Sunday, April 19, 2015

Bear Markets

Our family owned "Larimore's Diner" in Foxboro, Mass. in 1929. I was 5 years old. When the depression hit, we lost the Diner and moved into my grandfather's home in Miami. My grandfather was an investment professional on Wall Street, who like so many others, went bankrupt. We were forced to move when he lost his Miami home (next door to where I live now.)

These figures show what the worst bear market was like:

BEAR MARKET OF 1929-1937 (Dow plunged 89%)

-1929--1930--1931--1932

(-31%)(-25%)(-43%)(-08%) Large Cap Stocks
(-34%)(-35%)(-47%)(-06%) Mid/Small Cap Stocks
(-47%)(-38%)(-50%)(-05%) Micro Cap Stocks

Figures cannot convey the horrifying and debilitating effects of a bear market. You watch in agony as month after month your life savings evaporate before your eyes. Gloom and doom talk is everywhere. Nearly everyone else is selling. You have no idea when, or if, your portfolio will stop losing money. 

Your friends and relatives urge you to sell before losing everything. Nearly all financial 'experts', including newspapers, magazines, and radio commentators recommend "sell". You are ridiculed for trying to hold on. You begin to have self-doubt. Dispair sets in. Buying stocks is unthinkable. Suicide's increase. 

Most stock investors in the 30's sold and never returned to the stock market. Many ended their days with their family in poverty. I remember the "poor farms" on the edge of towns. There were no social security retirement benefits. Beggers were everywhere.

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