A Birthday for the Bull Market

by Eric Fry.

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:

Dow Performance Since its March 2009 Low

“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:

Dow Performance, Sept. 1934-Oct. 1936

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

Dow Performance, Sept. 1934-March 1938

“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!

Eric Fry
for The Daily Reckoning

Eric J. Fry, Agora Financial's Editorial Director, has been a specialist in international equities for nearly two decades. He was a professional portfolio manager for more than 10 years, specializing in international investment strategies and short-selling.  Following his successes in professional money management, Mr. Fry joined the Wall Street-based publishing operations of James Grant, editor of the prestigious Grant's Interest Rate Observer. Working alongside Grant, Mr. Fry produced Grant's International and Apogee Research, institutional research products dedicated to international investment opportunities and short selling. 

Mr. Fry subsequently joined Agora Inc., as Editorial Director. In this role, Mr. Fry  supervises the editorial and research processes of numerous investment letters and services. Mr. Fry also publishes investment insights and commentary under his own byline as Editor of The Daily Reckoning. Mr. Fry authored the first comprehensive guide to investing internationally with American Depository Receipts.  His views and investment insights have appeared in numerous publications including Time, Barron's, Wall Street Journal, International Herald Tribune, Business Week, USA Today, Los Angeles Times and Money.

  • Steve K

    This truly is a “bull” market. B.S., that is. Essentially, from the day the markets tanked after the House initially vote down TARP, until it finally blows up in everyone’s face, we are watching an exercise in financial puppetry, with the multinational corporations, FED and those quite ironically termed our “representatives” working to transfer as much wealth as they possibly can to the elite class before they try to take the party global with the new, improved, fiat currency. Only Chuck seems to think the Chinese have other ideas in that regard…. but there has to be a conflict much bigger than we’ve been in recently to pull it off… Hooyah!!

    Don’t worry, our mainstream media will keep us informed…Journalism and all that.

    Bill was going to write about retreat properties, I believe… productive land etc… Bill?

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