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The stock market crash of 1929 was one of the most devastating events in American history. It is true that market valuation are stretched, sitting as they are against a backdrop of declining corporate profits; soft economic growth, both here and abroad; interest rate policy reaching the limits of its efficacy abroad; and the threat of interest rate increases here at home.

Keep in mind that 1) a sudden increase in inflation/interest rates can cause significant losses to your long-term bond portfolio, 2) bonds have had substantially lower returns (about half) than equities over the long-run, 3) bond interest income is taxed as a substantially higher tax rate than stock dividend income and capital gains and 4) bonds have the substantial risk of value erosion from inflation over time.

Until four trading days ago, the market traded in a narrow range with an upward bias: (1) The daily volumes (second panel) approximated their daily norms while (2) the daily price changes (top panel) usually showed gains or losses that were about half of their norms.

Perhaps surprisingly, both Kezdi and Willis (2008) and Gouret and Hollard (2010) find no relationship between personal characteristics and the propensity to give problematic answers, with the potential exception of income and expectations themselves.

Just like Parts I and II in our stock market crash history series (covering the stock market crash of 1929 and the dot-com crash of 2000-2002 ), the 2008 stock market crash, boiled down, was caused by a speculative bubble In 1929, it was speculation over the railroad industry; in 2000, it was speculation over Internet companies; and in 2008, it was speculation over real estate.

By Kay