pay particular attention to is that in 1930 there was a very nice rally from Dow 200 to 300. A 50% retracement. Bear market rallies can be very impressive. Then from 1930 thru 1932 the Dow went from 300 to 40.

Now, compare that to what I posted the other day of statements made by various "experts" during the initial downturn during that time.

http://www.gold-eagle.com/editorials_01/seymour062001pv.html

I bring this up only to try to stress to my family and friends that it is highly possible that we are nowhere near the end of this bear market.

There is no good news to be had in the near future. None that would be worthy of a true turnaround. Most people are still in denial that we're headed downward for a while. The deleveraging that still has to take place is beyond most peoples comprehension. From the banks to the common man. Overall we have leveraged beyond our means. We gambled that the good times would continue rolling and we bought more than we could afford to maintain thinking that the gravy train would go on forever.

I have come up with a couple of careers that should do well over the next couple of years or more... Insurance fraud investigator because as people become desperate, they'll either lie about items being stolen or when they can't make payments on their vehicles, they'll mysteriously disappear. The other career I see as being strong is auto mechanic. People are going to hang on to their cars longer than they used to and repairs will be inevitable.

This rally off the Nov 21 low may continue a little bit, but I don't think it'll last much longer. We'll have a drop soon and THEN we'll have what could be one of those 50% rallies. If you've held on to your stocks thus far, THAT will be when you want to get out. It'll be your last chance for quite a while.