Today vs 1929

This market has fallen farther and faster than 1929 crash. The New York Times points out that the S&P 500 is down 56% since it peaked on Oct. 9, 2007, 513 calendar days ago. In the identical number of days from the 1929 market peak, the market was down 49%. So we have fallen farther, faster in this market crash than the mother of all crashes. Following the 1929 crash, the Dow finally bottomed out in 1932 after a 90% slide.

The burning question is the fundamental soundness of current price levels. I refer you to Leonhardt’s excellent columns.

P/E is now 14, after falling from its bubble-highs. Leonhardt points out that in past crashes it hit 7 or so. Stocks have another 50% to go. (P is stock price, E is 10 year trailing earnings). 14 is a normal P/E, but not a bargain level, particularly in a recession. So far the crash has brought us back to normal, nothing more. A 4000 Dow might just happen.

This may be a particularly ugly crash simply because stocks were more overpriced.

Here is a link to a great NY Times Article.