Stocks in Germany, the UK, France, Italy, and Spain Plunge Below Year 2000 Levels: Buy-and-Hold Horror Shows

Food for thought in light of the biggest stock market bubble in the US ever.

By Wolf Richter for WOLF STREET.

Major European stock indices plunged below their bubble highs from over two decades ago. This is not to say that they plunged that much this week, but that they had finally risen past their prior bubble highs from over two decades ago, powered by money printing, and then they plunged.

German stocks. The most widely cited German stock market index, the DAX, is a total return index that includes dividends and is therefore not comparable to a price index such as the S&P 500 Index, which does not include dividends. But the less-often cited DAX Kursindex (DAXK) is a price index, and does not include dividends, and is comparable to the S&P 500 Index and most other major stock indices. So that’s what we’ll use here.

The DAXK plunged by 4.4% on Friday, and by 10.1% for the week, to 5,517. Since the all-time closing record of 6,873 on January 5, 2021, it plunged 19.7%. But wait… that all-time closing high was up only 10% from the bubble high in March 2000 – yup, that bubble that imploded 22 years ago. And on Friday, the index closed 11% below the bubble high of March 2000. Note the gigantic volatility investors went through over these 22 years to end up below where they’d started.

UK stocks. The UK FTSE 100 price index dropped 3.5% on Friday and 6.7% for the week, to 6,987. The index is now down 10% from its all-time high in May 2018. But wait… The Friday close is down just a tad from the close on December 31, 1999, which had been the bubble high 22 years ago, and now the index is back at it:

French stocks. The CAC 40 price index plunged 5.0% on Friday and 10.2% for the week, to 6,062, and is down 18% from its all-time high on January 2021. But wait… yup, the index has now dropped 12% below its bubble high back in September 2000. And note the horrendous volatility that investors had to endure to go nowhere:

Spanish stocks. The Spanish IBEX 35 Index dropped 3.6% on Friday and 9.0% for the week, to 7,721, and yup, for buy-and-holders, this stock market has been a total 25-year nightmare. On Friday, stocks dropped to the lower portion of the 25-year range, to a level seen already in 1998. The index is now down 52% from its peak in December 2007:

Italian stocks. Italy’s FTSE MIB Index plunged 6.2% on Friday and 12.8% for the week. This horror show is now down 55% from the peak in March 2000, and back where it had been sometime in the 1990s – as my data goes back to only December 1997, and even back then, the index was still higher than today. Another great market for buy-and-holders to get wiped out:

There are a bunch of other stock indices globally, including big ones such as the Japanese Nikkei 225 and the Chinese Shanghai Stock Exchange, that today are below their bubble levels of many, many years ago.

This shows that for many big stock markets around the world, buy-and-hold only works if you buy low and hold till prices are high and then sell before they plunge again. So basic market timing. Otherwise you might be screwed for decades, or maybe for the rest of your life – the Nikkei is still down 33% from that bubble high in 1989. Once these mega-bubbles implode, stock markets may not see their old highs for decades. Food for thought.

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  204 comments for “Stocks in Germany, the UK, France, Italy, and Spain Plunge Below Year 2000 Levels: Buy-and-Hold Horror Shows

  1. Nick Kelly says:

    The Dax was down 4 % plus other day when CNBC big news was Dow down 1.5% and Nasdaq 2.5 or so. The diff is the Dax is not full of Bumble. Peleton, Uber, and Cloud- type crap. Stuff not fluff.

    • Wolf Richter says:

      Those stocks you mention are NOT in the S&P 500 either. As I said elsewhere here, to get into the S&P 500, they have to be profitable for four quarters in a row and must be among the largest in their industry.

      • Nick Kelly says:

        True. The ones I mentioned are not on S@P but like Peleton and Bumble are on the Nasdaq. My idea here is that the 4 + hit on the Dax is more significant than hits on the Nasdaq.

        • Spudbuster says:

          This does not take into account Inflation, dollar value and the change of quality of stocks.

        • Nick Kelly says:

          Ok. Take those into account and see if it changes the point: there is way more crap in the Nasdaq than the Dax. E.g., the Dax contains the German auto stocks. It is more about the real German economy. ‘Stuff not fluff’, so a 4 + % hit on the Dax is a bigger deal than 2.5 on the Nasdaq.

      • VintageVNvet says:

        Gonna ”go out on a limb” here once again, and repeat as close as remembered what I and IIRC OS said two years ago:
        DOW 18K,,, S&P 15-1800
        Far shore it will take some time, very clearly illustrated in your great charts.
        As per others, glad I am ”farmed out,” and keeping the powder dry, but will likely only go into the TIPS or similar this round.

        • Tina says:

          Remember that these are valued in paper currency, which is devalued as a matter of policy. Which one is more valuable? Russia has been buying gold for a long time now.

      • andy says:

        Largest in their industry and profitable on paper. Like Tesla.

      • Comaboy says:

        Are you attempting to cast aspersions on “buy and hold” strategy, frothy stock markets propelled by forces unrelated to company fundamentals, or both?
        So many studies have shown that timing the market while earning above-market returns is extremely difficult and very rare. Is this a rare talent you possess?
        If you do have this insight and won’t share it with the rest of us (I wouldn’t), what is the next best strategy, o great oracle of the Wolf Den?

        • Harrold says:

          Show us those studies, padre. The only ones I’ve ever seen say trend following if the only profitable strategy.

          Wall Street says buy and hold because they want YOU to do that, while they trade in and out, as Wolf suggested.

        • sunny129 says:


          ‘timing the market while earning above-market returns is extremely difficult and very rare’

          True in general. But we are in extra-ordinary times, unlike any time beforein the 200yrs of mkt history! Global debts are in record! MKts valuation still very high!

          Now the inflation is flaring up! The tsunami coming due to Ukrane war and the secondary effects on our fossil fuel dependant Economy will be disatrous, to say the least. This is a surreal bull mkt built on debt on debt, with no underlying fundamentals but on shares buy-back and account gimmicks. Covid has weakened global economy! Credit mkts are in chaos!

          Global recession is guaranteed! Will have a D2 is the next question?

          Been in the mkt since ’82 and the valuations are still insane! Even if there is 50% loss, it will be still above the fair value. this is similar to 2007-’08 but much worse b/c of insane credit creation! I employ same methods then, now, when I lost nothing but even made a tiny profit!

          Reality is a lot worse than most, especially newbie investors think!

          I stickout my neck and declare that staying put and or putting new money into this insanely valued mkt is a fool’s choice.
          Without Energy there is NO Economy! Fed is irrelevent at this point.

        • Wolf Richter says:


          Timing the market or luck were the ONLY two things that worked in Europe over the past 25 years. Buy and hold wiped people out. Go look at the charts in the article above — yes, RTGDFA.

        • JGarbo says:

          That’s why I don’t “hold”, just trade the trends, forget the divs. Works so far.

        • Wisdom Seeker says:

          To be fair to the Germans, the DAX total return index has doubled over the past 22 years. Total return is the correct index to gauge a Buy-and-Hold strategy. But Buy-and-Hold in the DAX was a losing strategy from 2000-2013… and a lot of investments did better over the past 22 years.

          The S&P500 should include dividends as well, but it doesn’t. There’s a lesser-known S&P500 Total Return Index (same stocks but including the dividends). It increased 4.5x over the past 22 years, handily outperforming the DAX. This is a reasonably fair comparison since both indexes were near highs in 2000 (and may well be just off historic highs now).

          Oddly enough, Gold beat them both. Gold is up 5.5x over the past 22 years… This isn’t a strictly fair comparison since 2000 was a historic low for gold whereas it was a bubble peak for stocks. Gold was a huge loser from 1980-2000 when stocks had a fantastic run.

          Anyway, Buy-and-Hold fails when you buy during a boom-bubble, especially if you are forced to sell during the bust due to adverse circumstances.

        • Howard says:

          Buy and hold. Then hedge using options (buy PUTS) as insurance or inverse ETF during crisis. That’s how you can protect your long term portfolio. Basically, one needs to be somewhat wary and active in the market.

          Or just stomach the draw down like all the sheeple.

      • NBay says:

        Speaking of S&P, a 1950-present chart will show you it took off like a rocket in 1980… did the number of incarcerated Americans, (both far far more than population increase) and Wolf’s “income and wealth inequality charts also did… did deficit spending…..and serious de-reg and union busting began.

        No need to mention the actors that got the best scripts that year, I guess… Oscar though.

    • Jason B says:

      You need to include dividends on the return of each index. Right now the comparison is price index instead of total return index. Total return for all of these is much higher than what is shown.

      • Wisdom Seeker says:

        I’m with Jason on this. Buy-and-Hold cannot be judged correctly unless one uses a total return index.

        I would go further: any comparison of trading strategies also needs to account for tax-policy differences and various potential types of slippage.

        That said, I’ve seen buy-and-hold fail for people who either can’t stomach the plunges, or get into financial trouble during a recession – could be due to job loss or divorce, or just an unexpected medical crisis. Being forced to sell at a loss hurts a lot of people.

        To make Buy-Hold work, you have to be a market optimist with an iron stomach and a “fortress” type personal balance sheet, AND you have to do the buying outside of a major bubble.

    • dang says:

      Capitalism always starts at the bottom and finishes at the top.

      And otherwise, muddles along, through scandle and set back. The future is more important than the past.

      • dang says:

        I hope we are on the eve of a reckoning of conscience that lays us low, a controversial point of view I’m sure, but one born while celebrating my good fortune.

        The vulgarity of wealth overwhelms me.

        • dang says:

          I wish I had it.

        • 91B20 1stCav (AUS) says:

          dang-i have always found it easy to be vulgar with little or no monetary investment (original Latin derivation of the term?), but as you hilariously note, many spend much in order to demonstrate vulgarity with impunity, or i daresay, to acclaim…

          may we all find a better day.

    • dang says:

      What does a decline in the price of an over priced market mean, opportunity ? Or the chance too buy into an over priced market ?

      • dang says:

        The Fed’s engineering of zirp and inflation on the nations retiries conservative accounts, illuminates who’s actually in charge of the retirement accounts because they’re stealing a whole lot of money from them to pay for the billionaire orgy.

        The new economics, invented just this afternoon.

        • dang says:

          Human history seems to be the story of slavery.

          We are all slaves of one degree or another, helpless to define the future, worried by an unpredictable present, and angry about a song of the past.

    • dang says:

      Does anyone think that financial assets are fairly priced ? If so, I will sell you a 50 year Italian bond, paying 1,5 %.

      Where was Italy, 50 years ago. Developing.

      Where will they be 50 years from now, beautiful, of course. Just like now.

  2. OutWest says:

    As always, excellent reporting…

    I struggle to see an upside to this in the near term and I’ll go ahead and say that this is likely to be a truly historic inflection point.

    Glad I’m not in these markets. I watch the nasdaq…look out below.

    • JayW says:

      For better or for worse, my IRA is 100 in cash. Most likely, US stock indexes will take at least more 12 months to find the bottom. If at some point there’s a solid 5-7% drop, I may put some money in, otherwise I’m going to be as patient as possible.

      The level of inflation is just unheard of, and I just don’t see JPowell having the stomach to rapidly raise the funds rate upwards of at least 3-4% to start tamping down inflation. Most likely, they’ll slow poke it to 1.5%, maybe 2% before the housing market rolls over. As noted by Wolf, the magic number for 30Y mortgage rates is probably about 4.5% where will start to see the housing market start to turn towards a 5% correction. 5% mortgages would result in a 10-15% correction, which in my view would be extremely welcome.

      • andy says:

        They say the market bottom is when all the bears are dead from catching all the falling knives.

        • Trefoil says:

          Wouldn’t that be bulls that are dead from catching falling knives?

        • andy says:

          Bulls are dead in top one third, bears are dead in bottom one third.

        • Gerry says:

          The stock market never recovered its resiliency after the 9/11 attacks. Endless wars and private equity billionaires who pay no income taxes. Waiting for the big economic Night of the Long Knives to wreck the real estate market. Hopefully, no one launches a few few tactical nuclear weapons to major population centers instead of just in Syria or in China’s Tianjin.

        • dang says:

          The market bottom is currently unfathonable.

  3. Seattle Guy says:

    WOW – Since these are our trading partners….and they are markets for our goods…NOT a good outlook for our “booming exports” What do they know that is NOT yet reflected in our Nasdaq high P/E ratios and NYSE valuations?

    Germany would need every one of the 600 LNG ships 100% devoted to its energy needs were Russia to cut them off. I call that dependence and a vulnerability – Hungary says they are 80% dependent.

    Strange to watch this slow-motion trainwreck coming home to the Nasdaq and NYSE movie theatre near us…

    • Harvey Mushman says:

      Pretty much all of Western Europe is dependent on LNG from Russia.

      • Wolf Richter says:

        The natural gas Europe gets from Russia is transported by pipelines, huge long pipeline, not ships. LNG is transported by ship.

        But Europe gets LNG from the US and other distant natural gas exporters.

        • roddy6667 says:

          LNG is refrigerated. It takes a lot more than a hose or a pipe to load or unload one of the LNG carriers. They need special facilities. LNG will not be making up for closed pipelines soon.

        • Anthony A. says:

          @roddy6667: absolutely true and the LNG unloading facilities which need to be built as big time projects costing $$$$ (Billions) and take years to complete.

        • kam says:

          LNG cost is very expensive fob Europe. Russia easily holds the low cost producer cards.

        • Greg says:

          With the cost of steel, nickel and other basic materials significantly higher than 5 years ago, and with the cost of skilled labor subject to wage inflation, the construction cost of new LNG facilities is going to be astounding.

        • SilentC says:

          Hi Wolf, you made a comment earlier that did not accept replies about luck or timing being the only way to have made money in these markets since 2000. I’m wondering if you discount value investing strategies here. I pulled up VTRIX (Vanguard International value) and rough numbers it looks like it did around 2% + ~2.5% yield in a very low inflation environment for most of that time period, and maybe an extra 0.25-0.5% in local currency. Not awful. I read a paper one time that I have tried unsuccessfully to find again that looked at bottom quartile P/E or maybe P/BV companies in Japan in the 1990s and it claimed you did not get your face ripped off owning those. Anyway, just curious if you have deep thoughts on this, thank you.

        • Wolf Richter says:

          So do you accept 30% plunges to earn a 2% yield? I wouldn’t. I wouldn’t accept so little return for such a big risk. I’d rather go for higher-quality bonds.

          If you want to take big risks (30% decline), that’s great, but the potential return has got to be greater than 2% a year.

          For example, before 2012, the German 30-year government bond yielded between 2.5% and 5%. So you could have bought a 30-year bond at issuance at the time (the bond itself, not a bond fund) and for the next 30 years, you earn 3.3% a year in interest and after 30 years you get ALL your money back. And you don’t have to worry about the market going crazy on you. It rather do that than go through 30 years of German stock roller-coaster and not get all my money back.

          But if I feel like I can time the market for that 30% upswing, and then sell, I might try that. But that’s not buy-and-hold.

          Everything boils down to risk and reward. If that relationship is out of kilt, I’m not doing it.

        • SilentC says:

          Great point regarding the bonds Wolf. I was trying to say total return to international value investing was maybe 4%+ in USD which is better than a sharp stick in the eye but it seems like
          many people, even people who should know better (like myself) conveniently forget about bonds just because the yields seem low. It seems silly to buy US corporate IG ten year bonds yielding 3.5% and yet it probably is not these days vs US stocks.

      • dang says:

        Europe is not dependent on Liquified Natural Gas (LNG) nor are they dependent on natural gas from Russia. They may be attacked by the disruption of service, unsuspecting, they are vulnerable in the short run. Incentivized to make changes that may not be too the liking of the mob that owns the cloud.

    • Augustus Frost says:

      The stock market does not equal the economy.

      That’s what most people don’t understand because they accept the fallacy of external causality by which I mean prices are determined by something like earnings.

      The European stock markets aren’t the best example of this because in the aggregate, economies have been the weakest in the world during this period. But if you look at others, similar patterns are evident.

      Taiwan just recently passed its 1989 bubble high a few years ago. It’s about 30% higher now but went nowhere in 30 years during which time the economy and the accounting number known as earnings increased noticeably. During the first Asian crisis in 1997, Malaysian stocks fell back near or below 1970 levels. It was one of the “Asian tigers”. The Hang Seng index is marginally higher now than it was in 1997 when Britain handed it over to China.

      For most people, it doesn’t matter how much evidence you show them, they still believe otherwise. They don’t believe it now and they will never believe it later.

      To provide a US example, CSCO still sells for about 30% less than its all-time high of $82. It crashed to $8. It’s been a market leader the entire time in growing industry.

      The patterns in these markets, the same outcome is in store for the US market but with an even bigger drawdown because the valuations are and were so much more inflated.

      It’s potentially going to take decades to end the manic inflated perceptions of the US stock market since the late 90’s.

      The most ironic thing about this topic is that if you ask the typical US stock “investor”, they probably think the fundamentals are reasonably good and a minority think it’s “great”.

      The reality?

      The US has a smoke-and-mirrors fake economy entirely supported by the loosest monetary policy in history and debt. That’s what makes current earnings possible. Even worse, society is rotting below the surface and has been my entire life.

      But it’s only manic psychology which explains why “investors” assign such high valuations when by any sensible standard, fundamentals now are worse or a lot worse than earlier periods (such as the mid 60’s) when valuations were much lower.

      • gponym says:

        Well said.

        American media likes sound bites, and what better sound bite than a number, especially when like the Dow DJIA it’s been drummed into our brains like a mantra (“the Dow”/the Tao) since kindergarten. A lot easier than figuring out what makes the real economy tick.

      • kam says:

        The cost of making a very few amount of people very, very rich via the Fed’s monetary thievery, is the loss of the engine of the U.S. economy. The engine that made America rich in the first place.

      • Mad Puppy says:

        Thanks for putting into words the ever prevailing sense of unease I seem to have about the markets and the overall economy. I ,too, am old enough to remember a different time. Like so many others, just watching and waiting, and keeping my powder dry, sometimes literally and sometimes figuratively.

      • Harvey Mushman says:

        “Even worse, society is rotting below the surface and has been my entire life.”

        I have to laugh when I hear statements like this. As if there was a time when society was so great.

        • VintageVNvet says:

          Exactly correct IMO also HM!
          Difference this time is the HUGE increase in ”on the scene” communications now available to everyone with a phone == almost everyone except older fa(r)tter folks such as myself who don’t carry their ”leash” AKA phone with them around town, etc.
          HUGE and to me very welcome increase in communications so that we can all, if we choose, see what’s happening via other than ”controlled media.”

        • Augustus Frost says:

          You’re missing my point which I could not explain in detail.

          To anyone who opens their eyes, it should be obvious that the actual fundamentals in the US suck now and have for years.

          Look at real median household income and net worth as reported by FRED since 1998 and 1999.

          There has been a 5X increase in the national debt since 2000 and a 14X increase in the FRB’s balance sheet since 2008 yet both metrics still flatlined.

          We’re talking about essentially a zero percent increase for an entire generation which is probably the weakest performance in US history even as the economy experienced “growth” somewhere around 90% of the time since 2000.

          What do you think is going to happen to these two data points and American living standards when the mania ends if this is the best the US can produce during “good times”?

          Let me guess?

          This is America and somehow, someway, this country is exempt from the same reality which applies everywhere else.

          Any set back will supposedly be so minor (like the GFC at worst) as to hardly be noticeable.

          The point I was making is that the social rot which has been accumulating beneath the surface for decades is the actual cause behind this awful economic performance, since obviously economics doesn’t exist independently of the society.

          No, American society was never “great” in the past. It’s a lot worse now, in the aggregate. If it happens at all, reversing this decline isn’t going to happen without a noticeable decrease in living standards and it won’t be temporary either.

        • VintageVNvet says:

          Try explaining how great USA was around 1900 – 1920 FOR THE VAST MAJORITY AF:
          You cannot because it WAS NOT,,, but it took Clarence Darrow and similar really brave — or reckless folks to give their all to make any awareness of that fact to the middle and upper middle classes who were living in their own cocoon…
          NOT saying times are good now,,, but rather they are just about the same as always for WE the PEONs who did and do continue to live pay check to pay check AKA hand to mouth.
          Read about the ”history” of any era anywhere, literally THE story from and by those approved and supported by our owners/oligarchs/etc., and it’s always been the same or worse than now.

      • Harrold says:

        Augustus — your view is too simplistic. The stock market is consumer and business confidence. The stock market is the basis for all pensions and retirement funds. It is the basis for literally quadrillions in leveraged loans and derivatives. I think you will find out it is the economy.

        The examples you cite just show you don’t understand how investment works. It is all about discounting the future, not today or yesterday. That is why cisco will never come back, and tesla has a higher market cap than the entire auto industry combined.

        • HowNow says:

          Harrold, will you please explain your last sentence? thanks…

        • Harrold says:

          The market only cares about perceived growth of company profits. A slow growing company will never be loved. A fast growing company gets much love, even if it doesn’t show a profit.

          So cisco was a buble stock in 2000 when investors believed their growth rate was very high. In hindsight they turned out to be wrong, but that was the thinking. Same thing now with tesla. Very high valuation because of the BELIEF that rapid growth will continue. We shall see!

      • dang says:

        I love your explanation but I think you are wrong in the following way

        You ignore the potential for a disaster to save us like WW1 and WW2 and the dust bowl and the Great Depression.

    • Nick Kelly says:

      The largest source of electricity in Germany is coal. I knew Germany had coal but a recent bit in the NY is all about a mad scramble for lignite in the old GDR, East Germany. This is brown coal and is one step over peat. It makes less heat and more pollution. Whole villages are being levelled to get this stuff. It is surface mining so no deep shafts but huge holes left which are turned into shallow lakes afterwards.

      With nukes mainly shutting down and Russian supply an unknown Germany has to make do. In case anyone feels judgmental, a tidbit from the NY: in 2021 China started three times the coal- fired generation of the rest of the world combined.

      • dang says:

        As an old miner like me might say, waste coal is a matter of price. So is running out.

    • Robert says:

      correction: they have cut themselves off from Russia

    • dang says:

      Theater is designed to stimulate hysteria. And the R/U drama seems to be designed to create hysteria.

      It’s good for business.

  4. Concerned_guy says:

    Wolf- You had other articles about stock market getting unplugged one stock at a time, and seeing some many other stock have already dropped more than 50%, I wonder why the sp500 index is not dropping much more. Could it be possible for the underlying stocks in an index can drop (have dropped) a lot but the index would not drop that much (or remain relatively high)?

    • Wolf Richter says:

      Most of these stocks are not in the S&P 500. To get into the S&P 500, they have to be profitable for four quarters and be among the largest in their industry.

      If they’re traded on the Nasdaq, they’re in the Nasdaq Index (which is down 18% from its November high). If they’re traded on the NYSE, they may not show up in any of the mayor indices, except maybe the Russell 2000, which is down 19%.

    • Zark Muckerberg says:

      Maybe because they’re the last domino to fall. So far, no bankruptcy amongst the no-revenue “tech” IPOs. A lot of money still swishing around

    • billytrip says:

      Just my opinion as a “retail” investor who has largely been out of the market for a long while.

      When a bull market starts unwinding, nobody wants the party to be over. So at first, the most obviously overpriced stocks get hit. The meme stocks. The momentum plays that rely on greater fools forever.

      But those getting out of those stocks are not ready to leave the party. They have been making easy money for years and giving that up is hard.

      So they start rotating into safer stocks. Dividend yielding stuff, widow and orphans stocks like consumer staples and utilities. You can look at certain targeted ETFs and while the overall stock market is going down a lot of these “safe” stocks are going up.

      In aggregate then the market is not going down so fast. Of course at some point investors will be dumping even the widows and orphans stocks. Then, look out below.

      • Winston says:

        Around 15% of retail investors today got their start in 2020. (CNBS)

        Retail investors made up around 17% of the market in January of 2020, but that number was 25%+ in July and August of that year. (Reuters)

      • YuShan says:

        The biggest losses will not come from a “crash” but from an orderly, steady deflation of asset prices. This is because a classic crash will prompt central banks to implement panic measures to support the market, while an orderly 3% off every month would not trigger that, but still causes the market to lose 2/3 of its value over a 3 year period.

        Significant market corrections take several years to play out. 1929-1932, 2000-2002, 2007-2009 for example. Japan 1989-2009 was almost 20 years from top to bottom!

        • Augustus Frost says:

          There has never been an orderly decline in market history from a mania peak, at least not in any market with scale. If there is one, I’d like to know which one.

          The pattern in the past is one or more crashes and then the Chinese water torture like decline you describe follows.

          The last few decades have convinced most US market participants of central bank omnipotence. When sentiment changes sufficiently, nothing they do will make a difference.

          First, central bankers aren’t robots as evidenced by the slowly changing environment for US monetary policy now. Contrary to what so many think here, they aren’t going to go against everyone else indefinitely.

          Second, if they did try to do that by “printing to infinity”, the market will crash anyway when the currency crashes.

          When a mania breaks, most “investors” in the market will end up huge losers because by definition, fake wealth isn’t real.

        • Augustus Frost says:

          Following up on my last post. Crash doesn’t mean a market losing most of it’s value in one day, a week or a month. The March 2020 decline during COVID is the closest one to that in modern history but it “only” lost about 35%.

          Following the 1929 peak, US stocks fell 50% in six months to the April, 1930 low. That’s a crash.

          There was no crash in 2000-2002 but the mania never ended. It’s the same mania we are in now.

          Most of the losses during GFC happened in the fall of 2008, but that wasn’t a crash either because we are still in the same mania now too.

          Japanese stocks lost about 50% from the 19889 peak in six months. that’s a crash too. Taiwan crashed form it’s concurrent 1989 mania peak too but that’s not a big market.

          If you are referring to a complete wipeout of 80% or 90%, it’s never happened to my knowledge in market history “overnight” in any market with any scale.

        • Nick Kelly says:

          Did you think the market recovered in 32? The Depression was not a correction, and its scale dwarfs those pin pricks. The economy collapsed. Wheat fell until unable to afford its storage it was dumped on the ground. Similar with all commodities: cotton, copper etc. Ten thousand US banks closed with no deposit insurance.

          Far from intervening, the Fed did nothing, until in 34, the Fed Reserve Banks themselves closed.

          Yes the Japanese stock market did not recover for 20 years but the economy proved that it is not the stock market. See Japanese trade surplus in the period.

        • Jake W says:

          augustus, great points. another thing to remember is that even after the 35% crash during march of 2020, which was really a flash crash more than anything, prices only bottomed at their 2016 levels around the time of the election. that just means that the 2016-2020 multiple expansion was unwound. it wasn’t a crash in the traditional sense.

        • AK says:

          I suspect this is exactly what Federal Reserve would like to happen – engineer slow and steady deflation of the stock market bubble while at the same time protecting the housing market from major declines. Not sure they will be able to do that though, but IMHO that is not a bad plan.

        • Pea Sea says:

          Nonsense. That’s a terrible plan. The housing market has experienced massive irrational gains in the last year or two, and those gains not only should *not* be protected, but should be allowed to unwind as quickly as practicable–meaning as quickly as possible without provoking a GFC-style meltdown.

        • Shiloh1 says:

          Augustus, 1966 to 1982? Was that the Decline and Fall after The Nifty Fifty?

        • will says:

          Ty for your insightful comments Augustus.

          On the other hand though with respect to: ” Crash doesn’t mean a market losing most of it’s value in one day, a week or a month”

          One of the things that I’ve been wondering about for at least a decade is whether there’s a reasonable likelihood of the next crash actually occurring as a series of limit-down “flash crashes” resulting in markets being suspended (because if they limit-down close every time they are re-opened, when would anyone reasonably suggest to re-open them?).

          It’s a difficult supposition to make. It takes years of grinding lower to drive investors to hopelessness which would characterize a real market bottom. However, I could definitely see a situation where assets become stranded in suspended paper markets very quickly and price discovery becomes a nebulous proposition; how quickly under such a circumstance would the public come to the conclusion that the market is “never coming back” and that it’s the “end of western capital markets” etc?

          There was a very compelling question asked ~20 years ago by a (I think?) psychology professor: “is the market on prozac?” His supposition being that such an enormous number of Americans are consuming mood altering pharmaceuticals with good documentation of altering behavioral characteristics such as risk/reward perceptions and risk aversion; that the follow-on question is whether this collective behavioral modification explains why equity markets had become increasingly untethered from reality during his lifetime.

          I’ve never forgotten this compelling question because the answer has never seemed entirely clear to me. But a market driven by emotionally-altered individuals and millisecond automated robots that were created in their image, is difficult to imagine as being one where past rules necessarily apply…

          Thank you again for your comments, I quite agree with everything you said. But the wrinkles are very interesting to think through..

          On another note. I’ve been out of the market for over a decade now. My thinking on the matter is exactly the above: my adult lifetime I’ve just seen the market to go up and down only to end up at the same place. Why not just avoid all the stress and sit on cash? I also learned in 2009 that the greatest plays to be had are during the crash – this is the only time that possibilities are truly interesting.


  5. KPL says:

    UK FTSE – “The Friday close is down just a tad from the close on December 31, 1999, which had been the bubble high 22 years ago, and now the index is back at it:”

    Which is double the bubble lows of 2008.

    If this plays out globally in a way that money printing cannot help (given the indebtedness on a global scale), what has happened till now may be just a side show. The fireworks might just be getting started if inflation keeps on biting the Fed’s heels. Once the Fed starts raising rates and does QT (only because it has to) the other pygmy central banks have to swallow the bitter bill and follow suit. It will be a delightful movie to watch the King Kongs turn into headless chickens!!

    • Augustus Frost says:

      The real fireworks will occur when major central banks lose control over interest rates or the national currency starts crashing.

      Central banks will have to choose which one to defend because they can’t do both at the same time.

      • Jake W says:

        that’s what so stupid about “investors” being so excited by jerome saying that we would have a soft landing. “yeah, don’t worry about markets, because we’ll get inflation under control while preserving them.”

        no, you fool, you can’t do both, and no amount of jawboning will change that. as you always say, there is no something for nothing.

      • dang says:

        I think we are beyond a crash by virtue of analysis.

        I think we are in the realm of a continued, managed looting of the citicizinery by the wealthy.

        All they have to do is keep printing money, which they will do.

        The last thing on their mind is the idea of financial loss of the lower 99% as opposed to the horror of the American kings and queens losing a dollar

        • dang says:

          My father, shot in the face in WW2, silver and bronze star recipient, Teamster steward, 10th grade education, predicted the outcome of the IVY league folly. The fools paradise that America is currently tolerating.

        • dang says:

          America’s heartache is like indigestion.

          The bottom of the S&P 500 is at least fair value, $220 per share.

          If the theory of reflexivity has validity, the financial bottom may be much lower. The social bottom, not so far away.

  6. Peter Weyant says:

    The other thing this shows you is positive, the market has already adjusted for the most recent bubble and should not have major downside shocks outside of geopolitics.

    • TimTim says:

      That’s what you took from this article?

    • GotCollateral says:

      I think you may have had one too many hits from the crack pipe…

      • Cvillian says:

        Or just watching/reading too much CNBC. Has anyone noticed how lopsided the reporting is from that organization? It borders on propaganda….

        • Greg says:

          I occasionally watch CNBC for entertainment purposes during the daytime. Their coverage from Asia and Europe is slightly better than the garbage spewed by their US commentators and hosts. The US sessions seem to be patterned after sports network programming formats. I think to many people grew up with gaming and sports betting as their predominant pastimes..

        • Jake W says:

          cramer is the worst offender there.

      • Michael Gorback says:

        Speaking of which, I haven’t received my free government crack pipe.

        • Spudbuster says:

          This does not take into account Inflation, dollar value and the change of quality of stocks. Also think of where the markets would be without all the government intervention like zero percent interest, bailouts, stock buybacks, war mongering and trillions of new debt, not just the fed 30 trillion but corporate debts.

        • dang says:

          Oh I think you have, obviously you are so pleased with yourself. That something like crack is lying to you about your signifigance in this world.

          An evil clown.

    • roddy6667 says:

      The market is just starting to adjust. These are the warning tremors, not the Big One.

      • sunny129 says:


        wait, until Oil goes up for $150 or more per barrel!

        • Tom S. says:

          It seems like it will be oil. But, inflation is spreading broadly across all commodities. Should consumers in America slow consumption due to high prices, the inevitable deflationary outcome will necessitate holding cash. The wealthy holding cash is what will break the interest rate environment. Meaning, prices on debt securities will tumble while rates shoot to the sky. 401ks seem like they’re already pegged as collateral.

    • Mark says:

      “A man sees what he wants to see, and disregards the rest ”

      Paul Simon

      • HowNow says:

        “…hears what he wants to hear…”

        Great lyrics. Aren’t we all like boxers, standing alone in a clearing?

      • 91B20 1stCav (AUS) says:

        Mark-respectfully, the lyric is “hears”… (…cue ‘American Tune’…).

        may we all find a better day.

    • Augustus Frost says:

      There are no positives in the sense that market participants will collectively be able to keep all the fake wealth reflected in current prices.

      That’s what your comment ultimately implies.

      • dang says:

        You are only taking into consideration money. The source of all this money was virtue.

        Would I pay one sintavian for one share of the most overpriced market in history, including the tulip mania, no.

        Man is a bipolar animal. Manic/Depression is the life blood of thought, the great rationalization of the clueless that believe in God.

    • AK says:

      IMHO geopolitics are precisely the main factor that is going to determine fate of North American and European stock markets this year. I suspect that Federal Reserve and other central banks, while very powerful, will not be able to counterbalance the negative impacts that geopolitics are sure to cause.

  7. Iona says:

    What I notice is the similarities between the chart of France, Germany and the uk. Those countries are quite different and I would expect their stock indices to reflect that but instead it seems to me they are synced due to the tide of liquidity from the ECB, fed and whoever else. A similar correlation can be found among markets in the US. In my opinion it’s killed off a lot of value investing and replaced it with momentum trading and given the fed and it’s cronies way too much sway over the economy.

    • Iona says:

      I think you will find a big difference between Europe and the US is buybacks.

      • AK says:

        Could you please elaborate on your buybacks point ? Do you mean that European companies don’t do buybacks, or buybacks are not allowed in Europe ?

        • HowNow says:

          Generally, they weren’t allowed in most EU countries until 5 or 6 yrs. ago but are now much more common.

    • dang says:

      They are the nations of the EU, land of the common currency, the Euro. unit of currency, without intrinsic value, a lie codified by agreement and laws.

  8. KPL says:

    “Once these mega-bubbles implode, stock markets may not see their old highs for decades. Food for thought.”

    Another food for thought is: all the previous bubbles have been stopped by the Fed – by creating a fresh bubble and by taking the interest rates down to 0 or thereabouts and staying there for years and also taking money printing to another level up (and up and away in 2020) and by wearing the cloak of atlas to the stock market. Have we reached a stage where atlas might shrug?

    • TimTim says:

      On this occasion the weight of debt in the world, it’s consequences, may become more than Atlas can lift.

      He may just drop the dammed thing and walk away.

      • TimTim says:

        Shrugging becoming an expensive indifference of yesterday.

      • wotan says:

        Maybe Atlas will just shrug?

        • Anthony A. says:

          Atlas may blame inflation and the stock market dive on Russia’s invasion of Ukraine. They just need to get Cramer on board with this. LOL

        • NBay says:

          Atlas shrugged because all the lesser people wouldn’t let him build his Fountainhead.

    • AK says:

      Perhaps Federal Reserve has noticed that it had popped previous stock market bubbles, and decided to avoid doing the popping this time, and do a slow and gradual bubble deflation instead of pop ? So far things seem to be suggesting that it is possible to do some bubble deflation without causing market panic / bubble popping – S&P and DJ seem to be retreating in orderly manner, there were nor any bank or pension fund crashes so far…

      • VintageVNvet says:

        ”BIG money” easing out more slowly this time AK, likely due to clear communications from THEIR wholly owned Fed and paid political puppets / politicians.
        Watch closely to see where the pea is under the three see shells, eh?
        What, you don’t think there is actually a pea under any of the SHELLS???
        You must be a (take your choice):: Radical,,, or Commie,,, or, whatever not to trust ”THEM.”

      • KPL says:

        Yes, looks like as long as the frog is being boiled slowly the Fed is okay with looking on (since their buddies would have got an advance message and got out while before the boiling starts).

        My grouse with this is when will the arsonists who pose as firefighters and Kingkongs be “taken out” as Lindsay Graham would say…

    • dang says:

      The momentum only seems to change when even fools see the folly, too late to avoid the reperecussions. Too early to profit.

      Software companies are vaporware, in the long run. maybe

  9. Martok says:

    Good food for thought Wolf with your analysis and I don’t think most people (excluding those involved in conflict) – fully understand the dire realities to come.

    A MarketWatch article by Mark Hulbert proclaimed this wasn’t a “Black Swan” event by saying:

    “Black swans in the stock market are sudden, awful, unpredictable and extremely rare — such as a market crash. They are not, as Taleb complained in an interview with The New Yorker two years ago, “any bad thing that surprises us.” The current U.S. stock market correction — along with its apparent proximate cause — Russia’s invasion of Ukraine — does not qualify”

    Our markets and most of worldwide markets are in the “bubble of everything” created by unprecedented QE, and current actions of QT and interest hikes in the works of a fragile markets that a month ago was going to be precarious to control, as that only.

    Then you have Hulbert saying this isn’t a Black Swan event! — That has the possibility of a whole EU conflict, and Putin calling these sanctions a “act of war”, and has his nuclear status/threats on high alert, his markets crashing, Ruble below .01 cent, — Hulbert’s claim is absolutely absurd to me and crazy.

    IMO – all markets will take a huge hit with unknown downside, they were ready to take a hit with the Fed talking of just series of .50 basis points to 2% without this chaos.

    We are in for a rough ride for many months, and or years as investors rotate to safer investments, cash out, or margin called out, BK’s – with a ripple effects on businesses at possible catastrophic levels.

  10. Harry Houndstooth says:

    Wolf certainly reinforces the conviction to use SQQQ and SRTY as trading vehicles (instead of TQQQ and URTY).

    Just ratchet your account higher by side stepping the rallies.

    Wisdom served up fresh daily.

  11. Edward Xylem says:

    It’s working its way towards the centre. The is nigh for the S&P500 as a final domino and gold to shine. Au might see a pullback first from mid March but the trajectory is up over time and by a decent % compared to any paper asset.

  12. Zark Muckerberg says:

    Late 90s was dot com stuff. Looking at 2008, they’re all down too. Small world 🌎

    Perhaps Meta should represent the people of Earth. Kidding.

  13. phleep says:

    Real growth happened in the early 1900s with arrival of electricity, indoor plumbings, cars. It happened postwar with wider deployment of those things, and some wavelets of electronics. The song bringing ever-wider crowds of retail investors in, said over large enough horizons, the stock market returned around 10 percent per year, a risk premium over “risk-free” bonds. Dreams, especially so materially dazzling, die hard.

    I am seeing a different picture now. I am too old to await these golden horizons to unwind placidly, and severely agnostic about this whole rosy picture of stepped but occasionally stuttering ascent. My stock bets are smaller and riskier and more nimble. I have devoted a lot of attention to cost control and bodily health. The 20th century warm and fuzzy middle class ideals and rewards ensemble is so far behind already in the rear view window. I have jettisoned the loser connections (gracefully enough) and kept the winners. I will not spend my remaining precious time clinging to a sing-song “it’s a small world,” happy-meal menu I never deeply bought into anyway. Nice to be able to get an emotional and intellectual and physical life that fits.

  14. phleep says:

    The risk-free rate pushed aggressively to zero and prolonged there, cuts off that rate from signalling risk. So risk has been sloshing around hidden in cheap plentiful credit and freely printed money. So the true financial state of many firms is worse than it looks. I.e., a sort of welfare state to keep up the Potemkin Village facade of free-trading capitalism has been the regime. Now the emperor is about to walk the catwalk, not entirely naked, but more so than the broad numbers have been suggesting.

    I’m not saying the system will collapse. It has remarkable resiliency, I will say as long as I am not the sacrificial animal du jour. But a lot of deadwood and leaves have gathered and the rangers have not been doing forest maintenance. They have been sitting in the warm lodge inside-trading and making press releases about how they have avoided the last catastrophe. Time to sdrop the donuts and get back to work.

    • HowNow says:

      Thanks, Phleep. Interesting imagery and sentiments.

    • 91B20 1stCav (AUS) says:

      phleep/how-would observe that the economic ‘rangers’, thinking they knew better, hosed down those smaller, periodic ‘fires’ (risk) that, in the past, cleared out the dead/diseased in the economic forest resulting in fewer, but much more massive and damaging conflagrations when they have inevitably occurred…

      may we all find a better day.

  15. Jacob says:

    I felt before looking at this article that central banks might step in tomorrow. But looking at the charts, many are around key resistance points. With the way Friday markets behaved, they have to step in Monday to restore order!!
    I still think this goes Zimbabwe, and the dollar crashes, not markets

    • YuShan says:

      Imo, it is possible it could eventually go Zimbabwe, but that won’t happen before making some very a serious attempts to save the currency (even it it requires crashing stocks). They will do a Volcker if required.

      Even the Fed understands that the way the American economy is structured, it relies on the US$ remaining a viable currency. And the only levers the Fed has to have any influence on the economy at all also require that.

      The Fed members will silently sell their stocks, perhaps buy gold, and then do what is necessary.

      • Augustus Frost says:

        It’s as close to a slam dunk that the economy and markets will be thrown under the bus to save the USD when it’s deemed necessary. The Empire requires it and (practically) everything else will be sacrificed to defend it.

        The FRB doesn’t exist in a vacuum, but you are correct, USD is the basis of its power, and they aren’t going to voluntarily commit institutional suicide to “print to infinity”.

        That will come later when all other options have been exhausted.

        • Nick Kelly says:

          The Empire requires it and (practically) everything else will be sacrificed to defend it.

          The economy, society, and we require it. The English speaking world has never had a currency collapse. They aren’t pretty and usually presage a societal collapse and internal revolution,
          ‘Oh bring it’ will say a few commenters.

          Uh huh. That prepper fantasy goes downhill real fast.

        • 91B20 1stCav (AUS) says:

          Nick-seems a lot of people have never heard of Gil Scott-Heron, perhaps thinking that the many visual templates provided by our contemporary entertainment are all they need to know while awaiting the end of the mini-series…

          may we all find a better day.

      • Jake W says:

        i agree with that. if destroying the currency is the line, they’ll step as close to it as they can, but they wouldn’t dare actually step over it.

        • AK says:

          IMHO US government has already undermined USD by showing willingness to use it as a financial weapon. This time it was used against major antagonist of United States, but all other countries in the world took notice, particularly the countries that aspire to be independent from United States (India, for example). The USD is no longer an ironclad way to store one’s wealth – it could be sanctioned whenever US government feels it suits it needs.

        • Nick Kelly says:

          The sanctions on Russia are being applied by most countries and all with reserve currencies except China if you want to call yuan a reserve currency, So which currency is your new clean shirt?

          The sanctions are highly unusual, unique for Switzerland, as is the situation, with the largest displacement of a population in Europe since WWII.

      • Apple says:

        Stock market in Zimbabwe did very well while its currency was crashing.

  16. YuShan says:

    The US stock market has been quite unique in its outperformance over the past decades. Europe has been almost flat on balance. Japan is still far below its 1989 top.

    Of course much of EU markets is unattractive business like banking (blows up every now and then because of too much leverage) and energy / mining ( which are depleting businesses).

    US has had the benefit of a high “tech” content (high growth and insane valuations) and some serious monopolies (= high profit margins). The question is if that is sustainable going forward. I think not, but it has gone on for much longer than I thought possible.

    Some people argue that EU markets are not that expensive, but imo that reflects their poor fundamentals. I also expect that when the expensive US stock market crashes (or deflates in a more orderly manner), it will drag down all other stock markets down too, regardless of valuation. USA is about 60% of world stock market capitalization anyway.

  17. YuShan says:

    Btw: even with the S&P500 returns looking good relative to others, John Hussman points out that:

    “It bears repeating that the S&P 500 lagged Treasury bills from 1929-1947, 1966-1985, and 2000-2013. 50 years out of an 84-year period.”

  18. YuShan says:

    Another issue that has been bothering me for years is the effect of DE-globalization on stocks.

    While much (most?) stock market gains have come simply from multiples expansion (which will eventually mean-revert), the areas where we HAVE seen actual organic revenue growth is often in China and some emerging markets. What if that gets cut off?

    The way things are heading now with cutting countries off from SWIFT and embargoes on all kinds of goods and materials, it is likely that some countries will respond in kind.

    When will China ban iPhones, of which most profits leave their country? I’m also always surprised of the massive footprints that companies like P&G, Unilever, Danone, etc have in Asia. This isn’t high tech stuff that they cannot make themselves. Everybody can make shampoo and bottled water. There is lots of margin in the “brands”. What happens if countries decide they like to get these profits themselves?

    What if poor countries start nationalizing their mines? Sure this shrinks the pie for everybody, but that won’t stop a populist government from doing this if it wins them votes.

    Growth in developed markets is flattening. Europe is a dying continent. Japan is too. USA is a bit better demographically, but not enough to compensate if world markets were to fragment.

    When growth isn’t there, that would require a re-assessment of some very high stock market valuations. It appears to me that there is an enormous mismatch between valuation and reality. It doesn’t make sense that valuations where much lower when all the globalization driven growth was still ahead of us. Now some of that will go into reverse, starting from historically very high valuations.

    • Stillastudent says:

      Very prescient analysis. Roubini has touched on the potential for de-globalization which hits many North American firms particularly, since they produced the “status” consumer products in emerging markets- Coca Cola, McDonalds, P&G, Starbucks etc. They are easily replaced with domestic products and are vulnerable.

      • VintageVNvet says:

        not to mention 3 of 4 you mention totally NOT needed by anyone anywhere,,, and the 4th of frequently dubious actual ”need,” aside from massive propaganda/advertising…

    • Augustus Frost says:

      Agree with your comments. In the upcoming major bear market, negative fundamentals which (virtually) no one considers possible will become reality.

      Look at the current European situation. Two potential countermoves against the sanctions are:

      Nationalization of corporate operations. This one is somewhat expected but I expect it to occur in many countries later during the worst of the bear market. This is similar to your China comments.

      Repudiating patents, trademarks and copyrights. This might not make much of a difference if it’s isolated but it’s not something hardly anyone has even considered. US corporate profits will crash if this happens to any scale.

      • Nick Kelly says:

        The USSR never paid a cent on patents. Turned out great as did nationalizing industry.

        • Augustus Frost says:

          My prediction is that a lot more countries won’t in the future either. That will absolutely crush the profits of many US multinationals. Products like pharmaceuticals will be at the top of the list.

          Is the US going to invade or sanction all these countries when it’s dozens or more?

          Good luck with that.

    • Anthony A. says:

      @YuShan: you mentioned: “What if poor countries start nationalizing their mines? Sure this shrinks the pie for everybody, but that won’t stop a populist government from doing this if it wins them votes.”

      I was working for Anaconda right out of college in 1973 about the time Chili nationalized Anaconda’s copper mines in that country. What that meant at the time, was the very cheap copper that Anaconda’s manufacturing plants processed into water tube, sheet, strip, rod, bus bar, wire, etc and made money on the increase in metal value pass through, now had to be purchased on Comex pricing, at much higher prices than what the Chilean Anaconda mined copper cost was.

      Instantly, manufacturing contribution went negative as the plant’s (several throughout the U.S.) were not able to get ~$0.12/lb copper and make it into products that were priced at ~$1.00/lb copper.

      Anaconda was on the way to BK at that time and I was an Industrial Engineer in a large plant doing efficiency studies (combining jobs, etc – lots of fun and the Unions were not thrilled with me). I was lucky enough after a few years to end up in Big Oil in California and watched Anaconda vaporize.

      Because of the input of very low copper prices for Chilean copper, Anaconda did all they could to get as much product through the plants and make “big money” on metal value out the door. And because of this business model, the plants had way more employees than needed and no one cared until the cheap copper went away.

      Anaconda’s motto at the time: “From Mine to Consumer”

      Also, the Anaconda copper mines in Montana went “away” from environmental pressures over time.

      That was a very interesting time to be in manufacturing in this country. Now, the vast majority of copper based primary products are made in Europe and Asia.

    • AK says:

      I think US stock markets reflect the superpower status that United States achieved after the collapse of socialist camp (Soviet Union fell apart, and China changed to state capitalist model). If United States will manage to defend its superpower status, then its currency and its stock markets will remain highly desirable by wealthy people in the world. If United States will not succeed in defending its superpower status, and will get downgraded to just a player in world affairs, then its currency and stock markets will lose some of their attractiveness, and stock markets will correct accordingly.

      • Augustus Frost says:

        I’d be interested to see evidence that foreigners are large buyers of the largest big cap US stocks. Stocks like MSFT, Google, Amazon, AAPL and Tesla and I’m only using these as examples.

        I don’t believe such evidence exists. The Swiss National Bank has purportedly bought large cap US stocks (which I think is insane) like AAPL but that’s effectively no one’s money from QE.

        There is probably noticeable but relatively limited buying by pension funds.

        Otherwise, I doubt individuals outside the US are willing to pay so much more for US stocks than their own.

        Most foreigners don’t have US brokerage accounts and most US stocks have limited availability as ADR equivalents elsewhere.

        • Nick Kelly says:

          Why is it insane for SWB to buy Apple? They have to buy US $ to keep the franc from rising too high, always their problem, so after converting to US $ they buy the same item that has made Berkshire 500 billion. Where else should they store their dollars?

  19. historicus says:

    The US will be viewed as a safe haven.
    Likely, that will lead to losing “less”.

    The Fed has created a DYSTOPIA..
    in cash, punished by a Fed created inflation
    in stocks, punished by a Fed created inflation AND punished by drops in the market due to inflation and world events (the later not the Fed’s doing)

    Now, what happens to real estate? In FL AZ CA SC TX?

    • Augustus Frost says:

      The US stock market is the most overpriced market in the world, by far.

      By any sensible analysis, US stocks should lose a lot more value than most or all other major markets.

      As the global reserve currency, the USD is also (one of) the most overvalued major currencies. I don’t have an opinion on how it will fare relatively, but it should still be a huge loser, especially against the currencies of countries whose GDP primarily consists of real production as opposed to BS services.

    • Old School says:

      Zirp and $30 Trillion of world QE has blow up total stock, bond, real estate, gold, crypto, art markets to a huge amount. I have seen numbers in excess of $650 trillion. That’s probably about 50% or more central bank dependent.

      Fed is going to try to leak a little air out without causing a crash in all asset markets that makes their balance sheets look puny.

      • Nathan Dumbrowski says:

        Agree with ^^ from Old School. The interest rate increases are nice and will help but the real problem is the Trillions $USD of funny money printed by CBs and held by government agencies. The temporary QE is like the temporary inflation. It has become part of the day to day operations. Loosen the reins and let the markets do their ugly job

  20. Xavier Caveat says:

    Are people’s pensions & retirements as tied to the stock markets in Europe as they are here with 401k’s?

    • Steve Butcher says:

      In the UK – Yes, very much, although it’s split into two basic groups. Some people (mostly in the public/government sector) have what are called “Gold Plated” pensions, you are guaranteed a fixed amount for your pension based on your final salary when you retire – this is regardless of what happens in the market. However, the public institutions who run these schemes usually have the member’s contributions invested in the markets – so in the event of a market crash, it will be the Government that has to plug the giant black hole it will generate.

      The second group are private pensions, usually managed via self invested pension schemes. They are initally setup with a default investment scheme but users can take more active management and change the funds in which the pension is invested in. I don’t know the figures but I suspect most people leave it on the default scheme which would most likely follow the traditional 60/40.

      In addition, the future of children’s investments are also tied to the markets, with various schemes such as Child Trust Funds which were created to help parents save for their children, these are also mostly invested in the traditional 60/40.

      Finally, a big push was made to encourage saving via Stocks & Shares ISA, where you can take advantage of tax breaks to encourage savings – again these have market exposure.

      So in the event of a major market crash, the only people not screwed will be those on Gold Plated pensions. To rub salt into the wounds, it will also be down to all the people in the private sector whose pensions were decimated to then pay more in taxes to plug the funding gap to preserve those Gold Plated ones.

      • Xavier Caveat says:

        I could see a little bit of envy from those wiped out, compared to the precious few made whole.

        It’s going to be a really bad time to flaunt showy wealth in the near future.

    • Augustus Frost says:

      In continental Europe, never read it even once.

      This makes sense with the relative impact of QE. If they were buying stocks in anywhere near equal proportion as Americans, the charts in this article should not be possible.

  21. perpetual perp says:

    These Euro stock markets are all EU right? Could that be an influence affecting each in the same way? They seem to be in sync. And they all share the same Central Bank too. Just like the US. In any case, using debt needs to be stopped. Both of these banks can inject funds directly without creating more public debt! The ‘taper’ should be used more forcefully.. But it does not follow that the money supply needs to shrink. Shrink the debt. Do not shrink the economy.

  22. Yerfej says:

    At some point it might occur to people that ALL social and financial engineering are methods leveraged by elites to delay the inevitable market mechanism while they loot the common people of their wealth. The elites are running a huge con on the people, although some like Schwab don’t even bother to hide their intentions of confiscation of EVERYTHING from those outside the club.

    • AK says:

      I am under the impression that this has already occurred to many people in Anglophone world (I can’t say for the rest of Western world because I can only read English). The strength of populist movements in USA proves this.

  23. CreditGB says:

    “A rising ocean lifts all boats”

    As inflation rages on and increases exponentially, is the market “bubble” really as big as it may seem?

    If my house “bubbles” and has increased in “worth by 50%, but the buyer’s pocket book thanks to inflation is also up 50%, what happened to the “bubble” price of my house?

    Maybe this is upside down thinking. I’ve been wrong 6 times already this morning.

    • YuShan says:

      It depends. Wages haven’t gone up by 50%. Also, high inflation will require interest rates to rise (i.e. higher mortgage rates). This means that people won’t be able to get as high a mortgage as before, so the maximum they can bid for a house will be lower.

      I think a good metrics is price/income ratio (which is very high at the moment). That is only sustainable if you can finance extremely cheaply. That was the case in recent times, but persistent high inflation is likely to spoil the party.

      30-yr mortgage rate bottomed at ~2.6% last year. When that rises to 5.2%, that means financing cost double. That will hurt house prices.

      • AK says:

        Speaking of the impact of rising interest rates on the housing market – IMHO government may be able to mitigate the impact of rate increases by introducing some schemes that keep a cap on the mortgage payments. Things like making mortgage payments tax deductable (interest and principal), or allowing interest-only mortgages, or whatever scheme that creative economic minds can come up with.

        • HowNow says:

          Yes, when rates get high, new ideas are hatched to keep housing going: when rates shot up in the late 70s- early 80s, I remember banks offering lower rates, but the terms were that the bank would get a percentage of the capital gain on the property when it was sold. Weird ideas are born, but some die at birth.

    • Augustus Frost says:

      The biggest mania today is in the bond market and it’s also global. Aggregate bond (debt) quality, interest rates, and credit standards have never been lower than now and in recent years.

      UST credit quality is the lowest since at least WWII and probably the Civil War. Similar idea applies to all other developed country

      It doesn’t matter that governments can “print” to pay it back. Everyone knows that and did. If this was a legitimate reason, then interest rates should have been equally low (or lower) in the past.

      QE isn’t the reason either, as only manic psychology (and desperation) would ever lead central banks to collectively implement this insanity.

      If it weren’t for the bond mania, housing bubble 2 wouldn’t be possible.

      The one thing we can know is that mortgage rates aren’t historically low because borrowers are so fantastically credit worthy and the collateral is so reasonably priced.

      • Nick Kelly says:

        After WWI US credit was the highest in the world and arguably the highest of any country over the rest of the world in history. All the parties owed it huge sums and were unable to borrow more. So yes it is lower now.

        Same applying to ‘all other developed countries’ ?
        Credit rating is measured against other developed countries. Again UXS still highest. But could no one have good credit, the only logical conclusion of this idea? Apparently not since US treasury auctions are brisk. But going forward it is going to have to pay more than 1.7 for 10 yr money. Just not 20% like Russia.

        Even buying the 10 yr 3 months ago looks good against the Nasdaq’s last 3 months: minus 17 %.

    • Fat Chewer says:

      Another way to look at seems contrarian these days, but everyone seems to have forgotten that interest rates are supposed to rise in a bull market. It is fundamental to how the system works. Interest rate rises have never been feared to this degree before, well, during most of the 20th C anyway. That’s because the fundamentals were there. High productivity, wages and prices rising in harmony, growing exports, less dependence on imports. People lived frugally and simply with few modern luxuries, well within their means, they saved money and paid off their debts as promptly as possible. Debts were only taken out on houses for the most part. Yes, no one wanted interest rate increases while they were paying off their house, but the rises on their mortgage were partially offset by their savings being paid more interest. It was also an IRON CLAD FACT (something that seems to have been lost today) that interest rate rises were proof of a growing economy and you could expect that your wages would also rise in that growing economy.

      So to answer your question, interest rates should already be at the mean (~5% and maybe even rising) right now if this truly were a strong economy by historical standards and also by orthodox economic theory.

      Fighting outbreaks of inflation will require interest rate increases to quell them, but of course, printing so much money to prop up haggard economies has never been tried to this degree before, so it appears that is the real reason why rates have to rise, not because of the current situation’s strong fundamentals.

  24. They’re all casinos and all casinos are different. In Europe the roulette wheel has only one green 0, in the US two. After a decade of slow growth and zero interest rates, and implementing a regional currency, I think the EU may be the best, and priced in 10% chance of nuclear war. Japan is aging isolated and in the shadow of China. China is in the shadow of a party committee with no guidelines other than bureaucratic. If Korea reunites that will be an economic powerhouse. The US is hamstrung by fiscal divisions. Lacking clear forward looking policy they are too volatile. Globally we should have a long period of peace and prosperity. That’s what all this business in Ukraine is about.

    • Xavier Caveat says:

      If a casino employee or punter tries to rip off the casino, they’ll go to jail.

      Wall Street is no game of chance, stealing is a way of life, and those good at it are heralded.

  25. GSH says:

    Interesting. 56 out of 57 commenters expect a major stock market collapse. A lot of the big players have bought insurance. This is usually a short-term bullish sign.

    Investment brokers seem to agree that non-US markets (developed and emerging) are cheap. They have been pushing for retail diversification out of the US market for years. So far this has been a mistake.

    • Augustus Frost says:

      Investment brokers consider non-US markets cheap primarily only by comparison to the ridiculously overpriced US markets. Wall Street will never admit the US stock market is ridiculously overvalued any more than the NAR will admit it for US housing.

      The other primary reason they make this claim is because of the P/E ratio, even though accounting standards differ and it ignores risk premiums.

    • YuShan says:

      I disagree that non-US markets are cheap. But even if they were… Do you think they will do well if US markets sink? If history is your guide, they will simply get cheaper.

      Regarding expecting a major market collapse: I don’t expect anything anymore. But I see a risk/reward ratio that I don’t like, and for that reason won’t invest in this stock market.

  26. Mark in NM says:

    Things are much worse than these charts would indicate. Assume I had $100 to buy 10 shares of stock on Jan 1, 2000. I held those shares for 22 years during which time the share price went up and down and is now back to $10 per share, that is breakeven price. So I sell those 10 shares and get my $100 back. Now, that nominal price in 2022 dollars is actually only worth $60 in 2000 dollars, so I have actually lost 40% of my capital. See Wolf’s piece on inflation from Feb 10, 2022.

  27. georgist says:

    Surely the US stock market outperforms European ones is because wages are lower and working conditions are terrible in the USA. More surplus value is retained by capital.

    • GSH says:

      Yes, compared to Europeans, Americans are exploited. Germans/Austrians have min 6 weeks of paid vacation, plus 2 weeks of paid holidays, plus 13th and 14th salary, plus medical, plus free college tuition, etc. Check out their pregnancy/maternity benefits….unreal. My parents did not save a dime for retirement, gave their house away to their kids while living in it and lived well off their “Pension”. A different world.

      • wakarimasen says:

        This was long time ago. In Germany vacation is 4 weeks. Older people with very old contract may be have still 6 weeks. Most have not 13th and 14th salary. Minimum wage is 9.50 EUR. Since Germany wanted to profit from the Chinese Boom the last 25 years – it kept the wages down. Living standard is not very high. Italian households average wealth is 3 times as high as in Germany – just the italian state is always nearly bankrupt. (Check out in Wikipedia or the study of the Bundesbank)
        The german standard of living during the time of the EURO currency has decreased significant.
        So I guess currently you can earn much more in the US and by the way there were no – absolutely no stimulus for the consumers. No 600 $ additionally benefits per week of unemployment etc. etc… .
        And now inflation and recession kicks in. And exactly after Covid vanish, Ukraine comes and continues the process of disruption and inflation and the imposed sanctions hurt ourselves and Europe dramatically, particulary after Germany has closed nearly all of its nuclear power plants in order to get green. Those capable politicians are exactly that what we need.

      • Happy1 says:

        Europe is not just Germany and Austria, its also Spain and Italy. Wages are lower in Europe on the whole, as are taxes, and unemployment is generally higher.

  28. John says:

    Nice graphs, as always. Just remember the quote from Warren Buffett. If you can’t tolerate a 50% drop in value, then don’t invest in stocks.

  29. SpencerG says:

    I think these charts would be better if we could see the P/E line on them as well. The real issue is trying to avoid buying at a peak and selling at a trough.

    That said I thought the charts were interesting for another reason. For all the talk about “The World is Flat” for the past 20 years… it is shockingly obvious from those charts that apparently there are at least two different worlds… even in the industrialized world. The German, French, and English markets move largely in tandem in those charts… but NOT the Spanish and Italian markets. Those markets move in tandem with one another. And NONE of them seem to move along with the U.S. markets.

    I would be curious if any of Wolf’s European readers could explain.

    • Augustus Frost says:

      I am not from Europe, but the actual reason has nothing to do with what most people think or believe.

      There is no formula for any value. That’s why the US market is so completely detached from reality and in deep outer space value wise. (Relative) value is the result of a collective “mental constuct” which means it is independent of the so-called fundamentals.

      Look at the prices of the mania (or bubble) stocks in the US. Has absolutely nothing to do with any of these company’s actual business prospects. It’s based upon a complete fantasy. If it did, none would be worth more than a (very low) faction of current or prior value.

      Also look at Bitcoin or other crypto. Crypto “currencies” are literally nothing yet have a collective value of over $1T.

      This pattern isn’t just limited to these examples but can literally apply to anything. Most of the time, it just doesn’t.

    • BeeKeeper says:

      I will give you SIMPLISTIC version.
      EU is mostly institutional trading. Most of the people are invested through INSTITUTIONS (mutual fund, insurance, etc.)
      There are huge limitations on LEVERAGE for individuals, not for institutions. Individuals mostly trade FX market CFDs, not stock markets.
      Moreover, stock markets VOLUMES are LOW. Thus institutions spill over to other markets by doing the SAME STRATEGIES.
      Finally, ECB protects highly leveraged investors/institutions.

  30. El Cheepo Gooseman says:

    Only question is,……..what is Paul Pelosi buying?????

  31. Finster says:

    IIRC these indices are generally stated in different (local currency) units (i. e. pounds for the UK, euros for France, Italy & Spain) and so are not all directly comparable to each other. It would be interesting to see what they’d look like stated in the same units, say, dollars to make comparable to US indices.

    Even better, converted into gold terms. Since the beginning of 2000, even the S&P is down by more than half. Looked at this way, the majority – sometimes even more than all – of aggregate stock price appreciation is an artifact of currency depreciation.

    • Augustus Frost says:

      US stock market has lost more than 50% relative to gold since the all-time peak in 1999.

      Dow valued at 43 ounces then and about 17 now. This excludes dividends and taxes.

      • Old school says:

        Dividends are a big deal as US companies in aggregate pay out about half of their earnings in dividends. Dividend yield of SP500 is highly correlated to future long term earnings. When it gets as low as 1.0 – 1.3% it’s a very bad sign for long term returns.

      • Finster says:

        The exact calculation varies but even after dividends the stock market is still negative for the millennium in gold terms. Not unique to gold either. At last check, stocks have also underperformed copper.

        The culprit is that stocks were way overvalued at the end of 1999. Unfortunately, the same is true in 2022. But either way, it’s eye opening that the much touted “stocks for the long term” have actually underperformed mere chunks of inert metal over more than two decades.

        The most interesting takeaway may be how you would never hear about it in the mainstream financial media … that its priorities may lie not in informing its viewers but in selling financial products.

  32. suny129 says:

    Things in the investing and real world is a lot different than just TWO weks ago! Global recession is guranteed, considering where does the price of oil/gas now and it’s peak price? D2 is NOT out of the question!

    Fed is now irrelevant! Whatever they do, they cannot PRINT energy or other natural resources needed in our Consumption based Economy predominantly financed by DEBT for over two decades!

    Piper is here to collect, NOW!
    No one rings a bell at the start of BEAR mkt (which started a couple of weeks ago!)

  33. David Hall says:

    Some supply chains might need to rearrange themselves. Brazil is not going along with a Russia boycott. China wants to grow more of its own food, it is dependent on imports. A bulk carrier hit a mine in the Black Sea and sank near the coast of Ukraine. Farmers may want to plant more crops as grain prices soar. The working class laments the disappearance of cheap gasoline. Arizona farmers get reduced water allotments due to the drought.

    I looked at home prices near where some family used to live in Ohio. A condo for $78,000.

    • TXRancher says:

      “Farmers may want to plant more crops as grain prices soar. ”

      But those grain seed prices for planting and required fertilizer have also soared making your plan impractical.

  34. Zark Muckerberg says:

    Crude Oil future briefly touched $130.50 today 📈

    That sweet, sweet dino juice will affect all stock markets

  35. ctcarver says:

    Hi Wolf,

    For the sake of perspective how do these various indices compare relative to the size of US indices in their respective markets? By this I mean The DOW is 30 very large cap companies out of ~6000 listed stocks. The S&P is 500 of the largest cap.

    FTSE 100 is it more equivalent to the S&P in the US due to (what I assume to be) a smaller number of listed companies. I assume the CAC and IBEX are closer to the DOW?

    Thanks as always for the great site

    • Wolf Richter says:

      There is actually not a huge difference long term between the Dow and the S&P 500. But the Nasdaq is on its own track.

      Germany had its own version of the Nasdaq, the “Neuer Mark,” which it set up during the dotcom bubble, and it totally imploded as its listed companies imploded and was shut down. That’s how bad it was.

  36. sunny129 says:

    We are witnessing watershed moments of history, now!

    “There are decades where nothing happens; and there are weeks where decades happen.”
    Vladimir Ilyich Lenin

  37. AverageCommenter says:

    Who can name a major “tech” company that has blossomed out of either Spain, Italy, or France this century? Their buy & hold horror shows are directly connected to their lack of innovation. Even Sweden at least came up with Spotify. High tides raise all boats & the Nasdaq has been lifted by the Faang stocks, for example. There are no real modern darlings on those stock exchanges in the 3 countries I named, thus there was nothing really to lift them past valuations equal to those seen in the turn of the century. You don’t create or invent then you become a dinosaur. Spain, Italy, France birth rates aren’t keeping up with the majority of the world either similar to their publicly traded companies. Those countries are relics of an era that has past & their relevance on the world stage will decline parallel to their lack of innovation and pro-creation

  38. Gabby Cat says:

    Is anyone else looking at the DJIA index? On March 4, 2022 it closed at 33,640. Ironically, it hit bottom on March 6, 2009 of 6,469.95 during the last bubble?Do you think our government would let it fall 80.8% to 6,6469.95? How did this get so large?

  39. cas127 says:


    I’m sure you’ve noticed a “day of week” effect for most of your posts (certain days average higher number of comments…and very, very likely pageviews).

    I find this “buy and hold” vs. mkt timing debate very interesting and likely to be of much greater interest to a broader audience. I encourage you to post some more on this topic on your peak viewership days and maybe do a little lobbying to see if a major financial website might provide a link.

    “Buy and hold” is strongly supported by the academic literature and most empirical US data (at least partially because it works against valuation errors) but your European empirical data at least re-opens the debate.

    (Although I suspect that by starting the graphs in the late 90’s, you are rigging the game a bit, setting a benchmark of peak overvaluation…against which subsequent years are of course going to look bad. Starting the graphs in 1990 or 1980, might not make long term returns look quite so appalling).

    Anyway, I think this is a potentially rich vein for ongoing reader interest among a much broader audience than Wolfstreet may normally get.

    • Wolf Richter says:

      Thanks. I also covered this a few years ago. Last time, I also included Asia. This time, I separated them, and will cover Japan, China, et al in a separate post.

      Just an FYI: Pageviews are totally unrelated to comments. There are only about 100-200 active commenters, many of whom post multiple comments. They post when the topic stimulates discussion.

      So far, the European stocks article got close to 15,000 views and is still going strong, and it’s probably going to get to 20,000. It wasn’t linked by a major site. Google News sometimes runs my article headlines, and then they get a lot more views. I cannot control that, and it didn’t happen with the European stocks article.

      I don’t time articles. When I have an article, I post it right away. This is a high-pressure business. The deadline was always an hour ago :-]

  40. Winston says:

    As I’ve predicted, once they’re any threat to the established financial order by acting as anything other than a pump and dump scheme to separate suckers from their legal tender, they’ll be worth what they’re actually worth – zero – for any legal activity anyway. This is just the beginning.

    Cryptos Slide On News Biden To Sign Crypto Executive Order This Week
    MAR 07, 2022

    Biden’s EO will direct federal agencies “to examine potential regulatory changes, as well as the national security and economic impact of digital assets.” It comes at a time when the White House’s approach to crypto has attracted fresh attention amid concerns that Russian firms and oligarchs could use crypto to evade the restrictions.

    • Cas127 says:


      Good catch, I hadn’t seen this item.

      Perhaps of great significance also is the recent willingness of bitcoin intermediaries (I think it was CoinBase, but I’m not 100% sure) to help gvts interfere with/seize/block the bitcoin of up to 25k Russian nationals.

      Leaving the Russian aspect out of it, almost the entire base appeal (not hype appeal) of alt coins is that seizure/dilution happy governments cannot gut the “store of value” function of alt coins through seizure/dilution.

      To the extent that bitcoin intermediaries are going to aid said gvts with seizures/blocks/dilutions, then 95% of the true worth of Bitcoins is going to be lost (read collapsing values).

      Hopelessly broke governments are inevitably going to claim that their money printing is key to “national defense” (Snort…it is the exact opposite) and are inevitably going to ram through “laws” allowing for direct/indirect seizure/dilution of any “store of value” they don’t directly control.

      If bitcoin intermediaries aid this, they are slitting the throat of the alt coin mkt.

      The Russian aspect of this is actually a small portion of a much larger story.

  41. marc says:

    Stock markets have an Achille’s heel: high and/or rising inflation.
    Some nice fat retirement portfolios are about to be destroyed.

  42. TheFalcon says:

    If you “buy” an index fund(s) every 2 weeks via your 401K or other fund contribution, you are “buying and holding”. Buying on the way up and the way down. This I believe to be the recipe for long-term success in the market. You just can’t time it right over and over. Forget about it. Keep buying and keep holding, keep working at the career you love, enjoy your family and friends and what the world has to offer.

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