Category Archives: Rank

Bull Market Ranking

Slowly and deliberately, the bull market moves ever closer to the 1923 rank of 3rd place in the top 10 stock market recoveries.

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Let us consider the significance of the current market matching the rise of 1923.  In James Grant’s book titled The Forgotten Depression, Amazon has the following review:

“James Grant’s story of America’s last governmentally untreated depression: A bible for conservative economists, this ‘carefully researched history…makes difficult economic concepts easy to understand, and it deftly mixes major events with interesting vignettes’ (The Wall Street Journal).

“In 1920-1921, Woodrow Wilson and Warren G. Harding met a deep economic slump by seeming to ignore it, implementing policies that most twenty-first century economists would call backward. Confronted with plunging prices, wages, and employment, the government balanced the budget and, through the Federal Reserve, raised interest rates. No ‘stimulus’ was administered, and a powerful, job-filled recovery was under way by late 1921. Yet by 1929, the economy spiraled downward as the Hoover administration adopted the policies that Wilson and Harding had declined to put in place.

“In The Forgotten Depression, James Grant ‘makes a strong case against federal intervention during economic downturns’ (Pittsburgh Tribune Review), arguing that the well-intended White House-led campaign to prop up industrial wages helped turn a bad recession into America’s worst depression. He offers examples like this, and many others, as important strategies we can learn from the earlier depression and apply today and to the future. This is a powerful response to the prevailing notion of how to fight recession, and ‘Mr. Grant’s history lesson is one that all lawmakers could take to heart’ (Washington Times).”

The claim in Grant’s book is that the absence of market intervention will allow markets to correct and recover on their own.  Considering that the 1923 market rise was an outgrowth of the decline from 1920-1921 it is not surprising that the current market could increase as much as it has from the 2009 low. 

In fact, as we’ve continuously argued since February 2009, markets work in spite of government intervention. As highlighted in the chart above, with or without a Federal Reserve, the current stock market recovery is not unusual and has the potential to increase to the 1929 (29,207.53) or 1987 (44,474.68) recovery levels.

Bull Market Ranking

Have we reached the top in the market?  We don’t know.  However, what we do know is that the current market run from March 9, 2009 peaked on January 26, 2018 at 26,616.74 for a gain of +312.66%.  Among the top ten bull market runs, since 1835, this would rank as number four.

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Fastest 1,000 Points or Slowest +4.17%?

Saw this headline and almost did a spit-take.

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Fortune Magazine claimed to “fact check” whether history shows that this was the fastest 1,000 points.

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Sadly, Fortune never actually compares the current +4.17% gains to any other in the 122-year history of the DJIA.   You have to wonder if Fortune included the 15 years after 1972, when the Dow finally crossed over 2,000. 

To their credit, Fortune does say, “…the Dow has grown larger over time, meaning a 1,000 point move today is less significant percentage-wise compared to such a movement 20 years earlier.

Again, for the Dow Jones Industrial Average (DJIA), going from 24,000 to 25,000 is equal a +4.17% change. As noted in Fortune, on a percentage basis, +4.17% isn’t much.  However, we have listed the gains above +4.18%  that took less than 34 calendar days since 1896.  Although there are too many to show, we’ve only relegated this to the last 45 incidents from the lowest percentage gain excluding multiple events in the same year.

Date DJIA % change days
July 21, 1897 4.21% 10
June 29, 1938 4.21% 1
November 27, 1905 4.22% 1
April 5, 2001 4.23% 1
November 30, 2011 4.24% 1
March 4, 1926 4.38% 1
December 24, 1902 4.43% 8
November 1, 1978 4.46% 1
November 2, 1904 4.50% 7
November 26, 1963 4.50% 1
January 15, 1934 4.52% 1
January 17, 1991 4.57% 1
February 9, 1931 4.62% 1
June 19, 1930 4.63% 1
May 29, 1962 4.69% 1
October 28, 1997 4.71% 1
October 9, 1974 4.71% 1
June 12, 1940 4.73% 1
February 11, 2010 4.75% 3
August 17, 1982 4.90% 1
March 16, 2000 4.93% 1
November 16, 1933 4.93% 1
November 12, 1896 4.93% 8
September 8, 1998 4.98% 1
May 17, 1915 5.02% 1
May 27, 1970 5.08% 1
October 16, 1903 5.11% 1
January 27, 1899 5.36% 20
August 17, 1898 5.41% 12
August 11, 1909 5.43% 22
December 22, 1916 5.47% 1
November 22, 1920 5.51% 1
February 5, 1917 5.77% 1
October 20, 1987 5.88% 1
October 20, 1937 6.08% 1
January 19, 1906 6.08% 14
October 7, 1929 6.32% 1
July 24, 2002 6.35% 1
May 10, 1901 6.37% 1
March 15, 1907 6.69% 1
March 23, 2009 6.84% 1
January 6, 1932 7.12% 1
November 10, 1911 8.27% 14
January 14, 1908 8.61% 11
September 5, 1939 9.52% 1

Bull Market Ranking

Since January 2011, we have advocated against the claim that the Federal Reserve was responsible for the rise in the stock market.  Our theory has always been based on the precedent of stock market data which can be traced to periods in American history when there was no central bank.

In February 2014, we compiled enough of the necessary stock market data to show that:

“The most important concept that should be taken away from all this data is that a central bank did not exist from 1836-1914. There was no way to ascribe the gains of the market to the Federal Reserve. All iterations of a central bank with the First Bank of the United States (1791-1811) and the Second Bank of the United States (1816-1836) did not have any effect on the data sets that we have provided from the period of 1836 to 1914. In order for the claim that the current market run is based on the monetary policies of the Federal Reserve, we’d need to be able to demonstrate that the stock market would have behaved differently without the existence of a Federal Reserve (February 17, 2014).”

In that same February 2014 posting, we listed the market percentage gains that were experienced when there was no central bank in place.  We averaged the gains in the seven market cycles while having no Federal Reserve and showed that the average gain would have brought the Dow Jones Industrial Average to 17,500.  However, as time has passed and the Dow has increased, we’ve shown what the next level the Dow would need to go to in order to exceed the next highest bull market (on a percentage basis).  In November 2014, we said:

“If the Dow were to go to the extreme of rebounds with no Fed (1857-1864), then in theory the index could climb as high as 24,840 (November 2014).”

On December 18, 2017, the Dow Jones Industrial Average increased to the 24,840 level on an intraday basis. The gain from the 6,450 level is approximately +285.11%.  We think that the stock market’s ability to rise to the current level has been more about confidence in the economy and less about actions taken by the Federal Reserve.  Below we show the ranking of the current bull market to put the market action into perspective.

Dow Altimeter Review

In the period from 1920 to 1989, the Dow Jones Industrial Average would consistently be undervalued or overvalued at set Altimeter levels (15 and 30, respectively).  An investor could almost count on these general points to accumulate and sell stocks without fail.  Note the various dates when a “sell” or “buy” indication was given.  All points until after 1987 were useful indications for market under or over valuation.

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After 1987, the Altimeter for the Dow Jones Industrial Average started to change.  What has changed that made the Altimeter vary so much from the normal levels?  We think it has to do with the selection of companies that are included in the Dow Jones Industrial Average with less of an emphasis on dividend payments, lower dividend yields and lower relative payout ratios.  In addition, inclusion of companies like Visa, Apple, Microsoft, Intel and Cisco Systems has shifted the course of the index which might more appropriately reflect the changing nature of the U.S. economy, as seen in the chart below.

Stock Market Context is Invaluable

As market pundits either celebrate or examine the stock market crash of 1987, there comes point when all analysis becomes a form of paralysis. Some say a crash won’t happen again while others proclaim, almost daily since the 2009 low, that a crash is just around the corner.  When posed with such a question, we always ask, what is our point of reference?

To arrive at a point of reference, we read an article that says that the S&P 500 has had it “Too good, Too Long.”  We liked this reference point as it charts the S&P 500 from 1996 to 2017.  We decided to use the same number of trading days for the Dow Jones Industrial Average going backwards from the 1987 peak at 2,722.42, which led us to the beginning of 1966.  When you contrast the price activity of the S&P 500 against the Dow Jones Industrial Average over the two periods, we get a point of reference that is all too telling.

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Our observations of the market leading up to the the peak in the Dow Jones Industrial Average on August 25, 1987 contrasted with the S&P 500 since 1996 tells us a few things that need pointing out.

First, nothing that has happened in the exact same number of trading days between the two indexes is unique.  The Dow had declines of –35%, –44%, and –26% in the late-1960’s and 1970’s.  Likewise, the S&P 500 experienced declines of –49% and –56% in the period of late-1990’s and 2007-2009.

Second, the rise from the lows could be considered to be almost equal. If we take the low of 2009 for the S&P 500 and compare it to the corresponding low in the Dow Jones Industrial Average, based on the same number of trading days, we find that the increase in the S&P 500 is not unusual at this point as compared to the Dow.  From the 1978 low in the Dow, the index gained +266% to the 1987 peak.  The 2009 low in the S&P 500 Index the gain has been +278% so far.  If we take the ultimate low in the Dow Jones Industrial Average from 1974, the increase was +371%.  This puts the S&P 500 well within the range of “normal” for a market rise.

Third, looking at where the Dow Jones Industrial Average was and where it currently is, there is little to suggest that the action of the S&P 500 cannot go a significant distance above the current level with moderating declines in between.  Does the S&P 500 have to do in the future what the Dow Jones Industrial Average has done in the past?  Absolutely not!  However, looking at what has happened could help to put the coming decline in the market into proper context.  As our latest bull market ranking has demonstrated, there is still a lot of upside potential in this market. 

In reality, a market crash is always on the horizon. Also, when data is provided, if there is no context then there is no meaning or value. So, what should investors being doing now in preparation for the next crash? Our opinion is that investors should stockpile cash as the stock market increases.  Use that cash for when the next stock market decline ensues.  Educate yourself on investment values and be ready to hold your nose and buy those values at significant lows relative to prior peaks.

Bull Market Ranking

For anyone who claims that the current bull market is a Federal Reserve induced binge based on manipulated monetary policy, this market still has to exceed the bull market that followed the decline of 1852 before the non-central bank era bull markets could be legitimately ignored.  For those willing to look at the history of stock market recoveries, we present the top ten market recoveries from 1835 to 2017.

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