Remain Vigilant, Worst May Not Be Here Yet – Professional Edition

September 29, 2008

The question now facing us is whether the market’s mini-crash will now accelerate into a full-blown crash of historic proportions, or have a snapback rally. If we look at 1929 as a template, the crash lasted 5 days beginning with the break of major support on October 23. That would coincide with today. There was a big loss followed by an afternoon recovery to narrow the loss on the second day, and consolidation on the third day. The real crash came on October 28 and 29, when the market made its initial low before dropping to a lower low 2 weeks later. So if we get a bounce back over the next two days do not lower your guard. The worst may not be over. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.

This entry was posted on September 29, 2008 at 11:09 pm and is filed under Professional Edition, Today's Markets. You can follow any responses to this entry through the RSS 2.0 feed.

6 Responses to Remain Vigilant, Worst May Not Be Here Yet – Professional Edition

Aaron krowne on September 30, 2008 at 1:56 am

Do you really think 1929-like action can happen again today? There was no PPT back then.

Not to say that the market can’t go down, but it will probably be more controlled… remember these guys aren’t playing a level playing field; they can probably have market makers rig bids in the desired direction.
Lee Adler on September 30, 2008 at 10:34 am

There may be a difference in degree, if only because stocks could be held on 90% margin in 1929, but yes, I definitely believe that the pattern could be very similar, and that the losses this time could be staggering.

That’s what cycles are all about. The cycle structures forecast said that September into October could be very weak. We also saw this market match the pattern of May-September 1969, where cycle structures were very similar, almost on a day to day basis. The template didn’t break until yesterday. The 1929 template now fits quite well. I think it’s germane.
Dave P on September 30, 2008 at 1:32 pm

You don’t restore confidence in insolvent banks by propping them up. Confidence is restored by weeding out the bad ones. Apparently nothing was learned from the Japanese experience. A bail out will just drag this into a prolonged agony lasting a decade or more. Ergo, I would welcome a crash.

Exercise: try adjusting the fictitious $14T GDP by the inflated dollar value and all the false capital values and what you get is a REAL GDP of something like $7-8 trillion. That is a good indicator of at least how far we need to fall to approach true value.

Besides that the total credit driven economy is coming to an end. The new paradigm is save and spend, not borrow and spend. No more borrowing to make payroll. No more getting rich selling pieces of paper. From now on you are going to have to make something somebody really wants. Unfortunately, we sold off all our machine tools. An industrial re revolution is going to take a long time.

In the meantime, a lot of beans will be eaten, not counted.
Stuart on September 30, 2008 at 5:44 pm

But how do you reconcile that in 1929 the Dollar was limited by a gold standard, as such credit creation and money “printing” was limited. Today neither are not. Does this not afford more of a means to avert a 1929 style depression? Can they not unleash a barrage of printing to offset?
Lee Adler on September 30, 2008 at 5:57 pm

In none of my work do I attempt to forecast what the economy will do. It is geared mostly toward stock prices, and secondarily to bond prices and precious metals prices. I think the economy will do much better this time. At least I hope so. But that has absolutely nothing to do with the stock market.

I think the report speaks for itself about how that 1929 comparison relates to today, in that it was specifically related to the current 5 day period in the stock market, which is all that there reports are about. I wouldn’t want to go beyond that, and I don’t want anyone to think that I am predicting a Depression.

I regret if those who only read the blurb and not the report got that impression, and I certainly hope that the report as a whole is clear that that is not what I was talking about or attempting to imply.

For those of you interested in how the Fed responded to the Crash, I recommend Kindleberger’s Manias, Panics, and Crashes.
Stuart on September 30, 2008 at 9:54 pm

Gotta me kidding me. They’re going to attach the bail-out bill to, likely an AMT bill already in the senate and do an end run on Congress to get it passed by a vote tomorrow night. OMG. This oughta get a few people up in arms.