Stocks are headed for a fall

[Tet]

Re: Stocks are headed for a fall

Um, how about 1987?? 1998 panic???

Secondly, this conditional statement (if no war, then no crash) would be more robust if you could apply it to all stock markets, all the time. And you really can't (example: asian financial crisis).

You'd have to refresh my memory as to which war we had in 1987 and 1998 because I don't remember anything that required the needed borrowing. I obviously was implying that this refered to the US markets not the Asian markets, Asians aren't smart enough to understand the bennefits of blowing up innocent people like we are. From memory the Panics would include 1857 no war, shortly thereafter though. Panic of 1873 following the War Between the States and end to reconstruction. 1929 Crash and shortly thereafter WWII. I think you find there is a Panic before or after any war of any size. Didn't the Nifty Fifty crash after Vietnam?

[Rajiv]

Re: Stocks are headed for a fall

An article worth readingThe Second Great Depression

A great picture of the bonar BTW

There are many similarities between the pre-Depression era and our own. Paul Alexander Gusmorino says:

"The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade....The excessive speculation in the late 1920's kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the misdistribution of wealth, caused the American economy to capsize.

(The income disparity) between the rich and the middle class grew throughout the 1920's. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75% increase in per capita disposable income…A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32% in manufacturing8. During that same period of time average wages for manufacturing jobs increased only 8% (This ultimately causes a decrease in demand and leads to growth in credit spending)

The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge's (pro business) administration passed the Revenue Act of 1926, which reduced federal income and inheritance taxes dramatically…(At the same time) the Supreme Court ruled minimum-wage legislation unconstitutional.

The bottom three quarters of the population had an aggregate income of less than 45% of the combined national income; while the top 25% of the population took in more than 55% of the national income...Between 1925 and 1929 the total credit more than doubled from $1.38 billion to around $3 billion”. (Just like now, the growing wage gap has spawned massive speculative bubbles as well as a steady up-tick in credit spending. Wage stagnation forces workers to seek other opportunities for getting ahead. When wages fail to keep pace with productivity then demand naturally decreases and business begins to flag. The only way to spur more buying is by easing interest rates or expanding personal credit, and that is when equity bubbles begin to appear. That's what happened to the stock market before 1929 as well as to the real estate market in 2007. The availability of credit has kept the housing market afloat but, ultimately, the resultwill be the same.

On Monday October 21, 1929, the over-valued stock market began its downward plunge. It managed a brief mid-week comeback, but 7 days later on Black Tuesday it plummeted again; 16 million shares were dumped and there were no buyers.

The game was over.

Confidence evaporated overnight. People stopped buying on credit, the bubble-economy collapsed, and the mighty locomotive for growth, the American consumer, hobbled into the Great Depression. Tariffs were thrown up, foreigners stopped buying American goods; banks closed, business went bust, and unemployment skyrocketed. Tens years later the country was still reeling from the implosion.

Now, 77 years later, Greenspan has led us sheep-like to the same precipice. The economic dilemma we’re facing could have been avoided if the expansion of personal credit had been curtailed by prudent monetary policy at the Federal Reserve and if wealth was more evenly distributed as it was in the ‘60s and ‘70s. But that’s not the case; so we’re headed for hard times.

[Ishmael]

Re: Stocks are headed for a fall

Tet there was a significant drop (38.9%) in the market from November 1916 to December of 1917 which was WW1 and also a significant drop (24.7%) drop from February 1966 to October 1966.

[Tet]

Re: Stocks are headed for a fall

Tet there was a significant drop (38.9%) in the market from November 1916 to December of 1917 which was WW1

US doesn't declare war until 1917 and it takes a while to mobilize.

and also a significant drop (24.7%) drop from February 1966 to October 1966.

Troop levels in Vietnam reach 400K by the end of 1966, I'd be more concerned about what happens when these wars end, like the Nifty Fifty crash of 1973. I don't see this war ending any time soon.

[akrowne]

Re: Stocks are headed for a fall

Nice timing.