Hi James F. Hopkins; Regarding 1929 and comparison to
today's modern markets.
You said: The nature of the market , mutual funds, lack
of gold standard, futures, and options make comparing them
such a total farce that I can not grant any thing but contempt
to those who use artifice on the gullible in their attempts to
induce a fear so that the market and perhaps them with it
can feed off that fear.
There is a certain tendency for each generation to assume
that theirs is the one that invented something, and that
previous generations hadn't thought anything like that up.
Back when I was a kid, we thought our generation had
invented sex. Not the case. And the 80s wasn't when
stock market speculation was invented:
(1) Of course the 20s had mutual funds.
(2) The gold standard is now pretty much the dollar standard, but
it really doesn't have much to do with the stock market.
(3) Did futures not exist in 1929? I think they did, at least for
private transactions, but I don't have any immediate evidence
one way or the other.
(4) There was a lively options market in '29. For a reference,
pick up a copy of The Art of Speculation by Philip
L. Carret, written in 1930, and recently republished by John
Wiley & Sons, Inc. Chapter XVIII is devoted to "Options and
Arbitrage." I should note that the options markets were not
then standardized the way they currently are. Instead options
typically had a fixed term of 30 days, covered 100 shares, and
were struck at a value enough out of the money to get the
sales price of the option down to $137.50. This was their
standard, and they traded them for the same reasons that
we trade options today, i.e. speculation and risk management.
Rather than feeding off fear or using artifice, I suggest that
those who make the comparisons with the 20s are simply
better read than the thundering herds. After the debacle of
1929-32, the investing community had to gain back the
confidence of the investing public. They did this simply
by using investors greed to sell them revisionist histories
of the '29 bubble and crash.
Everybody pretty much believes what they want to believe.
And investors who want to believe that "This time it's
different." will believe in the face of all facts to the contrary.
So the revisionist histories of the '29 market crash live on.
And the 'facts' have been repeated so many times that
everybody just assumes they must be true. To find out the
facts, you have to go back and read the original sources.
Another good book on the '29 crash is J.K. Galbraith's
book, which I have quoted at length on Silicon Investor.
On the other hand, I agree whole heartedly with your statement
that TA isn't going to tell us much in advance when the market
is going to wreck. On the other hand, since the market is
at an all time high, I can predict with great certainty that Monday
will not be a panic (i.e. market closing) day.
-- Carl |
