Magnitude Of The Current Decline

I'm going to give you some statistics that our models are pondering. I've developed some thoughts in terms of a longer term thesis as to what these mean which I'll share with you over the coming weeks and months. But since these numbers are fresh in my head, I'm going to put them out here for others to read. One note of disclaimer. Other interpretations of market money flows will likely differ from where I believe bear and bull markets begin and end so my data could differ a bit from others. Still anybody crunching the same facts will come up with similar if not identical end results.

First though the best argument against being 100% in cash at this time comes from analysing the last bull market which I believe started in March of 2003 and ended in early October, 2007. That bull market advanced close to 90% from the lows to the highs and lasted roughly 56 months. Yet that bull gave very uneven returns. Here they are:

47% of the gain came between March of 2003 and March of 2004. Almost have of that total came in the first 3 months. People that were 100% in cash missed out on a lion's chunk of the gains. In this period the market averaged almost 4% a month.

11% of the gain came in a 27 month period between March of 04 and the summer of 2006. In this period the market averaged about .4% per month and all of these years saw most of their gains in the 4th. quarter of the year-meaning portfolio managers were likely trying to manufacture year end returns for their clients.

The rest or 32% of the gain came in the 15 month period between the summer of 2006 and early October of 2007. Stocks averaged roughly 2% during this period.

With that as background and also drawing on 20 some years in the investment business I can state there is nothing like what we've been experiencing in the modern investment era. To show you how rapidly the down trend arrived ponder these numbers:

It took a bit under 1 month to give back 11 months gains from the 2003-2007 bull market.
2 months to give back the next 13 months gains.
6 months to give back the next 9 months gains.
2 months to give back all the rest of the gains to 2004.
1 month to give back everything else back to 2003.

In comparison:

The 1987 crash was the middle of a decline that lasted approximately 16 weeks and gave back about 1.5 years of market gains.

The bear market of 2000-early 2003 took about 10 months to give back most of 1999's gains, about 7 months to give back 1998's gains and about 12 months to get markets back to where they were in early 1997.

Again today I simply wanted to throw these numbers out there for you. We'll come back to them again in the future to try and address what they mean.