Not to sound to ‘geeky’ this morning, but do you know what was going on 29,220 days ago? If you haven’t had a lot of coffee yet, another hint might be 80-years ago…but that makes it just too obvious: Wall Street was going through it’s infamous Black Tuesday in 1929.
Market crashes then – along with now – are not one day affairs: Black Tuesday followed Black Monday, which in turn was preceded by Black Friday and Black Thursday, which gets us back to October 24 of 1929. A reread of the Wikipedia history of those days seems in order:
“The Roaring Twenties, the decade that led up to the Crash,[5] was a time of wealth and excess, and despite caution of the dangers of speculation, many believed that the market could sustain high price levels. Shortly before the crash, economist Irving Fisher famously proclaimed, “Stock prices have reached what looks like a permanently high plateau.”[6] The optimism and financial gains of the great bull market were shattered on Black Thursday, when share prices on the NYSE collapsed. Stock prices fell on that day and they continued to fall, at an unprecedented rate, for a full month.[7]
The October 1929 crash came during a period of declining real estate values in the United States (which peaked in 1925) near the beginning of a chain of events that led to the Great Depression, a period of economic decline in the industrialized nations.
In the days leading up to Black Tuesday, the market was severely unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot-Hawley Tariff Act, which was then being debated in Congress.[8] After the crash, the Dow Jones Industrial Average (DJIA) partially recovered in November-December 1929 and early 1930, only to reverse and crash again, reaching a low point of the great bear market in 1932. On July 8, 1932 the Dow reached its lowest level of the 20th century and did not return to pre-1929 levels until 23 November 1954.”
In the wake of those days – and the decade that followed – America stumbled through a series of policies that were supposed to help the recovery (“Good times are just ahead”) but arguably what really ended the Great Depression was the US entry into World War II.
Two of the greatest pieces of scholarship which are acknowledged by most who’ve studied events in detail are that 1) The U.S. knew at some level that Pearl Harbor was to be attacked and 2) Adolph Hitler’s body was not the one found in that Berlin bunker – based on recent DNA work – unless he’d been turned into a woman first.
It’s the inconvenient facts that lead many conspiracy students to suspect that there really is some kind of uber klassen (The PowersThatBe) which really call the shots – that drive the direction of great nations – and it’s the soil in which alternate levels of reality flourish. As one example: An alternative ending to WW II is that the Allies made a secret deal with German and that Hitler and some key Nazis were allowed to escape and continue work on the Nazi Bell – a kind of flying saucer precursor that bent space-time.
All of which is very interesting but leads inevitably to a massive time-sink and since most of us have less than 20,000 days of life left (if not 1,149 days – do the math), so we properly remain focused on making enough money to have a passable life and toward this end we study the financial picture hoping to get enough insight to stay one step ahead of the herd.
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Have we avoided the Second Depression, now that the stock market is back over the March 6,627 lows set earlier this year? I doubt it. But it’s a contentious point since most people don’t properly consider the time value of money – in much the way a frog being brought to a boil doesn’t consider slow changes in water temperature while he could do something about it.
My own study of events – now spanning 15+ years – is that we began the Second Depression in the Spring of 2000 when the Internet Bubble collapsed. I’ve asked you to do this before, but it has been a while. Look up the weekly closing Dow for the week ending January 10, 2000 (data available here) 11,722.98.
Then go to the Minneapolis Fed home page and plug that number into their handy inflation calculator along with 2000 for a start and 2009 for an end and tell me where the Dow would need to be just to stay even with inflation: 14,514.17 is the answer you should be coming up with.
That should prove to you that at its lows in March of this year, the Dow has lost 54.34% of its purchasing power between 2000 and today. If you want me to run through how at yesterday’s close the Dow was down 32.73% from 2000 levels, I’d be tempted to decline just so as not to keep running your nose in it, but you see the point.
Along in here, those most strongly in denial about the Second Depression get all huffy and start firing off emails (which I round-file) screaming “What about dividends? What about stock splits, you moron?”
In response I used to send back long academic emails suggesting their criticism is unwarranted for any number of reasons: The replacement of real losers in the average periodically is an artificial inflation of the Dow since if you let me put only profitable companies in and bury those that have gone banko under the carpet, I can make the number do anything I want it to. Secondly, there’s the matter of management fees and commissions that go a long ways toward offsetting ‘profits’ claimed by SD deniers.
Then there’s the ‘beaut’ of a discussion about the integrity of the ‘offishul’ government inflation numbers which are based on hedonics; substitute the cost of ground sirloin when sirloin steaks got too pricey, kind of thing.
Then there’s the mitigation work which has been done in the Second Depression. Horrific as it was the attack on the Twin Dowers on 9/11 created an overnight industry in America – OK, two industries: World Cop and The Security Industry. Why throw in a housing bubble from St. Al’s Fed and you’ve got the impact of the Civilian Conservation Corp, the Works Progress Administration, and a host of other Roosevelt-era solutions all over again.
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All this is foreplay, of course, and merely sets the stage for some of the major news stories of the day. Some of which get widespread coverage and some of which get buried.
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The first of the buried stories, although it’s getting out, is that economic stimulus package-created jobs are overstated by thousands according to an Associated Press study.
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Next is the story I reported yesterday: Seems Commerce Secretary Gary Locke was in China this week bartering U.S. advanced missile technology in return for China not trashing our economy right now.
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Then there’s the three-card Monte over the future of the internet. On the one hand, the FCC seems to be pursuing an open internet policy, but the GAO this month has a report out hinting maybe government needs to do more to prevent internet service from degrading as work-a-at-home strategies are implemented to deal with swine flu. Is this a move toward “Show me a shot card and I’ll let you log on?”
The MSM will likely focus on this morning’s GDP report, so we might as well get that out of the way:
“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.5 percent in the third quarter of 2009, (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.
The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 5). The “second” estimate for the third quarter, based on more complete data, will be released on November 24, 2009.
The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, private inventory investment, federal government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The upturn in real GDP in the third quarter primarily reflected upturns in PCE, in private inventory investment, in exports, and in residential fixed investment and a smaller decrease in nonresidential fixed investment that were partly offset by an upturn in imports, a downturn in state and local government spending, and a deceleration in federal government spending.
Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change. Final sales of computers subtracted 0.11 percentage point from the third-quarter change in real GDP after subtracting 0.04 percentage point from the second-quarter change.
What does it add up to? Just another Thursday morning. Or, at least so far.
Using the “Ure Indicator” gold was down $12 yesterday, and so the market being down 119 was no surprise. Likewise this morning, gold is up over $7 top $8, so the Dow seems destined to bounce up 60-90 early on. A non-event, except that gold coming down from $1060 to the $1026 range means we ought to bounce up to $1043 (50% retracement) and then maybe – just maybe down to 992…not trading advise, just thinking out loud.
Consumer confidence is down again….and no, no sign of Christmas, except that may have been the blip in shipping numbers recently. Both presents have been shipped now.
Unemployment Numbers
The weekly:
“In the week ending Oct. 24, the advance figure for seasonally adjusted initial claims was 530,000, a decrease of 1,000 from the previous week’s unrevised figure of 531,000. The 4-week moving average was 526,250, a decrease of 6,000 from the previous week’s unrevised average of 532,250.
The advance seasonally adjusted insured unemployment rate was 4.4 percent for the week ending Oct. 17, a decrease of 0.1 percentage point from the prior week’s unrevised rate of 4.5 percent.
The advance number for seasonally adjusted insured unemployment during the week ending Oct. 17 was 5,797,000, a decrease of 148,000 from the preceding week’s revised level of 5,945,000. The 4-week moving average was 5,960,750, a decrease of 78,750 from the preceding week’s revised average of 6,039,500. “
Tad higher than expected (520-525K).
Still Weaseling
As long as today is shaping up as a replay of stories from earlier this week, how about the latest on Iran playing the West for time on the nuclear inspections discussions?
Pimpin Blair
Oh, I see the PowersThatBe are still pushing for Tony Blair to become president of the EU.
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I’ve never been a fan of governments appointing governments – it’s just not as comforting as direct popular election to my way of thinking. Which is why I don’t live in Europe, I suppose. there’s many things the U.S. has to work on, like ending the role of checkbook dispensing special interests in Washington, but Europe?
People in Europe seem a little dazed and confused: They fight two world wars to embrace separate national identities and now they’re on the verge of embracing….what? Makes no sense to my simple-minded worldview.
Oil Leak
Big news in Australia is about the oil leak that has plagued a Timor Sea drilling operation for nearly 10-weeks. Kinda hard to fix when it’s 2.6 kilometers down in the ocean. No one has any clue as to how much oil has leaked so far.
Weedys
A hearing was held in Sacramento this week on legislation which would allow recreational use of marijuana in California. There was nothing especially notable about the hearings: The moneymen were saying it would bring hundreds of millions in revenue in, while law enforcement had the same-old arguments. But, then again, if alcohol use were up for debate, I expect the lines would be draw, except the alcohol interests have more money for lobbying.
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Since we’re in the Second Depression anyway I figure a modest improvement in the social mood could be had by changing the PTB attitude from “Let them eat cake!” to “Let them eat brownies!” Who’d need bread and circuses then?
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But speaking of California – the Circus, not the State – you saw where in a note back to lawmakers explaining why he didn’t sign a particular piece of legislation, the letters reading down the left margin spelled out …well go read down the left margin of the rejection email and see what you think. It’s here. Oh my! Just a coincidence says an aide. You mean a 1 in 200 billion coincidence says a CBS-13 piece by Steve Large. He dug up a Sacramento State stats prof….
Aw, let them eat brownies… We’d then be better equipped to deal with what’s now what I call Firesign Government.
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If “Don’t crush that dwarf…hand me the pliers” doesn’t make any sense to you, either you didn’t see “Nick Danger in the case of the Missing Yolk” or you’ve never heard “Waiting for the Electrician or Someone like him…” In either event have another brownie and it will all make sense. Us Boomers had our moments.
“George how can you make jokes about drugs?”
“Uh…the same way I make serious about finance and government?”