7 replies to this topic

[MDurkin]

So interesting 100 years later most are dead from the previous downturn.

 

Dow Jones

 

1907 saw a 44 percent decline. 2008 saw a 54 percent loss.

1921 saw a 47 percent loss.      2020 saw... ?

 

https://en.wikipedia...on_of_1920–21

Edited by MDurkin, 03 April 2020 - 01:14 AM.

[Douglas]

MDurkin, I was going to post something about this "little" forgotten depression in my weekend risk window update.  Coming at the tail end of the 1918 Spanish Flu Pandemic makes it really interesting given what we are going though.  The accounts I have read don't blame it on the pandemic, but on the surge of soldiers returning from WWI, the war rebuild costs and tight monetary policy to fight inflation caused by after war shortages.  Maybe the pandemic should be added to my list.  The roaring '20's of course followed this depression.  Given all the funny money being created during out little depression by the governments and central banks, maybe we'll have another roaring '20's of our own to look forward too.  Nice to have something positive to think about.  

 

Regards,

Douglas

[12SPX]

That is very interesting!!!  

[diogenes227]

"IN THE STOCK MARKET, HE WHO KNOWS HISTORY IS BLESSED TO REPEAT IT."  -- old diogenes proverb.

 

[Dex]

Not so unusual.

https://en.wikipedia...e_United_States

[kaiser soze]

I don't think the short-lived 1920-21 depression is a good analog. The fed raised interest rates instead of decreasing them like now, and this caused short term pain while providing ballast for the 1920s boom economy.  Corporate and speculator leverage were low.  The only resemblance is the severe downturn in commodities.

 

In my opinion, the stock market and economy were taking a similar route to 1920-21 in 2018:

1. We had volmageddon in February 2018 at QQQ=168 similar to the Dow Jones Industrial Average correction at 108 in June 1919

2. We had a second top one month later in March 2018 at QQQ=172 similar to the Dow correction one month later at 112 in July 1919

3. We had a third top several months later in September 2018 at QQQ=185 similar to the third Dow top at 120 in October 1919

 

In both cases, a sharp 25 % correction followed after the third top.  In the the 2018 case, the Fed capitulated and decreased interest rates + stopped quantitative tightening, resulting in the resumption of the Bull.  In the 1919-20 case, the Fed increased interest rates and allowed the bear market to run its course (after a large bear market rally in March-April 1920) to form a final bottom at Dow=68 in December 1920.

 

IMHO, due to the Fed's easy money and high leverage in both the corporate and leveraged speculation spheres, the only analog that matches the present is 1929. The 1900 top in the London stock market also has some structural similarities to the present situation.   

Edited by kaiser soze, 03 April 2020 - 11:35 AM.

[kaiser soze]

Here's the chart of the 1919-20 Dow Jones Industrial Average for those interested.  Below that is the 2018 chart of the QQQ - notice the uncanny similarities.

 

 

 

 

Edited by kaiser soze, 03 April 2020 - 11:49 AM.

[gm_general]

I always chalked up these downturns to the 80 year cycle, which runs on alternate generations. This cycle is tied to innovations that get things from here to there that create a speculative bubble. To name a few - the canal bubble of the 1760 era, the railroad bubble of 1840 era, the automobile bubble of the 1920 era, and the Internet bubble of the 2000 era. In this analog 1920 is 2000 and 1929 is 2008-9.