Sunday, September 1, 2013

Stock Market Risk

Click to enlarge.

As seen in the chart, the unsustainable exponential growth party ended in the first quarter of 2000. In my opinion, those who think our problems all started during the Great Recession are therefore quite mistaken.

Welcome to the new normal! It involves all kinds of exponential trend failures!

Since 2000, we've revisited the median twice. Let's hope we don't revisit the realistic worst case (as seen in the 1950s and 1970s). I say realistic worst case in that historical perspective rear view mirror looking way. Should you be looking out the front window, your realistic worst case may vary!

For what it is worth, I've been permanently bearish since 2004. As a retiree, I no longer have any desire to swing for the fences. I just don't think this economy can support sustainable fence swinging any longer, not that it ever really could. As seen in the chart, the 1980s and 1990s were just an unsustainable exponential growth illusion of prosperity. Those expecting to go back to that era are far more optimistic than I could ever be (especially from these already elevated levels).

This is not investment advice.

See Also:
Stock Market Analysis - The Bearish Case

Source Data:
St. Louis Fed: Custom Chart


Who Struck John said...

Be awfully curious to see what that chart looks like if you run it back to 1900. Would be nice to see the 1907 panic and Great Depression data for comparison.

Stagflationary Mark said...

Who Struck John,

Like you, I would love to see that chart!

More data would allow us to see if there is an upward bias over time.

I have my doubts that there is, but I could be wrong. This is in sharp contrast to those who have absolutely no doubt that stocks only go up relative to GDP. You know, like they did in the 1980s and 1990s!

Mr Slippery said...

Out of curiosity, why just non-financial corporates?

Stagflationary Mark said...

Mr Slippery,

Out of curiosity, why just non-financial corporates?

Perhaps I'm more concerned about the health of the host than the health of the parasite? Just a thought, lol. Sigh.

Gallows humor.

Troy said...

The debt structure of financial business distorts the debt picture.

Company A lending to Company B lending to Company C doubles the outstanding debt, but that's not the true debt loading of the economy, the money at risk in the actual economy is only in Company C's hands.

(I.e. removing the Company B step there does not change the actual financial picture)

As for the illusion of prosperity thesis of the 1980s and 1990s:


1980s: $28k to $36k

1990s: $36k to 44k (hey! a pattern!)

2000s: $44k to $48k (bummer!, where'd that other $4k go???)

2010s: $48k to $52k if we're fecking lucky

Stagflationary Mark said...


2010s: $48k to $52k if we're fecking lucky

Baby needs a new pair of shoes Trailer (1974)

Play the numbers game. It can be good to you.

We take quarters, dimes, and nickels too.

Check your number, play it all.

Hit it big, you're walking tall.

Troy said...

Too bad stopped blogging, I just found that today.

Another guy in the Keen camp. Really weird how Keen is super-heterodox, when what he's preaching is "fecking" obvious. real per-capita (age 25-54) debt

Stagflationary Mark said...


I guess I'm indirectly in that same "fecking" obvious camp, because I'll never forget the one mortgage offer that clued me in that there was a problem.

The fine print showed payments rising 7.5% per year each year for the next 5 years. Great for people who desperately need to lower payments now but miraculously won't care 5 years from now. That offer showed up in my mail back in 2004. It was a holy @#$% moment for me. Sigh.