Conservatively speaking, there’s about a 100{bf6128eaee7daf804a40e739f155a69f2d5a72ca2bacccc9954495bcd60bdcac} chance the market is in the middle of a moderate and possibly major stock market bubble. The economy had been showing signs of weakness for months before the stock market crash, and with or without it, a downturn in the normal business cycle was taking place. Like Hussman and so many others, I believe that a stock market crash and a new financial crisis are imminent.
It would take 27 years for the stock market to recover and surpass its pre-crash level. 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{bf6128eaee7daf804a40e739f155a69f2d5a72ca2bacccc9954495bcd60bdcac} to 776.76 – its second largest medium-term percentage decline since the Great Depression. The measurement strategy makes use of the fact that the respondents of HRS-2008 answered the survey during twelve months from February 2008 to February 2009, a time period that includes the time of the stock market crash in early October. A commission was established called the Pecora Commission which would research the reasons for the crash.
We argue that the post-crash association between volume and disagreement was dominated by the large increase in both right after the crash (a strong positive connection), and subsequent movements are of second order importance. It means relief for the poor and the jobless, recovery of the economy back to normal and reform of the financial system to avoid depression and encourage people to invest in the stock market again. There’s tons of evidence that people trying to jump in and out of the market at what they think are opportune moments do worse than they would have done had they just bought some stocks and forgot about it. On average prices had fallen to a mere 12 percent of their 1929 levels and only five stocks exceeded by one-third their 1929 prices. In such a case, the crash would have a negative effect on everyone’s expectations.
The potential for a stock market crash was higher than ever and it made me take all my money out of the stock market. Over the weekend (26.+27.10.1929) the ongoing stock market slide (amounting to approximately 20{bf6128eaee7daf804a40e739f155a69f2d5a72ca2bacccc9954495bcd60bdcac} from its record peak) during September and October 1929 were dramatically and nervously highlighted by newspapers. After missing the biggest crash in 70 years, mainstream and even many contrarian commentators were on the lookout for the next one.
The market continued to decline in value, leaving investors who had purchased stock on credit financially destroyed. The real risk here is something nobody’s talking about – that Beijing uses current market conditions as an excuse to slam down on the economic reforms that have gotten it this far. This is also a good reason to make sure that some of your cash is on the sidelines and can be put to work when the dust has cleared after a crash.