Dr. Guckien: From that post you had linked.
"It is also quite sobering to see that DTV vs. total Market Capitalization is again beyond where it ended the fateful year of 1929. Throughout the mania, this was the one indicator that did not compare with 1929."
I have long awaited someone to raise this red herring. Without debating the clear differences between the 1920s and late 1990s (and there are LOADS of national [massive changes in margin and banking regulations] and global [a monstrous European depression arising in the aftermath of WWI], and at the risk of echoing the basic tenant of all mania's ("this time its different"), I'm afraid I must: This time it IS different...not on any other point, perhaps, but this one. Comparing daily trading volume with market capitalization is comparing apples to oranges. There are hundreds of thousands of individuals buying and selling, buying and selling, buying and selling the same stocks over and over and over again. And it has absolutely nothing to do with capitalization. On any given day, I alone can generate between 50,000 to 100,000 traded shares on certain issues...trading 5,000 share blocks. I'd reckon that that was NOT the case in 1929. There were absolutely no "private" daytraders then as now...and that fact alone is lacking in every analyses I've read attempting to compare 1929 to 2000. Why is average daily volume important, anyway? |
