Worth a read: Carlyle Dunbar, The Globe and Mail

Excerpt:

I recall a 1974 New Yorker cartoon caption saying, “What do you suppose happens when the stock market goes down to zero?” Humour so typically expresses a truth, and in 1974 investors did start to believe the world was coming to an end and the market was headed for zero. We haven’t reached that point. There are still too many people out there who believe we’ve hit bottom.

When the bear market does end, most people won’t believe it. That is a clear memory from early 1975, when the market rallied tremendously. I wrote an article — based mainly on the opinion of U.S. market analyst Richard Russell — reporting a bull market had started in the United States and Canada. It invoked no reaction from readers that I can recall, and nervousness from editors.

Investors didn’t believe in the bull market for years to come, because they had been so badly burned in the long collapse of the 1960s bull market. Though investors like to believe themselves rational, they ultimately act based on emotion.

In 1973-74, there was Watergate, soaring energy prices, auto sales down by one third or more, and the biggest bank collapse in U.S. history (the scam artist responsible had first practised his trade in Canada). Mutual fund redemptions were so severe the Canadian mutual fund organization stopped publishing the data, on the theory that if investors closed their eyes, the bad news would all go away.