Bear Market

Paper Summary:

This paper analyzes the differences between the American economy of 1970 and today, when it compares the two "secular" rather than a "cyclical" bear markets. It illustrates the structural changes in the economy, and the possibility that problems with the nature of government or industry will curtail investment until the problems are resolved.

From the Paper:

"A recent advertisement for a mutual fund featured a picture of a tricycle. The caption read, "In 1973, our mutual fund managers were riding out a bear market. What was your mutual fund riding?" The point was well made - many features of the 1973-1975 bear market resemble the woes of the current stock market. Analysts, keen on every new opportunity to convince investors that the worst is over, do so in their own interest. A good understanding of the last long-term recession is instrumental in gaining insight into where we will find the end of the current one. As such, it is important to remember this era in American history when evaluating potential courses of action either as an investor or as a business leader. However, the many differences between the economy of the 1970's and today's economy should temper our perspective."

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