Investing Wisely - Compare the Peak of the Depression to the Dot Com Peak!

By: Steve Bauer | Fri, Dec 24, 2010
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Brief Introduction

My focus is "Investing Wisely", e.g. taking advantage of the Bull / Bear Cycles as they occur within the overall marketplace. Integrating modern analytics within these Cycles, means maintaining a process of the thorough fundamental, technical and consensus analysis of the marketplace. I believe that this discipline provides the necessary clarity regarding the Rotation that most all Companies goes through - from favorable times to unfavorable times and perhaps back again.


The chart below (long term viewpoint) compares the inflation-adjusted S&P 500 performance during the current secular bear market (the inflation-adjusted S&P 500 peaked in 2000) (i.e. Dot Com.) to the inflation-adjusted S&P 500 performance following the peak of 1929 (i.e. during the Great Depression).

Both the 2000 to present S&P 500 (blue line) and the 1929-1949 S&P 500 (gray line) having been normalized to where each of their peaks began in year zero and at the $100 level.

What is of interest is not that both markets had declines and rallies of equal magnitude -- they did not. However, they look like each other - don't they?

What is also of interest is that both bear markets have tended to head in the same direction for approximately the same amount of time. For example, both bear markets suffered through a major decline during the first 2 1/2 years and then rallied sharply into year seven. Both markets then formed a major peak in year seven and declined sharply in the middle of the eighth year. Both bear markets have continued to follow a similar path following the eighth year trough. That's worth pondering for awhile - Isn't it?

If this similarity in the direction were to continue, the current stock market rally would need to close out (terminate) in fairly short order. And if it then continued to track the Depression chart, as it has been, the stock market is in deep, deep trouble for a long while.

My Wrap:

It is important that this Article not be viewed as a recommendation for the purchase or short sale of any Company or ETF at this time. Favorable to the process of "Investing Wisely", it is intended to suggest that - weighting fundamental, technical and consensus data is very helpful to identify Inflection Points as the marketplace cycles from Bull to Bear and back again over and over and over again.

It is this continuous "Cycling" that presents us all with clear Inflections Points.

So the good news is that - we are given frequent and conservative (low risk) opportunities to "Invest Wisely" or to simple hold cash.

Source & Data Information: BarCharts, Bauer Capital Management, Bloomberg, Chart of the Day, CNN Money, Fortune, Harver, MSN Financial,, Seeking Alpha, StockCharts, Reuters, Yahoo Financial, Worden.

My Current Bottom Line:

* I am holding 100% Bearish Positions.

* Patience and Discipline - waiting for my list of Fundamental, Consensus and Technical - "Conformations" to all fall into place is part of the necessary process for "Investing Wisely".

* Inflection Points historically have occurred historically about three - five times per annum. We have already had 5 clear and meaningful Inflection Points so far this year. Investing at or around the time of my Inflection Points has proven to be a profitable way to invest.

* In my late August posting, I said: "The Market is now (very possible) setting up for another meaningful but likely (short in duration) Rally!" It certainly did rally!

* Now it looks just the opposite. One of these days this choppy and bifurcated market (late April to date) will do something meaningful and the next possibility of that is a meaningful Pullback.

* High Volatility may not currently be showing up on VIX due to the current rally - but VIX being an Inverse Indicator, I can assure you that it is clearly - alive and well.

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Thank you for your time in reading my "stuff" and continued interest in my work.

Smile, have Fun - "Investing Wisely",



Steve Bauer

Author: Steve Bauer

Steven H. Bauer, Ph.D.

Steve Bauer

Steve has several degrees, i.e. post graduate degrees and doctorate and a great deal of (too much) continued education. For seven years, he did a stent as a University Professor of Finance and Economics.

Dr. Bauer also writes for His articles can be viewed at:

He owned a privately held asset management firm and managed individual investor and corporate accounts as a Registered Investment Advisor - for over 40 years.

Professionally he is a financial analyst and private asset manager / consultant / mentor.

Steve can be reached at

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