Jeff Koopersmith on then… and now.
September 19, 2008 – Geneva (apj.us) – The 1929 stock market crash, which sent people tumbling out of windows to their deaths on the filthy sidewalks below, followed a strong bull market that lasted for several years.
While the Dow has been flat – pretty much at 12,500 for the past few years – the markets globally have never been higher. Remember only 11 years ago in 1997 the Dow moved between 6000 and 8000 which was unimaginable at the time. Ten years before that, in December, 1987 it closed at around 2,000.
Remember, in 1929 the markets reached their zenith just after a round of profit taking. also in early September.
Brokers were advising their clients to "take profits" as the market zoomed. You should know that the markets – worldwide – have done just that today, September 19th: ZOOMED to such levels as have not been seen before.
You can bet that the top clients and the employees of the brokerage houses are now poised to take profits – not just in the United States, but worldwide.
In 1929 the market moved down nearly 20% under this kind of profit-taking. Short sales were very high at the time as well- just as they are today, with Britain banning them this morning "for the next several months" – a total government manipulation of the markets which is most likely as illegal in Britain as it may be in the United States.
Just as earlier this week the markets and governments around the world began to panic, a month later in October of 1929 the market started rising again.
It did not take a month for the rise to occur this week, only a few days.
On the October 26, 1929 this is what the Wall Street Journal (never trust it) wrote:
In its place was a decidedly improved sentiment; the atmosphere had been cleared and a period of normalcy again reigned.
Sentiment was extremely cautious. While most observers believed the worst of the sharp break was over , they did not look for any immediate recovery…It is the general view that nothing more than backing and filling movements can be expected. Then if conditions are favorable, the groundwork can be laid for a new advance later on.
Just two days later on the 28th the market plunged nearly 14% in a single day, and then lost another 12% on the 30th. In all the market dropped nearly 40% in less than a single month.
Again, as today, the media, and particularly the Wall Street Journal tried to put lipstick on that pig.
On the 30th of October 1929 the Journal's headline was this:
Bankers State Support Continues—Spokesman Expresses View Hysteria is Passing
Remember those words: "STATE SUPPORT"
The downtrend continued until July, 1932. By that time the stock market in New York had lost 89% of its value. It did not recover fully until 1954.
This said, I am telling you that the crash of 1929 is back. In fact, there is no one who knows what will happen over the next week, month, or year.
One thing is clear however – the dirt always comes out in the wash, and I might bet we are only at the "pre-soak" cycle.
Jeff Koopersmith is an internationally renowned political consultant, opinion research authority and policy analyst. He has lobbied for causes including the alternative fuel sector and women's health, and is an expert on the international real estate market. He lives in Philadelphia, Washington and Geneva.