Comments on: History Lessons On Recessions http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/ Mutual Funds, Investing, Retirement, Economy, Personal Finance Fri, 12 Mar 2010 06:35:41 +0000 http://wordpress.org/?v=2.3.1 By: Penelope http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-497 Penelope Tue, 22 Jan 2008 03:25:13 +0000 http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-497 The market discounts the future. The WSJ article draws misleading conclusions that recessions aren't always bad for stocks because the authors only look at returns DURING the recession, completely ignoring what happened just beforehand. The same thing is happening today. The market is discounting a recession, but the damage to stock prices may be done by the time the economists conclude that we're in one (which we are). To say that the recession had no negative impact on stock prices would be clearly erroneous. The market discounts the future. The WSJ article draws misleading conclusions that recessions aren’t always bad for stocks because the authors only look at returns DURING the recession, completely ignoring what happened just beforehand.

The same thing is happening today. The market is discounting a recession, but the damage to stock prices may be done by the time the economists conclude that we’re in one (which we are). To say that the recession had no negative impact on stock prices would be clearly erroneous.

]]> By: Kurt Brouwer http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-495 Kurt Brouwer Tue, 22 Jan 2008 00:50:22 +0000 http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-495 Good point. However, of the nine recessions referenced in the article four had a drop of 27% or more. Five had a drop of 20% or less. The market is already down 15% from the high. So, in five of these cases, we would be at or near the bottom. I think you have to be careful with averages. For example, if a guy with a net worth of $1 walks in a room with Bill Gates, the average net worth of the room is $25 billion. However, the average net worth fell by 50% when he walked in. The point is that averages comprising nine events spanning 50 years do not mean a whole lot today. Good point. However, of the nine recessions referenced in the article four had a drop of 27% or more. Five had a drop of 20% or less. The market is already down 15% from the high. So, in five of these cases, we would be at or near the bottom. I think you have to be careful with averages. For example, if a guy with a net worth of $1 walks in a room with Bill Gates, the average net worth of the room is $25 billion. However, the average net worth fell by 50% when he walked in. The point is that averages comprising nine events spanning 50 years do not mean a whole lot today.

]]> By: Penelope http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-494 Penelope Mon, 21 Jan 2008 19:25:47 +0000 http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-494 A different timeframe yields dramatically different conclusions. From this week's Barron's: "Measured by the S&P 500's movements during the past nine recessions, the stock market has fallen on average of 25.60% from its peak prior to each downturn to its trough during the recession." http://online.barrons.com/article/SB120070189835701773.html?mod=9_0031_b_this_weeks_magazine_main&page=3 A different timeframe yields dramatically different conclusions. From this week’s Barron’s:
“Measured by the S&P 500’s movements during the past nine recessions, the stock market has fallen on average of 25.60% from its peak prior to each downturn to its trough during the recession.”
http://online.barrons.com/article/SB120070189835701773.html?mod=9_0031_b_this_weeks_magazine_main&page=3

]]> By: History Lessons On Recessions « Libertatem Amo http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-484 History Lessons On Recessions « Libertatem Amo Wed, 16 Jan 2008 03:44:50 +0000 http://www.fundmasteryblog.com/2008/01/14/history-lessons-on-recessions/#comment-484 [...] January 16, 2008 · No Comments If indeed the US is heading into a recession (which I doubt) it is important to look at past recessions and the effect they had on stocks.  History Lessons On Recessions [...] […] January 16, 2008 · No Comments If indeed the US is heading into a recession (which I doubt) it is important to look at past recessions and the effect they had on stocks.  History Lessons On Recessions […]

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