Some folks may think that, after spending the past two years or more warning of a crash, we’d jack it in and jump on the roaring stock market bandwagon. Unsurprisingly, avarice prevailed as some traders speculated in stocks paid for by billions of dollars worth of unsecured checks, causing Kuwait’s stock market to inflate like a balloon and pop in a most analogous manner. The market is not always forgiving, so please don’t attempt to punt the market if you are ignorant.
After the experience of the 1929 crash, stock markets around the world instituted measures to suspend trading in the event of rapid declines, claiming that the measures would prevent such panic sales. By the fall of 1929, the stock market peaked and then plunged, financially-ruining many stock investors (some of whom jumped out of tall city buildings to their deaths).
John Hussman is a former professor of economics and international finance at the University of Michigan, and the information in his latest weekly market comment is staggering. Nevertheless, the comparison can shed light on the effect of a large and perhaps qualitatively different event compared to the more normal” declining market. By the summer of 1929, it was clear that the economy was contracting and the stock market went through a series of unsettling price declines. I try to keep my blog on topic, but as a stock trader by nature I thought I would put out a warning for those interested. Directional correlation between the USD/YEN and the SPX was highly conspicuous, if not an outright signal of official market market intervention. Market crash is specifically associated with human psychology and mass movement.
See, for example, Kezdi and Willis (2008) about American households and Hurd, Rooij and Winter (2009) about Dutch households. The stock market crash signaled the beginning of the Great Depression that would last for ten years until 1939. Kezdi G, Willis RJ. Stock Market Expectations and Portfolio Choice of American Households. This day is considered to be the worst day in the history of U.S. stock market. For example if I have $1000 and I wanted to buy $1500 of stock might broker would have lent me $500 on top of my original thousand dollars to reinvest into that stock. October 24 (known as Black Thursday) was the first in a number of increasingly shocking market drops.
However, it would be a great mistake to forget the past and have a pathologic optimism when trading stocks – you should be ready for everything. But if this bubble suddenly bursts and the market starts catching up with economic reality , that is going to turn out to be very favorable for Donald Trump. By 1933 the value of stock on the New York Stock Exchange was less than a fifth of what it had been at its peak in 1929.