The Good, The Bad And The Ugly Of The Stock Market
When the term "stock market" is introduced in a
conversation today, it seems to elicit many different responses and emotions,
dependent upon the age of those involved. For the general public who are over 80
years old, it elicits it's share of bad commentary. The boomers and their adult
children have seen the entire gamut of the market...The good, The Bad and The
Ugly!
The Great Depression
As children, adults in their 80's well remember the
havoc and devastation the great depression inflicted on our society. They
also remember the trigger as being the collapse of the stock market on (black)
Tuesday October 29th, 1929. Coast to coast bank failings were soon to
follow. All western industrialized countries experienced foundering economies
for the next 10 years. It is interesting to note that although only 16% of
American households had any investments in the stock market at the time, the
crash of the market is the first thing reflected on when contemplating
the devastation and subsequent depression our country faced during those years.
In actuality, the Great Depression of the 1930's was due to a convergence of
many economic factors.
As is normal during any bubble, the vast majority of
investors were convinced that the flourishing market of the twenties would go on
forever. During the prior 6 years the market had increased 500% to peak at over
380 points by September 3rd of that year. The market lost 17% of its'
value between September 3rd and a week before the crash. Whipsawing,
it then regained half the loss, which it then again lost during the week before
the crash. The signs of impending catastrophe, in retrospect were indeed
ominous.
Most today are unaware that the crash that occurred on the
29th of October, 1929 was not the worse loss for the market during
that week.
Thursday, October 31st, only 2 days after the notorious Black Tuesday
another accelerated freefall began. There were almost 13 million shares traded
that day. A new record for trading in a day that would not be eclipsed for
another 39 years. (Today, 13, 000, 000 shares are a mere drop in the bucket.
NYSE daily trades normally run between 1 and 4 billion shares.) The market then continued in a freefall for the next month.
Enter The Baby Boomers
Those memories of the crash most likely contributed to the
lackluster market throughout the next 50 years. The hardships those generations endured created a total distrust in the stock market for many, and even distrust for banks for a large number of survivors of that era. Regardless, the baby boomers
were beginning to flex their investment muscle in the eighties. They were in
their mid-thirties at the turn of the decade and not burdened with the memories
that their parents had to endure. The current recession they were experiencing was coming to an end and the coming
result was a market boom not seen previously in our history.
The boomer investors of today seem to be in one of two
camps. Either shell shocked by the money they have lost by market trends and the
scams perpetuated by numerous companies and individuals, or riding high with the
profits they are attaining by astute and sometimes lucky trading decisions.
Coming out of an economy worse than anything we have seen
today, (contrary to what the politicians and news media would have you believe),
the boomers in 1981 were ready to get back to spending and jump into the stock
market with both feet.
They watched as the prime lending rate soared to an
unprecedented 21.5%, inflation to over 14%, the Dow down to a low of 760 in
April of 1980, and the unemployment rate at around 12%. The shell
shocked business community and public in general were natural players for a soon
to arrive rock and roll economy.
Boom
Between 1980 and 1987, the Dow soared to over 2700 points.
However, by the day of the October 19th 1987 market crash, it had
ebbed to around 2250. The day of the crash, the Dow lost over 22% of its? value
and fell to just over 1700 points. It took the next two years to surpass the
2700 point peak it had attained in August of 1987.
After that, it was Katy bar the doors, save for a temporary
downward blip in 1990. The high flying tech business of the 1990s was to push
the market to new extremes once again. Extremes that pushed the Dow to over
11, 700 points by January of 2000. A bubble was created that would burst in 2001,
as a result of the internet business crash and Y2000 scare. The Dow plummeted to
around 7300 by October of 2002. This time however, it was off to the races again
a mere 5 months later.
This bull market run essentially lasted until October 2007.
The Dow had increased to a staggering 14, 164 points. Unfortunately, that same
quarter triggered another recession with a GDP growth of -1%. Those analysts who
forgot to pay attention to history, were predicting a run into the 35, 000 area
during the next few years. OOPS!
Bust
The failure of Bear Stearns coupled with a drop of the Dow
to 11, 000, led many to believe the recession was over. However, after the
failure of Lehman, the market continued to fall to 7500 points. A short lived
rally to over 9000, preceded another freefall to 6600 points. Over 17 months,
the market had lost 50% of its' value. Once again though it showed stubborn
resiliency. Within 6 months it was back over 9000.
Then during May of 2010, we saw the Dow once again crest
11, 000. Today, (May 13th, 2010), it sits at just shy of 10, 800 points.
The market machinations of today as compared to 20 years
ago have little resemblance to each other. Between the 80's and today, the
masses have earned and lost trillions of dollars in the stock market. Investment
houses have had to adjust to the new breed of investors, created with the advent
of the internet. Broker fees have plummeted to accommodate those who feel they
have no need for broker interaction. Day Trading, previously practiced by only a
few, is an entire industry in itself. This phenomena was the result of trade
fees being slashed, the internet, online brokerages, and in some cases, the get
rich quick dream. Rather than getting rich quick, some investors have day traded
themselves into the poor farm.
Many long term investors have been bilked out of their life
saving by the likes of Enron and Bernie Madoff. Still others have earned
millions with astute short term trading. Some have succeeded with long term
strategies. Options are now a vehicle of choice for many traders. Traders are
learning of and profiting from the leverage afforded by options. Like stocks,
option trade prices have been slashed, making trading more affordable than
ever.
Because of all the huge market swings, the corporate scams,
corporate failures and individual market ideologies, there never seems to be a
scarcity of high spirited conversation whenever the subject of discussion among
friends turns to the stock market. We would like to think at StockTraderPros.com,
that you will find an abundance of helpful information regarding the stock
market and investments in general. We will be sharing information about The
Good, The Bad and The Ugly stock brokers. Option brokers will be reviewed as
well.
We look forward to being your go to stock market reference
site of choice. We will have a ticker to keep you appraised of current stock
prices shortly.
We intend to bring stock market products and other venues
of interest to you. Shortly, we will have our blog published. We encourage you
to visit it and share your stock market experiences with our community. We will
be sending of tweets as our site gets updated. Click on the birdie to follow us on
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