03-18-2020, 07:28 PM
For the record -- I have a bachelor's degree in economics from years ago and some further training in accounting. I am not in the securities or banking industry, so you may consider my advice for what it is worth. Mercifully I am selling you nothing. I am nearly broke so you can count that against me. On the other hand, I have no stake in the current economic order, so that might establish some credibility on my part.
Three years ago it would have seemed silly to take some spare cash and buy a three-year certificate of deposit paying a ridiculously-low rate of interest. The stock market was still in a bull market unlikely to fail. Corporate profits were unusually high thanks to suppressed wages and a tendency toward monopoly. The only really-poor sector was brick-and-mortar retailing and certain areas of the restaurant business. So stay clear of Sears, JC Penney, Macy's, and in general low-end casual dining.
Guess what? Buying a three-year bank CD with a ridiculously-low interest rate sounds rather good by contrast, doesn't it? Oh, sure, you would have paid taxes for cashing out on the Obama part of the bull market that has just ended (and don't fool yourself --it has ended!). This may not be an exact replay of 1929, but it looks to me more like 1929 than like 2008. In 2008, corporate stocks were not the objects of speculation before the crash. Stocks had barely recovered what they had lost after the Tech Crash. The 2008 disaster was largely in the financing of real estate. Real estate and its financing are always closely-connected, and about anyone with a modest IQ and some integrity could see that the two activities were full of two-legged vipers. The manufacturing sector that was without culpability in the disaster got hurt, but it could recover... and it did. Thus the Obama boom that has been reduced to the Obama boom. (To be non-partisan, much the same results would have been had had John McCain been elected President in 2008).
This time the recovery in stock prices far overshot the recovery of the overall economy and became a speculative frenzy devoid of any rational basis. That is definitely the time in which to cash out and leave the market. So the Dow goes to 24K, 25K, 26K... and eventually many people start talking about when the Dow will reach 30K.
In August 1929 some were thinking of when the Dow, then approaching 380, would reach 400. By July 1932 it would approach something roughly a tenth of that. The Dow would reach 400, though -- on December 29, 1954. And that is when one doesn't take account of a rise in prices in 25 years. So when does the Dow reach 30K -- if the analogue following 1929 fits perfectly, maybe May 2045. Yes -- you heard that right -- about when Americans are celebrating the 100th anniversary of VE-Day. To be sure, there were changes that kept stock market prices depressed. One was that the recovery of the 1930's was largely with small businesses and with workers getting much better wages in the middle-1930's. Heavy taxes were placed on 'unearned' income because such was politically popular and such taxes remained in effect long after World War Ii. The fellow who worked in manufacturing typically kept any surplus earnings in savings accounts with deposit insurance, so the common man was not even dabbling in the market. The 1929 Crash stayed in the public consciousness for a very long time.
Speculative frenzies of any kind are the last stage of any boom, and they begin when such activities are the only game in town. When other sorts of investments disappear or go unfashionable, the speculative frenzy begins. Everybody seems to think that he can sell at the peak -- and the peak goes, and the falling-knife stage comes. Then nobody really wants to sell except in a panic, and because there are no more people to buy in, the market keeps imploding. Collapse ensues, and people are left with nothing.
Donald Trump will not be re-elected. His one strength has been his ability to ride a seductive market. That, folks, is not coming back. Prosperity will return to America, but in a very different way. Maybe those few who sold out and decided to avoid being the vultures who consume the poisoned carrion will be around to invest in different ways -- like small business, real estate in new or recovering markets (Trump bought in low in New York City -- and that is the entire scope of his financial acumen), or venture capital in a new market.
If it sounds bleak -- good reason exists for skyscrapers having windows that cannot be opened from the inside -- some things can go right. America has a long heritage of responsible government with Donald Trump as the biggest aberration by far. Americans consider economic stewardship an expectation instead of a lucky result. America still has a capitalist market economy, and its people still dream of better lives through economic gain and what it can buy them. So long as people get paid fairly by the standards of the time they will have a work ethic. Remember well: for working people, life was generally better -- often much better -- in 1938 than in 1928 by measures of such big-ticket possessions as cars, furniture, appliances, phonographs, and radios If government takes a bigger role in the economy (the high-tax, high-spend 'social market' economy), then the spending will itself be prosperity while making people able to achieve more. We have tens of millions of people left behind in the supposed good times, and nothing about them says that they cannot do their share and get a fair share. Above all we expect integrity as the norm in politics, academia, and commerce; integrity prevents the disasters that corruption mandates.
Before someone compares what ensues to the 1930's, let me suggest that the 1930's had their virtues in America. We chose the best President we could have possibly had, someone who stabilized the milieu in which capitalism could operate. FDR backed the banks but in return made them custodians of other people's money. They could no longer be the high-stakes rollers; the bankers were the ones to keep the economic order from becoming a casino riskier than anything now in Vegas. FDR pushed technological investments that put an end to the worst sting of regional poverty. He got youth off the street and either into high school or the CCC. Figure that many aimless youth could do well with a little time in the wilderness building some hiking trails while getting to appreciate wilderness... We could use that again. He took the side of labor when it sought to organize the giant manufacturing plants, much in contrast to recent Presidents who have done everything possible to eviscerate unions if they could do anything at all. I'm not saying that Biden will be the new FDR, but Trump was the antithesis. Obama? He may have dreamed of it, but historical reality showed that he wasn't.
Three years ago it would have seemed silly to take some spare cash and buy a three-year certificate of deposit paying a ridiculously-low rate of interest. The stock market was still in a bull market unlikely to fail. Corporate profits were unusually high thanks to suppressed wages and a tendency toward monopoly. The only really-poor sector was brick-and-mortar retailing and certain areas of the restaurant business. So stay clear of Sears, JC Penney, Macy's, and in general low-end casual dining.
Guess what? Buying a three-year bank CD with a ridiculously-low interest rate sounds rather good by contrast, doesn't it? Oh, sure, you would have paid taxes for cashing out on the Obama part of the bull market that has just ended (and don't fool yourself --it has ended!). This may not be an exact replay of 1929, but it looks to me more like 1929 than like 2008. In 2008, corporate stocks were not the objects of speculation before the crash. Stocks had barely recovered what they had lost after the Tech Crash. The 2008 disaster was largely in the financing of real estate. Real estate and its financing are always closely-connected, and about anyone with a modest IQ and some integrity could see that the two activities were full of two-legged vipers. The manufacturing sector that was without culpability in the disaster got hurt, but it could recover... and it did. Thus the Obama boom that has been reduced to the Obama boom. (To be non-partisan, much the same results would have been had had John McCain been elected President in 2008).
This time the recovery in stock prices far overshot the recovery of the overall economy and became a speculative frenzy devoid of any rational basis. That is definitely the time in which to cash out and leave the market. So the Dow goes to 24K, 25K, 26K... and eventually many people start talking about when the Dow will reach 30K.
In August 1929 some were thinking of when the Dow, then approaching 380, would reach 400. By July 1932 it would approach something roughly a tenth of that. The Dow would reach 400, though -- on December 29, 1954. And that is when one doesn't take account of a rise in prices in 25 years. So when does the Dow reach 30K -- if the analogue following 1929 fits perfectly, maybe May 2045. Yes -- you heard that right -- about when Americans are celebrating the 100th anniversary of VE-Day. To be sure, there were changes that kept stock market prices depressed. One was that the recovery of the 1930's was largely with small businesses and with workers getting much better wages in the middle-1930's. Heavy taxes were placed on 'unearned' income because such was politically popular and such taxes remained in effect long after World War Ii. The fellow who worked in manufacturing typically kept any surplus earnings in savings accounts with deposit insurance, so the common man was not even dabbling in the market. The 1929 Crash stayed in the public consciousness for a very long time.
Speculative frenzies of any kind are the last stage of any boom, and they begin when such activities are the only game in town. When other sorts of investments disappear or go unfashionable, the speculative frenzy begins. Everybody seems to think that he can sell at the peak -- and the peak goes, and the falling-knife stage comes. Then nobody really wants to sell except in a panic, and because there are no more people to buy in, the market keeps imploding. Collapse ensues, and people are left with nothing.
Donald Trump will not be re-elected. His one strength has been his ability to ride a seductive market. That, folks, is not coming back. Prosperity will return to America, but in a very different way. Maybe those few who sold out and decided to avoid being the vultures who consume the poisoned carrion will be around to invest in different ways -- like small business, real estate in new or recovering markets (Trump bought in low in New York City -- and that is the entire scope of his financial acumen), or venture capital in a new market.
If it sounds bleak -- good reason exists for skyscrapers having windows that cannot be opened from the inside -- some things can go right. America has a long heritage of responsible government with Donald Trump as the biggest aberration by far. Americans consider economic stewardship an expectation instead of a lucky result. America still has a capitalist market economy, and its people still dream of better lives through economic gain and what it can buy them. So long as people get paid fairly by the standards of the time they will have a work ethic. Remember well: for working people, life was generally better -- often much better -- in 1938 than in 1928 by measures of such big-ticket possessions as cars, furniture, appliances, phonographs, and radios If government takes a bigger role in the economy (the high-tax, high-spend 'social market' economy), then the spending will itself be prosperity while making people able to achieve more. We have tens of millions of people left behind in the supposed good times, and nothing about them says that they cannot do their share and get a fair share. Above all we expect integrity as the norm in politics, academia, and commerce; integrity prevents the disasters that corruption mandates.
Before someone compares what ensues to the 1930's, let me suggest that the 1930's had their virtues in America. We chose the best President we could have possibly had, someone who stabilized the milieu in which capitalism could operate. FDR backed the banks but in return made them custodians of other people's money. They could no longer be the high-stakes rollers; the bankers were the ones to keep the economic order from becoming a casino riskier than anything now in Vegas. FDR pushed technological investments that put an end to the worst sting of regional poverty. He got youth off the street and either into high school or the CCC. Figure that many aimless youth could do well with a little time in the wilderness building some hiking trails while getting to appreciate wilderness... We could use that again. He took the side of labor when it sought to organize the giant manufacturing plants, much in contrast to recent Presidents who have done everything possible to eviscerate unions if they could do anything at all. I'm not saying that Biden will be the new FDR, but Trump was the antithesis. Obama? He may have dreamed of it, but historical reality showed that he wasn't.
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.