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A Great Depression Deja Vu?

Written By Brian Hicks

Posted September 10, 2009





Here’s some more news from the pages of the Wall Street Journal during this week in 1930.

Needless to say it makes for an interesting read—especially since the bulls see nothing but sunny skies ahead these days.

Market Commentary:


  • Bulls encouraged by good business news continuing to trickle in yesterday, including Aug. rise in steel production and $30M rise in commercial loans in latest week. Several bear attacks failed, and stocks strengthened in late afternoon. Retail shares rallied impressively on news of recent sales improvement, including Woolworth, Macy, Best & Co., Associated Dry Goods, Abraham & Straus. Banks, utilities strong. Oils weak on lawsuit against curtailment. Bond market firm, particularly convertibles and preferreds. South American bonds higher. US govt. dull, unchanged.


  • Roger W. Babson (economist, made perfectly timed bearish call in fall 1929) optimistic on immediate future, sees possible “stampede of orders” due to underproduction; says it’s as evident now that business is bound to improve as it was clear a year ago that it must deteriorate.


  • R. Whitney, NYSE Pres., blames depression on overproduction caused by artificial price-fixing efforts (made production artificially profitable). Says market crash didn’t cause depression but followed decline in business by a few months; blames lag on lack of accurate economic statistics. Criticizes proposed Stock Exchange regulation as making “prices on the Exchange a false reflection of the state of business”; denies stock market speculation harmfully diverted funds from other uses.


  • Dow considered to have given “highly bullish signal” by closing Saturday above the 241 resistance level where selling was repeatedly encountered in summer. This “reflected powerful buying based on growing optimism regarding autumn trade prospects.” Major investors reported to have participated in buying after being “persistently bearish since the early part of the year” and making “huge profits on the short side.”


  • Some of “the shrewdest market traders” now see “definite turning point” in stocks. Conclusion isn’t based on “chart theories such as double or triple tops” but on fundamentals. Believe long side will be the safe one from now on, and “standard stocks can be bought with assurance of profit. The corporations, the country, and the people are very rich, richer than after any previous panic, … industry and the market are in a strong position to stage a comeback.”


  • Good business news has started to accumulate over the past week, including better wholesale and retail reports (ex. Woolworth), good steel news (increase in production and some indications of price improvement), increase in freight loadings for second week in a row (although still well under 1929 level), some increase in gasoline prices.


  • Market observers call bear attacks in past week “rather theatrical,” often delayed until final hour to affect sentiment at close.


  • Henry Ford, sailing on ocean liner Bremen, predicts early end to depression. Says might last past Oct., but no wage cuts needed for return to normal conditions.


If they only knew what was headed down the pike.

History is simply fascinating.

To read more about the news from the 1930’s click here

Related Articles:

News From The Great Depression

The Great Depression’s Ben Bernanke

A Fair Comparison? Probably Not.

Warren Buffett says the economy is in a ‘shambles’

Stephen Roach’s Outlook: “A rude awakening”

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