The Peter Falk character in the wonderful comedy The In-Laws worked for the CIA. He said the benefits were great as long as you lived long enough to collect.
The aftermaths of bear markets can be great as well. You just have to be around long enough to collect. Paul Price, writing in Seeking Alpha, took the 10 worst calendar-year markets and figured the returns for the following year and also the subsequent five-year annualized returns. It looks like this:
Year
Decline
Following year
Five year
annualized return
1930
-24.9%
-43.3%
+3.1%
1931
-43.3%
-8.2%
+22.5%
1937
-35%
+31.1%
+4.6%
1941
-11.6%
+20.3%
+17.9%
1957
-10.8%
+43.4%
+13.3%
1966
-10.1%
+24%
+8.4%
1973
-14.7%
-26.5%
+4.3%
1974
-26.5%
+37.2%
+14.8%
2001
-11.9%
-22.1%
+6.2%
2002
-22.1%
+28.7%
+12.8%
Source: Seeking Alpha
The average five-year return is 10.79%. Notice that all five-year plots are positive even the five years that began in 1931 with a negative 43% and also the five years that began in 1974 with a fall of 26.5%. Again, thanks to Paul Price. I didn't confirm these numbers independently. I'm passing them along and believe they are price-only. Dividends not included.
P.S. Will you be there when Cramer makes his next move?
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Vincent Farrell Jr. is chief investment officer for Soleil Securities Group and a regular guest on CNBC and other national print and broadcast media.
Prior to joining Soleil in August 2008, Farrell was a principal of Scotsman Capital Management. Before that, he was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships.
Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.
Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.
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