Friday, February 13, 2009

Is this 1930 all over again?

Before moving on to the main topic allow me to point out that Timmy Geitner (our new Treasury Secretary) wasted no time getting up to speed as the new ring-leader for the Plunge Protection Team (PPT). As you can see in the DOW chart below, the PPT fingerprints were all over the markets yesterday... Just take a close look at the last hour of trading - at precisely one hour before close the markets were massively pumped - free market society my A@@!

Moving On... Is this 1930 all over again?

The Great Depression started with the stock market crash of 1929, but the markets didn't bottom out until mid 1932. Along the way there were several major rallies, yet the overall trend was bearish in nature and new lows were periodically made after these bear market rallies faltered.

Anyway, much like today - where many "experts" advise that the markets are ripe for a re-entry point and our economy will soon turn around - pundits and leaders of the depression era were consistently telling folks "The Bottom is in"... Those who took this "expert" advice did so at their own peril - and ultimately most were creamed as the markets continued to fall into the abyss for several years.

Allow me to share a few quotes from the Depression Era:

"We will not have any more crashes in our time." - John Maynard Keynes, 1927

"There will be no interruption of our permanent prosperity." - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

"There is no cause to worry. The high tide of prosperity will continue." - Andrew W. Mellon, Secretary of the Treasury, September 1929

"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." - New York Times, October 14, 1929

"This crash is not going to have much effect on business." - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression..." - Harvard Economic Society (HES), November 2, 1929

"The Government's business is in sound condition." - Andrew W. Mellon, Secretary of the Treasury, December 5, 1929

"President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch, March 8, 1930

"The spring of 1930 marks the end of a period of grave concern... American business is steadily coming back to a normal level of prosperity." - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover, May 1, 1930

"The worst is over without a doubt." - James J. Davis, Secretary of Labor, June 29, 1930

Gentleman, you have come sixty days too late. The depression is over." - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor, September 12, 1930

"President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington dispatch, October 21, 1930

"I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co, November 1930

"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce, June 9, 1931

"I believe July 8, 1932 was the end of the great bear market." - Dow Theorist, Robert Rhea, July 21, 1932

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." - President F.D. Roosevelt, 1933

Lets compare those quotes to some made over the past few years:

"Home sales are coming down from the mountain peak, but they will level out at a high plateau -- a plateau that is higher than previous peaks in the housing cycle.” - David Lereah, Chief Economist, National Association of Realtors, Dec 2005

"We may see a blip up in foreclosures and delinquencies." - Leslie Appleton-Young, Chief Economist, California Association of Realtors, Dec 15 2005

"The U.S. housing market appears to be emerging from its recent travails and the worst may well be over",Federal Reserve Chairman Alan Greenspan, Reuters release Oct 9, 2006

"The subprime mess is grave but largely contained" - Federal Reserve Chairman, Ben Bernanke May 17 2007, Speech before the Federal Reserve Bank of Chicago

"This is far and away the strongest global economy I've seen in my business lifetime."- Henry Paulson, US Treasury Secretary, July 12th, 2007

"The market impact of the U.S. subprime mortgage fallout is largely contained and the global economy is as strong as it has been in decades." - Henry Paulson, August 2007

"This is not a rescue" - Goldman Sachs Chief Financial Officer David Viniar after Goldman poured $3 billion into one of its hedge funds, Aug 13, 2007

"I hope you're confident about our economy. I am." President Bush at the Robinson Helicopter Co. in Torrance, Calif, Jan 30, 2008

"Losing a job is painful, and I know Americans are concerned about our economy; so am I. It's clear our economy has slowed, but the good news is, we anticipated this and took decisive action to bolster the economy, by passing a growth package that will put money into the hands of American workers and businesses." - President Bush on news that the economy lost 63,000 payroll jobs in February, March 7, 2008

"The worst is likely to be behind us,"- Henry Paulson, US Treasury Secretary, May 7th, 2008

"These institutions [Fannie and Freddie] are fundamentally sound and strong. There is no reason for the kind of [stock market] reaction we're getting." - Christopher Dodd, Chair, Senate Banking Committee, Financial Post, July 12, 2008

“My first instinct was to let the market work, until I realized, being briefed by experts… It turns out that there’s a lot of interlinks through the financial system.” - President George W. Bush on $700B Treasury Department bailout plan, Sept 2008

"We think that 2009 is likely to be better than 2008." - Richard Bernstein, Chief investment strategist at Merrill Lynch, Dec 2008

"I definitely think the market is nearing the bottom" - financial writer Lita Epstein — also the author of "The Pocket Idiot's Guide to Investing in Mutual Funds, 12 Feb 2009.


I believe we're merely at the beginning of this tectonic economic crisis - a parallel 1930 if you will, but with it - a massive transformation will take place - a paradigm shift that we may NEVER fully recover from.

What do I mean?

Currently we are undergoing a lack of trust between banks, people and government. As this crisis unfolds, the masses will awaken and realize they also can no longer trust Wall Street, their 401K's, their Currency, Social Security, Gvt Promises etc...

People will eventually stop using banks, will stop investing in the markets, will flock to tangibles, will stop paying their fair taxes, will hoard food/essentials and use barter - as the country turns more "Darwinian" and barter becomes far more mainstream...

Bottom Line:

Yes, as far as time lines go, I believe this is 1930 all over again, but the outcome will likely be far more precarious...

I honestly feel that Wall Street and our banking systems are DEAD - but they just don't realize (or if they do) believe it yet.

Once the masses awaken and these two entities are placed 6-feet under, our corrupt political leaders (with no one to kowtow to) will quickly learn that they must significantly change their ways and once again become a government of the people, by the people, and for the people - else the masses will DEMAND this change with anger, pitchforks, rope and very, very little sympathy.

Best Regards



Anonymous said...

Yes, that's what it is. The Plunge Protection Team is at large again !!!!

Anonymous said...

Randy has nailed it !!!

Anonymous said...

Yes. Go back and look at some of the past large drops and then look at the Friday charts. You'll see several Fridays where around 3pm there was a "rally" and the market was up at close. Then go and check and you'll see that there were things that came out that day, which were expected to be bad, which were and should have bombed the whole day. Where the market should have tanked, it went into the weekend on the up. Definately PPT at work.

And when you read that that one senator said the markets tanked on Sept 15th last year and the government pumped 150 billion back in to stave off a dramatic crash, it makes me question what I see happening in the markets. Whenever you see a spike like you reported on a day that was mostly down, then some behind-the-scenes activity was at play.

Anonymous said...

Whenever the market closes up, people (news) immediately clamor about the possibility of light at the end of the recession.

Folks, during the Great Depression there were many rallies. In fact, some went up 50% from the overall down figures.

The DOW is no indicator of how bad this is. We are in a Greater Depression and no matter how optimistically people want to spin things, the layoffs will continue.

Unknown said...

Didn't work so well today did they!

Anonymous said...

That was definitely a nice collection of quotes, Randy, that really shows the position we are in. The only problem with comparisons with "The Great Depression" is that during the '20s - '30s America was the worlds largest creditor and a Powerhouse manufacturing economy that, basically, single-handedly dragged the rest of the world out of the depression whereas, at the moment, America is the worlds biggest debtor and a Consumer economy that drags on the rest of the world. My take on where we're going from here can be seen here : Sorry if I shouldn't advertise but my opinion is a little large to stick in here. :-)

Anonymous said...

Randy missed an important point, the government will NEVER become a government of the people. Things are going to get really bad in the next 2 or 3 years, people are going to really start to panic and the government is just going to expand to never before seen lengths. Soon the dollar will be inflated to the point of becoming worthless and the government will try to make some sort of new power move that will strip us all of liberty and rights. Grab on to Christ people, because in this grim future, it's all we have but luckily all we need.

Anonymous said...

TimmyG and Bernanke are pulling out their last ditch effort to create a surge in credit, debt creation, to the zombie banks and their vampire CEOs in order to jump start price asset value inflation. It won't work. No one will borrow.

They will both, and Obama, look like Hooverite failures. By then, so much more debt and monetized currency will be destroyed. It really won't take long.

The real bottom up economy will not be able to get moving because so much of what was available was given over to the top.

Sean, yes the US has been the world's biggest debtor and the world's largest importer of finished goods, but through our consumer frenzy spree, we made the world's top tier very rich, as well as many workers had money in their pockets. But now, that has blown down.

Anonymous said...

I don't think it will be like 1930, but it could be. It will be like you try to catch a frog and that frog keeps hopping around and around. In 1930, you don't have hedge funds to make ppl fear of high oil price/ fractional reserve/ credit crunch problem.. but now you have all.
You will know it after the frog keeps hopping for many years and... then realize that.. wow unemployment rate keep topping 0.3% monthly... top top and top... and finally find... ah we are at 15% unemployment rate.

Anonymous said...

NOT Recommended Readings ( because it causes negative externalities/negative impact to the society ,lack of social responsibility, lack of co-ordination and Disunity) :
1. The Competitive Advantage of Nations ( Michael E. Porter)

Recommended Readings :
1. "Collaborate with your competitors - and win " (Gary Hamel, Yves L. Doz and C.K. Prahalad)
2. " The knowledge-creating company " ( Ikujiro Nonaka)
3. " Building a learning organization " ( David A. Garvin )
4. " The reinvention roller coaster : risking the present for powerful failure" ( Tracy Goss, Richard Pascale, and Anthony Athos)


The doing trap : Author Rita Mae Brown defines insanity as doing the same thing again and again but expecting different results. With no awareness of the power of context, we continue to beat our heads against the same wall.

There is NO such " strive to be excellency " because YOU don't know where the excellency is ... and you will only chase the rainbow which never ends. Excellency is very relative meaning (comparison to others). And what will happen when everyone strives to be excellency, it will create disunity.

" To reinvent itself , an organization must first uncover its hidden context " ... what is HIDDEN CONTEXT ? How to create a flawless economy which doesn't need government intervention with NO economics cycle ?

Benedick said...

Quite useful piece of writing, thanks for this post.
computer programming school | kosher catering nyc | austin florists


I do not think were their yet 1933 that is.


Its gona be just like the 1930's.