Scary 1929 market chart gains traction - Mark Hulbert - MarketWatch

Posted by straightlinelogic 12 years ago to Economics

What makes this plausible is that virtually no one thinks it can happen because "the Fed has our back." Tom Demark is a very good market technician, and although he is not mentioned in the article, Robert Prechter, another respected technician, has issued the same warning. By the way, for those who dismiss technical analysis as hokum--it's usually the technical analysts who get these change-of-trend calls correct. Fundamental analysis is usually no more than extending a straight line on a chart, with perhaps a small fudge factor. For the fundamental reasons why the stock market is set for a fall, see the most recent straightlinelogic post "We've Run Out of Future," which I posted on the Gulch on Monday.

SOURCE URL: http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11

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Posted by DrZarkov99 12 years ago

What will make this crash worse is that the powerful have computer controls to protect them from major retirement funds from getting out ahead of them. The biggest impact will not be on the bankers, but on the small investors and retirees, whose retirements are tied to 401-K accounts. The best thing I can think of is to divest yourself of as much debt as you can, and do what you can to prepare to survive independently. Rest assured, the Federal government will make every appearance to ride to the rescue, with the Guaranteed Retirement Account, but taking over all of the private IRAs and handing you a stack of worthless T-bills.

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Posted by mminnick 12 years ago

The Fed doesn't have out back. Even if it did, if the traders and arbitragers' get nervous like the last several weeks , the market does really strange things.
I also think that market fundamental are being ignored by many and a correction is on the way that will make paying attention to the fundamentals more important than in the past year or so.
And yes it is a scary parallel.

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Posted by richrobinson 12 years ago

This is ominous. I have thought for some time we were due for a major correction. With the FED tapering its bond buying it seems a drop is certain. I guess the question is just how bad will it be???

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  Posted by straightlinelogic 12 years ago
  
  My favorite technician is Prechter. His analysis is that we are at the end of a 200+ year bull market cycle that actually topped in 2000. The end of such a cycle is generally a mania, which began in 1982. Manias end with vicious bear markets that take the market back to where the mania began (the bear market that began in 1929 took the Dow from 381.17 to 41.22 when it bottomed in 1932), which would imply a drop in the Dow to less than 1,000. The predictive problem with manias is that they generally go on much longer and take markets much higher than any rationale analyst would predict. Conversely, the subsequent bear market is much more severe than anyone expects, a crash rather than a correction.
  
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    Posted by richrobinson 12 years ago
    
    Human emotion is hard to predict. If the market starts a major correction panic will probably set in as it did in 1929. I hope for the best but charts seldom lie.
    
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  Posted by khalling 12 years ago
  
  Bad
  
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    Posted by richrobinson 12 years ago
    
    Could be interesting. At 18 trillion dollars in debt and all the money printing we have already done I think even the most hard core Keynesians will have to admit they are out of ideas.
    
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      Posted by straightlinelogic 12 years ago
      
      Here's an idea: let it happen. It worked in 1920-21. Finally let decades of malinvestment and ultimately unproductive "rescues" clear out of the system and start all over again, with a much freer economy.
      
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        Posted by Zenphamy 12 years ago
        
        Maybe so, but then we got FDR and the HUGE jump towards Socialism. I think maybe we've gone far enough down that road.
        
        But then again, maybe we've gone so far down that road that a complete reset is the only option. But how do we prevent the socialist from doing the reset instead of the rest of us?
        
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        Posted by straightlinelogic 12 years ago
        
        Well, for one thing, they'll be broke. Bankruptcy is not fertile territory for socialism. The economic "miracles" of the 20th century were from countries like Japan and Germany after WWII and Hong Kong that started with virtually nothing. When an economy is flat on its back, it can only get back up with the one thing that works--capitalism.
        
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        Posted by richrobinson 12 years ago
        
        That should have been done in 2008. As long as the Feds try to micro-manage we are in trouble.
        
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        Posted by straightlinelogic 12 years ago
        
        The 2008 rescue only made the problem bigger, which means the crash will be bigger than the last one.
        
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        Posted by richrobinson 12 years ago
        
        The question now is not if but when.
        
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      Posted by straightlinelogic 12 years ago
      
      By the way, if you are ever looking for zinger statistics on U.S. debt, revenues, and unfunded liabilities, check out usdebtclock.org. It is invaluable. I use it all the time on my blog.
      
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        Posted by richrobinson 12 years ago
        
        Cool site. Thank you.
        
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      Posted by khalling 12 years ago
      
      The CBO was using as strong a language as I've heard from them
      
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Posted by fivedollargold 12 years ago

One difference I can think of is that Red China is buying our debt. Once they decide not to do so, the recent years of mega-borrowing will come back to haunt the USA as interest rates will skyrocket.

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  Posted by Zenphamy 12 years ago
  
  I thought China had already stopped buying our debt and had started buying gold and working out a separate monetary unit for trade with Russia, Iran, and a couple of others.
  
  The Fed has been buying our debt with money they print and now carries that as assets on their sheets at over $4 trillion. (They call it QE)
  
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    Posted by fivedollargold 12 years ago
    
    My understanding is that they reduced the amount of debt they are buying, but have not stopped buying it completely.
    
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      Posted by straightlinelogic 12 years ago
      
      The have not. They have to buy our debt in order to recycle the dollars they receive for their exports.
      
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Scary 1929 market chart gains traction - Mark Hulbert - MarketWatch

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