Stocks' bottom in sight. Again.

弹棉花

NEW YORK (MarketWatch) -- We'll say it again: A bear-market bottom may be in sight.

We base this opinion on the work of Prof. Jeremy Siegel of the University of Pennsylvania's Wharton School, author of the classic book, "Stocks For the Long-Run." Note: Siegel doesn't necessarily agree with our conclusions. See Siegel's Website

 

Siegel's most famous finding: Stocks have accumulated on average in real terms at a remarkably consistent 7% or so over the past 200 years. Shown on a log scale this consistent trend appears as a straight line.

 

In prior MarketWatch columns, we have looked at stocks relative to this long-term trend line. When we last looked, we found stocks were down 38% below trend, around the levels seen at historic bear market bottoms in 1981 (40% below trend), 1974 (41% below trend) and 1932 (42% below trend).

 

This was an unpopular conclusion. See Oct. 23 column and angry comment thread

But, hey, the world did not in fact come to an end in October. The Dow Jones Industrial Average has bumped along in the 8,000-9,000 range since then.

 

Siegel's year-end data is now out.

 

Adjusted to Jan. 14, Siegel's broad measure of stocks is now down even further, to 43.1% below trend.

 

That means that this bear market is now actually slightly worse that the 1972-1974 bear market, which was heralded as a once-in-a-generation experience.

 

But it was 35 years ago. And that's a Wall Street generation.

 

Bottom line: In two centuries, Siegel's year-end data has never shown the stock market further below trend than it is today.

 

Of course, that doesn't mean traders can breathe easily.

 

We're acutely aware of this because we've been updating this chart on MarketWatch for nearly five years.

 

When we first looked, stocks were just 14.7% below trend. See April 16, 2003, column.

 

That was not a typical bear market low, in sharp contrast to the very typical bull market high (85% above trend) in 1999. So we concluded stocks had little room to zoom.

 

And stocks did bumble along in the Dow 10,000-11,000 trading range for another couple of years. But then they did zoom, exceeding 14,000 in late 2007.

 

We continued to point out that stocks had not made the sort of typical bottom that historical precedent suggested should follow a typical top. See Feb. 23, 2007, column.

We concluded then: "Stocks are not low by historic standards. They can go up, but they can't go all that far before getting to unsustainable levels. And, someday, they have to go down."

 

Now, stocks have indeed gone down. But we have to admit that a lot of people made a lot of money in the interim. They can't have lost it all in the Crash of 2008. Can they?

 

Nevertheless, our conclusion today mirrors what we said back in 2007: Stocks are now (finally) low by historic standards. They can move sideways or go lower, perhaps by quite a lot. But they can't go all that much lower before getting to unsustainable depths.

 

And, someday, they have to go up.

ULTRAETF

Long-Run.

Fan8an

thanks

小兵

zzzzzh

maserati

Jeremy Siegel? He is such a dumb ass and was famously bullish in 2000 just as the stock market was collapsing. If you listened to him, you would have lost your shirt. He's been bashing about China's economic growth for a long time and appraised india's so called democratic model. I don't know why Wharton still keeps him.

弹棉花

原帖由 maserati 于 2009-1-19 10:27 发表 Jeremy Siegel? He is such a dumb ass and was famously bullish in 2000 just as the stock market was collapsing. If you listened to him, you would have lost your shirt. He's been bashing about China's e ...

It’s just another way of evaluating the market. Even if he is right, valuation seldom plays a major role in determining market direction, especially in the short term.  

weigoodone01

meow

2brakefirst

So that this post should not be 置顶. It seems misleading.

原帖由 maserati 于 2009-1-19 10:27 发表 Jeremy Siegel? He is such a dumb ass and was famously bullish in 2000 just as the stock market was collapsing. If you listened to him, you would have lost your shirt. He's been bashing about China's e ...

弹棉花

原帖由 2brakefirst 于 2009-1-19 15:27 发表 So that this post should not be 置顶. It seems misleading.

There are always different opinions in the stock market. No one can guarantee that his or her opinion is absolutely correct until the market proves it, and being wrong in the past does not necessarily mean that he is wrong this time.

bayliner1979

just curious, where did he get the "trendline"? looks like a random pick and full of shits.

弹棉花

原帖由 bayliner1979 于 2009-1-19 16:40 发表 just curious, where did he get the "trendline"? looks like a random pick and full of shits.

It says in the article, stock market returns on a log scale. You might be able to get some more details on his website.

kellyluo

Thank you for sharing. It is good to know the market position from another perspective.

peachseed

7%的理论根据是什么？如果仅仅是fit data，那基于这个“observation”的所有结论都没有意义了。

弹棉花

原帖由 kellyluo 于 2009-1-19 18:26 发表 Thank you for sharing. It is good to know the market position from another perspective.

You are very welcome.

弹棉花

原帖由 peachseed 于 2009-1-19 18:34 发表 7%的理论根据是什么？如果仅仅是fit data，那基于这个“observation”的所有结论都没有意义了。

我粗略地查了一下，网上关于这个结论的资料不是很多，我猜测这里的 real term 是指 inflation adjusted。

like2swing

pennbrook

Prof. Jeremy Siegel is great for investors, read his " the future of investors", a great book for long term investment. Also, website: http://www.jeremysiegel.com/

弹棉花

原帖由 pennbrook 于 2009-1-19 20:45 发表 Prof. Jeremy Siegel is great for investors, read his " the future of investors", a great book for long term investment. Also, website: http://www.jeremysiegel.com/

I don’t know him very well, but his name is quite frequently mentioned on some major financial sites. He has also written another book “Stocks for the long run”, and The Washington Post called it one of the 10 best investment books of all time.