Stock market mirroring great depression?

Thrugelmir

StevieJ wrote: »

I think it was a little more than that, otherwise the crash would have only happened here.

We've George Bush and the creation of Ginnie Mac to thank for the crash (property wise ).

StevieJ

Thrugelmir wrote: »

With hindsight we really didn't have a clue what was driving the property market relentlessly upwards. Even now their is still an expectation that as the banks have been bailed out all is well.

Sub prime lending on interest only basis was NR's downfall not low cost mortgages.

I think at some point there was a recalibration one off step change reflecting lower long-term interest rates and increased affordability (up to around summer 2004) after that it was just fluff and mirage.

Thrugelmir

StevieJ wrote: »

I think at some point there was a recalibration one off step change reflecting lower long-term interest rates and increased affordability (up to around summer 2004) after that it was just fluff and mirage.

Late 90's onwards was the emergence of interest only mortgages, without the necessity of the borrower having a repayment vehicle to discharge the capital. Previously endowment policies and the like had to be taken out and were assigned to the mortgage. The lender held the policies as security.

Taking NR as a good example as it was a sizable lender in its heyday. 35% of its total loan book between 1999 and 2007 was on an i/o basis.

People were therefore borrowing more than they could really afford. As capital repayments would have to come out of future take home income pay. But no one cared as property prices were rising so quickly that the capital never had to be repaid anyway.

If all mortgages were on a repayment basis or similar, which increasingly is the case now. The market would not risen as rapidly.

Also now we've arrived at the point where we find that the funding doesn't exist. So equilbrium has to be returned by a fall (stagnation) in prices, repayment of capital debt and increased personal savings.

sabretoothtigger

Not sure which chart would be most relevant, I havent read the whole thread. But this link is for a site which is bear paradise

http://dshort.com/






This chart is more optimistic in one way then the OP link. From the low this bear rally exceeds the 29 'recovery'

To me this is only proves a greater bubble exists now, the strength is in fallback and this market hasnt really stopped going up since march so there has been no test






bear markets and recession periods for last 50 years and beyond

http://dshort.com/charts/bear-markets.html?bears-since-1950

It lists america but they are our biggest trading partner

StevieJ

Cheers Sabre, I knew you would come up with the goods :beer:
I note the initial drop is totally different, how can talking head write that it mirrors the current situation It is not even
similar to the situation as we speak, it should have dropped but it has diverged and increased instead by another 10% and still rising.

That is a great chart.

1984ReturnsForReal_2

In October/Nov we will know what is going to happen.

If its going to kick off it will be then.

sabretoothtigger

They said that about September and it aint happening. When is the next round results and earnings, last was July I think, before that March.
I guess that makes it more like Nov for a knock in expectations and so share prices and then we have late december again for probably low volume

citigroup wrote:

15/10/09 11:00 Results third quarter Q3 2009 Results

purch

This chart is more optimistic in one way then the OP link

This chart is more accurate in all ways than the OP link

From the low this bear rally exceeds the 29 'recovery'

Once you retrace more than 20-25% of the drop, it ceases being a Bear Market rally.

This rally has retraced over 50% :j

[Deleted User]

OP you head for the hills if you like but me and the portfolio are staying put. This rally has legs. Wait for the next pullback (prob to 5000+) to buy in

sabretoothtigger

Once you retrace more than 20-25% of the drop, it ceases being a Bear Market rally.

This rally has retraced over 50%

I remain unconvinced because in comparison to the other recoveries on that chart, there has been no consolidation in this rally.

The red and green lines rise strongly but then fall back some before finally achieving their long term recovery. All we did so far is make a new low and then go straight up 50% like you say, it aint proper!
Its closer to 1929 in that they also fell and went right back up, later the falls amounted to a new low.

my only reasoning for no new low is that value will be lost in currency instead



This considers more time and the longer term trend.




How could this be true? we arent that bad surely, the difference is the currency, we have more inflation now then 1929 so value leaks out and we dont realise so thats why we dont get a new low now or next year. The double dip if it occurs wont look that bad on the surface