Jump to content
House Price Crash Forum
Sign in to follow this  
Frank Hovis

Ftse Long Term - 1929 The Wrong Guide?

Recommended Posts

This is a nice bit of empirical science, I hold a view on this but I'm happy to have it corrected.

My basic idea on stocks is twofold:

i) comparison of the stock market with 1929 is inappropriate because then the money and credit went into stocks, pushing up the prices and dropping the yields. This time that credit went into houses. They will take the big tumble, not stocks. This can be evidenced by comparison of the pre-peak growth in prices.

ii) the British stockmarket has not gone up as much as the Dow since the last recession, and therefore was due less of a fall

So I wouldn't say I'm bullish on stocks (global depressions aren't usually good news for them!) but that I can't see a collapse and can no way see a repeat of 1929 for my reason (i) above. I think it's sloppy thinking to say that the collapse of a 12 year property bubble will impact stocks in the same way as the collapse of the 1920s stock bubble.

Now the initial answer to this is simple - are (i) and (ii) true?

Well I think (ii) is as the peak in the FTSE is on a par with 2000.

ftse-100-august.gif

http://www.forecast-chart.com/historical-ftse-100.html

However I can't find other comparisons of suitable scale, e.g. http://stockcharts.com/charts/historical/h...CFYIA4wodmWr1RA top left graph seems to support my idea (i) but the scale is tiny.

Anybody have any better sources?

I'm happy to be disproved on this, but in summary what I'm suggesting is that stocks and particularly the FTSE will not collapse and buying on the lows will be a good strategy rather than a bull trap because this was a property bubble not a stock bubble.

Oh, and house prices are toast :D

Share this post


Link to post
Share on other sites
This is a nice bit of empirical science, I hold a view on this but I'm happy to have it corrected.

My basic idea on stocks is twofold:

i) comparison of the stock market with 1929 is inappropriate because then the money and credit went into stocks, pushing up the prices and dropping the yields. This time that credit went into houses. They will take the big tumble, not stocks. This can be evidenced by comparison of the pre-peak growth in prices.

ii) the British stockmarket has not gone up as much as the Dow since the last recession, and therefore was due less of a fall

So I wouldn't say I'm bullish on stocks (global depressions aren't usually good news for them!) but that I can't see a collapse and can no way see a repeat of 1929 for my reason (i) above. I think it's sloppy thinking to say that the collapse of a 12 year property bubble will impact stocks in the same way as the collapse of the 1920s stock bubble.

Now the initial answer to this is simple - are (i) and (ii) true?

Well I think (ii) is as the peak in the FTSE is on a par with 2000.

ftse-100-august.gif

http://www.forecast-chart.com/historical-ftse-100.html

However I can't find other comparisons of suitable scale, e.g. http://stockcharts.com/charts/historical/h...CFYIA4wodmWr1RA top left graph seems to support my idea (i) but the scale is tiny.

Anybody have any better sources?

I'm happy to be disproved on this, but in summary what I'm suggesting is that stocks and particularly the FTSE will not collapse and buying on the lows will be a good strategy rather than a bull trap because this was a property bubble not a stock bubble.

Oh, and house prices are toast :D

been thinking the same for some time. the stock market was never in a bubble. it was housing. what this actually means is difficult to judge. but have been dipping in to stocks, on long terms basis. good companies that pay dividends. they seem good value in some cases.

who knows?

Share this post


Link to post
Share on other sites
This is a nice bit of empirical science, I hold a view on this but I'm happy to have it corrected.

My basic idea on stocks is twofold:

i) comparison of the stock market with 1929 is inappropriate because then the money and credit went into stocks, pushing up the prices and dropping the yields. This time that credit went into houses. They will take the big tumble, not stocks. This can be evidenced by comparison of the pre-peak growth in prices.

ii) the British stockmarket has not gone up as much as the Dow since the last recession, and therefore was due less of a fall

So I wouldn't say I'm bullish on stocks (global depressions aren't usually good news for them!) but that I can't see a collapse and can no way see a repeat of 1929 for my reason (i) above. I think it's sloppy thinking to say that the collapse of a 12 year property bubble will impact stocks in the same way as the collapse of the 1920s stock bubble.

Now the initial answer to this is simple - are (i) and (ii) true?

Well I think (ii) is as the peak in the FTSE is on a par with 2000.

ftse-100-august.gif

http://www.forecast-chart.com/historical-ftse-100.html

However I can't find other comparisons of suitable scale, e.g. http://stockcharts.com/charts/historical/h...CFYIA4wodmWr1RA top left graph seems to support my idea (i) but the scale is tiny.

Anybody have any better sources?

I'm happy to be disproved on this, but in summary what I'm suggesting is that stocks and particularly the FTSE will not collapse and buying on the lows will be a good strategy rather than a bull trap because this was a property bubble not a stock bubble.

Oh, and house prices are toast :D

Well I am personally of the opinion that the Great Depression was caused by the bank failures and the bond market crash of 1931 not the Stock Market crash of 1929. The Stock Market was just the environment where the credit bubble was blown in that era. In fact the evidence suggests that we have had two bubbles over the past decade. The first in stocks during the Dot.Com boom and the second in property. Both were inflated by low interest rates and lax monetary policy. The fact that stocks were not implicated in the later stages of the credit bubble does not necessarily mean they are a good investment opportunity going forward. The period 1982-2000 was a secular bull market for shares that lasted almost two decades. It was preceded by a bear market in shares that also lasted the best part of 20 years. If you look at the attached chart you will see that between 1966-1982 the Dow Jones basically went nowhere.

http://stockcharts.com/charts/historical/djia1900.html

Given that this was an era of rampant inflation you would have lost serious money if you were long stocks over this entire period.

If these time spans are anything to go by the next good time to get into stocks as a long term investment will not be until well after 2015.

Edited by up2nogood

Share this post


Link to post
Share on other sites
I'm not happy with the thread title, Frank. :huh:

Sorry 1929. Tbh I didn't check the date but relied upon your sig.

This was partly a response to a thread by the usually excellent Dr Bubb who was putting up the post-WSC share graph and saying that was coming to us when I don't think it is.

Share this post


Link to post
Share on other sites
been thinking the same for some time. the stock market was never in a bubble. it was housing. what this actually means is difficult to judge. but have been dipping in to stocks, on long terms basis. good companies that pay dividends. they seem good value in some cases.

who knows?

the stock market was in a bubble, remember the dot-com bubble. The housing bubble was money moving from one bubble and starting another. Look back at when house prices started to take off.

Share this post


Link to post
Share on other sites
the stock market was in a bubble, remember the dot-com bubble. The housing bubble was money moving from one bubble and starting another. Look back at when house prices started to take off.

Isn't that what they're saying? There was a dotcom bubble but it was long gone by 2007 so there was no stock bubble to collapse.

Share this post


Link to post
Share on other sites
Isn't that what they're saying? There was a dotcom bubble but it was long gone by 2007 so there was no stock bubble to collapse.

I was responding to hedi who said that the stock market was never in a bubble.

It takes time for a bubble to form. Money moved from stock to property. The property bubble should/could have ended in 2004 when house prices stalled but tptb kept it alive and helped inflate it further.

Stockmarkets rode up a long way at the same time as property gained, maybe not a bubble but not far off.

The smart money was out of property and stock before the major declines. Some will have re-entered stock and the financials but most is probably on the sidelines awaiting the next bubble.

Share this post


Link to post
Share on other sites
I was responding to hedi who said that the stock market was never in a bubble.

It takes time for a bubble to form. Money moved from stock to property. The property bubble should/could have ended in 2004 when house prices stalled but tptb kept it alive and helped inflate it further.

Stockmarkets rode up a long way at the same time as property gained, maybe not a bubble but not far off.

The smart money was out of property and stock before the major declines. Some will have re-entered stock and the financials but most is probably on the sidelines awaiting the next bubble.

I understand now.

This looks close to a HPC consensus. There is no stock bubble to burst.

Caveat that there has been a recent overdone rally which looks due a correction.

Share this post


Link to post
Share on other sites
Well I am personally of the opinion that the Great Depression was caused by the bank failures and the bond market crash of 1931 not the Stock Market crash of 1929. The Stock Market was just the environment where the credit bubble was blown in that era. In fact the evidence suggests that we have had two bubbles over the past decade. The first in stocks during the Dot.Com boom and the second in property. Both were inflated by low interest rates and lax monetary policy. The fact that stocks were not implicated in the later stages of the credit bubble does not necessarily mean they are a good investment opportunity going forward. The period 1982-2000 was a secular bull market for shares that lasted almost two decades. It was preceded by a bear market in shares that also lasted the best part of 20 years. If you look at the attached chart you will see that between 1966-1982 the Dow Jones basically went nowhere.

http://stockcharts.com/charts/historical/djia1900.html

Given that this was an era of rampant inflation you would have lost serious money if you were long stocks over this entire period.

If these time spans are anything to go by the next good time to get into stocks as a long term investment will not be until well after 2015.

look further bank

the depression was caused by the huge run up in debt facilitated by the central banks

it was made worse by government interference in the correction i.e. new deal, price fixing re wages, tariffs etc

oh hang on same things have happened this time

only this time the true fall in gdp will be masked by the printing of currency - but they know not what they bring forth

Edited by lowrentyieldmakessense(honest!)

Share this post


Link to post
Share on other sites
Isn't that what they're saying? There was a dotcom bubble but it was long gone by 2007 so there was no stock bubble to collapse.

Does not look gone to me

picture1yrp.jpg

valo.jpg

Share this post


Link to post
Share on other sites
Isn't that what they're saying? There was a dotcom bubble but it was long gone by 2007 so there was no stock bubble to collapse.

bubble in credit led to bubble in revenues.

Share this post


Link to post
Share on other sites
bubble in credit led to bubble in revenues.

+1

The source of the current collapsing bubble was excess credit/debt everywhere.

So remove that credit and everything goes, sure a lot it ended up in property but stocks also 'benefited'.

After all the stimulating of the last year, stocks worldwide are 100% in a bubble now.

Share this post


Link to post
Share on other sites
bubble in credit led to bubble in revenues.

..led to bubble in tax take, led to bubble in government spending and growth of public sector.

See California for how this plays out.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   287 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.