HB,
Interesting anecdote in "The coming Internet Depression" about how the increasing importance of the automobile became to the economy in the 20's parallels the high tech market of today:
"Tripling of auto production was the single biggest force for growth in the 1920's, and it helped drive a similar expansion in related industries such as steel, rubber, and highway construction." "In retrospect, the first precursor of the coming storm was a simultaneous slowdown in auto production in the spring of 1929 and a fall in auto stocks. After the peaking in April 1929, factory production of passenger cars slid by 41% over the next six months. Few economists or corporate executives were concerned, because they had seen similar slides before. Production had fallen by 40% or more in the secon halves of both 1927 & 1928, only to bouce back even bigger than before. But never had a slide in production been accompanied by a similar downtrend in the price of auto stocks. Investors reacted to the drip in auto stocks by shifing into other stocks. At the time this "market rotation" was applauded as a sign of strength in the economy. At a moment when the high-flyers of earlier months were losing ground, the really sensational advances were being made by shares of such solid and conservatively managed companies as U.S. Steel, GE, and ATT wrote Frederick Lewis Allen in "Only Yesterday". What investors did not realize, however, was that the falloff in auto sales and auto stocks was a sign that the leading sector of the economy, the one that had driven growth, was faltering. And that, in turn, was a sign that the boom was near it's end."
DAK |
