Here are two charts. The chart above is courtesy of Barry Ritholtz' The Big Picture blog. It compares the 1937-38 DJIA to the 2008-09 SPY, as well as the 1929-39 DJIA to 2000-2009 Nasdaq. Uncanny!
The link below shows a chart found on Mish's Global Economic Analysis blog comparing the
GDP of US from 1990 to 2009 overlaying GDE of Japan from 1989 to 2009. Intriguing.
What is the take away? For me, that markets are mechanisms of human behavior. That humans react to similar situations in similar ways. That the last credit crisis with the magnitude to match our current sutuation was during the great depression, and the current market has behaved accordingly.
From chart #2 US GDP vs. Japan GDE I believe we have the most recent example of a major economy moving through a credit crisis. Given that our government's response to our credit crisis is similar to Japan's response of printing massive amounts of currency (quantitative easing), using taxpayer dollars to prevent insolvent companies from failing, bringing interest rates to zero and leaving them there, and now buying our own debt, it becomes intriguing to analyze the slope of the Japanese stock market over the past two decades.
http://stockcharts.com/h-sc/ui?s=$NIKK&p=M&st=1980-09-24&id=p91741461629&a=179098887&listNum=4
Keep in mind that when Japan's financial system went bust, their populace had substantial savings compared to ours with negative savings, and their economy began it's slide during the most prosperous 20 year period of the 20th century, whereas we enter our crisis with the global economy in recession. Thus, this comparison may be trite for several reasons, one being that the outcome of the current crisis in the US could be more dire than theirs.
Fubsy
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