Stock Market and Black Swan event 2014

January 23, 2014~

Many of my followers know that I am a freelance photographer, what they may not know is that I was a stockbroker for a number of years and won numerous stock picking awards and contests. As 2014 gets off to a relatively modest start, my proprietary indicators have been throwing up red flags as of late. My indicators predict a pull back to the 12,811 -12,820 level on the Dow this year, a 20.9% loss. Should we get the black swan event, my target on the Dow is 9,774, or a loss of 39.6%, with long term support around 7,286.

If the markets dropped the 89.5% they did in the 1930’s, that would give us a Dow of approximately 1,738.74. Unthinkable at today’s levels.

The Dow Jones fell from a high of 386.10 on 3rd September 1929 to a low of 40.56 on July 8th 1932, a massive nominal drop of 89.5% and 87.5% inflation-adjusted. The market would not recover to nominal 1929 prices again until the 1950’s, some 25 years later. In inflation-adjusted terms, the market price of an average investment made in 1929 would not break-even again until 1960, some 31 years later.

 

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