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Strategies & Market Trends : Waiting for the big Kahuna
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To: Lazarus_Long who wrote (14553)3/3/1998 12:54:00 PM
From: Tommaso  Read Replies (2) of 94695
 
RE: the comparison with 1929.

Thanks for the thoughtful analysis.

As you say, the U. S. economy has shown no signs yet of the weakness that preceded the stock crash in 1929.

I wonder if, however, the interdependence of our economy with others now means that the entire world is operating much more nearly as a unit than ever before. It is often pointed out that, for example, within the United States in the 1920s the farmers were in a depression the whole time, during the supposedly boom phase. This weakness of the farm sector is instanced as evidence of something fundamentally unsound within the United states at that time. Now we have an entire geographical sector having suffered a sudden and huge decline in wealth: most of the Asian economies.

Has anyone on this thread seen any direct evidence yet in the U.S. of the contraction in Asia. Perhaps these incredible cheap gasoline prices are partly the result of that--although most of the OPEC countries are overproducing, too. But is anything else showing up yet? I guess I keep looking for prices on the best imported men's shoes to drop from --say-- $150 a pair to $75. Isn't it strange that shoes can cost more than a TV set, parenthetically.

The recent turnaround in long-term interest rates is attributed by the media to selling by bond and hedge funds; it could also reflect selling of bonds by the Fed to control the money supply. If for whatever reasons the long bond goes back up to 7% this could easily trigger the start of selling in the U.S. stock market. Maybe this could expose the "hidden flaw" you mention--and maybe the hidden flaw is the vast overexpansion of credit in the US.
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