Get Your Nest Egg Back

By Tobin Smith

If you're having a hard time wrapping your brain around the global financial and economic meltdown, I've got three numbers that should help to clarify things: 1974, 1983 and 1997.

In fact, these are all the numbers you need. Well, those and two multipliers: 50% and 2x.

A Crisis Timeline

Every forecast regarding this crisis has met or exceeded the historic levels of 1974, 1983 and 1997. And every drop in valuation for the major indices has exceeded 50% or two times historic range.

1974

How deep will the bear market go?

Deeper than the 1973-1974 bear market -- the last "big one," which "only" ran 48% from top to bottom.

Why?

Because the meltdown of our capital systems and the impact of the evaporation of 50% of stock values is 10 times more pervasive in the lives of U.S. citizens now, than the 1973-1974 bear market.

In those days, less than 15% of households owned stocks or mutual funds. Now more than 60 million households own stock either directly or indirectly. The negative effect of a 50% reduction in wealth is stunning, and it is historic in the fact that it has affected so many more people this time around.

In 1973, no one had an IRA or 401(k). Defined benefit plans covered more than 60% of U.S. workers, whereas today that number is less than 15%. Now more than 60% of U.S. workers have a 401(k) or an IRA rollover account.

We've witnessed $5 trillion to $7 trillion in consumer wealth disappear in 12 months and, as a result, I'm forecasting negative 6% to 8% consumer spending year-over-year for the fourth quarter.

When is the only time we saw more? 1973 to 1974.