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 yesterday, even as late as 1931, they didn't know they were in a "Great Depression" yet. On the contrary, the promise from the White House was that "prosperity is just around the corner."
Don't believe it? Check out this excellent compilation of New York Times clippings from early 1930 put together by Dan Alpert of Westwood Capital. There is nary a hint that anyone had any idea about the disastrous decade that was to come.
Dan's complete compilation is contained in a broader research piece, which we've embedded at the end. The slides below contain excerpts from February-April, 1930.
Is the current pullback just a "correction" and a "buying opportunity"? Or, as in the spring of 1930, is it the start of the REAL market crash? You be the judge. Meanwhile, here's what things looked like in the spring of 1930...
The Greatest Sucker's Rally In History, Play By Play >
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Had the Hoover and Roosevelt administrations, plus the Federal Reserve, avoided intervening in the economy we would not have had the Great Depression. In the rest of the industrialized world it was just known as "the depression" not "the Great Depression". England for instance did not have their own version of the "New Deal" nor a British FDR.
We are well on our way there.
The way we describe our economy and quality of life is madness!
Real unemployment is about 20% and rising. We describe the unemployed as those who are registered and actively seeking employment. But once you've given up, you are no longer considered unemployed.
We describe our economy by how well the elite are doing with their zero-sum scheme known as the stock market. When the elite are doing well, our economy is booming. It doesn't matter that real American wages have been sinking for forty years. Because the populace doesn't count.
Take back the language. Only by forming a real picture of our world can we take the necessary steps to right our fast sinking ship.
"Capital must protect itself in every possible manner by combination and legislation. Debts must be collected, bonds and mortgages must be foreclosed as rapidly as possible. When, through a process of law, the common people lose their homes they will become more docile and more easily governed through the influence of the strong arm of government, applied by a central power of wealth under control of leading financiers. This truth is well known among our principal men now engaged in forming an imperialism of Capital to govern the world. By dividing the voters through the political party system, we can get them to expend their energies in fighting over questions of no importance. Thus by discreet action we can secure for ourselves what has been so well planned and so successfully accomplished." USA Banker's Magazine, August 25 1924
They need consumer/debt slaves. If we can expand consciousness and create a shift, we would gain power by refusing to take part in the cycle.
No more buying unnecessary garbage on credit. Energy awareness and conservation.
These shifts will create change.
Until then, all we can do is moo and stampede wherever they guide us.
BTW, I am one of those who has never been counted. I graduated college in 2008 ( High GPA too!) and was "lucky" to get an entry level, part time position. I don't make enough to live ( I have to get food stamps and have NO benefits) , and see no hope of ever having a job with a living wage and health insurance. I am not counted, nor are my underemployed clients.
One more note: I think that the reason that the food stamp program covers so many people is to keep us off the streets with pitchforks. If we were all as hungry as we could be, there would have already been rioting in the streets.
From 1979 - 2006, the average income of the richest 0.1% of Americans rose a staggering 364%, nearly 25 times more than the growth of the median household income. Between 2001 and 2007, the real income of the median working-age household decreased by 1.9%, a loss of $1,107, despite productivity increasing by 18.5% over that time.
In 2006, the top 1% of households received 20% and the top 10% received 46% of the nation’s income (highest shares since 1928 & 1932 respectively). The top 10% of the population owns 74% of the nation's wealth, the bottom 40% owns less than 1%. The top 10% paid an average of 17.7% of income in taxes, the middle class (including social security and medicare) 31.2%.
We're screwed, huh?
--Abraham Lincoln
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x1771143
The trick is to get you hooked early so you would never consider dissent, even when such dissent is in your best interest. Fear is a powerful tool. The president is hard pressed to buck tradition and actually turn his powers on his handlers. Power is the people surrounding the president. Priority is obvious and direction is also obvious. Brace yourself.
precedes a downturn. Too much of societies wealth being thrown away for the funding of war.That tends to do a lot to help the situation deteriorate. Or lets say a series of Natural Disasters that combined with stupid human mistakes serves to divert much of a societies wealth into making repairs or even just survival. We have lots of that going on right now. Then of course there is the greed factor, which always plays a part. I would say we have the perfect recipe for a crash and even though our Economists and our Politicians would like very much to convince us otherwise, I think we are staring a disaster in the face. A calm before the storm.
Roosevelt could use what happened in Russia as a justification for much more minor change in The USA.
Not that much has changed since 2008. The toxic assests haven't been payed down. That was the cause, no?
with the financial media feeding the BS that all is well, most people have no clue as to the current problems, nor just how bad they will get.
Great read Mr Blodget