03-06-2005, 01:16 AM
Interesting read - the paralles, the paralles it is errie (the stuff in () are my thoughts):
Factors that lead to the Great Depression
Speculations (people flipping houses, owning two or three to sell before they are even made) in the 1920s caused many people to buy stocks with loaned money (home equity) and they used these stocks (home equity) as collateral for buying more stocks (homes). Broker's loans went from under $5 million in mid 1928 to $850 million in September of 1929 (consumer debt - home and credit card - at record highs). The stock market boom was very unsteady (last two years are choppy to say the least :P), because it was based on borrowed money and false optimism. When investors lost confidence, the stock marcket collapsed, taking them along with it.
Short signed government economic policies (tax cuts, emergency fed rate, fuzzy fed data) were one of the factors that led to the Great Depression (part II?). Politicians believed that business was the key business in America (change in bankrupcy rules). Thus, the government took no action against unwise investing (housing market - carry trade). The economy was not stable. National wealth was not spread evenly (how true:(). Instead, most money was in the hands of a few families who saved or invested rather than spent their money on American goods (ahh change that to foreign goods - even worse). Thus, supply was greater than demand. Some people profited, but others did not. Prices went up and Americans could not afford anything. Unevenness of prosperity made recovery difficult.
The masses as a rule never ever learn. They are doomed to repeat their mistakes over and over again. Hence the saying "history repeats itself". They seem to love pain and misery and its something that will stay with the majority forever. The bursting of the Nasdaq bubble less than 5 years ago where trillions of dollars in market value were wiped out taught them nothing. They seem to think this is their second chance to make the killing of a lifetime. The sad part is just like the Nasdaq bubble; the masses are jumping in towards the end rather than at the beginning of the move.
It is the talk of the town now that real estate is the way to go now and the way to make a fortune. Everyone who knows nothing about investing has suddenly become a top-notch expert in this field and is busy dishing out advice. This is eerily similar to the last stages of the Nasdaq bubble. When markets enter the extended bubble phase it is really hard to predict when the end will come, however now that they are entering the hyperextend phase it virtually becomes impossible. All technical and fundamental tools cease to function, sanity is replaced with insanity and greed. What is certain is when this bubble bursts it going to be extremely painful and millions of individuals will find themselves among the ranks of the poor and destitute.
Nothing is making SENSE. We allare scratching our heads the way the market is reacting.All technical and fundamental tools cease to function - Friday was a great example - the last 14 months are a great example.
Factors that lead to the Great Depression
Speculations (people flipping houses, owning two or three to sell before they are even made) in the 1920s caused many people to buy stocks with loaned money (home equity) and they used these stocks (home equity) as collateral for buying more stocks (homes). Broker's loans went from under $5 million in mid 1928 to $850 million in September of 1929 (consumer debt - home and credit card - at record highs). The stock market boom was very unsteady (last two years are choppy to say the least :P), because it was based on borrowed money and false optimism. When investors lost confidence, the stock marcket collapsed, taking them along with it.
Short signed government economic policies (tax cuts, emergency fed rate, fuzzy fed data) were one of the factors that led to the Great Depression (part II?). Politicians believed that business was the key business in America (change in bankrupcy rules). Thus, the government took no action against unwise investing (housing market - carry trade). The economy was not stable. National wealth was not spread evenly (how true:(). Instead, most money was in the hands of a few families who saved or invested rather than spent their money on American goods (ahh change that to foreign goods - even worse). Thus, supply was greater than demand. Some people profited, but others did not. Prices went up and Americans could not afford anything. Unevenness of prosperity made recovery difficult.
The masses as a rule never ever learn. They are doomed to repeat their mistakes over and over again. Hence the saying "history repeats itself". They seem to love pain and misery and its something that will stay with the majority forever. The bursting of the Nasdaq bubble less than 5 years ago where trillions of dollars in market value were wiped out taught them nothing. They seem to think this is their second chance to make the killing of a lifetime. The sad part is just like the Nasdaq bubble; the masses are jumping in towards the end rather than at the beginning of the move.
It is the talk of the town now that real estate is the way to go now and the way to make a fortune. Everyone who knows nothing about investing has suddenly become a top-notch expert in this field and is busy dishing out advice. This is eerily similar to the last stages of the Nasdaq bubble. When markets enter the extended bubble phase it is really hard to predict when the end will come, however now that they are entering the hyperextend phase it virtually becomes impossible. All technical and fundamental tools cease to function, sanity is replaced with insanity and greed. What is certain is when this bubble bursts it going to be extremely painful and millions of individuals will find themselves among the ranks of the poor and destitute.
Nothing is making SENSE. We allare scratching our heads the way the market is reacting.All technical and fundamental tools cease to function - Friday was a great example - the last 14 months are a great example.