Wow. I thought the crash in October 1929 brought the market down to the low levels that signalled the great depression. So I was surprised to learn that after a large rebound in the DOW it was really the declines of 1930 that brought the DOW down into the depression era numbers. Look at the 1920’s rise of the DOW and fall to about 250 after the crash of October 1929: Graphs Source is Dow Jones Indexes
Now comes the scary part. Post crash DOW of about 199 was about FIVE TIMES the DOW lows seen during the great depression with a DOW at 41 (yes, that would be forty-one) in 1932.
OF COURSE you can overgeneralize from the depression data. Today billions of shares trade in a market far greater than at that time, the global economy is totally different, etc, etc.
However what really concerns me is the fact that the drops we’ve seen of some 40% from DOW highs of the late 1990s look more like the 1929 prelude to a depression than I’d been thinking. Are we in for just the modest rebound we’ve seen from the market lows of a few years ago and then a long slide into economic despair? Is this even knowable?
Warren Buffett, in an excellent interview on Charlie Rose a few days ago, seemed to think that the bailout / rescue plan will avert a catastrophe, but he was clearly thinking there was at least some trouble ahead bailout or not.