Stocks, 1929-1935

The stock market is behaving like it is the 1930s all over again, and many commentators are saying it is the worst economic environment since, so I thought it would be interesting to see how stocks did during that time. 

Is history repeating itself?

This, I believe, is the absolute worst case scenario for today.  I do not believe we will experience a replay of the 1930s.  However, if I am wrong, it will not be any worse.

Stocks were cut in half in Autumn of 1929.  Stocks were cut in half from the top in October 2007 to the low in October 2008.

Stocks stabilized in November and December 1929, but with a lot of volatility.  Then, stocks rallied.

From November 13, 1929 to April 10, 1930, stocks rose 47%.

Is the market stabilizing with a lot of volatility before embarking on a vicious bear market rally in the new year? 

I don't know.  History is not that easy.

However, even during the worst bear market in stocks, there were significant rallies.

And would it not be interesting if the market hit its low this week, the very week it did so in 1929?

I am expecting a bear market rally and am positioned accordingly.  But I do not think it will be anything more than that.

Comments

[Running Amok In Fantasyland]

You are on the scent, T.

Basing now for rally that begins just before holidays and, after some disbelief early in new year, runs through first half 2009. Then another bad summer and fall.

[psychodave]

Toro, I agree with all you've been posting, at least in a general sense.

For past 3 weeks I've been asking myself:
"If, thanks to Fed & Gov't action, it took us a full year to accomplish what they did in 3 months, does that mean our 'Hoover Recovery' (Nov'29 to Apr'30) will be prolonged by us to a full year or more?"

I vote no for a Great Depression II because of the graphs dacian posted on 11/10. In 1930, the %-change in Adjusted Monetary Base started declining from the crash to Nov/Dec 1930. Its not the Spike Up in yoy %change of dacian's Source Base plot, its the abrupt decline immediately following it.

The only way we get that is if our long gov't bond declines, as Hoover's did from 96 in Nov/Dec 1930 to a low of 65 in July 1932. That may prevent U.S. Treasury from financing Fed. Reserve's efforts to provide lending while our limp, crippled, useless (and criminal!) banks clutter up the path to recovery.

A link helpful to me:
http://3.bp.blogspot.com/_H2DePAZe2gA/SQtMxfI05KI/AAAAAAAAGPo/CFrhBX6J--0/s1600-h/1929to1933.PNG

[bill chan]

Today from marketwatch:
"In essence, these advisers came face to face with John Maynard Keynes' famous pronouncement that "the market can remain irrational longer than you can remain solvent."

[dacian]

"I am expecting a bear market rally and am positioned accordingly. But I do not think it will be anything more than that."

Why even bother rally then? I'm not an expert at all, but if we know we'll sell off later, why rally? It makes no sens. We rally because we some of the problems will be addressed and solved and not just for the beauty of a rally, right? Actually, I think that's why we don't rally. Because everyone knows we'll sell off later anyway :)

[dacian]

My friends, there is a risk that tomorrow we take out the October lows on SPX. If 840 doesn't hold (and Intel just sent a bad signal), we go to hell.

[Hassam]

Markets are controlled by emotions. This is called expectations in financial economics. Stock markets are just the sum total of all investors sentiments. Markets will turn bearish when investors turn pessimestic. But there is one market that is always bullish. It is the largest market in the world. No one can control it. Not even governments or central banks. Yeah, daily more than $3 trillion get transacted on the forex markets. One currency goes down, the other goes up. Forex Trading is being called the Recession Proof Business of 21st Century. Learn forex trading:

http://forex-or-stocks.blogspot.com

[forex forum]

this is so crazy how the market looks the same as it did in the thirties. I know were are in a recession but unsure about a depression. I hope it recovers like it did in the thirties.