Gene, the 1973-1974 downturn was very much like what I see happening. The great majority of stocks topped out in 1968-1969, but the infamous nifty fifty kept taking the larger indices higher. However, when the big boys got hit, the little stocks got hit again. When we talk about PE ratios of 15 times, we have to remember that 1974 saw PE ratios of 3-6 times among a large number of well-known stocks and even names like Merck and Coca Cola were selling at 8 times. Then, if you compound that pe ratio compression with a downturn in the earnings themselves, you can see how some stocks lost 90% or more of their value.
I think 1929 was a bit broader, with the avg. NYSE stock down 89%, peak to trough. Of course, if you bought the peak in 1929 and held, you got even by 1952. <g> Which is longer than the avg. mutual fund portfolio manager has lived, so far. |
