Monday, November 2, 2009

"Ja, ja, So Your U.S. Market is Up a Bit, Ever Hear of Berlin, 1923?"

This morning both the DJIA and S&P are up a bit over 1.1%.
Here's a partial repost from Oct. 13, 2008 when the DJIA was up 11% on the day.
(sticking with the language of love, I was dancing around calling it 'Die Glückliche Zeit' [The Happy Time] which was the German term for the period when the u-boats were running free and sinking Allied shipping virtually at will).
If you are any good at this stuff volatility is your friend.
At least until everyone else quits and you're bartering junk silver for wheat as the world sinks into a new dark age.*
...It was while skimming the GFD list that this popped out (remember this is inflation adjusted!):

Best and Worst Investment Periods in Germany

What were the best and worst months in the history of the German stock market? The most obvious factor is the importance of the hyperinflation of 1922 through 1924. The data have been calculated in real returns, adjusting for inflation during the hyperinflation of the 1920s, and as you can see, the hyperinflation provided investors with both strong returns and dismal returns, though more of the latter. The dates outside of the 1920s which registered as among the best and the worst are conspicuous, October 1949 for the stabilization of the German financial system, November 1918 for the end of World War I, September 1931 in the middle of the collapse of the German economy, and of course, October 1987.

Best Months Percent Return Worst Month Percent Return
September 1923 99.12% August 1922 -43.90%
December 1922 67.91% December 1923 -31.68%
June 1923 60.38% July 1922 -29.94%
August 1924 47.66% August 1923 -29.32%
November 1923 38.25% November 1919 -29.26%
October 1949 32.04% April 1924 -27.98%
April 1920 31.67% September 1931 -25.85%
February 1923 29.58% October 1922 -24.65%
April 1923 29.28% November 1918 -23.16%
October 1923 26.20% October 1987 -27.31%

The Best and Worst Years

What about the best and worst years for stocks in Germany? Again, the 1920s and 1930s dominate the data, with 1923 providing probably the strongest return to any stock market in the history of stock markets as German stocks recovered from the collapse into hyperinflation of 1922 when stocks provided their worst returns in German history. The post-World War II period also provided some of Germany's best returns.

Best Year Ending Percent Return Worst Year Ending Percent Return
November 1923 1229.73% October 1922 -84.89%
January 1924 521.73% February 1920 -81.25%
July 1959 126.11% August 1919 -77.65%
February 1950 120.22% January 1923 -67.79%
January 1927 114.11% December 1918 -56.03%
February 1921 110.39% November 1924 -48.26%
December 1926 108.11% April 1932 -46.29%
February 1927 107.09% September 1931 -44.30%
December 1949 102.32% January 1926 -38.88%
January 1952 98.17% December 1987 -36.49%

Ja, I have your puny little American 11%.

I haven't checked these numbers against Gielen (Gregor, I forget the book) but I seem to remember that during the first week of 1924 the Berlin Exchange was up 30%, so these are the right order of magnitude. Here are the Global Financial Data lists of largest moves through 1999.

*It's hard for me to type those last few words whithout hearing Churchill's voice delivering the "Their Finest Hour" speech:
"...Hitler knows that he will have to break us in this Island or lose the war. If we can stand up to him, all Europe may be free and the life of the world may move forward into broad, sunlit uplands. But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science."