What Happens When You Buy Assets Down 80%? ? Mebane Faber ...

We?ve done a lot of articles on value and drawdowns on the blog before (search the archives). ?I was curious what happens when you bought the US equity sectors back when they were really hammered (French Fama to 1920s). ?

Average 3 year nominal returns when buying a sector down since 1920s:

60% = 57%

70% = 87%

80% = 172%

90% = 240%

?

Average 3 year nominal returns when buying an industry down?since 1920s:

60% = 71%

70% = 96%

80% = 136%

90% = 115%

?

Average 3 year nominal returns when buying a country?down?since 1970s:

60% = 107%

70% = 116%

80% = 118%

90% = 156%

?

It?s hard to buy something down 80%, especially if you owned it when it was down 30, 50, then 80%. ?But usually that is a great time to be wading in?Some recent examples of assets that have gotten clobbered include tech in 2002, homebuilders in 2009, and Greece and (Junior) Gold Miners now. ?

Source: http://www.mebanefaber.com/2013/06/25/what-happens-when-you-buy-assets-down-80/

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