This page has been archived and commenting is disabled.

Stocks Galloped Higher in 1929, Too

RickAckerman's picture





 

 

As usual, the stock market was vexatiously out of step with reality last week, soaring on word that the ECB plans to do “whatever it takes” to preserve the euro and the political union that it binds. For U.S. investors, especially those who believe in hope and change (and, presumably, the Easter Bunny), there was also the invaluable news that the U.S. economy is once again verging on recession – a development which is widely believed to portend yet more Fed easing. Completing the delusional vision that good times are soon to return nonetheless, crude oil finished the week with a gain of about $4 per barrel.  Of course, no one actually believes that so strong a recovery impends as to squeeze current supplies of crude that are more than adequate. Even so, the news media, feigning ignorance of forces that have been pushing the global economy toward an abyss, and abetted by the stock market’s steroid-addled lunge, were only too happy to report events in a way that did not challenge officialdom’s cynically crafted, positive spin.  The Establishment’s most useful memes were dutifully trumpeted by The Wall Street Journal in two headlines that ran above the fold on Friday:  Weak Economy Heads Lower, said the topmost, in a heavy font; and, immediately below it, in italics, the implicitly good news:  Markets Jump as European Leaders Vow to Protect Euro; Flagging U.S. Recovery Could Spur Fed.

 

 

Such headlines have the seeming heft of history-in-the-making. Notice, however, that it is not facts that have borne this weight, but mere hope and speculation. To say the markets have responded positively to some banker’s speech is hardly an assurance that the ECB’s latest nostrums will work.  As for the Fed’s supposed ability to revive the economy with yet another monetary nudge, it is only on Wall Street where the cynicism such speculation evokes could produce an ostensibly positive outcome – i.e., last week’s 600-point surge in the Dow.  Despite such effusions, however, there is growing tension between the stock market’s ebullient leaps on the one hand and mounting perceptions on the other that the global economy is poised to collapse.  Under the circumstances, we imbibe headlines like the ones above with a growing sense of foreboding. The reassurances that our leaders seem increasingly desperate to promote are perforce muted by the echo of headlines from the past. Below are a few to ponder as we bear witness to the stock market’s inscrutable rise. All appeared on the front page of The New York Times during the summer of 1929.   While a few of them suggest that little has changed, others seem ominous in hindsight:

 

  • Leaders Assure President Senate Will Cut Tariff to Protect the Consumer
  • Stocks Set Record as Money Drops to 6%
  • London Suffers Record Heat; British Drought Most Serious
  • Britain Won’t  Join Neighbors in Tariff War with America
  • Red Army Reported Massing on Frontier of Manchuria
  • Three Banks Closed by State In Passaic; Quick Sale Forecast
  • Heat of 91 Kills 3; Squalls Sweep City
  • U.S. Steel Profit at Peace-Time Peak
  • Baby Auto for Two to Be Sold by Mail
  • Mercury Drops to 56 Degrees in Coldest Aug. 5 Here
  • Farms Ship Wheat in Record Volume
  • Capone Shifted to Another Prison Because Fellow Inmates Threatened Him
  • Stock Prices Break as Rise in Bank Rate Starts Selling Rush
  • Stocks Regain Half of Friday’s Losses
  • Bank of England to Get $250M [from Fed] if Necessary
  • China Says Soviet Is Trying to Start World-Wide Revolt
  • Stock Market Goes Up, Surprising Wall Street; Brokers’ Loans at Peak Had Indicated a Drop
  • Arabs Invade Palestine from Three Directions
  • Turks Threaten to Seize Synagogue in Tax Dispute
  • Heat at 94 Again; Wave Nation-Wide
  • Stock Prices Break on Dark Prophecy; Follows 19-Day Advance [September 6]
  • [Professor] Finds Nation Lacks Direction Because Teaching Is in Hands of Women
  • Senate Foes Attack Tariff Bill
  • Boy Held in Theft of $512,000 Bonds
  • Stock Leaders Sag in Liquidation [September 25]
  • Toppling Markets Rallied by Bankers [September 26]
  • Maniac Kills Man by Push on Elevated
  • Hoover Defeated on Flexible Tariff
  • $1,253,702,357 Rise in Taxable Realty on City’s Rolls
  • Year’s Worst Break Hits Stock Market [October 4]
  • Brisk Rally Checks Long Market Drop [October 6]
  • Radio Carries Cheer to Byrd in Antarctic
  • Hoover to Attend World Series Game Today
  • Stocks Driven Down as Wave of Selling Engulfs the Market [October 20]
  • Stocks Gain Sharply but Slip near Close [October 23]

And we all know the rest.  If there’s a lesson in this sequence of headlines, it is that we should batten the hatches if and when the stock market’s daily gyrations become front-page news in the The New York Times.  Of course, the worst conceivable outcome would be a market that fails to gyrate, instead collapsing in a flash crash so devastating as to crush all speculation about a recovery.

 

***

Trading stocks, options and commodities in these treacherous times calls for great patience and skill. Click here if you’d like to see how Rick’s Picks approaches the challenge.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 07/30/2012 - 12:51 | Link to Comment bagehot99
bagehot99's picture

But, but Barack Obama says everything will collapse if we don't invest more borrowed/printed/fantasy money that we don't have and cannot ever repay, in education (union teachers) and sanitation (union garbage collectors) and civil servants!

Because that's how businesses are built (you didn't do it!).

Lions led by fucking donkeys, and he's still at 45% approval - which means 45% of the population don't have the brains they were born with.

Mon, 07/30/2012 - 12:27 | Link to Comment Crispy
Crispy's picture

"The stock market is only distantly related to economics and reality. It is an emotional mix of greed, avarice, apprehension, fear and panic -  all loosely connected to corporate earnings, the business cycle and the real world".

Ray Devoe

Mon, 07/30/2012 - 11:53 | Link to Comment BeetleBailey
BeetleBailey's picture

So...lemme.....get this straight.

The stock markets are up ....ONLY...because of the "hope" of CB's  printing money....

...that will..somehow....create......jobs.....or something...

...that this "new money" will somehow.......stimulate...the economy(ies) of the planet.......

...that....historically...this has never really worked....ever...

....oh and the only OTHER reason is.....that everything else sucks even worse (bonds, yields,  ka ka...etc.)........

...so the market is the best place.....to make money....now....as money will be.......worth less...........

I see...........SAID THE FUCKING BLIND MAN...

JESUS H. CHRIST...SOMEBODY OPEN UP WITH A WATER-COOLED THOMPSON SUB MACHINE GUN WITH A MILE LONG CLIP AND TAKE OUT EVERY SINGLE STINKING BANKER, POLITICIAN, SO-CALLED "ECONOMIST".....AND WHILE YOU'RE AT IT, SHOOT UP THE CNBC SET TOO.....

Mon, 07/30/2012 - 11:32 | Link to Comment ebworthen
ebworthen's picture

Thanks for the insight.

The only thing that has delayed our 1932 depression is FED intervention and delusion.

Our real Depression is yet to really hit and the FED can't stop it, just delay the inevitable.

The headlines are eerily similar; the more things change the more they stay the same, eh?

Mon, 07/30/2012 - 11:14 | Link to Comment Wags
Wags's picture

You didn't build it anyway so you can't lose it.

Sort of remnds me of Sept 2008

Mon, 07/30/2012 - 11:04 | Link to Comment geno-econ
geno-econ's picture

The best thing about Fiat currency is that it prevents Protectionism from flourishing ---until financial collapse !

Mon, 07/30/2012 - 10:56 | Link to Comment Dareconomics
Dareconomics's picture

A wise man once told me that only two things drive the stock market: greed and fear. The fundamentals eventually have their say when they influence greed and fear. This always takes longer than you think it will.

This is my first time giving investment advice here in Dareconomics, so listen carefully. The market is surging on the hopes of more money printing. The reason this is happening is because the economy is stalling, and this makes it more likely that the Fed will place more money into the financial system. To summarize, the economy is doing poorly and that's why the market will rise.

It is time for you to take advantage of this stupidity. Put options are very cheap due to the recent market surge. Buy them to insure your portfolio against a crash until January expiration. If the market moves down, the profits from this hedge will negate the losses from your portfolio. If the market does not move down, you will incur a taxable loss. This is a pretty good deal.

http://dareconomics.wordpress.com/

Mon, 07/30/2012 - 12:51 | Link to Comment BandGap
BandGap's picture

Thank you, Captain Oblivious.

The only way to win is to not play the game.

Mon, 07/30/2012 - 10:55 | Link to Comment TrainWreck1
TrainWreck1's picture

This time it will be different.

We have Obama AND a secret weapon, http://cache.daylife.com/imageserve/0d8d4TYeqR3iH/610x.jpg

 

 

Mon, 07/30/2012 - 12:32 | Link to Comment Winston of Oceania
Winston of Oceania's picture

Now that was funny...

Mon, 07/30/2012 - 10:50 | Link to Comment CheapBastard
CheapBastard's picture

"This time is different."

Mon, 07/30/2012 - 10:51 | Link to Comment Conax
Conax's picture

I feel so dirty now..

Baby boomer, Christian (at least in theory), old white man, I blame myself.

I started every war, I blew up social security, I want young folks to slave away in abject poverty so I can get free viagra to boink old ladies with.

All those years with aching feet hustling around in non-union factories producing packaging machines, electro-platers, and automation for the big car plants, all for 25,000 a year, now laid off permanently and told to go die, I'm no better than a parasite and should be executed by Justin Bieber lookalikes.

Nah, I'm not going to take the blame for this one. Fook ya'll.

Mon, 07/30/2012 - 12:42 | Link to Comment Winston of Oceania
Winston of Oceania's picture

"no better than a parasite "

That my friend is why the Gub'ment has taken to calling us Consumers, we consume from the System of the Central Planners. When you no longer have a function you are no longer of use and only consume. George Bernard Shaw has got his wish, that all men must get up and declare their worth to the machine lest they be judged obsolete. Which then begs the question of how long it will take before the State decides that to just kill you off is a waste of resources and recycles the animal protien back into the "system" as they do now in agriculture.

Mon, 07/30/2012 - 12:01 | Link to Comment Zero-risk bias
Zero-risk bias's picture

Thinking about this the other day. Seeing the hapless denizens, young and old, busy and happy in their daily minutia.  Can't help but feel sorry for the youngest. Personally, I missed out on being the result of the boom by a decade, still it's probably the tale end, and I can relate. We're all riding the bus, just board and alight at different times.

Props to the dude. (Fuckit)

Mon, 07/30/2012 - 10:41 | Link to Comment Umh
Umh's picture

People are scared to be out of the market, because it may go up. Even if individuals stay out of the markets directly their 401K's, 403B's etc are in the markets. Money managers are people too; yes I've had my doubts.

Mon, 07/30/2012 - 12:16 | Link to Comment edifice
edifice's picture

If you're smart, you'll either cash out or borrow against your 40x account, take the hit, and sink whatever's left into hard assets. In my case, having a 403b that I cannot borrow against or cash out, I wrote it off as a loss; to me, it's just another tax I have to pay and will receive no benefit for (like Social Security).

Mon, 07/30/2012 - 10:29 | Link to Comment adr
adr's picture

There will end up being about 25 people celebrating DOW 50k in NYC. The rest of America will be mired in race wars, civil wars, Dawn of the Dead style zombie cannibalism.

What was left of honest working Americans took all the money they had and left for Asia, Europe, Canada before the final fall.

It doesn't matter what level the stock market gets to if 99.9% of the people do not see any benefit from it.

Mon, 07/30/2012 - 10:32 | Link to Comment ATG
Mon, 07/30/2012 - 10:05 | Link to Comment Boilermaker
Boilermaker's picture

 

 

 

Well, also:

  1. Paper trades, no online accounts
  2. No HFT
  3. Gold Standard in place
  4. Bid / ask in much higher increments and not sub-penny
  5. Mark-to-market in place
  6. Manufacturing base still the backbone of the US economy
  7. No overwhelming entitlement programs

So, yea, other than that...exactly the same.

Mon, 07/30/2012 - 10:54 | Link to Comment FieldingMellish
FieldingMellish's picture

Precisely.

Mon, 07/30/2012 - 09:54 | Link to Comment FieldingMellish
FieldingMellish's picture

I don't know why people insist on drawing direct parallels between the Greate Depression and today. There are similarities yes but the differences are enormous. Its a crisis to be sure but its not your grandpappy's crisis. The road going forward will look different.

Mon, 07/30/2012 - 10:47 | Link to Comment Winston of Oceania
Winston of Oceania's picture

No the debt burden caused that and this so the differences are in enumeration only...

 

Oh and btw "The road going forward will look different"; only the means by which we kill millions in the next war will be any different at all because WAR is the only place left to go. This ends no differently than every time in the past, go back and look for yourself.

Mon, 07/30/2012 - 10:37 | Link to Comment Precious
Precious's picture

... because fear and greed are timeless, that's why.

Mon, 07/30/2012 - 10:34 | Link to Comment LawsofPhysics
LawsofPhysics's picture

You are correct.  The make-believe "paper" world looks very similar.  However, the actual physical resources that are left in the real world looks very different.  Besides, I do not believe that they had tactical nukes then either.

Mon, 07/30/2012 - 10:51 | Link to Comment FieldingMellish
FieldingMellish's picture

That also had a gold standard.

Mon, 07/30/2012 - 10:29 | Link to Comment bushwarcrime
bushwarcrime's picture

This is a sham of a mockery. 

Mon, 07/30/2012 - 11:58 | Link to Comment Piranhanoia
Piranhanoia's picture

of a sham

Mon, 07/30/2012 - 09:38 | Link to Comment Shizzmoney
Shizzmoney's picture

For U.S. investors, especially those who believe in hope and change (and, presumably, the Easter Bunny)

This is the scary part of all of this.  The fact that the people with liquid capital or political capital, are mostly religius, and actually still think that God created Man out of dust and Woman from Adam's rib (I've always said this was a Biblical Misinterpretation - Adam STUCK IT in her ribs).......is really fucking scary.

How can we get people to believe the Market is rigged, when we can't even get them to dispell the fact a man once walked on water based on a story told 2000+ years ago?

There is nothing worse than a group of people who run things, who tout that they know it all and give the public a false sense of hope, that actually in the end, are the stupiest and/or ignorant people in the room.

Before 07/08 crash, BTW, there was a rally, too.

Mon, 07/30/2012 - 09:52 | Link to Comment madcows
madcows's picture

Too funny.  The imminent collapse is the fault of the religioso's.  Those bible thumping bastard's think they know it all.  Their naive understanding of the Cosmos is the reason for our current condition.

Take your head out of your a$$ and look around.  The governments spent more money than they took in because its much easier to get reelcted when throwing money around than when taking it away.  Now, those governments are severely in debt, to the point that they can't ever pay it off.  We're at the end of the road and it has nothing to do with religion.  Moron.

Mon, 07/30/2012 - 11:59 | Link to Comment Piranhanoia
Piranhanoia's picture

it is called faith, and it is a game of fools.  It kills you every time.

Mon, 07/30/2012 - 10:31 | Link to Comment bushwarcrime
bushwarcrime's picture

Did you mean Mormon?

Mon, 07/30/2012 - 10:29 | Link to Comment Omen IV
Omen IV's picture

Nonsense - without the religious nut jobs there would be NO republican representation at the level it currently is today - and there would be far less participation in wars and armaments and therefore a balanced budget

wars since 1952 and the interim period costs for armaments cost cumulatively more than the $15 trillion in national debt for absolutely nothing!

 

Mon, 07/30/2012 - 12:58 | Link to Comment JeffB
JeffB's picture

Yeah, Obama has done a lot to balance the budget. Or is he a Republican? or a Christian?

It's a little scary how little the movies running in some people's heads have to do with reality.

 

Mon, 07/30/2012 - 10:37 | Link to Comment LawsofPhysics
LawsofPhysics's picture

LMFAO!!!  Right, because religious groups, never start wars or perform horrific acts.  How fucking stupid are you?  

Mon, 07/30/2012 - 09:36 | Link to Comment Meesohaawnee
Meesohaawnee's picture

in 1929 there were actually humans trading. Not algos programmed by bennie.NO CNBS as a propaganda arm.. thats a huge difference.

Mon, 07/30/2012 - 10:02 | Link to Comment Boilermaker
Boilermaker's picture

And, we were on the gold standard.  Meaning a-hole Bernake's could just print money and slam it ino the market at will.

Mon, 07/30/2012 - 11:50 | Link to Comment JeffB
JeffB's picture

Yeah, this time it's different.

Sort of.

In some ways it will probably be worse.

History may not repeat, but it rhymes... as they say.

 

Do NOT follow this link or you will be banned from the site!