All in a day's work

This post is just to bring about some thoughts to the current situation which hopefully some of you might find interesting.

1. The first huge spike from the left of the chart on 1929.

Right before the run-up, we can see some resistance from 1900 to 1926 before a bull run that ended in 1929. This run increased Dow Jones by a good 138% within 4 years.

That spike happened in 1929 before it collapsed to 44.17 points, this also meant that within 4 years, Dow Jones lost almost 89.2% of it's value.
I stress again, 89.2%.

2. The recovery from 1929.

If an investor added a position at the peak of the bull run on 1929, he would have to wait 30 years before he managed to break even, not considering the dividends that he might received throughout the entire holding period.

This once again stresses the importance of entry price for long term holding as it determines the yield thereafter from divvy.

After the recovery to it's previous high which took 30 years, the stock market tanked for almost another 30 years, from 1958 - 1986 thereabout.

3. The break of the 1000 mark and beyond

This historical peak of 1,000 was finally breached around 1983. This is the start of a monstrous run which was never seen in history.

Since 1983 till 2008, a period of 25 years, Dow Jones not only broke the 10,000 mark but in fact hit 13,930. In 25 years, Dow Jones increased 1393%.

Once again, I repeat myself, in 25 years, DOW JONES went up 1393%.

A few questions which I think can be pondered on would be:

1. Did the economy improve so much in the last 25 years to warrant such an astronomical increase, if we consider that the saying of the stock market being a reflection of the economy is true.

2. What then could be the reasons for such a sudden increment in Dow Jones

3. If PE ratio is a reflection of the investor's confidence in the company's future earnings, what motivated them to push PE ratios upwards

4. What causes Dow Jones to lose almost 90% back in 1929 (This can be easily found online, just google it.)

5. Lastly, will this be a repeat of 1929 or rather, has the run-up been way too strong to be justified by current share prices implying room for further drop, back to the times when the stock market reflects the economy in that time.