Posted on 08/11/2010 8:05:33 AM PDT by blam
REMEMBER: In 1930, They Didn't Know It Was "The Great Depression" Yet
Henry Blodget
Aug. 11, 2010, 10:21 AM
In the past year, we've written a lot about the similarity between the rally of early 1930 and the one we had through April of this year.
The early 1930 rally came after the market had fallen nearly 50% in the fall of 1929. The spring 1930 rally took the market up nearly 50% again, to a level that was only about 20% below the previous peak.
That rally, of course, was also the biggest sucker's rally in history. After the market peaked in April 1930, it crashed again, eventually ending up down 89% from the 1929 high and more than 80% from the 1930 high. The market did not reach the 1930 high again for another quarter of a century.
The rally that recently ended in April 2010 came after a crash that was actually slightly more severe than the 1929 crash (53% versus 48%). It took the market up nearly 80% from the low! The recent rally also lasted longer than the 1930 rally did--a year, as opposed to 6 months.
The 2009-2010 rally that ended in April, of course, may actually be the start of a great new bull market, one that will shake off the current "correction" and roar back to the market's old highs. On the other hand, it may yet also be another version of what happened in 1930--the start of another bear market that will take the market down for years (or even, gulp, to a new low).
Importantly, we won't know for sure what today's market is until we look at it with the genius of 20/20 hindsight. As Peter Schiff pointed out recently--and David Rosenberg observes today--
[snip]
(Excerpt) Read more at businessinsider.com ...
Your posts are always so cheery!
So, what do I do with all my money in my 401K?
So, what do I do with all my money in my 401K?
First, start calling it your 101K.
In 1930 it wasn’t the “Great Depression” yet. Why? Simple. FDR had not yet begun to “fix” the problem.
There was one Holocaust, one Civil rights movement, one Hitler and one great depression. Like the "Great Depression", a term maybe created to describe what we are going through now, but it ain't no great depression. We will be rid of B.Hussein soon and be riding a new wave of prosperity due to actions of an unusually educated electorate.
And in 1865, they didn’t know that The First Civil War had just ended.
It is nearly always the case that people do not realize history in the making. I was a freshman in college in 1968, and we had no clue that we were witnessing a social revolution in America. I get the feeling that we are witnessing another historical event, and it could be another deep economic depression. Only time will tell.
According to EVERY economic model that I have been able to find, hyperinflation will be the endpoint of any economic stabilization that may occur. Once we monetize the debt, the game will be over.
Hyperinflation, not the stock market, will destroy our retirements.
But that is only my opinion.
I asked the question because he was a farm boy who made good and was living and working in Chicago.
He would never purchase stocks. Had everything in the bank. So I wondered if that made him feel secure and immune from the craziness.
His answer should make everyone very cautious.
His reply:
“I had no idea. I would travel my territory just as always. This customer would tell me that he was putting off purchasing the new machine for a month or two, but he would purchase it before the year was over. That customer would tell me that he was putting off building the new factory until next year, but that he would definitely build it next year.”
“It was the same story all over the territory. Next month, next year....”
“It was 1932 before I realized there was never going to be a new factory...there was never going to be a new machine purchased.”
Just think of that. Three years traveling the Midwest living on promises and your savings account.
I see many similarities in today.
By the way, he also told me that there were many buildings such as offices buildings and apartments built during that period. The contracts were let, the money was borrowed and the wheels were in motion and could not be stopped.
Of course, they were operating on the same hope for the next deal that Dad was operating on.
Today looks to me to be a repeat. A new plant here and there, a big profit here and there but still not enough to turn things around but enough to tempt the unsuspecting.
Be careful.
“We will be rid of B.Hussein soon and be riding a new wave of prosperity due to actions of an unusually educated electorate”
Wow, that’s reassuring. You bought a waaaay better crystal ball that I did. Mine isn’t NEARLY that precise.
The only way to un-screw the mess that Zreo has made is a radical, to the point of being draconian, reduction in the size of the Federal Government. These Fed apparatchiks are going to have to swim on their own in the private sector like the rest of us.
The economy is like the Titanic with Government employees in the smoking lounge and the rest of us locked in third class.
One small step. Defined contribution instead of defined benefit retirement plans for public employees (at ALL levels of government).
That’s a important story, because I could tell one almost exactly the same today. I assume that your father sold machine tools like lathes used in machine shops?
Today, the sales of machine tools are tracked by the government as a leading economic indicator. Back then they were not.
Right now, the sales of machine tools for factory production are at a very low level. Not completely zero, but waaaay off from two years ago. I know. Because I have been in this business for 25 years.
1.November 2010: Boot majority of Dems from Federal House and Sentate by elections.
2.January 2011: Defund Obama policies and bills passed in last session.
3.January 2011: Start investigative hearings into Obama appointees, and Obama.
4.Spring 2011: Remove Obama from office using the 25th
Amendment or for not being eligible for the Office as he is not a Natural Born Citizen.
5.November 2012: Elect Sarah Palin President.
6.January 2012: Rescind all Obama-era policies and legislation.
7.Spring 2012: Begin process of radically downsizing Federal Government.
8.Spring 2012: Initiate judicial impeachment proceedings against Liberal activist judges.
9.By Fall 2013: Eliminate the Fed and go to a silver backed currency.
10.By Fall 2013: Rescind the 17th Amendment, US Senators to be appointed by State Legislatures.
11.2014: Celebrate the might economy and world peace that results! *
I like your plan! Are we going to take back Mexico since we won it 150 years ago, or do we let them keep it?
“One small step. Defined contribution instead of defined benefit retirement plans for public employees (at ALL levels of government)”
Very true. Public Pension funding is in crisis ALL over the country. It’s an impending disaster. The NY times just published a great article about it. However, I would not normally EVER recommend that anyone read the lefty NY Times. Search their site for “public pension funding”.
That's what they WANT you to think. Remember how it played out in 1994/1996. Repub's took over Congress in '94 and everyone had forgotten what they were so mad about by '96 and re-elected Billary.
If the Repubs take over Congress/Senate in November, then 0bama and the media will be banging on the Repubs as the "party of no" for the next 2 years. By 2012, people will have forgotten how upset they were in 2010, and we can get a new crop of not-so-blue-dog Democrats. 0bama sees 2010 as a great opportunity to purge his party of moderates, and can replace them with new-thinkers more to his liking in 2012. They know how to steal primaries and they know how to steal elections. Don't count them out. The seeds of our destruction were created by Wilson, sowed by FDR, watered in by Johnson, and have been fertilized richly by RINOs all along the way. 0bama is the one they have been waiting for to reap the harvest.
Pray to God that we have some freedoms remaining in our country in 2016, and that we have the opportunity for a truly free election that year. I, for one, am not counting on it.
I haven't forgotten the repugnicans can faux up a crow bar.
There are similarities but more differences. One difference is the type of president/administration we have now as opposed to 1930. Another difference is that in 1930 we had not had massive govt overspending and undertaxing for 50 years. We also didn’t have an overhang of trillions of dollars in unfunded liabilities and unsupportable pension plans. We didn’t have a demographic situation as problematic either.
I don’t blame Obama for causing the coming decade plus of misery. I do blame him, his minions and his party for making it worse. The root causes were in place long before Obama came on the scene. The misery will continue long after he leaves.
As for the market, it is still range-bound. It staggers about between about 9,700 and 10,700. It does so in rather volatile fashion due to light trading volume and high frequency computer trading.
We have seen about $14 trillion of wealth destroyed, and seen about $2 trillion in govt stimulus. That puts us squarely in deflation. In 2007 over 80% of our wealth was held in real estate. That real estate has deflated in value. That workout is not over. Stocks have deflated in value also. Commodities? Mostly deflated in value, except for gold. But gold is insignificant in size compared to other asset classes.
So I submit that any inflation, let alone hyperinflation, is quite some way off and is unlikely to take place in this cycle. The govt will have to print at least $12 trillion to get us back to even. They can’t do that quietly or quickly so there will be plenty of notice if they start trying.
Watch the bond markets. That’s where the clues to direction will be found. Bonds predict the future much better than stocks.
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