Current Recession Is Tracking the 1930s Bear Market 50 comments
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The following is a simple comparison of today's market to that of the 1930s...no economic analysis here...
Today we’re 19 months from the S&P 500 peak in October 2007. How does the past 19 months compare to the 19 months after the S&P 500 peak in 1929?
The first graph below shows that today’s 19-month decline from market peak is almost identical to the 19-month decline from market peak after 1929 (down about 40% in both cases). Interestingly, the ‘recovery’ of the last couple months is almost identical to the recovery during the first couple months of 1931.
The second graph below extends the 1930s historical comparison to include a full 10 years of data after the 1929 market peak. It turns out the first 19 months of decline after 1929 was nothing. Markets subsequently fell another 67% or so. Could this happen again today?
Also, in the second graph I included both total returns and price returns for the S&P 500. Just a nice illustration to show how the power of reinvested dividends helped investors recover some of their money over time.
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arabianmoney.net/2009/.../
An Economy On Life Support Is Not Recovering
The myth that the New Deal lead to recovery persists. Here is a debunking in layman's terms.
www.nolanchart.com/art...
On May 17 11:22 AM Steven Hansen wrote:
> there are so many artificial influences (government interference),
> that i doubt a new low will be reached.
Hey, according to Der Fuhrer Obama, this is a favorite word for Rahm Immanuelle so it must be acceptable for public consumption, right?
> including:
> 1) Population - Baby Boomer Aging/Retirement/Death & Total Population
> growth reductions, over the next 20-30 years.
> 2) Peak Oil - We are already on Hubbert's slippery downslope, with
> no replacement in sight for the many applications/usages of Oil,
> including Transport, Chemicals & many others.
> 3) Climate Change - Like many areas of modern life, we have done
> things without fully understanding where they will lead us. Now,
> as Major tipping points in the Global Climate become more apparent,
> there is a push under way, to undo what we have done.
>
> However, there are problems, in all of these issues:
> 1) Two of the oldest players, GREED & POLITICS, are still at
> the table and they will be formidable foes.
> 2) It may already be too late, to undo a large part of the seeds
> that have been planted.
>
> Because of these inputs, this event will take its own course.
>
> That said, I suspect that the "Demand & Supply" constraints placed
> on the Global economy, will continue to act in a manor similar to
> a Boa Constrictor, by strangling the life out of its prey (the Global
> economy), until the day that herd finally understands what is happening
> and the stampede begins!
>
> That said, this event will finally be known as "The Greastest Depression".
Ben pledged to Milton Friedman that the Fed would never again make the mistake it did in the 1930's, i.e., fail to dump money from helicopters to prevent deflation (okay, back then they would have used dirigibles, I guess). And he is true to his word! Now they're talking about bailing out truckers who are too big to fail, for pity's sake.
What we are seeing is Keynesian economic fallacy on steroids. When the pumped up roid body of the American economy finally collapses, it will take many years of rehab before the poor thing is able to compete again.
The banking system needed a drug test, not a phony stress test. And the pushers in the Fed and Treasury need to be locked up.
How come we do not see this in the mainstream media. I guess that the mainstream media is lethal to my portfolio more than anything else.
On May 18 12:34 AM Peter Cooper wrote:
> Did you read what President Obama's economic advisor Martin Feldstein
> said in Brazil last week? This really blew the green shoots to pieces.
> I think all the bulls out there ought to have a read and think about
> whether they are just hopeless optimists about to get mauled by a
> very large bear, see:
> arabianmoney.net/2009/.../
We have to be willing to work all jobs and not just push computer keys.
On May 17 10:46 PM stockartist wrote:
> Our citizens must remember why our grandparents came to this country.
> Freedom to live and worship where we choose, create wealth and a
> better life.
> Our citizens need to roll up their sleeves and start businesses where
> they are producing goods and creating good paying jobs and careers
> for our people.
> Where is that entrepreneurial spirit that had driven our country
> to greatness? Write your congressman and ask them to help start business
> by cutting taxes and creating incentives.
>
> On May 17 11:10 AM Plan B Economics wrote:
On May 17 01:02 PM Ecomike wrote:
> Interesting to look at the 2 almost vertical rises of about 100%
> from the 1932 and 1933 bottoms. We had a gold standard in the 1930's,
> and a continuation of Republican policy from 1929 to 1932, both
> are not present this time. I find the comparison between the 18 month
> long 2001-2003 crash, followed by a 6 month long bull market rise
> that recaptured most of the prior 18 month loss, and the recent 18
> month crash and the current 2 month rise a more interesting comparison.
>
>
> If we do crash again (which I doubt) I believe we will recover to
> current levels in a year or less, just like we did in 1932 and 1934,
> so I am 50% stocks (holding and will not sell, no matter how low
> we go), and 50% cash ready to pick up more bargains if others are
> foolish enough to give away cheap stocks again like they did at 666.
Here is a nice graphic showing the cycles for the doubters: tinyurl.com/r4lntw
On May 17 05:29 PM cybergeezer wrote:
> 2008 is like 1937 and 2000 is like 1929; if you compare the Dow in
> 1929 to the Nasdaq in 2000. The Dow did not peak like the NASDAQ
> did in 2000, It was 70 years between these market crashes(4 generations).
> Both were due to stock speculation, mortgages and banks failures
> . The market took 2 years and 8 months to reach botton in both 1929
> and 2000. Looking at 1937 Dow, it appears as if we will reach bottom
> again in 2012.
> There also appears to be I8 year cycles.
> 2000- 2018? Consolidation Crash 2009 (9th yr.)
> 1982- 2000 Bull Market
> 1964- 1982 Consolidation Crash 1973(9th yr.)
> 1946 -1964 Bull Market
> 1928- 1946 Consolidation Crash 1937 (9th yr.)
> 1911- 1029 Bull market
> Congress was at fault, for rescinding the Glass-Steigel Act and failure
> to regulate mortgage stocks and derivatives. Congress still has failed
> to place a usury rate on credit card accounts. 25-35% interest rate
> is LOAN SHARKING. In 1980, the maximun rate charged was Fed Rate
> +4 (14% + 4=18%).
> cybergeezer
THEN, it will implode. Round two of credit infused 'growth' but may as well take advantage of it while it lasts.
On May 17 09:10 AM Jimbo wrote:
> "This time, it's different". What about all those Alt-A mortgages
> and other toxic securities waiting in the wings? The previous depression
> did not have Social Security, unemployment insurance, Bank account
> insurance etc. That's to the good for the present crisis. But we
> are a debtor nation now with our industrial capacity stripped from
> us. The vote buying mechanism in Washington is in full cry. I see
> more pain and agony before us.
arabianmoney.net/2009/.../
The current rally in US terms is an inflation led bear market rally, you have not in US $ terms made any real money.
If you doubt my thinking, have a look at China, India or Australia, all three have made REAL GAINS in this rally as their currencies have risen with the rally. Why is this? because all three have either growth or real hard mining, metal assets.
I will shortly be writing my part 2 to my original story on this subject.
The great depression was a recession that was made far worse by:
1) no liquidity - tied to the gold standard and horrible central bank policy which led to thousands of bank failures. That's devastating without FDIC insurance!!!
2) deflation - again no liquidity, horrible central bank policy!!!
3) trade barriers exploded
4) increase in taxes - well the US is doing that now???
5) increased interest rates (can you imagine???)
6) Fiscal policy - make work programs that simply don't work (all countries are doing this now, doesn't work but it makes a good headline and might get votes).
Also, Asia will be the next growth engine until the US can get back on their feet. This is not the great depression all over again - not even close...
Japan once suffered an attack by zombie banks, and may be an instructive example. The Nikkei peaked around 39k in 1989 and has not seen that level since. It's now around 9300 after "bottoming" around 7k. Just a thought.
I have to admit the charts presented above are a bit eerie, and I have real doubts about the equity markets right now. But if the timing of tops and bottoms turns out to be the same I'll be a little more than surprised. I might take up technical analysis.
Thanks for an interesting post, and good presentation too.
On May 19 09:57 AM User 84715 wrote:
> This will go down as the "great recession" which is a term I certainly
> did not invent but it's very appropriate. This looks more like mid
> 70's, early 80's, early 90's then the great depression.
>
> The great depression was a recession that was made far worse by:
>
>
> 1) no liquidity - tied to the gold standard and horrible central
> bank policy which led to thousands of bank failures. That's devastating
> without FDIC insurance!!!
> 2) deflation - again no liquidity, horrible central bank policy!!!
>
> 3) trade barriers exploded
> 4) increase in taxes - well the US is doing that now???
> 5) increased interest rates (can you imagine???)
> 6) Fiscal policy - make work programs that simply don't work (all
> countries are doing this now, doesn't work but it makes a good headline
> and might get votes).
>
> Also, Asia will be the next growth engine until the US can get back
> on their feet. This is not the great depression all over again -
> not even close...
On May 19 06:27 AM maxe wrote:
> This is not only tracking the great depression, but actually tracking
> it faster, which if anything is more serious. For those that think
> 666 is, was the bottom you are fooling yourself.
>
> The current rally in US terms is an inflation led bear market rally,
> you have not in US $ terms made any real money.
>
> If you doubt my thinking, have a look at China, India or Australia,
> all three have made REAL GAINS in this rally as their currencies
> have risen with the rally. Why is this? because all three have either
> growth or real hard mining, metal assets.
>
> I will shortly be writing my part 2 to my original story on this
> subject.
Darned if I can locate it in my bookmarks, but it gives a longer time line than provided here, and eerily the series bounced at exactly the same point, before really taking the dive down to very low levels.