Monday, February 23, 2009

We're No. 2! We're No.2!

As posted on November 15th, 2008:

13 recessions since 1929 lasted on average 10 months.
Longest - Great Depression, 44 months.
2nd longest - 1973-1975, 1981-1982, each lasted 16 months.

In 13 recessions median S&P bottom occurred 58% of the way through the recession.

Average return from each recession's closing low to the end of the recession was 20.3% while the average return for the year following was 15.9%.

If this recession started in the 4th quarter of 2007 and lasts as long as the Great Depression the bottom (58%) is the 1st quarter of 2010.


Now that all major indices have busted through their November lows, if we optimistically assume the bottom will be here soon (odds are that it will be an intermediate not cycle low, but let's be positive!)then assuming we are roughly 58% through and given that the recession was called as starting in December 2007(had not yet been called as of the date of my first post, lucky guess!)... that quantifies the length of this recession at ~ 26 months.

26 months would be the longest 'recession' since the Great Depression.

Here's a real sobering thought:

If we pick a number our of the hat, let's say S&P 600, and assume we hit the number this quarter and this level is THE BOTTOM, then playing the averages (as stated above 20.3% and 15.9%) would suggest that we would only gain 20% by the end of the 'recession' (in this example,February 2010) for a level around S&P 720.

Stickin' with the averages it would suggest we hit S&P 825 at the end of 2010.

This of course is just quotin' averages, actual results may vary.

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