Monday, April 27, 2009

Hulbert: 25 Years to Bounce Back? Try 4½

Mark Hulbert once again busts a myth that has been making the rounds. The myth is that it took investors 25 years to get back what they lost in the crash of 1929 - in fact I've attached a chart showing what some are using to demonstrate that investing in stocks right now is hopeless.

In reality it took only 4.5 years (despite an 83% drop). How is this possible - doesn't the chart tell the whole story? It certainly does not. The chart excludes dividends and the fact that we had a severe deflation (the opposite of inflation). I encourage you to read the story, its short, easy to understand and worth your time.

Having said that.....I'm not confident of a four and a half year recovery. As I've always stated, I don't know where the market will go, but I still see a lot of risk in the financial sector as the massive losses are hidden but will have to be dealt with at some point.

Still, this is a great article.

Scott Dauenhauer CFP, MSFP, AIF