Sunday - June 24, 2007
The 1929 Crash: Could It Happen Again? Yes-
Absolutely.
Looking
back, we can see that the Tiger programs would have easily
spotted the top as it was being made in the Summer of 1929. The Tiger
"Accumulation Index" had been mostly very negative for months. Big
Money
was getting out of the market. They were "distributing" their
shares to
the naive and uninitiated. The
amount of distribution is often a very good sign
of how deep the resulting decline will be. In 1929 it was massive.
"Big Money"
did not have to start dumping their shares until the neckline of the classically
bearish
head and shoulders pattern was violated early in the October 1929 Crash.
If you are lucky, you will never see
a chart of a major index showing such heavy
and steady "distribution" as in 1928-1929, over such a long a period.
But the charts
of 1969, 1972-1974, 1987 and 1999-2000 do show that when tops take a long time to
take shape, the resulting declines are deeper and last longer, too. All
the red
distribution in the Tiger chart proved quite prescient, as the DJI declined until
1933
and lost 80% of its value.
The Tiger Accumulation
Index was invented by me (William Schmidt, Ph.D.)
in 1972. Until 2007, I had not looked at the
1929 data. So, this chart is one
more important validation of the importance of the Tiger "Accumulation
Index".
While in graduate school at Columbia University, I had
worked for Smith Barney (then
Harris, Upham) in their headquarters in NYC and had seen the way institutions
"distribute" big blocks of shares during the day and at the close. I did
the first calculations
with this tool on a Bowmar calculator late in 1972. At first, I thought I had
made an
error in the formula, because all the charts showed very heavy distribution
(negative
Accumulation readings). But I had not. The 1973-1974 bear market
was about to
unfold.

Here is a song from February 9, 1930 by George Olsen,
called "I'm In The Market For You"
Play It.
(Source: http://www.btinternet.com/~dreklind/thecrash.htm)
I'll have to see my broker
Find out what he can do.
'Cause I'm in the market for you.
There won't be any joker,
With margin I'm all through.
'Cause I want you outright it's true.
You're going up, up ,up in my estimation.
I want a thousand shares of your caresses too.
We'll count the hugs and kisses,
When dividends are due,
'Cause I'm in the market for you.
Could A Crash and A Depression like 1929-1933
Happen Again in the US? Yes!
Absolutely. Though you won't
see this said very often by orthodox economists or
politicians. Keep in mind that the US Government is now much deeper in
debt and the US
has a far worse balance of payments problem than it did in 1929. True,
margin requirements
for stocks are 50%, not 10%. But the volume in index related
derivatives is enormous and they are
now factored to double the underlying index's volatility.
The bursting of the vastly over-extended
housing bubble certainly could be the trigger now.
Under-consumption was a cause for the 1929 Crash and Depression. Thus, we have to
be
concerned about the extent to which middle-class Americans have exhausted their
credit now.
And we must also admit the bearishness inherent in the severe maldistribution of
wealth in
America now, where the top one percent own more than the bottom 95%.

The world bull market has gone
largely up, uncorrected since 2003. A severe world-wide
equities' decline from a lofty, wildly over-bought condition would savage the
buying power
of many, many businesses and consumers around the globe. Illegal
insider selling has been
very pronounced. There will be another round of class-action lawsuits
against CEOs
for dumping their shares on the basis of inside information not yet released
to the general public.
This will hurt investor confidence significantly, just as it did in
2001-2002.
The US Federal Reserve Board has, except
for brief periods, always been much more
interested in finding ways to finance the US federal deficit than guarantee
reasonable
levels of employment. So, I would expect them to be very slow to
lower interest rates.
A "run" on the dollar or a severe oil shortage will make their job
much harder. Too many
mainstream economists are of the Chicago monetarist school. As a
result, they will keep
pushing monetary solutions when more basic problems, like the 2 billion
dollar Iraq blunder.
the exporting of jobs and maldistribution of wealth go unaddressed. The
quick fixes
Bush and Congress develop will not rescue the sinking economy. They
will be too little
and too late. Their failure will underline the crisis of confidnce, but
not solve it. Orders
will be delayed, making matters worse.
When Congress tries finally
to protect American jobs with tariffs, we will be going back to
the economic nationalism of the Smoot-Hawley Tariff of 1930. Moreover,
note how the
Democrats have now abandoned Keynesian fiscal policies as they promise
to balance the
federal budget in order to besmirch Republicans for the massive budget
deficits of the Bush years.
And if the Democrats cut military spending and troops in Iraq, the multiplier
effect will be
working in reverse, as thousands of soldiers become civilians again.
Many unorthodox
economists correctly have pointed out that each US recession
since 1948 has been deeper and required larger and larger deficit
governmental spending to
end the recession. The US deficits are now so large, it is not
clear how, other than printing
billions and billions more paper money, any Keynesian public work program
could be
funded.
Moreover, I doubt if there is
another deep turn-downwards in the US economy, that we
can we really expect the Japanese and Chinese, who have already financed so
much of the US
debt, to allow the US to deliberately further unbalance the budget to
the extent necessary to
jump-start a US economic recovery? Lastly, civil unrest would be highly
likely, as the difference
between the haves and the have nots in the US is now back to levels not
seen since the 1920s.
That would send even more US capital overseas.

George Bush let 9/11 happen, he let New
Orleans be destroyed, he has destroyed
Iraq for millions and millions who have no electricity, no clean water, no jobs and
no schools.
He has wasted a trillion dollars (when all the bills come in). Think how much good that
would
have done spent on American infrastructire and education. Bush is hopelessly
stubborn and even more
arrogant. His buddies are looters. He is just the man to make a bad situation
even worse!
Where will Americans go? Four million Iraqui have left Iraq.
http://www.commondreams.org/archive/2007/07/30/2860/
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