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Mix-Ansicht- The long term patience of investors is beginning to undergo its most dramatic - littlesoros, 12.12.2001, 10:46
The long term patience of investors is beginning to undergo its most dramatic
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In 1987, the pain from the Crash was over in three brief months as the Dow began to rocket up in early December. In 1990, investor's suffering from the Iraqi incursion was short-lived. As soon as the U.S. invasion began in January 1991, stocks were again headed up. Although the LTCM scandal in the summer of 1998 scared investors, by October, the Fed's rescue had set the stage for another tremendous rebound in prices.
Contrast these recent events to the long underperformance of stocks after the 1929 peak in manic activity. Looking at the weekly charts, it took 25 years, 2 months and 13 days before the Dow Industrials returned to the 1929 high. By February 1966, the small investor had finally returned in large numbers and recorded a near first ever encounter with the magic 1000 mark on the Dow. It took 6 years, 9 months and 6 days before the second attempt finally succeeded. After that top, it took another 9 years exactly for the Dow to top the 1973 high.
Periods of long under-performance are catalyzed by a secular shift in perceptions by investors. When values are obvious or prices rise for an extended period of time (for any reason), investors are willing to shift into riskier stocks from the relative safety of their personal savings. However, when values are not apparent or when prices fall for an extended period of time, the opposite is true. Investors shift from riskier stock assets and back into relative safety.
At present, the SPX would have to rally by 21.4% to achieve the three-year dollar average cost of investing in the S&P 500. Investors are so far behind the eight-ball that they are likely growing very impatient with the"promise" of stocks accorded by Wall Street firms.
Bear markets always follow bull markets. Secular bear markets always follow secular bull markets. The secular bull market lasted from August of 1982 to March of 2001 - 18 years and 7 months. The secular bear market has been in place for only 1 year and 8 months. The long term investor is just beginning to feel the pain.
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