Comparing financial markets to the 1929 crash

A very sobering presentation from JG Savoldi of BAM Investor on why a 17 month stock market decline is just not long enough, noting that currently there is extreme pessimism about the capitalist system but not about the stock market outlook. The BAM model is predicting a repeat of the crash of the 1930s, with the current rally a repeat of the bounce from the 1929 crash.

You could say that the government response has been different this time. But actually the squeeze on credit has been very similar to 1930 with banks holding on to cash. Debt levels are much higher than in the 1930s and the squeeze of global trade has been more immediate and larger.

If nothing else the disconnection between the current stock market optimism about a rapid economic recovery just does not agree with the economic facts which show a big slump and only a very slight improvement. That disconnection surely sets the stock market up for a fall. And the bank cash that is not going into global business has pumped up these markets to unsustainable levels.

In the 1930s after the big rally after 1929 markets then tumbled down and down to a bottom in the summer of 1932. The big 1930 rally proved very much a false dawn, and ruined many folk who thought they had made it past 1929. At the very least this suggests a hedged position is advisable in current markets.