The first response of the fed in the 1929 crash was to supply funds to the money markets. It was later that a sentiment spread in the fed, in the treasury, and in the executive branch that what was needed was to "wring out" excesses, and the money supply was allowed to contract disastrously. This could occur easily because the country remained on a gold standard. Scandinavian countries immediately went off the gold standard and suffered much less than Britain, France, and the U.S.
In some ways the stock market is even more inflated than in 1929. I agree that Prechter is not to be believed, but a 50% decline from the top is altogether likely, and mass psychological depression over stocks could easily cut the market by 60% or more.
I see the stock buy-backs at these high levels as a terrible idea--a distribution of capital by the big companies. The beneficiaries are short sellers or those cashing out at the top--not the long-term stockholders. The companies should be holding those assets for investment--or at least paying off any outstanding debt.
Besides Prechter, who doesn't count, prominent bears include John Templeton, Warren Buffett, and Alan Greenspan. There are probably others, but bearishness is such an un-American occupation that it can be quite unpleasant unless you are a billionaire. Billionaires usually have friends. Not always. Who would have wanted to hang around with Howard Hughes in his last years? |
