Back in December, I had drinks with a prominent macroeconomist who has been, among other things, advising Congress on how to handle the economic implosion. I asked him just how far he thought the stock market could fall. He didn’t miss a beat. The market lost 90 percent of its value, peak to trough, during the Great Depression, he said, before explaining that there really was no external bottom in a full-fledged panic. I was stunned by this fact, in part because the academic reality is so far afield from the accepted popular wisdom.
Several months later, the stock market is terrifyingly right on track.
In the here and now, the Dow has dropped 52.5 percent since its high of 14,279.96 on Oct. 11, 2007, to its low point of 6,779.62 during intraday trading on Monday. And in taking a similar 1 year-and-five-month period in the late 1920s, it’s a case of deja vu.
The rate of decline is mimicking that of the Dow during the Great Depression. Back on Sept. 3, 1929, the Dow hit a high mark of 381.17. And over a similar 1-year-and-four -month period, it fell 54.7 percent to 172.36 on Jan. 2, 1931. “It’s very troubling if you have a mirror image,” said Phil Dow, market strategist for RBC Dain Rauscher & James.
I don’t know much about stocks. I would not take my own investment advice, let alone try to offer any. I do, however, intuitively believe what Bob Dylan sang: “The darkest hour is right before the dawn.” So when is it darkest? History tells us it can get much darker. Let us pray for the rooster. Let us pray for time changes, solar flares, and long summer days. Because I am not sure what else there is to do.