Remember 1979: Is this time different?

In 1974 and 1975 the majority was wrong about any positive prospects for the US economy. How about 1979?

On the cover of Business Week magazine on Aug 13, 1979, the headlines announced "The Death of Equities" and the byline: "How inflation is destroying the stock market." But last year Money magazine said, "That, of course, turned out to be one of the great buy signals of all time."

By getting into stocks right then, savvy investors beat inflation easily for the following 5 to 10 years.

But this time is different right? Yes and No. Of course 2009 is a different time in history. But a fascinating paper by the economics department at Harvard, reveals that a significant number of factors are the same now as compared to other financial crises that have occurred for 800 years!

They find that these gloomy financial episodes "are typically spaced some years (or decades) apart, creating an illusion that 'this time is different' among policymakers and investors." Further they conclude that, "the recent US sub-prime financial crisis is hardly unique."

So are stocks dead this time? Or just resting?

Following the Business week article in 1979, buying stocks would have yielded, after inflation, an average annual return of 7.3%. The 10-year performance yield: 9.52% annually. Further, history shows that for 20- and 30- year periods, inflation-adjusted gains on stocks have never been negative.

So are we at the tipping point in the bear stock market of 2008-2009? What about 2010? Have another look at our recent charts and graphs. You be the judge. Because remember most economists make astrologists look respectable.