So much for "Dow 36000"

A few weeks and many Dow gyrations ago, I heard Maria Bartiromo on CNBC ask one of her equally excitable on-air colleagues "how long can this go on?" It's clear enough now that "this" -- wild stock market fluctuations around a generally bearish trend -- could go on for some time yet. On Friday, for the first time, one of the CNBC talking heads blurted out the previously unthinkable, saying something on the following lines: "once this liquidation is over, some of the pension types may never put their money back into stocks. We could see the market staying at depressed levels for years".

Indeed we could. The bull market has been in place for so long that a lot of people have forgotten what bear markets look like. This is especially true for a lot of the on-air staff at TV stations like CNBC and Bloomberg, who are too young to have real memories of the last one. (The lovely Maria, who is a bit older than she wants you to think, may be an exception). The fact is, though, that bear markets can last a long time. People might be a bit less keen to make comparisons with the 1929 crash and the ensuing depression if they realised just how long the market remained in the dumper: it was 1954 before Dow got back to its 1929 level. That's an awfully long time for the "pension types" and their clients. (You can see a graph of the Dow since 1900, together with an explanation of the rather odd way in which it's calculated, here.)

Even more recently, the Dow has wallowed for years on end. When I first started paying attention to stock markets as a youth, the average never seemed to be able to break above 1000. In fact, it stayed just below that level throughout the 1960s, and it was only the onset of the great inflation of the 1970s that finally gave it a kick higher. If we are entering an era of slow growth and possibly even deflation, we could very well see a similarly long period of sideways trading now, as my man at CNBC has belatedly acknowledged.

People are trying to look for the bright side of a downturn: return to traditional values, that sort of thing. For the more venal, though, this may also be a period in which the foundations of the next great fortunes are laid. As in the 1930s, those lucky enough still to have cash will be able to pick up some great assets at bargain prices -- though it may be their kids or even their grandchildren that reap most of the benefits.