A few days ago, I ran into an old friend who enthusiastically greeted me with “Wow, did you see the Dow crossing the 12,000 level? My portfolio is now within 5% of what it was 3 years ago!”
That seems to be theme of the news media these days as you’re being bombarded with statements like the S&P; 500 has risen 92% from the March 9, 2009 lows.
As if you are supposed to have bought stocks on that infamous date while feeling like a loser if you didn’t make 92%. All this rebound has done is bailed out the buy and hold crowd.
Remember the simple math fact that states that if you lose 50% of your portfolio value, you have to make 100% just to get to the breakeven point? This is exactly what happened in 2008; most investors saw their portfolios drop some 50% and they are now getting close to a breakeven point, just as my friend Mike mentioned above.
Mike’s quick reference matches my numbers as well. You may remember that our domestic sell signal kicked in effective June 23, 2008 with the S&P; 500 being at the 1,318 level. It’s currently just below the 1,300 mark and needs to gain another 1.65% just to get to the 2008 level we sold at.
In other words, simply looking at the rebound after the market crash is not seeing the big picture. You need to factor in what happened before March 9, 2009, in order to see that the last 2 years did not really produce any portfolio gains; it was simply time spent making up losses.
It’s hard to believe but, if you had sold along with us on June 23, 2008 and never reentered the market again, you’d be still ahead of those claiming of having made 92% off the March 09 lows.