A 1932-Like Decline

[RedEarth]

With today’s plunge in the stock market, the Standard & Poor’s 500-stock index has now fallen 42 percent over the last year. Just how bad is that?

It’s nearly as bad as one terrible 12-month period from late 1973 to late 1974. Other than that, it’s the worst decline since 1932.

These historical comparisons are best done in real — that is, inflation-adjusted — terms, so that’s what we will use from here. In real terms, the decline since Oct. 9, 2007, has been about 45 percent. From the end of September 1973 to the end of September 1974, the S.&P. 500 dropped 48 percent.

Robert Shiller, an economist, keeps stock-market data going back to 1871. The only other 12-month periods worse than the current one all came in 1932. In the early months of 1932, stocks were trading for about 45 percent to 55 percent less than they had been a year before. And then they kept falling.

The worst 12-month period happened between June 1931 and June 1932, when the stocks fell 62 percent. (Mr. Shiller’s data is monthly, so there was probably a 365-day period that was slightly worse than this.)

Earlier this week, I mentioned that the market was closing in on a dubious milestone: having fallen more than 50 percent from its inflation-adjusted peak, which came in August 2000. This afternoon, it blew through that milestone. It’s now 53 percent lower than its peak.

This is the third great bear market of the last century.

http://economix.blogs.nytimes.com/2008/10/09/a-1932-like-decline/

[AndyA]

1. Score another achievement for Bush's legacy!

Not only the worst pResident ever, but likely the most hated once he leaves office.

[izquierdista]

2. Can he do it?

Can he actually do worse than Nixon during Watergate?? :applause:

[Warpy]

3. My dad had ice water in his veins in the early 70s

and told me that terrible years like that one happened periodically to shake out all the weak investors and that the worst thing to do was join the panic and cash out.

He was hit with early retirement in 1973 along with the crash.

My folks survived and so will I. So will you if you don't panic.

[melody]

4. Well said n/t