What we experienced in 1999 and early 2000 was the tail end of one of the biggest stock market bubbles in history. Not the overall stock market -- just tech stocks. Nearly everything else was a screaming buy last March.
The bubble has been bursting for less than a year now. Is it over? The lessons from history are not comforting. On the discussion boards, I've posted some information on the bubbles of 1929 and 1973, which took nearly three and two years to deflate, respectively. Also, consider a study by Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co., cited in the July 3 edition of Outstanding Investor Digest.
In it, Grantham studied 37 examples of bubbles -- defined as 1-in-40-year breakout events -- in stocks, gold, oil, and the like over 200 years. He concluded: "Every one of them -- most of which were felt to be new eras -- gave everything back to trend. There were no survivors." That's scary enough, but consider Grantham's next point: "In the stock market, the subsequent declines never stopped at the trend line. They all went slicing through fair value like a knife through butter."
The bubble has been bursting for less than a year now. Is it over? The lessons from history are not comforting. On the discussion boards, I've posted some information on the bubbles of 1929 and 1973, which took nearly three and two years to deflate, respectively. Also, consider a study by Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co., cited in the July 3 edition of Outstanding Investor Digest.
In it, Grantham studied 37 examples of bubbles -- defined as 1-in-40-year breakout events -- in stocks, gold, oil, and the like over 200 years. He concluded: "Every one of them -- most of which were felt to be new eras -- gave everything back to trend. There were no survivors." That's scary enough, but consider Grantham's next point: "In the stock market, the subsequent declines never stopped at the trend line. They all went slicing through fair value like a knife through butter."
