Novel Investor The Great Crash 1929 by John Kenneth Galbraith The Great Crash was a defining moment in market history. Galbraith breaks down the events that led to the speculative excess of the late 1920s, details the last wild year, and the market’s collapse. It’s a warning for when the next speculative bubble comes around. The Notes The lesson of 1929: “One of the pregnant lessons of that year will by now be plain: it is that very specific and personal misfortune awaits those who presume to believe that the future is revealed to them.” 1920s The economy was good, wages grew slowly, and prices were stable. Roughly 23,000 new manufacturers were added from 1925 to 1929. Total manufacturing output rose by 11%. Industrial production rose from 67 in 1921 to 110 in 1928 and 126 in June 1929. 4.3 million autos were produced in 1926. That number increased to 5.3 million in 1929 (5.7 new cars were produced in 1953). Business earnings grew quickly. Mergers became frequent as regional businesses merged to become national businesses or were bought up by holding companies. Electric, gas, water, bus, and milk were bought by holding companies. Holding companies supplied the demand for new shares. Chain stores in food retail, department stores, and theatres overtook local mom-and-pop businesses. Chain stores issued shares to add new stores and those shares supplied the demand for stocks. Woolworths, Montgomery Ward, and American Stores were big speculative stocks at the time. “The market boom of 1929 was rooted directly or indirectly in existing industries and enterprises. New and fanciful issues for new and fanciful purposes, ordinarily so important in times of speculation, played a relatively small part.” Most Americans were not “in the market” during the 1920s. Firms across 29 exchanges had total accounts of only 1.5 million customers in 1929, 1.3 million were tied to the NYSE firms. So 1.5 million people, on average, out of a population of 120 million. Estimates suggest roughly 600,000 accounts were for margin trading. Florida Real Estate Boom The height was 1925 – 1926. Speculation took hold of Florida land prices on the belief that everyone would soon winter in Florida driving up land prices. The story was that higher income and better transportation would make Florida more accessible to all. “On that indispensable element of fact men and women had proceeded to build a world of speculative make-believe. This is a world inhabited not by people who have to be persuaded to believe but by people who want an excuse to believe.” The land was divided into lots and sold for 10% down. Trading was done in “binders” — a right to buy the land. Binders cut the purchase price by 90%, rose and fell with the value of the land, and could be quickly bought or sold. Many people bought lots sight unseen. “It is another feature of the speculative mood that, as time passes, the tendency to look beyond the simple fact of increasing values to the reasons on which it depends greatly diminishes.” Charles Ponzi developed a subdivision, at 23 lots per acre, “near Jacksonville” about 65 miles west of the city. Seashore lots sold as high as $20,000 to $75,000 at the peak. New buyers began to dry up in early 1926. Two hurricanes hit Florida in the autumn of 1926 that ended the speculation for good. 400 people died and houses were destroyed. Not everyone wanted to believe the good times were over. “The same Florida is still there with its magnificent resources, its wonderful climate, and its geographical position. It is the Riviera of America.” — Peter O. Knight, Seaboard Air Line. Knight wanted so badly for the speculation to continue that he was worried that help from Red Cross would permanently damage Florida’s prospects. “This reluctance to concede that the end has come is also in accordance with the classic pattern.” Exchange Crises Began in 1925 when Churchill returned Britain to the gold standard. It made Britain less attractive to foreign investment. The U.S. became more attractive. In 1927, the heads of the Bank of England, France, and Germany urged the U.S. to lower rates (easy money policy). The Fed cut rates from 4% to 3.5%. The price of government bonds rose, bonds were sold, and the proceeds were used to buy stocks or used as loans to buy stocks. “The greatest and boldest operation ever undertaken by the Federal Reserve System, and…[it] resulted in one of the most costly errors committed by it or any other banking system in the last 75 years!” — Adolf C. Miller, Federal Reserve Board dissenting member. “From that date, according to all the evidence, the situation got completely out of control.” — Prof. Lionel Robbins, London School of Economics This event is often pointed to as the reason for the speculative excess that followed. Galbraith points out that past periods of cheap, easily available credit led to negligible speculation. Brokers i.e. Margin Loans Margin loans were a growing business by 1926. “One of the paradoxes of speculation in securities is that the loans that underwrite it are among the safest of all investments. They are protected by stocks which under all ordinary circumstances are instantly salable, and by a cash margin as well.” 1926 = $2.5 billion in margin loans 1927 = $3.4 billion in margin loans 1928 = $6 billion in margin loans Margin loan interest rates rose from 5% at the start of 1928 to 12% by year-end. Foreign money flowed into the U.S. to take advantage of the high loan rates. U.S. corporations did too. New York banks did too — borrowing from the Fed at 5% and then lending it at 12%. Corporations loaned heavily in 1929 to the point that corporate loans exceeded bank margin loans. February 14, 1929: the Fed considered raising the rediscount rate from 5% to 6% to check speculation. It would have hurt regular borrowers more than speculators with margin loan rates over 10%. It would do nothing to slow the supply of loaned funds. Most brokers required cash of 45% to 50% of the value of the stocks in 1929. In June, July, and August of 1929, margin loans increased by $400 million per month. Half was supplied by corporations and individuals. Margin loan rates over those three months ranged from 7% to 12%. Investment Trusts “The most notable piece of speculative architecture of the late twenties, and the one by which, more than any other device, the public demand for common stocks was satisfied, was the investment trust or company… The virtue of the investment trust was that it brought about an almost complete divorce of the volume of corporate securities outstanding from the volume of corporate assets in existence.” The trusts could issue as many shares as they wanted to relative to the number of shares they owned. They could create an infinite supply of shares if demand allowed it. A handful of investment trusts existed in the U.S. in 1921. The number was 160 in 1926. It was 300 by 1927. 1928 saw 186 more trusts. 1929 saw a new trust roughly every business day — 265 new trusts appeared that year. Trusts sold $400 million in securities in 1927. Trusts issued over $3 billion — a third of all capital issued — were issued in 1929. By 1929, most trusts sold at a premium to NAV. The NYSE required trusts to post the book value and market value of holdings at the time of listing and update it annually. Most trusts chose to not list on the NYSE. By the end of the 1920s, trusts issued common stock, preferred stock, debt, and mortgage bonds — leverage to boost returns. They issued non-voting shares to keep control of the trust. “The principle of leverage is the same for an investment trust as in the game of crack-the-whip. By the application of well-known physical laws, a modest movement near the point of origin is translated into a major jolt on the extreme periphery.” Goldman Sachs Trading, Shenandoah, Blue Ridge The worst was a trust inside of a trust inside of a trust. Goldman Sachs Trading Corporation sponsored Shenandoah Corporation, which sponsored Blue Ridge Corporation. Each trust held shares in its sponsored trust and benefited exponentially when those shares traded at a premium. GS Trading also manipulated its own shares to boost its share value. Goldman Sachs Trading Corp. was created on December 4, 1928, by Goldman, Sachs and Company. Shenandoah Corp. was created on July 26, 1929, and was oversubscribed sevenfold. Shares were issued at $17.50, opened at 30, and closed at 36. Shared dropped to $8 by year-end. Blue Ridge Corp. was created on August 20, 1929. It allowed investors to exchange blue chip stocks for Blue Ridge stock. 1928 Market behavior changed in early 1928. The phase of make-believe i.e. self-delusion replaced reality. The market moves become more intense. The market saw large monthly gains followed by big losses, then higher highs. Single stocks moved 10 to 20 points in a single day. Ex: Radio, on March 12 gained 18 points, opened up 22 points the next day, lost 20 points, gained 15 points, fell 9, then gained 18 points. Trading volume gradually increases starting in March from 3.8 million shares/day to 5 million shares/day in June. September 17: “If Smith should be elected with a Democratic Congress we are almost certain to have a resulting business depression in 1929… The election of Hoover and a Republican Congress should result in continued prosperity for 1929.” — Roger Babson September: “There is no cause for worry. The high tide of prosperity will continue.” — Andrew W. Mellon “Mr. Mellon was participating in a ritual which, in our society, is thought to be of great value for influencing the course of the business cycle. By affirming solemnly that prosperity will continue, it is believed, one can help insure that prosperity will in fact continue. Especially among businessmen the faith in the efficiency of such incantation is very great.” The Times Industrial Average gained 86 points on the year — 245 to 331. Radio went from 85 to 420. Du Pont 310 to 525. Montgomery Ward 117 to 440. NYSE’s total volume was 920 million shares in 1928. A record! The previous record was 576 million shares in 1927. 1929 A columnist, known as the “Trader,” for the Daily News was paid $19,000 in 1929 and 1930 by John J. Levenson to speak kindly about stocks Levenson owned. Levenson later said the money was simply a gift. Radio shows, like William McMahon of the McMahon Institute of Economic Research, was paid $250/week to talk up stocks that pool operators were working. “Brokers’ offices were crowded from 10 A.M. to 3 P.M. with seated or standing customers who, instead of attending to their own business, were watching the blackboard. In some ‘customers rooms’ it was difficult to get access to a spot from which the posted quotations could be seen; no one could get a chance to inspect the tape.” — Stock Exchange Practices, Report 1934 March 25: market sold off, margin rates spiked to 14%. Popular stocks dropped 10 points or more that day. March 26: the market sell-off was worse. A record 8.2 million shares traded. 20 to 30-point losses were common. Margin rates hit 20%. Charles Mitchell, of National City, stepped in to lend money, easy margin rates, and prevent a panic. March 26: “We feel that we have an obligation which is paramount to any Federal Reserve warning, or anything else, to avert any dangerous crisis in the money market.” — Charles Mitchell, National City June: the Times Industrial index gained 52 points. June: “The consensus of judgment of the millions whose valuations function on that admirable market, the Stock Exchange, is that stocks are not at present over-valued. Where is that group of men with the all-embracing wisdom which will entitle them to veto the judgment of this intelligent multitude?” — Joseph Lawrence, Princeton June: Industrial/factory production peaked and slowed. Steel production slowed. The economy was slowing. July: the Times Industrial index gained 77 points. August: the Times Industrial index gained 33 points — 110 points in three months — from 339 to 449. Margin loans August: the Fed raised the rediscount rate to 6%. The market laughed it off. August: Brokerage branches, led by M.J. Meehan, were installed on big ships so speculators could speculate on the high seas as they traveled between Europe and America. September 3: the market peaked! 4.4 million shares traded on the NYSE, margin rates were 9%, $137 million in margin loans was issued that week. September 5: “Sooner or later a crash is coming, and it may be terrific… Factories will shut down…men will be thrown out of work…the vicious circle will get in full swing and the result will be a serious business depression.” — Roger Babson (Babson made many predictions over the prior years.) September 5: the market broke. Times Industrial index fell 10 points. Speculative stocks dropped more. 5.5 million shares traded. September: “We would not be stampeded into selling stocks because of a gratuitous forecast of a bad break in the market by a well-known statistician.” — Hornblower and Weeks, stock exchange house. September: “There may be a recession in stock prices, but not anything in the nature of a crash.” — Irving Fisher September 9: “It is a well-known characteristic of ‘boom times’ that the idea of their being terminated in the old, unpleasant way is rarely recognized as possible.” — NY Times October 15: “The markets generally are now in a healthy condition…values have a sound basis in the general prosperity of our country.” — Charles Mitchell October: “I expect to see the stock market a good deal higher than it is today within a few months.” — Irving Fisher October 19: Second heaviest Saturday trading ever with 3.4 million shares. Times Industrial index fell 12 points. Blue chips fell similarly. Speculative issues fell further. October 20: “Stocks driven down as wave of selling engulfs the market.” — NY Times frontpage headline October 20: Newspapers pointed out: Margin calls went out after the market closed on Saturday, That the worst was over, and Organized support would show up when the market opened Monday. October 21: volume hit 6 million shares (third highest ever), the ticker fell behind for the first time in a declining market. Nobody knew how bad their losses were. October 22: “The decline had gone too far.” — Charles Mitchell October 23: Market sees heavy losses. 2.6 million shares trade in the last hour alone. The Times Industrial index dropped from 415 to 385, losing all the gains since June. Margin calls went out that night. October 23: “Security values in most instances were not inflated.” — Irving Fisher October 24: Panic! Buyers dried up. Margins were called. A chain reaction of hit stop-losses pushed stocks into freefall. 12.9 million shares traded. Reports at noon spread of a meeting at J.P. Morgan and Company. Organized support. Heads of the biggest banks pooled resources to support the market. Richard Whitney bid 205 for U.S. Steel. Fear vanished. The market partially recovered into the close. The ticker stopped printing at 7:08 pm. October 24: “There has been a little distress selling on the Stock Exchange.” — Thomas Lamont October 24: “Commencing with today’s trading the market should start laying the foundation for the constructive advance which we believe will characterize 1930.” — Hornblower and Weeks October 25/26: The biggest names in the country sang some form of the “fundamentals are sound!” over the weekend. October 25: “There is nothing in the business situation to justify any nervousness.” — Eugene Stevens, President of Continental Illinois Bank October 25: “Fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis.” — President Hoover October 28: “We believe that the investor who purchases securities at this time with the discrimination that is always a condition of prudent investing, may do so with utmost confidence.” — Ad in Monday’s newspapers October 28: The day’s decline was worse than the entire previous week. The Times Industrial index fell 49 points. The ticker fell behind again, leaving everyone blind to how bad the losses were. Additional support never showed up. October 29: The market opened to selling. 16 million shares traded. The Times Industrial index fell 43 points, erasing the gains for the previous 12 months. White Sewing Machine Company, hit a high of $48 a few months before, closed at $11 the day prior, and at least one buyer caught a bid at $1 a share. October 29: “The main point which I want to emphasize is the fundamental soundness of [the] great mass of economic activities.” — Dr. Julius Klein, Assistant Secretary of Commerce October 29: “Believing that fundamental conditions of the country are sound…my son and I have for some days been purchasing sound common stocks.” — John D. Rockefeller October 23 – 30: Margin loans fell by $1 billion. Corporations and out-of-town banks took October 24 as a sign to recall their money. Margin lending dried up. October 30: A meeting of NYSE members was held. The decision was made to add special holidays and half days to the NYSE schedule. A half day was announced for Thursday, closed Friday and Saturday. October 31: It was a half day. The market gained. 7 million shares trade. Margin loans declined by $1 billion on the week, the largest drop ever. November 5: Election day. The market was closed. November 6: A half day. 6 million shares traded. The Times Industrial index fell 37 points. November 7: the market rose slightly. November 8: the market dropped slightly. November 11 -13: The Times Industrial index lost 50 points. November 11 – 13: “Verily, I say, let the fear of the market be the law of thy life, and abide by the words of the bond salesman.” — The Wall Street Journal November 11 – 13: “Probably none of the present generation will be able to speak again…of a ‘healthy reaction.’ There are many signs that the phrase is entirely out of date.” — NY Times November 13: the market hit a low for the year. The Times Industrial index closed at 224 down from a high of 452 on September 3. The market rose gradually to the end of the year. “The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning.” No NYSE firms failed in the crash. The story of widespread suicides following the crash is a myth. Data doesn’t support it. “The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.” 1930 – 1932 The market recovered from January, February, and March 1930. It slowed in April. May 1930: “We have now passed the worst and with continued unity of effort shall rapidly recover.” — President Hoover June 1930: the market dropped and continued on that course, for the most part, through June 1932. July 8, 1932: The Times Industrial index hit bottom at 58! Only 720,278 shares were traded on the NYSE. July 8, 1932: Blue Ridge stock hit 63 cents. Shenandoah hit 50 cents. July 8, 1932: Steel production hit 12% of capacity. The Bezzle: “At any given time there exists an inventory of undiscovered embezzlement in—or more precisely not in—the country’s businesses and banks. This inventory—it should perhaps be called the bezzle—amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.” The biggest embezzlement of the period was at the Union Industrial Bank of Flint, Michigan. An estimated $3.6 million was swindled. It began as a handful of individuals taking a little for themselves. They found each other out, chose to cooperate, and lost everything they stole in the market. They took money on the books to be loaned for margin but invested in stocks. They went short just as the market soared over the summer. To make up for their losses, they went long into the crash. “One of the uses of depression is the exposure of what auditors fail to find. Bagehot once observed: “Every great crisis reveals the excessive speculations of many houses which no one before suspected.”” Harvard Economic Society Made a habit of predicting the market and the economy in the 1920s. Early 1929: was bearish and predicted a recession was overdue. Summer 1929: Admitted error on the recession prediction, did a 180, and predicted things were good and would get better. November 2, 1929: “The present recession, both for stocks and business, is not the precursor of business depression.” November 10, 1929: “A severe depression like that of 1920–21 is outside the range of probability. We are not facing protracted liquidation.” December 21, 1929: “A depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.” January 18, 1930: “There are indications that the severest phase of the recession is over.” March 1, 1930: “Manufacturing activity is now—to judge from past periods of contraction—definitely on the road to recovery.” March 22, 1930: “The outlook continues favorable.” March 29, 1930: “The outlook is favorable.” April 19, 1930: “By May or June the spring recovery forecast in our letters of last December and November should be clearly apparent.” May 17, 1930: “[Business] will turn for the better this month or next, recover vigorously in the third quarter and end the year at levels substantially above normal.” June 28, 1930: “Irregular and conflicting movements of business should soon give way to sustained recovery.” July 19, 1930: “Untoward elements have operated to delay recovery but the evidence nonetheless points to substantial improvement.” August 30, 1930: “The present depression has about spent its force.” November 15, 1930: “We are now near the end of the declining phase of the depression.” October 31, 1931: “Stabilization at [present] depression levels is clearly possible.” Richard Whitney Became one of the scapegoats for the 1929 market crash. His real crime was grand larceny. He was arrested on March 10, 1938. He had made several horrible investments and borrowed millions to support the price of the stocks. When that didn’t work, he used his client’s securities as collateral for more loans. His final act was stealing from the NYSE’s gratuity fund. Great Depression 1933: GNP was 33% less than in 1929. Production volume didn’t return to 1929 levels until 1937. The dollar value was below 1929 levels until 1941. The average number of unemployed was above 8 million from 1930 to 1940. It only dipped below 8 million once in 1937. 13 million were unemployed in 1933 or 1 in every 4 in the labor force. By 1938, 1 in every 5 were out of work. Likely Causes: Bad Income Distribution: 5% of the population accounted for 33% of the personal income. The percentage of income from dividends, interest, and rent was twice as high as in the years following WWII. The economy became dependent on high levels of investment and/or high luxury spending. The market crash dried up luxury spending overnight. Bad Corporate Structure: holding companies controlled large sections of the economy and dividends from operating companies covered the interest of the holding company’s bonds. As the economy slowed, sales and earnings slumped, and dividends were the priority over everything to keep the holding company afloat. The market crash made it impossible for holding companies to raise more money through share issuance. Eventually, excessive leverage did them in. Bad Banking Structure: “Safe” loans backed by assets were safe until the price of the assets collapsed. Then banks started failing. Once one bank failed, depositors at other banks wanted their money, and it set off a chain reaction in the community. The first 6 months of 1929 saw 246 bank failures with $115 million in deposits. The FDIC didn’t exist. The money was gone. ” The weak destroyed not only the other weak, but weakened the strong. People everywhere, rich and poor, were made aware of the disaster by the persuasive intelligence that their savings had been destroyed.” Dubious State of Foreign Balance: In an effort to offset foreign imports, President Hoover and Congress increased tariffs. It drove many countries to default on loans with the U.S. and U.S. exports fell, hitting farmers the worst. Poor State of Economic Intelligence: the initial economic policy made everything worse. The first idea was to balance to budget, which eliminated tax reduction and reduced government spending when it was needed most. Fear of inflation reinforced the idea of a balanced budget (even though deflation was occurring). Inflation fears prevented the lowering of interest rates and easy money policy. The combination drove the economy from bad to worst. Market Booms/Busts “Speculation on a large scale requires a pervasive sense of confidence and optimism and conviction that ordinary people were meant to be rich. People must also have faith in the good intentions and even in the benevolence of others, for it is by the agency of others that they will get rich… When people are cautious, questioning, misanthropic, suspicious, or mean, they are immune to speculative enthusiasms.” “Savings must also be plentiful. Speculation, however it may rely on borrowed funds, must be nourished in part by those who participate. If savings are growing rapidly, people will place a lower marginal value on their accumulation; they will be willing to risk some of it against the prospect of a greatly enhanced return. Speculation, accordingly, is most likely to break out after a substantial period of prosperity, rather than in the early phases of recovery from a depression.” “A speculative outbreak has a greater or less immunizing effect. The ensuing collapse automatically destroys the very mood speculation requires. It follows that an outbreak of speculation provides a reasonable assurance that another outbreak will not immediately occur. With time and the dimming of memory, the immunity wears off. A recurrence becomes possible.” “The market will not go on a speculative rampage without some rationalization. But during any future boom some newly rediscovered virtuosity of the free enterprise system will be cited. It will be pointed out that people are justified in paying the present prices—indeed, almost any price—to have an equity position in the system.” “There is here a basic and recurrent process. It comes with rising prices, whether of stocks, real estate, works of art or anything else. This increase attracts attention and buyers, which produces the further effect of even higher prices. Expectations are thus justified by the very action that sends prices up. The process continues; optimism with its market effect is the order of the day. Prices go up even more. Then, for reasons that will endlessly be debated, comes the end. The descent is always more sudden than the increase; a balloon that has been punctured does not deflate in an orderly way.” The time to be cautious is when reassurance grows — “the economy/market is sound” — as signs of trouble emerge at market peaks. However, ignorance or refusal to believe that the good times will end is widespread. The minority who turn cautious miss the collapse. “As noted, at some point in the growth of a boom all aspects of property ownership become irrelevant except the prospect for an early rise in price. Income from the property, or enjoyment of its use, or even its long-run worth is now academic… What is important is that tomorrow or next week market values will rise—as they did yesterday or last week—and a profit can be realized.” “In all great speculative orgies devices have appeared to enable the speculator so to concentrate on his business.” “No one, wise or unwise, knew or now knows when depressions are due or overdue.” “A bubble can easily be punctured. But to incise it with a needle so that it subsides gradually is a task of no small delicacy.” “It is in the nature of a speculative boom that almost anything can collapse it. Any serious shock to confidence can cause sales by those speculators who have always hoped to get out before the final collapse, but after all possible gains from rising prices have been reaped. Their pessimism will infect those simpler souls who had thought the market might go up forever but who now will change their minds and sell. Soon there will be margin calls, and still others will be forced to sell. So the bubble breaks.” “One of the oldest puzzles of politics is who is to regulate the regulators. But an equally baffling problem, which has never received the attention it deserves, is who is to make wise those who are required to have wisdom.” “Of all the weapons in the Federal Reserve arsenal, words were the most unpredictable in their consequences. Their effect might be sudden and terrible.” “That much of what was repeated about the market—then as now—bore no relation to reality is important, but not remarkable. Between human beings there is a type of intercourse which proceeds not from knowledge, or even from lack of knowledge, but from failure to know what isn’t known.” “Wisdom, itself, is often an abstraction associated not with fact or reality but with the man who asserts it and the manner of its assertion.” On Meetings: “There is the meeting which is called not because there is business to be done, but because it is necessary to create the impression that business is being done. Such meetings are more than a substitute for action. They are widely regarded as action.” “The values of a society totally preoccupied with making money are not altogether reassuring.” “As often in our culture, it is far, far better to be wrong in a respectable way than to be right for the wrong reasons.” “Cause and effect run from the economy to the stock market, never the reverse.” “In Wall Street, as elsewhere, there is deep faith in the power of incantation.” “Of all the mysteries of the stock exchange there is none so impenetrable as why there should be a buyer for everyone who seeks to sell.” “Regulatory bodies, like the people who comprise them, have a marked life cycle. In youth they are vigorous, aggressive, evangelistic, and even intolerant. Later they mellow, and in old age—after a matter of ten or fifteen years—they become, with some exceptions, either an arm of the industry they are regulating or senile.” “An angry god may have endowed capitalism with inherent contradictions. But at least as an afterthought he was kind enough to make social reform surprisingly consistent with improved operation of the system.” “Long-run salvation by men of business has never been highly regarded if it means disturbance of orderly life and convenience in the present. So inaction will be advocated in the present even though it means deep trouble in the future. Here, at least equally with communism, lies the threat to capitalism. It is what causes men who know that things are going quite wrong to say that things are fundamentally sound.” © 2022 Novel Investor · All Rights Reserved · Terms of Use · Privacy Policy · Disclaimer
Yeah, just like now, they had too many damn happy-go-lucky HODLers. This time it's different! Look what a great invention it is! Come aboard and get rich quick (by giving it to me, of course)! It's all same B.S. Why is it so hard for these morons to wrap their head around the fact that it's not the history that repeats, but their idiotic behavior. As they say, what goes in, what comes out. Well, they've asked for it, now they will pay dearly for their mistakes.
Currently reading 'Megathreats' by Roubini. He dives deep into how history repeats. The thesis is that what is coming is going to be bigger than anybody can imagine.
Excerpt from the above book: America did not see it coming. In 1929, the United States was riding high on a great bubble of energy and excitement sometimes called the “Roaring Twenties.” Radios blared music in living rooms and dance halls; champagne and gin—both illegal—flowed freely in “speakeasy” clubs; and young men and women everywhere practiced the newest dance steps late into the evenings. Most people worked six days a week and made enough money to afford refrigerators, toasters, irons, and other new gadgets rolling off new factory assembly lines. The Ford Model T, a symbol of America’s energetic, on-the-move lifestyle, clogged highways and parking lots. For many, life was getting easier. People felt that a new kind of prosperity had arrived—the kind that would stick around forever. The most thrilling show of the decade was on narrow Wall Street, in downtown Manhattan at the New York Stock Exchange, a place where the wealthy could gamble with the millions of dollars piling up in their bank accounts. There they traded stocks, or pieces of paper representing shares of companies that were for sale to the public. In the heyday of the 1920s stock market, stock prices spiraled upward as more and more buyers jumped in, willing to bet that what they bought today would increase in value by tomorrow. Year after year, they were right: From 1922 to 1929, the average stock price more than quadrupled. Sounds similar to our day, eh?
"They found each other out, chose to cooperate, and lost everything they stole in the market. They took money on the books to be loaned for margin but invested in stocks. They went short just as the market soared over the summer. To make up for their losses, they went long into the crash." Best karma ever. Got double-f***'ed by the market. Suited them right. LOL I wonder if there were movies made about these embezzlers. Harvard Economic Society Sound like some of those "gurus" that were pushing up the market before the major financial crisis crash with their permabull declarations. LOL Another reason why you do not listen to "experts" and should always listen to yourself.
Yes except this time, it's not our fault. It's that damn virus. If the virus hadn't hit, our life was pretty good I should say. Now our lives are forever changed. Nobody would've ever imagined that now we could die from just hugging somebody or not washing our hands. And productivity is permanently reduced until complete automation by robots like depicted in that movie I, Robot is implemented. Then our economy would again take off to a new level provided that we are the first to reach that level of automation.
%% Farm+ farm crops had big trouble then also. Then the dust bowl\drought hit in 3 waves\1934\ 1936\1939. Strangely, a lot of that dust\dust \topsoil blew into Chicago.
No, it actually doesn't. But it's been clear for years you are obsessed with doomsday scenarios for markets. We could go over what you declared in March 2020 again, a spectacular miss. You seemed to have learned nothing from the experience.