I hypothesize that the higher purpose of the 2000-2002 decline was to scar for life a whole generation of the public… After that decline, many found the next way to riches in real estate. (Jeff Sasmor)

This may relate to a generalization of the Fed model and consumption wealth effect. Investors soured on stocks were incentivized by low mortgage rates and rising home prices to speculate in real estate instead of stocks. For families with roughly equivalent stock and real estate holdings, their net worth didn't change much through the stock bear/real estate bull market.

There is evidence that wealth effect (income+investments+home) at least partially propels the stock market. The richer people feel, the more they spend (goosing earnings) and the more they invest.

So where does the money go if both S&P and real estate go down? Perhaps conservation-laws don't hold because a stock can drop a great deal while only a few percent of the float trades. 


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