The Great Crash, 4-year view (Oct ’28 – Oct ’32):

Source: Yahoo! Finance. Click on image for larger view.

The Great Crash kicked off with a bang, with the Dow dropping 40% from the late August peak to early November 1929. It followed up with a 30% rally over the next five-months, and slid down the slope of hope for more than two and a half years, losing 89% from peak to trough.

This phase of the Greater Crash (which, measured in real terms, started in 2000) kicked off with a tantrum from Jim Cramer last August, and was pretty tame for the first 14 months, down only about 20% before last week. Now we are making up for lost time, so maybe we have to fall 50% (7000), before we can sustain a 30% rally (back up to 9000).

In the old days, it seems, there was a healthier fear of stocks, and investors were quick to spook at the first sign of trouble. Today, they have to be beaten over the head with it for a year and told by the Treasury secretary and president that the economy is on the verge of collapse, before they begin to rethink keeping their life’s savings in the stock market.