1937, not 1929

I love all of these comparisons to the Great Depression. A very easy comparison for those of us who didn't live through it. Most of the idiots on television who so readily invoke that comparison have no understanding of history.

The real reason for this post is to actually make the comparison between present day and the Great Depression...in terms of stock market charts. That's probably the only true comparison worth using. From 1929 until 1938, a chart of the Dow Jones industrial average looks remarkably similar to a chart of the Nasdaq from 2000 to the present. From peak to trough, in 1937 and 1938, the sell-off in the Dow lasted the exact same length of time as the same movement from October 2007 through November 2008 (36 weeks, I believe). A new rally began exactly 12 weeks later (in 1938). It has now been exactly 12 weeks since we made new lows in November. For this astounding trend to continue, we would have to see a rally here very soon. Only time will tell.

One last note. I listened to a speech given by Congressman Ron Paul in Houston recently and he make a couple of interesting points. One was that he appreciated all the compliments he'd received for his intelligent insight into the economy and the weakness in the U.S. dollar. His response was that he didn't think it took a genius to figure out that if you print a lot of money, you get a decline in its value (that got a few laughs from the audience.) The other thing he said that I thought was worth remembering was that economists (in this case Austrian economists) are not very good at market timing. Mr. Paul remembered that a distinguished Austrian economist noticed problems with Fannie Mae and Freddie Mac's debt levels back in the late 1990s. It took another decade for those companies to collapse under that mountain of debt. Obviously, the massive increase in current government debt levels and the printing of money as a "solution" to our financial problems will lead to problems, including a heavy dose of inflation. Timing and reacting to that inflation is the difficult part. We know the what, we just don't know the when.