During the 1920s, there was 10:1 leverage in stocks. Wall street recently saw as much as 30:1 leverage in derivatives. This is a good site with many charts comparing the two: http://www.voxeu.org/index.php?q=node/3421 Also, don't forget that a rising S&P 500, DOW or NASDAQ is completely irrelevant if the US dollar plummets with it. Inflation, inflation, inflation... Are we just experiencing a short recovery, but with greater inflation? Thoughts? Similarities? Differences?
............................................................................. The voxeu.... is outstanding.... Another item is population type.... In 29....there was a much larger agrarian population....more non-monetary .... more had access to simple self sufficiency.... One would think that the 2009 population would have it worse without simple agrarian self sufficiencies....
'Stock returns'(which is what matters for 99% of investors) recovered much earlier than 1954, deflation and dividends increased the purchasing power of stock holders
If you really believe inflation will support, let alone float, equities, then I think there is a basic flaw in that rationale. Inflation is a job killer, a tax on consumers and businesses, shrinks corporate margins, and discourages capital expenditures. Inflation and deflation are both highly destructive economic forces, and neither is good for the economy or equity markets. Anyone who claims that corporate profits/margins will rise in a period of protracted and significant inflation or deflation doesn't understand basic economics. Finally, ask yourself these questions: If you went around and asked your neighbors or a larger group of people if they are better off now than they were two or three years ago, what would the general consensus be? Also, do you see all this 'money creation' leading to 'spendable' dollars that are making it to the hands of small businesses and consumers, the two biggest components of economic health? The money being created now is not inflating prices - it's simply backstopping losses and allowing fat cats to profit in a very narrow area of the financial community. It's also being used to stem job losses in the public sector at the state, county and city levels of government.
Unfortunately, I'm not aware of another great source that actually uses statistics of multiple categories to form an opinion. There are countless amounts of blogs that are filled with doom predictions but their evidence is surely flawed or based on one observation. I tried finding this chart that compared 1929 to 2008 in the WSJ, but couldn't find it yet. Will keep looking.
Oh here it is (from October 2008): http://www.nytimes.com/interactive/2008/10/11/business/20081011_BEAR_MARKETS.html
Just like that genius John McCain once said, "the fundamentals of this country are still strong." This one looks like its improving! The reason I could be wrong is that these economic indicators tend to be laggards, whereas the stock market is a leader. But follow the trend of least resistance guys.
Thoughts? Similarities? Differences? [/B][/QUOTE] Oh, yeah, the Reg T was 10% in those days, now it is 50%. A little difference there. My mother (deceased 20 years) told me that when she was a kid, grown men would knock on the back door of her mother's house (an early widow). This was in the early 1930's. The men, popularly known as hobos, would offer to paint, rake leaves, etc for a meal. Work for food. Do you see any similarity to today? I don't.
This is a long-running theme I've been returning to time and again. From the very early stages of the financial crisis that began unfolding last September, it has been fashionable to say that banks had stopped lending, and that this was the proximate cause of the economy's collapse. I've taken pains to demonstrate that this was not true at all. This crisis had nothing to do with a shortage of money or a decline in bank lending. To be sure, the growth in bank lending has declined, as these charts show, and loans outstanding have declined in the past 3-6 months. But as the charts also show, lending is still up at a handsome rate over the past year or two. It is also the case that all measures of the money supply, which are ultimately driven by bank lending (banks have the unique ability to create money in our fractional reserve system), are at or near all-time highs, and they are still growing (with the exception of currency which is now flat but still at an all-time high). That loans outstanding have declined in recent months is not surprising at all, and in fact it is exactly what one would expect given the economy's weakness and the rise in bankruptcies and defaults. Everyone has been working very hard to deleverage over the past year, because leverage was a very bad thing to have had at a time when asset prices (e.g., equities and housing prices) were plunging. Many people and many companies and banks and hedge funds have been forced to deleverage by declining asset prices. My main point continues to be this: there is no shortage of money out there. Our problems have nothing to do with a lack of money or a lack of bank lending. In fact, one of the big problems we face going forward is that there is too much money sloshing around the global financial markets. We know that to be true because all currencies are weak against gold. An ample supply of money has stopped the deflation train dead in its tracks: breakeven spreads on TIPS have surged. Now we will have to contend with an abundance of money that is likely to result in higher-than-expected inflation in coming years. --Scott Grannis