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Strategies & Market Trends : ASSET COMMITMENT MODEL
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To: Jim Battaglia who wrote (147)5/30/1999 4:16:00 PM
From: Wren  Read Replies (1) of 176
 
Jim, Thanks.

I recently read an article about the 73/74 decline. A few excerpts:

"The sickening 44% decline in the DOW that began on Friday, January 12, 1973, was agonizingly drawn out, sapping everyone's patience and will."

Wisdom in early January, 1973:

Business Week - "The stock Market should go higher because 'prosperity is almost certain to continue."

Fortune - "it is hard to imagine a combination of circumstances that would entirely undo the good work of the past few years, which halved the inflation rate from roughly 6% three years ago to 3% now."

Director of research at a Wall Street firm - "Disney remains a good value even though it is priced at 70 times earnings. Disney typifies what a growth stock should be. It has a unique image and franchise."

Some of Nifty-Fifty on Jan 11th.

Disney P/E 70

McDonalds P/E 83

Avon - P/E 63

Eastman Kodak - P/E 47

Coca Cola - P/E 47

IBM - P/E 38

A few DOW levels:

1/11/73 - 1052 (all time high)
1/31/73 - 999
3/31/73 - 951
6/30/73 - 892
8/22/73 - 852
10/11/73 - 976
12/22/73 - 819
1/14/74 - 845
6/29/74 - 802
8/9/74 - 777
10/4/74 - 585 (Bottom)

Some individual stocks:

McDonalds - down 72%
Coke - down 69%
Avon - down 85% - P/E 9
Disney - P/E 13

DOW takes 8 years to make a new high.

End of excerpts.

I had money in the market at that time. One piece of it was managed by DLJ, which was possibly the hottest group of Wall Street money managers in early 1970s. I watched my money they handled go down to about 30 cents on the dollar. The two year decline and eight year recovery has effected my investment viewpoint, just as the Great Depression effected the investment viewpoints of my parents generation. Especially since I retired and depend on the portfolio, that experience effects my allocation between fixed and equities.

Thought some younger investors might find this interesting.
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