Tag Archives: crash

Fun with Numbers 1929 vs Now

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I thought I’d have a little fun comparing the highs and lows of the crash of 1929 to today.  I’d love to say that I came up with a wonderful prediction, but alas I can’t even read palms (yet).  So, to explain what I’ve done a bit the top section is from 1929, and the bottom from 2007.  What makes comparing the two time series is that we have incomplete data for 2008 as it is still unraveling.  For the 1929+ period I used the weekly timeframe whereas for 2007-2008 I used the daily.  For illustrative purposes this shouldn’t be a problem.

I was mainly curious to see the relationship between time and price descent.  As you can see from the Cumulative Days and % from start it only took 69 days for the Dow to crash (49.39%) starting 1929 and it took 365 days for the Dow to reach a (44.48%) decline starting October 2007.  So, in comparison our crash has been slow and steady with the main sell-off occurring from August through October.  The only reason we aren’t in further decline is because of a few recent rallies, however they are all over a very short period of time.

From about October 14, 2008 we have started to see huge swings in the market creating new highs and lows on a daily basis.  These will eventually be normalized when we have more data, but this is crazy.  Up 24.25% in 4 days, and then down (16.30%) in another 2.  Granted these are from the highs and lows of the session and not the closing, but either way you cut it the market is bouncing all over the place.  

Take the sell-off today during the last 15 minutes… The Dow was at 9358 and then fell off a cliff to close at 8990.96, a difference of 367 points in 13 minutes.  13 minutes and any gain was completely erased and we closed down from the prior session.  WOW

Conclusion?  Basicallly I wanted to demonstate that we are moving at an accelerated pace.  Many think that we are going to see a rally over the coming months.  I’m more in the camp that due to the volatility any gain because it occurs so swiftly will be shortly thereafter followed by another low.  

Time will tell….

Similarities to 1929

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This is a very pertinant watch if you are interested in the similarities of today to the 1929 crash. I keep looking at the charts and percentage changes from prior to 1929 till today. So, far we have almost retraced on the Dow 100% since the October 2002 low. If we cross that level of support I’m concerned that we won’t see another bottom until we hit about 1000 or 500 on the Dow.

Since about 1982 the Dow has taken off with only three decent corrections in 1987, 2002, and the one playing out today. I realize that we have to look at the Dow adjusted for inflation as that is implicit in the numbers, but all I’m trying to get across is that the bottom might be farther away than any of us can imagine.

Anyways, enough for now… Watch the video if you haven’t already.

CNBC says it perfectly

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NASDAQ @ 2:43 pm

 

I have CNBC on in the background and between reading and watching the events unfold one of the anchors labeled the situation perfectly.

He essentially said that a close of 200 – 300 (in the DOW) points down won’t send a strong signal to everyone that there really is a crisis.  However, if the market closes down sharply then that will send the needed signal that something “MUST” be done.  We are being spoon fed a load of crap.  

This bill will probably eventually pass…  With the amount of panic and amount of “wealth” lost today I wonder if the level of support will start to shift from negative to positive.

CNBC is also saying that Barney Frank said that they were going to monitor the market’s reaction after the vote. So, lets go through the motions and see how the markets react to a no go on the bill and then if they freak out we can make sure it will pass on the second go around.

Anybody ever been to a musical, a play, or a performance of any kind?  Well, there are scenes and each is carefully planned out.  First you lay the ground work and setup the plot, then there is a climax, and a resolution.  I highly doubt we are even close to the climax, which means we have a long way to go laying the groundwork.

Fed inflating with no restraint – Hyperinflation?

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A picture is worth a trillion words…

 

Money Supply 09/25/2008

Money Supply 09/25/2008

Frankly I’m not surprise to see what the Fed is doing and can only imagine what this is going to look like if this bailout goes through.  There is a precedent throughout time that inflating the monetary supply only prolongs the inevitable.  This is a sad state of affairs and I see only troubled times ahead for the once mighty dollar.  Like the Romans who clipped their gold and silver coins the United States is creating more and more money from nothing.  Why do we need a bailout package when we can just print money?  It isn’t actually printed anymore, but issued through treasuries between the Fed, the Treasury, and private banks.  

We are headed towards a recession if we aren’t already in one.  Inflating the money supply while in a recession presumably means higher prices.  The contraction in prices we recently saw was perhaps a byproduct of the Fed contracting the money supply, which it has now reversed course.  During the Great Depression of 1929 many banks tried using their depositor’s money to help keep the market afloat just as the Fed is now doing… The outcome?  You know what happened…  

Now we are taking the opposite position and inflating.  What happened to Rome… and thanks to Mike Hewitt at dollardaze.org he lists many countries plagued by hyperinflation. 

  • Angola (1991-1999)
  • Argentina (1975-1991)
  • Austria (1921-1922)
  • Belarus (1994-2002)
  • Bolivia (1984-1986)
  • Brazil (1986-1994)
  • Bosnia-Herzegovina (1993)
  • Bulgaria (1991-1997)
  • Chile (1971-1973)
  • China (1939-1950)
  • Free City of Danzig (1923)
  • Ecuador (2000)
  • England
  • Greece (1944-1953)
  • France (1789-1797)
  • Georgia (1995)
  • Germany (1923-1924, 1945-1948)
  • Greece (1944-1953)
  • Hungary (1922-1924, 1944-1946)
  • Israel (1979-1985)
  • Japan (1944-1948)
  • Krajina (1993)
  • Madagascar (2004)
  • Mexico (2004)
  • Nicaragua (1987-1990)
  • Persian Empire (1294)
  • Peru (1984-1990)
  • Poland (1922-1924, 1990-1993)
  • Romania (2000-2005)
  • Ancient Rome
  • Russia (1921-1922, 1992-1994)
  • Taiwan (late-1940′s)
  • Turkey (1990′s)
  • Ukraine (1993-1995)
  • United States (1812-1814, 1861-1865)
  • Yap (late 1800′s)
  • Yugoslavia (1989-1994)
  • Zaire (1989-1996)
  • Zimbabwe (1999 – present)

The fiat money system that we presently have, which in its present form has only been in existence since 1971 when we went off the gold standard.  To say that we have a precedent for what may or may not happen is incorrect.  We are now in uncharted territory, however history has its lessons.

Down with the dollar, manipulation everywhere….

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I don’t know what to think about today. There was nothing normal about how the markets went about their day. Up down up down waaaaay up. And exactly when the market took off gold dove. There was a perfect inverse correlation between the two markets.

When gold gets too high this isn’t good for banks and especially the fed. It is a signal of losing confidence on the dollar, which is a piece of monopoly money that we are able to use as a medium of exchange.

For the whole fiat currency to continue to function there has to be debt and liquidity. Liquidy is drying up as banks don’t want to lend to eachother. Nobody knows for sure who is the next in a series of falling dominoes. With the Fed injecting over 100billion dollars into the system last night our dollar is looking ripe for a major devaluation.

I’m off to Newport Beach today for a real estate seminar led by John Schaub. It should be interesting and I’m excited to learn something new and get my mind off the rapidly deteriorating economy.

Stocks for the LONG LONG LONG term

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“The best therapeutic move for long-term investors is to turn off your TV so as not to get caught up in all of the sensational headlines. The stock market has been and will continue to be the best source for wealth creation over the long-term.”

–Patrick J O’Hare, Briefing.com

I love hearing that the stock market for the long term is the way to make money. Close your eyes and prey. Whoa… Did you close your eyes and watch the money flow into your pockets when you labored every day for what you have invested?

What happens if you are in individual stocks and some of them go bankrupt? The indices adjust and find another company to take the failed ones place. Yes, the market has gone up in the long term, but what if you invested at one of the tops before the crash and had to wait 16 years to get your money back? I don’t know about you but I’d rather sit on the sidelines and wait it out. There are ways to see the hurricane of in the distance, but if you are unwilling or unable it will hit you.

When Columbus was making landfall the natives didn’t see his ships because they weren’t part of their reality. If we can’t adjust our thoughts to accept something new or different then how are we going to prepare for a possible change of future direction?

Read the following article… There is a grim reality facing us all. Investment banks have used up their ability to lend to businesses. Considering that the growth of our economy depends on the ability of credit we are facing a MAJOR did I say MAJOR issue in front of us.

Money Central Article

I’m also hearing local news radio having discussions about what to do with your money to keep it safe. Last night I heard someone saying that this is the time to start thinking about buying. Sure there is the old adage that when there is blood in the streets buy. When if the blood is only at a trickle when it will be a river?