BY INSTITUTIONAL ADVISORS APRIL 20, 2009
Post-Crash Rebound Accomplished
Apr 22, 2009
- Last years' forced liquidation
of unsupportable speculative positions fit the Classic Fall Crash
Model with outstanding fidelity. Thursday's Pivot had the table
of key dates.
- This included the rebound
to April 17, 1930, which was accompanied by reports about the
revival of speculation. Barron's coverage was vivid:
"It is thus apparent
that the public preference for stock is not only as marked as
ever, but also the will to speculate is still a speculative factor
not to be overlooked. The prompt return of huge speculation and
the liberal manner in which current earnings are again being
discounted indicate that it will be difficult to quench the fires
of stock-market enthusiasm for long." -Barron's The Trader, March 24, 1930
- Thursday's Pivot also included
a current response from a fund manager who is the most bullish
on "emerging market" equities "in a decade".
- The rebound in stocks and
commodities in the spring of 1930 inspired forecasts that the
economy would be recovering by late in that year.
- Until last week a similar
view from the establishment has been missing.
"The economy is
still weak, but there are some encouraging signs that support
cautious optimism. My outlook calls for the beginning of a recovery...as
early as the third quarter."
Reserve President Dennis Lockhart, Reuters, April 16, 2009
- This compares to some comments
made at the equivalent time in 1930:
"Trustworthy economists believe that decided business
improvement is inevitable by fall at the latest."
"Harvard Economic Society
also looks for a vigorous third quarter in business." -Barron's, May 26, 1930
Action in stocks, corporate
bonds, commodities as well as announcements from the establishment
continue to track the typical post-bubble contraction path. The
high for the Dow in 1929 was 381 and the rebound was to 297 on
April 17, 1930. The low was 42 in July 1932.
There is no guarantee that
this path will continue, but, then there is no guarantee that
Apr 20, 2009
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