[ Economist Article ]
Wayne,
Thank you for bringing the article to our attention. Throughout the course of my readings about the market I have drawn some parallels between today's markets and 1929's. Here's a little excerpt from Philip Fisher's works:
"...To see the rather extreme effect such general market appraisals can have in certain periods and how far these views can vary from the facts, it may be well to review the two most extreme such appraisals of this century.
Ridiculous as it may seem to us today, in the period from 1927 to 1929, the majority of the financial community actually believed we were in a "new era." For years earnings of most US companies had been growing with monotonous regularity. Not only had serious business depressions become a thing of the past, but a great engineer and businessman, Herbert Hoover, had been elected President. His competence was expected to assure even greater prosperity from then on.
In such circumstances it seemed to many that it had become virtually impossible to lose by owning stocks. And many who wanted to cash in as much as possible on this sure thing bought on margin to obtain more shares than they could otherwise afford. We all know what happened when reality shattered this particular appraisal. The agony of the Great Depression and the bear market of 1929 to 1932 will be long remembered..."
Pretty interesting material, considering Mr. Fisher's observations are dated many decades past.
I am now in the process of reading a book called It Was a Very Good Year: Extraordinary Moments in Stock Market History by Martin S. Fridson. (Sorry Dave, Suutari had to take a back seat because of the imminent situation with today's markets--I need to arm myself with everything I can find right now.)
In the course of my trading I try to keep in mind the state of the markets. I have no doubt in my mind that we are in a Tulip Market, and it has taught me to be more vigilant in establishing my "technical defenses."
I am more interested in drawing parallels with Japan's markets in the early 1990's. Having lived in both countries, I know what it is like to experience both a bull market and a bear market at the same time. One is characterized by extreme optimism and the proliferation of new "market experts," and the other is characterized by a more sober and pessimistic mood. When the market participants penetrate to even the housewives and other unsophisticated market players (I'm not implying anything by being a housewife), then greater caution must be exerted in my opinion. They are usually the last players in line.
I try to study and track both markets (US and Japan's), and I am trying to draw technical inferences among the 1990 Bubble Burst in Japan, the 1987 market here in the US (of which I think is actually different from today's markets), and today's market. From what I see, we are not quite there yet. I wish there were some data from 1929, but I don't have it to work with.
Regards,
Rainier |
