Taipan Daily: Caution Warranted by Lessons of 1932

So 2009 is finally over. A new year, full of promise and peril, stretches out ahead. Now what?

The Dow Jones Industrial Average (DJIA) – to use a commonly cited barometer – is up roughly 65% (as of this writing) from the ugly depths of the 2009 March lows. Going off that data point alone, it is no real surprise that investors are optimistic.

Trouble being, investors had even more cause to be optimistic in 1932, if stock market rallies are the measure du jour.

In a matter of months, the Dow rocketed a most impressive 94% – almost a clean double – off its 1932 lows. After a stunning, multi-year fall from the heights of 1929, some surely thought that rally to be the “all clear” signal. (more)