quently quoted and have often served as the return benchmarks for the
securities industry.^25THE BEGINNING OF THE GREAT BULL MARKET
The Ibbotson and Sinquefield findings were first published in the teeth
of the worst bear market since the Great Depression. Because of the Viet-
nam War, surging inflation, and the OPEC oil embargo, real stock re-
turns were negative from the end of 1966 through the summer of 1982.
But as the Fed successfully squeezed out inflation and interest rates fell
sharply, the stock market began its greatest bull market run in August- From a level of 790 the Dow began to shoot skyward, surging past
1,000 to a new record by the end of year.
Amid much skepticism, some analysts took the correct view of the
markets. Robert Foman, president and chairman of E.F. Hutton, pro-
claimed in October 1983 that we are “in the dawning of a new age of eq-
uities” and boldly predicted the Dow Jones average could hit 2,000 or
more by the end of the decade.
But even Foman was too pessimistic, as the Dow Industrials broke
2,000 in January 1987. Except for the great stock crash that occurred that
October, which is documented in Chapter 16, stocks marched steadily
upward, and the Dow broke 3,000 just before Saddam Hussein invaded
Kuwait in August 1990. The Gulf War and a real estate recession precip-
itated a second bear market, but this one, like the crash in 1987, was
short-lived.
Iraq’s defeat in the Gulf War ushered in one of the most fabulous
decades in stock market history. The world witnessed the collapse of com-
munism and diminished threat of global conflict. The transfer of resources
from military expenditures to domestic consumption enabled the United
States to experience increased economic growth and low inflation. The in-
terests of Americans turned inward, and the postwar baby boomers be-
came preoccupied with career enhancement and retirement security.
The Dow Industrials quickly scaled 3,000 in March 1991. Few
thought the trend would last. In 1992, Forbeswarned investors in a cover
story “The Crazy Things People Say to Rationalize Stock Prices” that
stocks were in the “midst of a speculative buying panic” and cited
Raskob’s foolish advice to invest at the market peak in 1929.^26
CHAPTER 6 The Investment View of Stocks 85
(^25) Stocks, Bonds, Bills, and Inflation Yearbooks, 1983–1997, Chicago: Ibbotson and Associates.
(^26) William Baldwin, “The Crazy Things People Say to Rationalize Stock Prices,” Forbes, April 27,
1992, pp. 140–150.