Ask Rande 10,000+

Top 186. Sep 28, 2001 5:17 PM

» BPyles - Dow Numbers

Thanks for chart, hard to read but not impossible. A real trip down memory lane. To think I missed the first 6 downers but been plugging away ever since - 1962. How on earth did I ever manage to stick it out?
Was doing DCA even before it was called that, "stay the course" before I ever heard of "Ask Rande" but mostly because did not know what else to do. Some of those events had slipped my mind, i.e., Sputnik - how could I have forgotten that- and afraid the Hunt Silver crisis did not make a lasting impression.

-- posted by BPyles

Top 187. Sep 28, 2001 9:07 PM

» bob90245 - Re: Here's some interesting numbers on the Dow:

In response to message posted by Rande:

Mean -8.1 4.5 6.9 12.9
Median -6.2 4.2 6.7 12.1

Are those mean and median numbers for just those crisis periods? I wonder what the mean numbers would be from the whole period (1940-1999).

-Bob-

-- posted by bob90245

Top 188. Sep 29, 2001 7:02 AM

» Rande - Re: Re: Here's some interesting numbers on the Dow:

In response to message posted by bob90245:

Those are the numbers for immediately after the disaster/crisis and then after the period of days category following. From 1940-1996, the S&P 500 returned 12.1% on an average annual compound basis.

-- posted by Rande

Top 189. Sep 30, 2001 9:52 AM

» JenL_2 - The War Effect

In response to message posted by Rande:

Rande - to add to your table of historical DJIA recovery times after devastating events - here's an article in 10/1 Barron's

The War Effect

Stocks' fate could be determined by America's success -- or failure -- in the terrorism fight

By Jay Palmer

If the U.S. is in a war against terrorism, as President George W. Bush has declared, what does that mean for investors over the next few years? A review of stock market action during and after five wars in the 20th century suggests that investors' fate from week to week depends largely on whether the U.S. is perceived to be winning or losing.

Under the right circumstances, war can breed corporate profits, technological advances and big changes in the balance of world power through the destruction of enemy markets and industrial capability. It can also lead to stock-market rallies, both during the conflict and in the years that follow.

As for wars of the past 100 years, the lessons are clear. "War initially spurs market panic and a flight to quality," says John Steele Gordon, author of The Great Game. "Only after that is over can war act as a turbo-charger for the economy and stocks."

Yale University Professor Paul Kennedy, author of The Rise and Fall of Great Powers, goes further. "Though it is not always enough to win, as damage to Britain and France in World War I and World War II shows, it's a lot better to win the war than lose it. At the same time, it's always preferable to fight the war away from home, on someone else's land."

World War I, which lasted from 1914 to 1918, generated little in the way of rewards for investors. When the war was triggered by the assassination of Austria's Archduke Ferdinand in June 1914, the Dow Jones Industrial Average stood at 83. The Dow quickly slid 35%, prompting the New York Stock Exchange to shut its doors for four months. The exchange reopened mid-December, and the Dow subsequently rallied, gaining more than 100% over the next two years only to fall again in 1917 when the U.S. entered the hostilities. By Armistice Day in November 1918, the Dow was back to its pre-war level, and before long the stage was set for the Roaring 'Twenties.

"The U.S. was the only unqualified winner of World War I," notes Kennedy. "While Europe lacerated itself, America saw a huge boost in power and prosperity." Overall, "the war to end all wars" saw stocks post annual average gains close to 10%, though the market failed to keep up with inflation, which averaged 11%.

Peace Dividend

If the wars of the 20th century are any indication, the market may be set for a major rebound once the conflict subsides. The question is, when will that be?

World War II, which ran from 1939 to 1945, also saw the markets fall at the start, tumbling 40% between 1939 and soon after Pearl Harbor. The market's bottom in April 1942 came in the same month as Jimmy Doolittle's bombing raid on Japan, an event that drove home the fact that this was a war the U.S. could win. From then on, markets mostly rallied, gaining on such events as D-Day and the dropping of the atomic bombs. At war's end, in August 1945, the market stood at about 167, well above the 155 level it had achieved before the war's outbreak in 1939. A further gain of more than 15% came in late '45 and early '46 before a correction set the tone for a period of sideways trading for the remainder of the 1940s.

Overall, the Dow rose about 8% annually during World War II, more than double the 3.7% rate of inflation.

The Korean War, from 1950 to 1953, saw an initial plunge in the Dow, with stocks falling 12% in the three weeks that followed North Korea's invasion of South Korea in June 1950. From then on the market surged, with the Dow rising from around 200 to 250 by the time the cease-fire was signed in July 1953. More important, perhaps, peace bought a dividend in the form of a 24% gain in the year that followed the war and further gains over the remainder of the decade.

Stocks gained 9% a year during the war, more than double the 4% annual pace of inflation.

The Vietnam War, dragging on from 1964 to 1975, was the worst conflict for investors, perhaps because victory was elusive. The Dow was trading at 840 when Congress passed the Gulf of Tonkin Resolution in 1964, allowing the U.S. to enter the conflict full-force. When Saigon fell 11 years later, the index was off just 10 points from its 1964 level, having had any would-be rally extinguished by setbacks such as the Tet Offensive, the Kent State University shootings, the assassinations of Martin Luther King and Robert Kennedy, Watergate and Richard Nixon's resignation, not to mention the Arab-Israeli war and OPEC's first oil embargo.

It was a war different from others in many respects, America fighting with one arm tied behind its back amid wide-scale public protest. It was also a war the U.S. lost. So did investors: stocks averaged an annual decline of 1% during the war years, with inflation stealing another 5% per annum.

The Persian Gulf War, from 1990 to '91, was the shortest of any. Initially, markets reacted bearishly to Iraq's invasion of Kuwait and the resultant threat to global oil prices. The Dow fell 18%, to 2365, in just two months. But after the swift victories of Operation Desert Storm, the Dow bounced back, posting an annualized gain of 9.7%, more than double the inflation rate. This helped clear the way for the biggest bull market in history.

The current war on terrorism has only just begun, and true to historical form, the market plunged after the initial attack. The degree to which last week's rally can be sustained depends, not least, on the the world's perception that the U.S. can emerge victorious. Let's hope Washington has the sense to conduct it with the precision of Desert Storm, not the hamfistedness of Vietnam.

Subscribe to WSJ & Barron's Online @ http://www.wsj.com

......Jen

-- posted by JenL_2

Top 190. Sep 30, 2001 10:03 AM

» Rande - Re: The War Effect

In response to message posted by JenL_2:

Jen,

There seems to be some belief that the U.S. and its allies may be preparing for a strike within the next 48 hours. Whether it comes sooner or later, a precision strike which ends in success would be very positive. Very positive.

-- posted by Rande

Top 191. Sep 30, 2001 10:23 AM

» JenL_2 - Re: The War Effect

In response to message posted by Rande:

Rande - but IMHO this may be a long drawn-out war with no clear victory at the end. Battles won along the way will be....

- capture of known terrorists and their associates

- freezing of terrorist assets

- thwarting of future terrorist attacks

- increased unity and cooperation between democrats, republicans and third parties as we focus our efforts against a common enemy

- increased cooperation between the U.S. and our allies against terrorism

I wonder how the market will react to a war such as that?.....Jen

-- posted by JenL_2

Top 192. Sep 30, 2001 10:38 AM

» Rande - Re: Re: The War Effect

In response to message posted by JenL_2:

Of course it's going to be long and drawn out. We'll be battling evil for the rest of our lives, as we have always had to do, and then our children after us. But for now, we've been attacked in a dramatic way that demands a response. There will be a an opening retaliatory salvo. And regardless of how long and drawn out the ensuing conflict might be, a successful initial strike would be pyschologically uplifting in the extreme.

-- posted by Rande

Top 193. Sep 30, 2001 6:14 PM

» Moe_Berg - Wash Sales Rule Question

ASSUMPTION:
Say I bought 100 QQQ at $70 in Dec 2000.

Say I bought 100 more QQQ at $30 on Sept 20, 2001.

Say QQQ rises to $40 by Oct 3 and I sell 100 QQQ at that date.

QUESTION:
Despite having sold 100 shares within less than 30 days of having purchased same, can I elect to use the FIFO method to allocate cost to the 100 shares sold Oct 3 by saying those shares were bought Dec 2000 at a cost basis of 70 - thus take a short term capital loss of $30 ($70-$40) on my 2001 tax return ?

If not, how would the loss be reported for the 2001 tax return ?

Thank you in advance for your answer.

-- posted by Moe_Berg

Top 194. Sep 30, 2001 8:07 PM

» number26 - bb radio show 9/30/01

hiya rande and friends
did anyone hear the caller today refer back to another caller on 5/6/01 who told bob the market would go down on september 11,01? the caller today said he took notes of that show at that time because he thought it was an odd call.
does anyone have a link to mr korn's summary of that date?
thanks

-- posted by number26