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Anatomy of a Crash: The current decline in financial stocks is on pace with that of the Dow post 1929, and tech stocks post 2000 (graph)
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 2 years 56 days ago (secondpagemedia.com). Views: 349
Tags: great depression economics housing bubble credit crisis |
| Related Tags: finance wall street business stocks video investing politics stock market |
Click here to see the chart. Here is the source.
The chart is one of current conditions in the financial markets vs. other great crashes in our modern financial history - running on a scale of days after the all time high. The purple line is the most recent crash that we have dealt with, the Nasdaq in 2001. It reached a high early that year and would go on to lose more than 75% of its value over the next 650 trading days (note: your average year will have roughly 250 trading days). As portions of its line on the left side of the chart are the furthest down, its decline was the most steep, only being briefly outdone by the 1929 Dow.
Speaking of which, the Dow Jones Industrial Average of 1929 onward is represented by the blue line. It reached its all time high in the middle of 1929, and would go on to lose nearly 90% of its value over the next 700 trading days.
The bold, dark red line is a chart of a stock created to represent a selected industry, in this case a snapshot of the financial industry as represented by the ticker symbol IYF. Its high came in the spring of 2007, almost rising back up to beat its mark that summer, but soon after entering a downward death spiral that has led to losses of more than 45% in less than 400 trading days.
XLF is the ticker symbol of another stock that does what IYF does, but for layman's purposes, is run by a different entity and calculates its price differently than IYF. In the end it is another measure for the financial sector. It is represented on the chart by the bold orange line. Where IYF never overtook its early 2007 high, XLF did, so on the chart its counting starts from the summer of 2007. Its decline, over time, is keeping pace with the speed and severity of the Dow post 1929 - having lost over 50% of its value in under 300 trading days.
The speed at which financials are losing value is staggering, but expected for an industry that made the seemingly fatal mistake of engaging in such a period of irresponsible loaning like there was no tomorrow. It's like the man who thinks he'll be dead in a year so he maxes out all his credit cards, only to find himself quite alive and with creditors haunting him night and day, wishing he was quite dead.
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ian said |
| 2 years 53 days ago |
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little known mathematical fact
By the way, this is a little known mathematical fact.
For a stock (or index) to go from -50% to -80% from its peak, it has to drop another 60%. To go from -50% to -90%, it has to drop another 80%. Imagine if financial stocks dropped another 60-80% from today's levels!
It makes a lot more sense to plot the above chart on a LOGARITHMIC plot, then you would see just how much more devastating it is to go from -50% to -90% compared to 0 to -50%. If I have time, I will get the same data, put it in Excel, and make a log plot.
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