CORRECTIONLESS MARKET: In 1929- Longest in DJIA history (at the time). 3.4yrs. (Mar. 1926-Sept. 1929). Today- Longest in DJIA history. 9.3yrs. (OCT.1990-Feb.2000). MUTUAL FUND MANIA: In 1929- The Investment Trust: "A few years ago it was practically unknown, under that name at least, in this country." But now so-called investment trusts spring into being almost daily; their offerings are avidly absorbed by the public, which begs for more. "Companies for the purpose of handling other people`s money have been springing up so fast of late that it is hardly possible to find enough experienced operators." The Saturday Evening Post-Apr. 28,1928. Today- Funds on Fire: That brilliant flame streaking across the horizon during the first half of the year wasn`t the Olympic torch on its 15,000-mile, 42- state trek to Atlanta: It was the mutual fund fireball... Investors` thirst for stock funds seemed unquenchable. Money-Aug. 1996. EXTREME OVERVALUATION: In 1929- DJIA price/dividend= 96th percentile DJIA price/book value= 99th percentile. Today- DJIA price/dividend= 99th percentile DJIA price/book value=99th percentile(The mutual fund mania causes stock prices to "detach" from values, sending valuation gauges to lofty levels to seldom or never before seen- i.e. a 96th percentile means the stock market has previously been more overvalued less than 4% of the time since Jan. 1910). OLD RULES NO LONGER APPLY: In 1929- "Old standards of judgment have been overthrown... In short, this market, this Coolidge market, like the younger generation, abandoned with sheer disregard, if not with disdain, all the old traditions and conventions and made for itself a new and bigger place." New Levels in the Stock Market- Aug. 1929. Today- Is The Market Just Plain Nuts? Month after month, the stock market keeps confounding its critics. Strategists see yearend forecasts eclipsed within weeks. Traditonal valuation yardsticks prove useless. Business Week- Jan.27, 1997. UNPARALLELED STABILITY: In 1929- "These Investment Trusts act as great cushions against the market`s shocks...Such influence, such terrific resources in constant reserve, have given the market an internal buoyancy it never possessed in the old days." Outlook&Independent- Sept.18,1929. Today- If Market`s a Yo-Yo, They Hold String Mutual fund investors are the key to stability on Wall Street. The New York Times- Jul.21,1996. RISKLESS ATTITUDE: In 1929- How High is "Up"? "Probably the question most frequently heard around Wall Street is "How high can stocks go"? To the unsophisticated observer there appears to be no maximum price." The New York Times- Aug.21,1929. Today- The risks in cash. "As we have come to reevaluate the concept of risk, it has become clear that the risk of not owning stocks is, in the long run, greater than the risk of owning them." Forbes- Jun.15,1998. PERPETUAL ECONOMIC PROSPERITY: In 1929- "If history repeats itself, and, if the stock market is as good a register of the trend of business as it was in the period 1903-1907, we are entering an era in business activity that was beyond the dreams of men a decade ago." New Levels in the Stock Market- Aug.1929. Today- Growth Forever "The U.S. economy likely will not see a recession for years to come. We don`t want one, we don`t need one, and, as we have the tools to keep the current expansion going, we won`t have one." Wall Street Journal- Jul.30,1998. "NEW ERA" HYPE: In 1929- "For the last five years we have been in a new industrial era in this country. We are making progress industrially and economically not even by leaps and bounds, but on a perfectly heroic scale." Forbes- Jun.15,1929. Today- The Triumph Of the New Economy "Is the market crazy"? Hardly. Underlying the equity boom is the emergence of a New Economy, built on the foundation of global markets and the Information Revolution." Business Week- Dec.30,1996. THE INEVITABLE WASHOUT: In 1929- The next decade saw the 2 most severe bear markets of the first half of this century: 1929-32: -86% 1937-38: -55% Most retirees didn`t live the 25 years necessary to see their portfolios recover. Today- The next decade? p.s. When using Today, I am referring to the present bull market( Oct.1990-present). Sincerely, NoJo

-- Robert Keiper (RSKeiper@aol.com), February 04, 2000

Answers

Good point. The situations are almost identical. Frightening!!

-- (ronR@horest.org), February 04, 2000.

Also see this older thread about the late 1920's:

http://hv.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=000mbl

"The Big Bull Market"

-- Linkmeister (link@librarian.edu), February 04, 2000.

NO! the situations are not identical. The type of margin buying permitted in the 20's is wholly outlawed now. Moreover, most private investors now go through mutual funds rather than buying stocks in individual companies.

Very different situation.

-- toomanytrollshere (nofrigginwayonthisboard@noljway.com), February 04, 2000.

There were mutual funds in the 1920s, too -- they were called 'investment trusts' then. Also, consider that the Dow has tripled during the past five years. To my knowledge, that rise from the beginning of 1995 to the end of 1999 was the fastest of any period during the 20th century.

Some may claim the 1995-1999 stock market advance is justified based on new technology and productivity gains, but they thought same thing in the late '20s about assembly lines and automobiles, radio and new gadgets that ran on electricity.

-- History doesn't repeat itself but (sometimes@it.rhymes), February 05, 2000.

http://averages.dowjones.com/business.html

Link

1924

Clarence Birdseye develops frozen foods, the most important innovation in foods since canning.

Organization of Massachusetts Investment Trust, the first modern mutual fund.

-- History doesn't repeat itself but (sometimes@it.rhymes), February 05, 2000.

Will someone format this post so that we can make sense of it? I can't tell what was being said in '29 and what is being said today. ...sdb

-- S. David Bays (SDBAYS@prodigy.net), February 05, 2000.

Subject: Are there uncanny similarities between the stock markets of 1929 and our current bull market?

CORRECTIONLESS MARKET:

In 1929- Longest in DJIA history (at the time). 3.4yrs. (Mar. 1926- Sept. 1929).

Today- Longest in DJIA history. 9.3yrs. (OCT.1990-Feb.2000).

MUTUAL FUND MANIA: In 1929- The Investment Trust: "A few years ago it was practically unknown, under that name at least, in this country." But now so-called investment trusts spring into being almost daily; their offerings are avidly absorbed by the public, which begs for more. "Companies for the purpose of handling other people`s money have been springing up so fast of late that it is hardly possible to find enough experienced operators." The Saturday Evening Post-Apr. 28,1928.

Today- Funds on Fire: That brilliant flame streaking across the horizon during the first half of the year wasn`t the Olympic torch on its 15,000-mile, 42- state trek to Atlanta: It was the mutual fund fireball... Investors` thirst for stock funds seemed unquenchable. Money-Aug. 1996.

EXTREME OVERVALUATION:

In 1929- DJIA price/dividend= 96th percentile DJIA price/book value= 99th percentile.

Today- DJIA price/dividend= 99th percentile DJIA price/book value=99th percentile(The mutual fund mania causes stock prices to "detach" from values, sending valuation gauges to lofty levels to seldom or never before seen- i.e. a 96th percentile means the stock market has previously been more overvalued less than 4% of the time since Jan. 1910).

OLD RULES NO LONGER APPLY:

In 1929- "Old standards of judgment have been overthrown... In short, this market, this Coolidge market, like the younger generation, abandoned with sheer disregard, if not with disdain, all the old traditions and conventions and made for itself a new and bigger place." New Levels in the Stock Market- Aug. 1929.

Today- Is The Market Just Plain Nuts? Month after month, the stock market keeps confounding its critics. Strategists see yearend forecasts eclipsed within weeks. Traditonal valuation yardsticks prove useless. Business Week- Jan.27, 1997.

UNPARALLELED STABILITY:

In 1929- "These Investment Trusts act as great cushions against the market`s shocks...Such influence, such terrific resources in constant reserve, have given the market an internal buoyancy it never possessed in the old days." Outlook&Independent- Sept.18,1929.

Today- If Market`s a Yo-Yo, They Hold String Mutual fund investors are the key to stability on Wall Street. The New York Times- Jul.21,1996.

RISKLESS ATTITUDE:

In 1929- How High is "Up"? "Probably the question most frequently heard around Wall Street is "How high can stocks go"? To the unsophisticated observer there appears to be no maximum price." The New York Times- Aug.21,1929.

Today- The risks in cash. "As we have come to reevaluate the concept of risk, it has become clear that the risk of not owning stocks is, in the long run, greater than the risk of owning them." Forbes- Jun.15,1998.

PERPETUAL ECONOMIC PROSPERITY:

In 1929- "If history repeats itself, and, if the stock market is as good a register of the trend of business as it was in the period 1903- 1907, we are entering an era in business activity that was beyond the dreams of men a decade ago." New Levels in the Stock Market- Aug.1929.

Today- Growth Forever "The U.S. economy likely will not see a recession for years to come. We don`t want one, we don`t need one, and, as we have the tools to keep the current expansion going, we won`t have one." Wall Street Journal- Jul.30,1998.

"NEW ERA" HYPE:

In 1929- "For the last five years we have been in a new industrial era in this country. We are making progress industrially and economically not even by leaps and bounds, but on a perfectly heroic scale." Forbes- Jun.15,1929.

Today- The Triumph Of the New Economy "Is the market crazy"? Hardly. Underlying the equity boom is the emergence of a New Economy, built on the foundation of global markets and the Information Revolution." Business Week- Dec.30,1996.

THE INEVITABLE WASHOUT:

In 1929- The next decade saw the 2 most severe bear markets of the first half of this century: 1929-32: -86% 1937-38: -55% Most retirees didn`t live the 25 years necessary to see their portfolios recover.

Today- The next decade?

p.s. When using Today, I am referring to the present bull market( Oct.1990-present).

Sincerely, NoJo

-- (cleaned@up.format), February 05, 2000.