is distributed for non-profit purposes only to those who
have expressed an interest in receiving such material in
accordance with Fair Use Copyright Practices.]
[Note: This is an excellent analysis by CBS Market Watch
and Thom Calandra. August 14, remains one of many possible
doomsdays in the near future. That is the
deadline by which all CEOs must either restate their
corporate earnings or face criminal penalties. At that time
it is possible that as much as another $1 trillion of shareholder
equity might be wiped out. In addition, FTW has been monitoring
reports of subpoena issuance to J.P. Morgan, Citigroup and
other major banking institutions over criminal involvement
with Enron. In addition, derivatives bubbles estimated at
between $25 and $50 trillion held by these banks stand on
the verge of collapse with either a further plunge in the
Dow or a rise in the gold price that cannot be contained
by the Gold Cabal and the Plunge Protection Team.
Last week, FTW received information from three credible
and experienced sources that the Bank of America had made
an urgent and secret appeal to the Federal Reserve for an
emergency bailout. We are watching all of these developments
closely and will have updated reports in the near future.
Additional reports indicate that the housing bubble is also
in a very precarious position. ED]
THOM CALANDRA'S STOCKWATCH
History of bull markets rife
Commentary: The worst of this episode isn't behind us
By Thom Calandra, CBS.MarketWatch.com
Last Update: 10:36 AM ET July 30, 2002
SAN FRANCISCO (CBS.MW) -- Wall Street says the worst of
the stock market is behind us. The brokers' highly paid
strategists, sweating bullets, are urging America to buy
early and often.
History will demonstrate the stock market's cheerleaders
are premature. Just look at the three great bull markets
of modern history. The biggest one we know all about: it
ended two years ago, and its aftermath has bankrupted thousands
of companies and erased $7 trillion or more of American
The other two great bull markets? One was during America's
roaring 1920s, when the Dow Jones Industrial Average rose
more than 400 percent. "The Jazz Age was wicked and
monstrous and silly. Unfortunately, I had a good time,"
newspaper columnist Heywood Broun once said.
The dancing and drinking of those follies came to a sober
end in 1929, marked in red ink by the October crash. History's
other great bull market in stocks was in Tokyo during the
1980s. Japanese stocks (and real estate) pumped fresh air
into the term "market bubble."
From 1923 to 1929, the Dow gained about 445 percent. Sure,
there were at least six rallies of 20 percent or more in
the early 1930s. In 1929, barely a month after the great
crash of October, the Dow began an almost 50 percent climb
that spanned five months of that year. Other rallies came
in 1930 and 1931, when the Dow leaped 35 percent.
Yet the Dow hit its low of the span in July 1932, at something
like 41. That level was far lower than the Dow's price nine
years earlier: 85 or so. As most veterans of that age tell
us, the U.S. economy didn't begin to recover until after
World War II, more than 15 years after the October 1929
In Tokyo, the Japanese bubble drove stocks to about 39,000
on the Nikkei 225 (65599W10: news, chart, profile). That
was in 1989, when the Tokyo market sold for 100 times earnings.
Once again, numerous rallies ensued. The Nikkei rose almost
20 percent months after the December 1989 zenith. About
a year later, Japan's benchmark index rose by more than
a third in a five-month span, into the spring of 1991.
As we know now, the Nikkei hasn't stopped skidding. It's
been as low as 9,420 in the past year, and as high as 12,081.
The number to remember, though, is where the Nikkei started
its amazing run -- 6,850 in 1984 -- before reaching its
pinnacle of 39,000.
Our modern American bull market began in 1990, with the
Dow (INDU: news, chart, profile) at 2,365. When the 10-year
rally began to unravel, the Dow was almost 12,000 -- in
January 2000. A total gain of almost 500 percent.
Raging bull markets, when they crash, always end lower than
where they started. Yes, Wall Street most likely will enjoy
the kind of snapback rallies we are seeing, when the Dow
stages 400-point-plus rallies. The upside volume on the
New York Stock Exchange Monday amounted to 91 percent of
the total -- a testament to the power of program trading,
corporate buybacks, short-covering by profitable hedge funds
and individuals who pray the worst is over for their fading
The folks on Wall Street say this time will be different.
That this rally will last. If history doesn't provide the
proper context for that pipedream, maybe valuations will.
America's 500 biggest stocks are selling for anywhere between
25 and 40 times one year's earnings, depending on how one
accounts for nonrecurring charges. Even at the cheap end
of that range, the S&P 500 ($SPX: news, chart, profile)
is still selling for more than twice the historical average
for a bear-market low.
The highest price-earnings ratio seen at a major market
bottom during the past 60 years is approximately 12.5, technician
Paul F. Desmond at Lowry's Reports tells me. That was in
Next time a guy tells you this time will be different, ask
if he or she works for a brokerage, investment bank, pension
fund or mutual fund manager. If the answer is no, ask when
was the last time they made money in this market of sick
Thom Calandra's StockWatch by e-mail
You can get free delivery of Thom Calandra's StockWatch
every trading day. Sign up for Thom Calandra's StockWatch
newsletter at MarketWatch.com. No strings attached. Subscribe
Thom Calandra's StockWatch is in its seventh year at CBS