Heinz,
With respect to comparisons to 1929:
A few months ago, I read Galbraith's book on the crash (I listened to it on audiotapes, so I could have been daydreaming at times), and it is very interesting to see some of the parallels in place right now, but the more I think about it, we may be a ways off still from the ultimate downturn which I totally expect, and no matter what I think, my trading will continue to be based on total overall caution.
I think we are beginning to see early signs of economic slowdown, but I don't know that these signs have manifested themselves to the declining state of the economy in 1929. I recall Galbraith stating that stocks continued to soar even though there were clear signs of a faltering economy.
Secondly, it remains unclear to me what the role of the massive retirement investments will be in the market, for which there is no comparison to 1929. Maybe it would actually magnify any decline via redemptions.
Thirdly, I am not clear as to whether one can find any current peer to the investment trusts of the late 1920s. Galbraith described these as totally leveraged equity instruments whose true value was a fraction of the value of the underlying securities. Are there instruments today that mirror the investment trusts of the 1920s ? Maybe I should view all the companies without earnings as being like those investment trusts as they have negligible book value ?
Lastly, I continue to wonder about this election year phenomenon that tends to keep the market propped up. Maybe another year passes before a true burst to this market. Who knows ? I sure don't.
Best wishes always,
David |
