A lessons from history.
10 January 2009, 11:59 AM
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A lessons from history.
Lesson from history 1.
Researching the British property market I read something about the 1890's property bust .. A lot of speculative building for rent and a lot of BTL and then the crash.
I read that in £ terms (ie not adjusted for inflation) the next time that prices went to 1896 levels was in 1950
.
That struck me as amazing but also what was amazing is that during that time price were pretty much static +1% one year and -1% the next.
If you suggested that might happen NOW people would role their eyes at you. But history tells us it's possible that some buyers who bought in 2007 may well have paid more for their house that it will be worth in 2032 when the mortgage is paid off ..
And in the stock market, remember it's always a long term investment. Well how do you define long term? How does 36 years and no overall growth grab you?
Lesson from history 2.
We recently celebrated the 100th anniversary of the start of the longest bear market in history.What’s that, you say never heard of the Crash of ‘06?
On January 19, 1906, the Dow peaked at 103. That date may not ring throughout the annals of history, but it was pretty important for the stock market.
The stock market soon crashed and by 1907, the Dow bottomed out at 53. Now that’s a bear market! None of this wussy 1.8% nonsense.
The Dow eventually recovered, but the January 19, 1906 high haunted the market for years to come. Even by 1914, the index was still in the 80’s when the exchange was shut down due to troubles "over there." Soon traders started doing business on the street, so the NYSE opened again that winter. And once again, the Dow plunged 53.
Nevertheless, the Great War was good business, and the Dow finally hit a new record of 103.11 on September 28, 1916. The Dow nearly got to 120 in 1919, but there were still some nasty corrections. The Dow fell below 70 in 1917 and again 1921.
By 1923, the market took off. The Dow broke 100 in 1924. In early 1928, it hit 200, and a year later it smashed through 300. Over the summer, the Dow peaked at 380.
Three years later, it was at 42.
After Pearl Harbour, there was another slow sell-off. On April 28, 1942, the Dow finally bottomed out at 92.92.
Researching the British property market I read something about the 1890's property bust .. A lot of speculative building for rent and a lot of BTL and then the crash.
I read that in £ terms (ie not adjusted for inflation) the next time that prices went to 1896 levels was in 1950
.That struck me as amazing but also what was amazing is that during that time price were pretty much static +1% one year and -1% the next.
If you suggested that might happen NOW people would role their eyes at you. But history tells us it's possible that some buyers who bought in 2007 may well have paid more for their house that it will be worth in 2032 when the mortgage is paid off ..
And in the stock market, remember it's always a long term investment. Well how do you define long term? How does 36 years and no overall growth grab you?
Lesson from history 2.
We recently celebrated the 100th anniversary of the start of the longest bear market in history.What’s that, you say never heard of the Crash of ‘06?
On January 19, 1906, the Dow peaked at 103. That date may not ring throughout the annals of history, but it was pretty important for the stock market.
The stock market soon crashed and by 1907, the Dow bottomed out at 53. Now that’s a bear market! None of this wussy 1.8% nonsense.
The Dow eventually recovered, but the January 19, 1906 high haunted the market for years to come. Even by 1914, the index was still in the 80’s when the exchange was shut down due to troubles "over there." Soon traders started doing business on the street, so the NYSE opened again that winter. And once again, the Dow plunged 53.
Nevertheless, the Great War was good business, and the Dow finally hit a new record of 103.11 on September 28, 1916. The Dow nearly got to 120 in 1919, but there were still some nasty corrections. The Dow fell below 70 in 1917 and again 1921.
By 1923, the market took off. The Dow broke 100 in 1924. In early 1928, it hit 200, and a year later it smashed through 300. Over the summer, the Dow peaked at 380.
Three years later, it was at 42.
After Pearl Harbour, there was another slow sell-off. On April 28, 1942, the Dow finally bottomed out at 92.92.
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