I did not bother to run the numbers since we are so far away from that level, but according to this CBSMarketwatch story the fully invested, long only, cash is trash, shorts are evil and unAmerican investor who was fully in at 2007 highs, needs a 72% gain from here using the S&P 500 as the index, just to break even. [ Feb 4, 2009: Americans Lost $10.2 Trillion in 2008 ]

  • Even as the market flirts with the break-even level for 2009, investors dreaming of recouping their money invested in stocks before the crisis still face a long road ahead.
  • Investors who were fully invested in the broad S&P 500 index at its 2007 heights still need that index to rally another 72.5% just to recoup their losses, according to Standard & Poor's. Including dividends firms give back to investors, the S&P still needs to rally 70%, as most S&P companies have cut back the income they provide investors.
  • Since hitting 12-year lows in early March, the market, as measured by the S&P 500 index, has now rallied about 35%.

  • But the advance remains only a small step if one intends to see their S&P 500 portfolio return to pre-crisis levels. From its October 2007 highs to its lows in early March of this year, the S&P plunged 57%. Yet, returning to the October 2007 levels means the S&P needs to gain much more percentage wise.
  • But a lot of investors close to retirement are already feeling those statistics, as they have to wait a lot longer to retire just to get back to breakeven, he said. [ Sep 1, 2008: Laboring Longer is Growing Trend for Americans ]
  • Going back to 1926 through October 2007, the average yearly return of the S&P 500 has been 10.5%. But if one includes the past 17 months of slump, the average yearly return has now sunk to 9.6%.
  • But in the 1930s, we had some years that returned 85% because we had fallen so hard, said S&P's Silverblatt. This time, it could also happen but it's safe to say that it will take at least several years.

So if you use LONG TERM averages it's going to take about 7 years to make up those losses from here. However, we have printing press prosperity now and this Great Recession thing will all be a bad dream soon enough... just a hiccup. If we can just repeat the past 8 weeks performance two more times we are there - break even. See you at all time highs circa Labor Day 2009.


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