Eight years ago last Friday our time, Lehman Brothers filed for bankruptcy and the GFC started in earnest. The stock market crash of 2008 and the subsequent financial crisis constitute a rare episode whose scope and implications fall outside the life experience of American households. Gundlach also admitted in September that his firm is shorting consumer discretionary stocks, a sure sign that its market outlook remains dim.
This is something that has not occurred in the last 15 years and it’s caught a lot of market analysts wrong-footed. More investors join in at this stable part of the investment cycle, as investors are encouraged to buy and to increase their profit in the stock market. More immediately, this helps us understand why the great credit crisis of 2008 worse than expected. USA went off the gold exchange standard in 1971 but it is really the Great Depression that sealed gold’s fate. The bottom line is, if the Dow again declined by 89.2% from its peak daily close, as it did in the 1929 – 1932 crash, the Dow would go to 1532! The time has come to brace for severe turbulence, likely starting in very late-2012/early-13, with a crash landing around 2018. Billion-dollar investor Warren Buffett is rumored to be preparing for a crash as well.
On December 31, 1927, two years before the stock market crash in October 1929, for the first time a number of companies split their shares. Although the market was able to regain the losses still, it is not enough to compensate the amount of money lost and the trust of people to the trade. On June 12, 1928, the New York Stock Exchange (NYSE) saw five million shares trade hands during a seemingly random drop across the board. I feel that many are performing the comparison without even knowing what happened from 1929 to 1932. The second time was September 14, 2000, with the S&P 500 at 1,480.87. Over the following 2 years, the S&P 500 declined 47.55% to 776.76 – its second largest medium-term percentage decline since the Great Depression. US stocks were up. Most European stocks were up. And the Aussie market is up today — no doubt on this great takeover news.
But if you can buy during the bottom 30% of the market and sell during the top 30% you will go along way to becoming a successful investor. Finally, the market has some strange movements: crude oil prices fluctuate within a week to 16%; U.S. 10 year bond yields fluctuate within 5 days to reach 20 basis points. The mechanism works by means of central banks buying bonds in the stock market or directly from banks. Farmers were already in a depression in the 1920s from World War I. Farmers expanded their output during the war when demand was high, but after the war they found themselves competing in an over-supplied international market. The banks holding the bad loans could call in the collateral , but in the market slide, even that meant losing money.
The results of the estimates suggest that the effect on the stock market crash on expectations was different in different groups of the population. However, not all was lost: a rally that started when Richard Whitey, then head of the New York Stock Exchange, calmly began buying shares of U.S. Steel and other companies. On October 24, 1929, hailed as Black Thursday, the stock market crashed, triggering the Great Depression. Changes in average μ (and average σ, see the online appendix ) are similar in the two groups, heterogeneity among stockholders reacted to the stock market crash more in relative terms. That’s because when the stock market started falling, brokers suddenly called in their loans.