Stock market mirroring great depression?

nobby24

You can't compare 1929 with today, the demographics are totally different. It's a different planet, the highest profile companies are Media and Search Engines. Are we going to have another miner's strike? There were 250,000 miners then, there are 5,000 now. Wars killed thousands of men in an hour, today every fatality is individually named on TV. Financial data is instantly available, decisions taken in seconds. 1929 is not today and it won't happen.

Lotus-eater

Thrugelmir wrote: »

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.

:eek: That's ridiculously sensible! Almost no one here will believe it. More to the point, almost no one in the outside world will believe it either, unless they are nutters who read certain doom websites.
You make it sound like we are teetering on the edge of a gorge, where presumeably either we fall down, or some rich bloke bails us out and builds us a bridge.
I think we're going to be bailed out, at least until the rich bloke runs out of funds, then we find the bridge is actually higher than we would have been had we stayed on the side of the cliffs.

Cleaver

nobby24 wrote: »

You can't compare 1929 with today, the demographics are totally different. It's a different planet, the highest profile companies are Media and Search Engines. Are we going to have another miner's strike? There were 250,000 miners then, there are 5,000 now. Wars killed thousands of men in an hour, today every fatality is individually named on TV. Financial data is instantly available, decisions taken in seconds. 1929 is not today and it won't happen.

Shhhh, stop ruining the graphs with your interesting points.

sabretoothtigger

nobby24 wrote: »

You can't compare 1929 with today, the demographics are totally different. It's a different planet, the highest profile companies are Media and Search Engines. Are we going to have another miner's strike? There were 250,000 miners then, there are 5,000 now. Wars killed thousands of men in an hour, today every fatality is individually named on TV. Financial data is instantly available, decisions taken in seconds. 1929 is not today and it won't happen.

Eighty years is long enough that alot has changed but Im considering that alot of the dynamics may not, mainly human nature.
In '29 they were greedy and then fearful and today its much the same, markets havent switched to operating on generosity, in 80 years we still buy sell and profit for similar reasons.

Secondly the chart shows, as a percentage when adjusted for inflation 1929-38, Japan 1990 and present day SP500 all have the same percentage worth over nine years. '29 fell harder quicker, Japan was flatter but we're all at the same point

So its already happened, we had the dotcom spike and the author of that chart is pointing out we have not grown since that time, much like the stats in my sig

Points to disregard that chart on would be the lack of dividends and its the SP500 not the FTSE100 and also its dollar inflation not pound. However usa and uk are closely tied in trade

It might be we do much better from here but its a good warning that inflation destroys real returns. Luckily government says we dont have any so I guess we're ok for now



Heres the full timeline for the chart showing where japan and 30's america markets went next

sabretoothtigger

Came across some big figures on the 1970s 'lost decade' and how it compares to now. Also an update to the chart shows inflation in theory has not held us back

In the 694 days between 11 January 1973 and 6 December 1974, the New York Stock Exchange's Dow Jones Industrial Average benchmark lost over 45% of its value, making it the seventh-worst bear market in the history of the index.[2] 1972 had been a good year for the DJIA, with gains of 15% in the twelve months. 1973 had been expected to be even better, with Time magazine reporting, just 3 days before the crash began, that it was 'shaping up as a gilt-edged year'.[3] In the two years from 1972 to 1974, the American economy slowed from 7.2% real GDP growth to -2.1% contraction, while inflation (by CPI) jumped from 3.4% in 1972 to 12.3% in 1974.[1]


Worse was the effect in the United Kingdom, and particularly on the London Stock Exchange's FT 30, which lost 73% of its value during the crash.[4] From a position of 5.1% real GDP growth in 1972, the UK went into recession in 1974, with GDP falling by 1.1%.[1] At the time, the UK's property market was going through a major crisis, and a secondary banking crisis forced the Bank of England to bail out a number of lenders.[5] In the United Kingdom, the crash ended after the rent freeze was lifted on 19 December 1974, allowing a readjustment of property prices; over the following year, stock prices rose by 150%.[5] However, unlike in the United States, inflation continued to rise, to 25% in 1975, giving way to the era of stagflation.


Aftermath

All the main stock indexes of the future G7 bottomed out between September and December 1974, having lost at least 34% of their value in nominal terms, and 43% in real terms.[1] In all cases, the recovery was a slow process. Although West Germany's market was the fastest to recover, returning to the original nominal level within eighteen months, it did not return to the same real level until June 1985.[1]

The United Kingdom didn't return to the same market level until May 1987 (only a few months before the Black Monday crash), whilst the United States didn't see the same level in real terms until August 1993: over twenty years after the 1973–74 crash began.[1]

http://en.wikipedia.org/wiki/1973%E2%80%931974_stock_market_crash

StevieJ

I don't like that Hannon guy but I admit this is funny, don't forget to click on here

http://blogs.telegraph.co.uk/news/danielhannan/100019911/which-politician-has-the-best-na

Cleaver

Another interesting trend.

fc123

They may not notice this graph Cleaver........perhaps more colour?

Cleaver

fc123 wrote: »

They may not notice this graph Cleaver........perhaps more colour?

Ahh, this isn't one of mine FC. Quite a famous internet staple.

sabretoothtigger

Theres been a recent spike in pirates, what does this say to global warming theorists

purch wrote: »

T


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

This rally has retraced over 50% :j

Depends how we measure it though. The measure is of course the british pound but if the value of that drops and is not consistent then how can we tell what value was gained or lost

Measured in gold over the last couple years this latest 'recovery' shows as a bear market rally or failed recovery.
Measured by current inflation its not but thanks to QE we have future troubles stored up in that respect I suspect.
Bonds drive factors much more then shares I think, it happened this way last year with the banks, debt or credit markets saw troubles ahead of stocks

http://www.telegraph.co.uk/finance/comment/liamhalligan/6844315/Deflationary-myth-is-poor-excuse-for-irresponsible-policy-excesses.html

So far during this financial year, HM Treasury has put another £107bn on tick, compared to less than £50bn by the same stage in 2008/09. The grim reality is that Britain is on course to borrow the thick end of £200bn a year for the next three years. The gilts market simply won't have it. When I raise such concerns, otherwise intelligent people tell me I am mad. "We're managing to sell all our bonds," they say.
But just look at the numbers. The vast majority of gilts sold during 2009/10 will have been bought by the Bank of England using the proceeds of QE, rather than by real investors making judgements about the UK's financial prospects.

Bright colours as requested





A quick explanation on this chart is that it shows how many ounces of gold it takes to buy 1 of a Sp500 index.
All that has to be understood is the relationship is negative over the last couple years. We all knew the price of gold went up so no surprise.

The significance here is the confirmation this is a failed market or bear market rally. Thats the bit with the red arrow. It shows we cant break this longer term trend, the relationship remains negative and this is a bear market even if the price tag says different.

It could be wrong and who cares what gold costs anyway. The positive at the end is that the last bit of the chart shows the ratio recently rose above the purple line so thats the only reason I have to doubt this market is not going to give bad returns in future