John Tamny is Political Economy editor at Forbes, editor of RealClearMarkets

The 1929-30 recession wasn’t anything special, it was in fact softer than 1920-21; the only difference being what the political class did in response. Having forgotten that recessions are a healthy sign of an economy on the mend, and that if left alone will set the stage for the next boom, politicians meddled. Government spending soared, the top tax rate was increased from 25 to 83%, regulations on hiring and investing grew, trade was made much less free (Smoot-Hawley tariff), and the dollar was devalued from 1/20th of a gold ounce to 1/35th. Politicians fell over one another trying to erect barriers to production, they succeeded, and with a substantial drop in production came a major decline in the supply of money. Friedman put the cart before the horse in blaming the Fed for the Great Depression.

The real gasoline on the fire flaming the Great Depresssion

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I have worked with the FX markets for a number of years, and it's my belief that movements in currency-cross rates and changes in interest rate differentials among the major currencies that act as the catalyst for in significant shifts in the Global Flow of Funds.

This Global Flow of Funds and the direction in which capital moves then precipitates moves in different Global Debt and Equity Markets, As Global capital effortlessly prints around the world, to take advantage of the ongoing battle of Risk vs. Reward

The Thai Baht devaluation of July 2nd, 1997 is thought by many to be the initial catalyst for the round of currency weakness on the Asian Pacific Rim.

The weakened currencies, then lead to significant moves in bond and equity
Markets around the world. Culminating with the Bankruptcy of Russia and the Bankruptcy of Long-Term Capital, which did not expect Credit, spreads on Global Debt to expand to such extremes Against US Treasuries.

In fact we had a Stock Market crash in Hong Kong in 1997, and then serious declines in Latin America And many other emerging markets. As well as a significant stock market decline in the US market during Q2 and Q3 of 1998.

removed Britain from been the KEY currency... (the reference currency)

1931...

The demise of the Creditanstalt and the Austrian government was followed by a run on Germany and an attack on Sterling, which was depreciated a massive 25 percent as a result. Afterwards, central banks began a run on the U.S. dollar, liquidating it for gold. The banks included the Bank of France, the National Bank of Belgium, the Netherlands Bank and the Swiss National Bank. The result was an immediate need to increase the interest rate in the U.S. from 1.5 to 3.5 percent.

These events triggered further panics and bank runs in the U.S.. Later, the U.S. dollar was depreciated and multiple bank holidays were called to contain the panic. The U.S. economy bottomed only in April 1933.

This thread is a place where we Keep an eye on a few stocks
and investment sector themes. I post some research articles
that I may want to refer to later.

One motivation for posting some of the material is to watch
the cyclical patterns and evolution of the Investment
mindset.

It's interesting to see how Investment perceptions and
outlooks change over time, both in regards to a specific
stock; and entire market sectors. This extends also to
Investing in Different Parts of the World and in different
asset classes.

I was just talking with Lee- L3 about Mark Mobius's
Templeton China Fund (TCH) and I was noticing that since
1994, it's down from $20 to $7 today. I then glanced at
SGF.

The Singapore Investment Fund (SGF) also made it's all-time
high in 1994 at $26 and is currently at $4.50

It reminded me of how eager Investors were to Invest in the
Emerging Markets, especially the NIC's (Newly Industrialized
Nations) of the Pacific Rim back in the late 1980's and the
Early 1990's.

Many will remember that both Japan and the Emerging Pac-Rim
countries were thought to be driving the American business
model out of business due to lack of U S companies to
compete, in Global markets. Indeed, Harvard University,
IBM, Exxon, GE and many other companies all had programs and
seminars to study Japanese Management Skills, then thought
to be vastly superior the US models.

The Japanese Nikkei 225 average was at 7000 and change in
1982,but had climbed to 39,300 by dec 31st of 1989.
No wonder almost everyone thought that the Japanese were
going to take over the world, economically speaking.

lowrisk.com

"The Roaring 80's" by George Goodman, who writes
under the nom de plume of Adam Smith, is excellent
in capturing the dominant investment and economic -
competitiveness thinking that existed back at the cusp of
1990's.

In this 1989 book, Goodman outlines the vibrant economies
of the Pac-Rim and pointed out that the issue was
being raised, whether America would continue to
be the significant economic force it had been in the Post
World War II years.

The Trading history of the Korea Fund (KF) illustrates the
Investment boom years advancing from $4 in 1986 all the way
to $40 in 1989. Then as the speculative era in the Pac Rim
stocks unwound the price fell all the way to $6 in 1997,
and is still under $10 today.

The Japanese Bubble Burst in 1990 and the Global Flow of
Funds began to shift in the early 1990's. European and
especially the US Equity markets became increasingly
attractive on a Global relative basis.

The Emerging Market stocks hit a secondary peak in 1994, and
then really fell of of a cliff starting in 1995.

Obviously Investors had found Happier Hunting Grounds for
their Global Equity Investments; and it's no coincidence
at all that, the US StockMarket really began an
acceleration of it's Multi-Year Bull Market in 1995.

I mention this for two reasons, I'm doing some research this
weekend and so this is fresh in my mind. And also, since
it highlights a few of the things that we are reflecting on
as we try to craft our longer term investment ideas.

Long-Term Capital Management L.P. (LTCM) was a hedge fund management firm [1] based in Greenwich, Connecticut that used absolute-return trading strategies combined with high financial leverage. The firm's master hedge fund, Long-Term Capital Portfolio L.P., collapsed in the late 1990s, leading to an agreement on September 23, 1998 among 16 financial institutions — which included Bankers Trust, Barclays, Bear Stearns, Chase Manhattan Bank, Credit Agricole, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Paribas, Salomon Smith Barney, Societe Generale, and UBS — for a $3.6 billion recapitalization ( bailout) under the supervision of the Federal Reserve. [2]

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