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I'll just present some random chat so don't take my ramblings to seriously, on why this might be 1929, or why it's not. Krugman seems to think it's 1931.
Not (these are the things that don't fit in): Weak dollar, worlds biggest debtor nation, global boom, US stock market going down in real terms the years before the crisis (due to this: I think it's unrealistic to espect the US stock market to mirror the 1929-1932 crash as dshort.com espect), tripling of the gold price,inflationary and global housing bubble, commodity boom, even through the boom ,even things like the seventies show on the TV, nothing like the eighties, even a war.
Yes (fit in): Possible liquidity trap, as private debt to GDP is stretched very far, and could contract for many years, unless very strong forces, or a war or some unknown that cause the the dollar to devalue, very sudden collapse, with a sudden drop in confidence.
In many ways 1929 reminds of year 2000. In the UK they had a housing boom from 1932-1937, in many ways, there is some resemblance of that on a global scale in the last years. That makes this to 1938.
In some other way, compared to the peak in interest rates, 1989 in Japan fit even better, thus, making the US treasury bond market from 1989-2009, to the bond market the germans never had between 1929-1949, because the US dumped it. Had the US (the creditor nation most similar to japan at the time), went off the gold standard early and pump primed their economy through using the printing press to buy german bonds and different european bonds, a lot of problems could possibly have been avoided. That line of thinking would make this to 1949. There is a pattern in emerging market shares, that mirror the dow jones in 1948. That makes WW2 in 1940, to the War on terror from 2001. In this scenario the US is the reincarnation of Nazi Germany.
The US in the twenties had a very stand alone boom in the stock market, most foreign indexes was completely dead in the 1920-s. The Norwegian exchange did absolutely nothing in the 1920's, no credit boom, not even a bull market nothing, it's exchange did however decline around 50 % between 1929 and 1932. It was the sharing of the bad times in Norway, without taking part in the good times. The only similar boom in the norwegian stock market to the the 2003-2008 era was in the era culuminating in around 1918, the high inflation enviroment following WW1. The second time things was similar was in the early seventies, when there was a global bubble not that unlike now. The norwegian stock market loves inflation driven booms, however it did poor in the stagflation era of the late seventies.
Some worthwile between the US and Japan. The japanse market, was partly a bubble through the whole seventies, and was expensive already in 1982, far more expensive than the US market in 82. It was most notably a bubble in japanese shares in 1971-1974, and again in around 80-82, it was inflation that caused investors to take money out from the US, and pour it into Japan. In 1989, after the great japanese bubble the Japanese market had became extremely overvalued, similar to the US market in 2000.
In Japan the housing market kept going to 92, 3 years after the nikkei peaked in late 89. For this reason alone, I think it's completely unrealistic to have a theory that the dow jones now, having gone negative in real terms from 2000 to 2007 (the japanese market went crazy from 82-89, especially from 87-89), to suddenly after the bear market started on the dow, to suddenly mirror japan when the event's was so different, with a huge real increase in the stock market, a housing market that kept going for 2-3 more years, and even totally different level of interest rates at around this time in the event, plus the fact that the rest of the world around then went humming along. If the US stock market in spite of these differences mirrors japan going forward I am stunned. Now we even have a global recession, unlike from 89 and forward.
Here is a fair comparison of the Dow vs Nikkei:
Reccomended:
http://static.seekingalpha.com/uploa...w_nikkei_4.png
It's correct in the sense that the nikkei, and dow, have had the same relationship to 10 year treasuries since 2003. Before 2003 nikkei declined with treasuries, around a 1:1 match, and from 2003 and on both dow and the nikkei have had around a 1:1 match with treasury bonds. If long term yields heads up here. The dow and nikkei will rise, but the nikkei will rise much more than the dow, as the dow will stagnate.
http://finance.yahoo.com/echarts?s=^TNX#chart2:symbol=^tnx;range=my;compare =^n225+^dji;indicator=volume;charttype=line;crossh air=on;ohlcvalues=0;logscale=on;source=undefined
Here, dow sucked in the seventies, nikkei did great, from 89-2000, dow did great, nikkei sucked, however, in 2003, I think they bouth were priced at the same level.
One more on Japan:
http://finance.yahoo.com/echarts?s=PCL#chart8:symbol=pcl;range=my;compare=^ n225+^tnx+brk-a;indicator=volume;charttype=line;crosshair=on;ohl cvalues=0;logscale=on;source=undefined
I think, honestly that the timber company, and the company of warren buffet, presents the same value, or even better, than the nikkei index, at these levels. I think the nikkei, and the dow as I mentioned, these companies to, met in value around year 2003, and have moved in tandem since. Still, in a trend with rising interest rates as in the seventies, I think the dow is more likely to stagnate, while the nikkei could outperform, but that's not because japanese companies makes more money, just because of speculation.
The US market had fair value as late as 1992. That's when the great bubble got going, when the japanese stopped spending and went into a slow depression and deflation. I think the fall in interest rates had to do with the fall of the berlin wall, the introduction of all kinds of wage arbitrage, and even the problems in Japan. I think they had a lot to do with why yields on US treasury bonds fell, and did not blow up like some latin american country, already then. It was a safe place to put money, and a way for Japan and other countries to stimulate their own economies through making their currencies cheap through buying US bonds. I think the fall of communism, with the clinton era, really gave the confidence in the US model a huge, huge boost. Ironically this confidence was at it's peak in 2000, when China started buying lots of treasury bonds, pushing down rates further giving further way to the housing bubble.
Some throught's on the trends going forward, random from some things I read today. The calculated risk Dshort:
http://dshort.com/charts/bears/four-bears-large.gif
Even it looks to work so far, I doubt the 1929 repeat will go on, due to the differences leading up to the events.
Speed of the housing decline
http://2.bp.blogspot.com/_pMscxxELHE...ierPricing.jpg
Extremely fast compared to Japan. Another reasong to write off the Japan repeat scenario. The American economy is just much more efficient in firing people, and cutting losses.
Sony: 1970-2009.
UNP: 1970-2009
Dow Jones 1970-2009
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=SNE&origurl=%2Ftools%2Fquotes%2Fintchart.asp&x=0&y=0&startdate=1%2F1%2F1970&enddate=1%2F1%2F2009&time=12&freq=1&customdate=true&hiddenTrue=&comp=unp&compidx=DJIA~1643&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=128&size=3&optstyle=1013
Indicating both are at a fair level. It just looks visually as the bubble that started in 92 and peaked in 2000, finally is deflated, through inflation from 2003, the performance of UNP, relative to sony and the dow, from 2003, is a symbol of the high inflation. In real terms, visually, it looks as the stock is even cheaper now than in 1992.
Total housing starts:
http://4.bp.blogspot.com/_pMscxxELHE...tartsF2009.jpg
How low can it go?
It sure is low now.
In and outgoing countainers of the US
http://2.bp.blogspot.com/_pMscxxELHE...ortTraffic.jpg
What this looks like to me is a bearish, and a bullish trend. The bull trend is in outgoing container traffic. The era from 2003 in some ways mirrors the performance of UNP, and companies like ETN. That could indicate that a weak dollar and inflation is likely to go on.
http://3.bp.blogspot.com/_pMscxxELHE...rtsJan2009.jpg
The same seen here: Much bigger correction in imports, than in exports.
Capasity utilisation:
http://1.bp.blogspot.com/_pMscxxELHE...yUtilFeb09.jpg
1969 mirrors 2000, 2002 mirrors 1971, 2009 mirrors 1975.
How much have the dollar devalued since 2000?
I have looked at a lot of different stocks, especially emerging market stocks, some different commodities such as gold, even some US utility companies. I think based on that, that the dollar since 2000 have kept only around 1/3 of it's value. What used to be 90 cent's is now only 30 cent's. It might even be worse.
On housing: http://jluscher.googlepages.com/Hous...Boom-large.jpg
The only similarity I see to now, on the chart, is the era right before 1950. That also fit with the war and the dollar devaluation. Confusing times. Maybe we will break out far before things have went down to the baseline, like in around 1950.
Not (these are the things that don't fit in): Weak dollar, worlds biggest debtor nation, global boom, US stock market going down in real terms the years before the crisis (due to this: I think it's unrealistic to espect the US stock market to mirror the 1929-1932 crash as dshort.com espect), tripling of the gold price,inflationary and global housing bubble, commodity boom, even through the boom ,even things like the seventies show on the TV, nothing like the eighties, even a war.
Yes (fit in): Possible liquidity trap, as private debt to GDP is stretched very far, and could contract for many years, unless very strong forces, or a war or some unknown that cause the the dollar to devalue, very sudden collapse, with a sudden drop in confidence.
In many ways 1929 reminds of year 2000. In the UK they had a housing boom from 1932-1937, in many ways, there is some resemblance of that on a global scale in the last years. That makes this to 1938.
In some other way, compared to the peak in interest rates, 1989 in Japan fit even better, thus, making the US treasury bond market from 1989-2009, to the bond market the germans never had between 1929-1949, because the US dumped it. Had the US (the creditor nation most similar to japan at the time), went off the gold standard early and pump primed their economy through using the printing press to buy german bonds and different european bonds, a lot of problems could possibly have been avoided. That line of thinking would make this to 1949. There is a pattern in emerging market shares, that mirror the dow jones in 1948. That makes WW2 in 1940, to the War on terror from 2001. In this scenario the US is the reincarnation of Nazi Germany.
The US in the twenties had a very stand alone boom in the stock market, most foreign indexes was completely dead in the 1920-s. The Norwegian exchange did absolutely nothing in the 1920's, no credit boom, not even a bull market nothing, it's exchange did however decline around 50 % between 1929 and 1932. It was the sharing of the bad times in Norway, without taking part in the good times. The only similar boom in the norwegian stock market to the the 2003-2008 era was in the era culuminating in around 1918, the high inflation enviroment following WW1. The second time things was similar was in the early seventies, when there was a global bubble not that unlike now. The norwegian stock market loves inflation driven booms, however it did poor in the stagflation era of the late seventies.
Some worthwile between the US and Japan. The japanse market, was partly a bubble through the whole seventies, and was expensive already in 1982, far more expensive than the US market in 82. It was most notably a bubble in japanese shares in 1971-1974, and again in around 80-82, it was inflation that caused investors to take money out from the US, and pour it into Japan. In 1989, after the great japanese bubble the Japanese market had became extremely overvalued, similar to the US market in 2000.
In Japan the housing market kept going to 92, 3 years after the nikkei peaked in late 89. For this reason alone, I think it's completely unrealistic to have a theory that the dow jones now, having gone negative in real terms from 2000 to 2007 (the japanese market went crazy from 82-89, especially from 87-89), to suddenly after the bear market started on the dow, to suddenly mirror japan when the event's was so different, with a huge real increase in the stock market, a housing market that kept going for 2-3 more years, and even totally different level of interest rates at around this time in the event, plus the fact that the rest of the world around then went humming along. If the US stock market in spite of these differences mirrors japan going forward I am stunned. Now we even have a global recession, unlike from 89 and forward.
Here is a fair comparison of the Dow vs Nikkei:
Reccomended:
http://static.seekingalpha.com/uploa...w_nikkei_4.png
It's correct in the sense that the nikkei, and dow, have had the same relationship to 10 year treasuries since 2003. Before 2003 nikkei declined with treasuries, around a 1:1 match, and from 2003 and on both dow and the nikkei have had around a 1:1 match with treasury bonds. If long term yields heads up here. The dow and nikkei will rise, but the nikkei will rise much more than the dow, as the dow will stagnate.
http://finance.yahoo.com/echarts?s=^TNX#chart2:symbol=^tnx;range=my;compare =^n225+^dji;indicator=volume;charttype=line;crossh air=on;ohlcvalues=0;logscale=on;source=undefined
Here, dow sucked in the seventies, nikkei did great, from 89-2000, dow did great, nikkei sucked, however, in 2003, I think they bouth were priced at the same level.
One more on Japan:
http://finance.yahoo.com/echarts?s=PCL#chart8:symbol=pcl;range=my;compare=^ n225+^tnx+brk-a;indicator=volume;charttype=line;crosshair=on;ohl cvalues=0;logscale=on;source=undefined
I think, honestly that the timber company, and the company of warren buffet, presents the same value, or even better, than the nikkei index, at these levels. I think the nikkei, and the dow as I mentioned, these companies to, met in value around year 2003, and have moved in tandem since. Still, in a trend with rising interest rates as in the seventies, I think the dow is more likely to stagnate, while the nikkei could outperform, but that's not because japanese companies makes more money, just because of speculation.
The US market had fair value as late as 1992. That's when the great bubble got going, when the japanese stopped spending and went into a slow depression and deflation. I think the fall in interest rates had to do with the fall of the berlin wall, the introduction of all kinds of wage arbitrage, and even the problems in Japan. I think they had a lot to do with why yields on US treasury bonds fell, and did not blow up like some latin american country, already then. It was a safe place to put money, and a way for Japan and other countries to stimulate their own economies through making their currencies cheap through buying US bonds. I think the fall of communism, with the clinton era, really gave the confidence in the US model a huge, huge boost. Ironically this confidence was at it's peak in 2000, when China started buying lots of treasury bonds, pushing down rates further giving further way to the housing bubble.
Some throught's on the trends going forward, random from some things I read today. The calculated risk Dshort:
http://dshort.com/charts/bears/four-bears-large.gif
Even it looks to work so far, I doubt the 1929 repeat will go on, due to the differences leading up to the events.
Speed of the housing decline
http://2.bp.blogspot.com/_pMscxxELHE...ierPricing.jpg
Extremely fast compared to Japan. Another reasong to write off the Japan repeat scenario. The American economy is just much more efficient in firing people, and cutting losses.
Sony: 1970-2009.
UNP: 1970-2009
Dow Jones 1970-2009
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=SNE&origurl=%2Ftools%2Fquotes%2Fintchart.asp&x=0&y=0&startdate=1%2F1%2F1970&enddate=1%2F1%2F2009&time=12&freq=1&customdate=true&hiddenTrue=&comp=unp&compidx=DJIA~1643&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=128&size=3&optstyle=1013
Indicating both are at a fair level. It just looks visually as the bubble that started in 92 and peaked in 2000, finally is deflated, through inflation from 2003, the performance of UNP, relative to sony and the dow, from 2003, is a symbol of the high inflation. In real terms, visually, it looks as the stock is even cheaper now than in 1992.
Total housing starts:
http://4.bp.blogspot.com/_pMscxxELHE...tartsF2009.jpg
How low can it go?
It sure is low now.
In and outgoing countainers of the US
http://2.bp.blogspot.com/_pMscxxELHE...ortTraffic.jpg
What this looks like to me is a bearish, and a bullish trend. The bull trend is in outgoing container traffic. The era from 2003 in some ways mirrors the performance of UNP, and companies like ETN. That could indicate that a weak dollar and inflation is likely to go on.
http://3.bp.blogspot.com/_pMscxxELHE...rtsJan2009.jpg
The same seen here: Much bigger correction in imports, than in exports.
Capasity utilisation:
http://1.bp.blogspot.com/_pMscxxELHE...yUtilFeb09.jpg
1969 mirrors 2000, 2002 mirrors 1971, 2009 mirrors 1975.
How much have the dollar devalued since 2000?
I have looked at a lot of different stocks, especially emerging market stocks, some different commodities such as gold, even some US utility companies. I think based on that, that the dollar since 2000 have kept only around 1/3 of it's value. What used to be 90 cent's is now only 30 cent's. It might even be worse.
On housing: http://jluscher.googlepages.com/Hous...Boom-large.jpg
The only similarity I see to now, on the chart, is the era right before 1950. That also fit with the war and the dollar devaluation. Confusing times. Maybe we will break out far before things have went down to the baseline, like in around 1950.
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