|DJIA (1922-1941) vs. NASDAQ (1992 - 2007)
12/31/1921 12/31/1926 12/31/1931 12/31/1936 12/31/1941
The Dow chart shows the roaring twenties (A-B), the 1929 peak (B), the crash of 1929 (B-C), the sucker rally of 1930
(C-D) and the prolonged stock market collapse that continued until 1932 (D-E). Financial collapse, hunger and
severe unemployment were hallmarks of the Great Depression.
The Great Depression lasted from 1929 until World War II (1941-1945). A partial recovery of the Dow (E-F) ended in
The most troubling attribute of the chart is the severe Bear Market which began in 1937 and ended in 1942 after a
decline of 52% (F-G).
How can I use this information?
There were those who said that a crash similar to the 1929 crash would never happen again. The above graph of the
NASDAQ amply proves the weakness of that assertion. In spite of the size of our economy and the advances in
technology, flaws in human nature still have the capacity to repeat and even exceed the excesses of the past. Will the
NASDAQ suffer a second severe downturn like the Dow experienced (F-G)? No one knows... except those who
possess sufficient power to move the markets. The rest of us must resort to conservative financial principles and a life
view that copes well with the unknown. Be tenacious about diversification, take calculated risks using proven methods
and reduce your debts to reasonable levels. Debt elimination should be the ultimate goal. History is sadly full of
examples of wealthy entrepreneurs who never paid off their home mortgage, only to find their fortunes reversed and
their homes foreclosed. Pay off your mortgage so you won't have to worry about a place to live. Conservatism may
limit your upside potential, but you will sleep better if the markets turn against you.
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5/31/1992 5/31/1997 5/31/2002 5/31/2007 5/31/2012
The Dow Jones Industrial Average (DJIA) is shown in blue and the NASDAQ is shown in gray. The
NASDAQ (1992-2007) is superimposed over the Dow (1921-1942) to show the correlation between
the indexes during those periods. The dates and returns pertain to the DJIA if in blue, the NASDAQ
if in gray. The daily close for each index is plotted in arithmetic scale.
Stock Market: Great Depression
Stock Market: Great Depression
The Great Depression / Stock Market Crash of 1929 forever changed the lives of millions who endured more than a
decade of suffering and fear. There is a disturbing correlation between the NASDAQ index during 1992-2007 and the
DJIA during 1921-1936. Each period experiences a boom, bust and partial recovery of surprisingly similar magnitude,
slope and duration. Fortunately we were not forced to endure another Great Depression similar to that of the 30’s. The
graph below superimposes 16 years of the NASDAQ (1992-2007) over the Dow (1921-1942). The charts of the two
indexes have been aligned to clarify the similarities between the Dow and the NASDAQ during those two periods.
The NASDAQ chart reflects the Tech Boom (A-B) as the NASDAQ soared to its peak in 2000 (B). The NASDAQ then
crashed in 2000 (B-C) and staged a sucker rally (C-D). The Tech Wreck continued until its bottom in 2002 (E). The
NASDAQ has made a partial but significant recovery (E-F) since the 2002 bottom.