Daily Blog - Tiger Software

                              June 24,  2007
         >>>
The 1929 Crash: Could It Happen Again?  
                       Yes- Absolutely.  
                And George Bush is Certainly Not As Good A President, as Hoover Was.
======================================================

   William Schmidt,     - Tiger Software's Creator
   (C) 2007 William Schmidt, Ph. D.  - All Rights Reserved. 

   No reproductions of this blog or quoting from it
   without explicit written consent by its author is permitted.

   Send any comments or questions
   to william_schmidt@hotmail.com

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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.
  

  wpe1E.jpg (47475 bytes)

                                         

  wpe1F.jpg (12163 bytes)                 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%. 

Image-Poverty.jpg (48096 bytes)

          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.   

  wpe1.jpg (15369 bytes)

         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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