Sep 18, 2008

INSANITY - 1929 and 2008

the similarities are unreal....even the time of year


The Wall Street Crash of 1929, also known as the Crash of ’29 or the Great Crash, was the most devastating stock market crash in US history Three phrases—Black Thursday, Black Monday, and Black Tuesday—are used to describe this collapse of stock values. All three are appropriate, for the crash was not a one-day affair. The initial crash occurred on Black Thursday (October 24, 1929), but it was the catastrophic downturn of Black Monday and Tuesday (October 28 and 29, 1929) that precipitated widespread panic and the onset of unprecedented and long-lasting consequences for the United States. The collapse continued for a month.

The crash in America came near the beginning of the Great Depression, a period of economic decline in the industrialized nations, and led to the institution of landmark financial reforms and new trading regulations.

Those reforms including the Glass-Stegall Act protected Americans from the excesses of Wall Street until Phil Gramm and the Gramm-Leach-Bliley Act of 1999 repealed the regulations and allowed Wall Street to run amok

These two look as if they just caught a whiff of the steaming pile of crap they left lying at the intersection of Wall and Broad in lower Manhattan.

The Roaring Twenties was a time of prosperity and excess in the city, and despite warnings against speculation, many believed that the market could sustain high price levels. Shortly before the crash, Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau." The euphoria 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.

In the days leading up to Black Thursday, 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. After the crash, the Dow Jones Industrial Average (DJIA) recovered early in 1930, only to reverse again, reaching a low point of the great bear market in 1932. The Dow did not return to pre-1929 levels until late 1954, and was lower at its July 8, 1932 level than it had been since the 1800s.
“ Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even. ”



After an amazing five-year run when the world saw the Dow Jones Industrial Average (DJIA) increase in value fivefold, prices peaked at 381.17 on September 3, 1929. The market then fell sharply for a month, losing 17% of its value on the initial leg down. Prices then recovered more than half of the losses over the next week, only to turn back down immediately afterwards. The decline then accelerated into the so-called "Black Thursday", October 24, 1929. A record number of 12.9 million shares were traded on that day. At 1 p.m. on Friday, October 25, several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor. The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers' financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market. As amazed traders watched, Whitney then placed similar bids on other "blue chip" stocks. This tactic was similar to a tactic that ended the Panic of 1907, and succeeded in halting the slide that day. In this case, however, the respite was only temporary.

Over the weekend, the events were covered by the newspapers across the United States. On Monday, October 28, more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 13%. The next day, "Black Tuesday", October 29, 1929, 16.4 million shares were traded, a number that broke the record set five days earlier and that was not exceeded until 1969. Author Richard M. Salsman wrote that on October 29—amid rumors that U.S. President Herbert Hoover would not veto the pending Hawley-Smoot Tariff bill—stock prices crashed even further." William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide. The DJIA lost another 12% that day. The ticker did not stop running until about 7:45 that evening. The market lost $14 billion in value that day, bringing the loss for the week to $30 billion, ten times more than the annual budget of the federal government, far more than the U.S. had spent in all of World War I.

An interim bottom occurred on November 13, with the Dow closing at 198.6 that day. The market recovered for several months from that point, with the Dow reaching a secondary peak at 294.0 in April 1930. The market embarked on a steady slide in April 1931 that did not end until 1932 when the Dow closed at 41.22 on July 8, concluding a shattering 89% decline from the peak. This was the lowest the stock market had been since the 19th century.
This morning we woke up to a market that lost every penny it had gained over the past eight years of the Bush Mis-Administration. The Dow Jones Industrial Aveage closed at 10.606 vs the 10.614 mark held on the black day that George W. Bush took office.

In the interim W has managed to spend and raise the NATIONAL DEBT by over 4 TRILLION DOLLARS without stimulating the economy. Most of us never thought that would be possible but like Houdini Bush has made trillions disappear while failing to record impressive growth in the markets.
The crash followed a speculative boom that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market, a significant number even borrowing money to buy more stock. By August 1929, brokers were routinely lending small investors more than 2/3 of the face value of the stocks they were buying. Over $8.5 billion was out on loan, more than the entire amount of currency circulating in the U.S. The rising share prices encouraged more people to invest; people hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble. The average P/E (price to earnings) ratio of S&P Composite stocks was 32.6 in September 1929, clearly above historical norms. Most economists view this event as the most dramatic in modern economic history. On October 24, 1929 (with the Dow just past its September 3 peak of 381.17), the market finally turned down, and panic selling started. 12,894,650 shares were traded in a single day as people desperately tried to mitigate the situation. This mass sale was considered a major contributing factor to the Great Depression. Economists and historians, however, frequently differ in their views of the crash's significance in this respect. Some hold that political over-reactions to the crash, such as the passage of the Smoot-Hawley Tariff Act through the U.S. Congress, caused more harm than the crash itself.

The 1931 Pecora Commission established by the U.S. Senate studied the causes of the crash. In response to that study Congress passed the Glass-Steagall Act in 1933, which mandated a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.
After the experience of the 1929 crash, stock markets around the world instituted measures to temporarily suspend trading in the event of rapid declines, claiming that they would prevent such panic sales. The one-day crash of Black Monday, October 19, 1987, however, was even more severe than the crash of 1929, when the Dow Jones Industrial Average fell a full 22.6%.

The Wall Street Crash had a major impact on the U.S. and world economy, and it has been the source of intense academic debate—historical, economic and political—from its aftermath until the present day. The crash marked the beginning of widespread and long-lasting consequences for the United States. The main question is: Did the crash cause the depression, or did it merely coincide with the bursting of a credit-inspired economic bubble? The decline in stock prices caused bankruptcies and severe macroeconomic difficulties including business closures, firing of workers and other economic repression measures. The resultant rise of mass unemployment and the depression is seen as a direct result of the crash, though it is by no means the sole event that contributed to the depression; it is usually seen as having the greatest impact on the events that followed. Therefore the Wall Street Crash is widely regarded as signaling the downward economic slide that initiated the Great Depression. One can date the onset of this Great Depression from December 1930 with the collapse of the Bank of the United States, a mid-size lender to the Jewish community in New York (it is often alleged that the Anglo elites let the bank fail from motives of anti-semitic malice).
Despite the lessons of history and remedies that have worked to keep us protected passed by Congress in 1933, the insane Phil Gramm with help from his deregulation crazy Republican buddies in Congress, repealed the Glass Stegall Act. Insane and crazy because they have decided to repeat the mistakes that led to massive failure.

Back in July of 2007 the Dow Jones topped out at just over 14,000 riding a wave of the Ownership Society (as formulated by the CATO Group)
..if you own something, you have a vital stake in the future of our country. The more ownership there is in America, the more vitality there is in America, and the more people have a vital stake in the future of this country. - President George W. Bush, June 17, 2004

We're creating... an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property. - President George W. Bush, October 2004. [2]

Individuals are empowered by freeing them from dependence on government handouts and making them owners instead, in control of their own lives and destinies. In the ownership society, patients control their own health care, parents control their own children's education, and workers control their retirement savings. - Cato Institute

Many people don't have the time, inclination, or expertise necessary to take full responsibility for their own well-being in areas that are so complex as assuring they have sufficient income for retirement or choosing a health plan appropriate for their circumstances. - Robert Reischauer, president of the Urban Institute, a Washington think tank.

...the key to health care reform is to restore control to the patients themselves. - John McCain's campaign website, 2008.
Mortgage lenders we now know told their sales agents that they would be fired if they checked on the incomes of people who applied for mortgages. As a result thousands of unqualified "owners" who were clueless about the fancy instruments offerd signed away their homes for loans to invest in stocks or to purchase goods from China. When rates increased or they lost their jobs to the Chinese they defaulted in record numbers. George Bush and his Republican friends gave Wall Street the green light to place the entire nation at risk of another 1929 like depression in order to boost stock sales and the credit crisis. John McSame was a key player along with his economic advisor Phil Gramm who will go down in history as the author of the great financial crisis of 2008.

GOD help us all if McHoover and Pinnochio Palin are elected
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