Daily Blog - Tiger Software

          June 24,  2007

The 1929 Crash: Could It Happen Again?  
     Yes- Absolutely.  

And George Bush is Certainly
Not As Good A President, as Hoover Was.

              By  William Schmidt, Ph.D.,     - Tiger Software's Creator
   (C) 2007 William Schmidt, Ph. D.  - All Rights Reserved. 

   No reproductions of this blog or quoting from it
   without explicit written consent by its author is permitted.

   Send any comments or questions
   to william_schmidt@hotmail.com


    Back to Home Page - www.tigersoft.com       TigerSoft Blog      Peerless Stock Market Timing: 1915-2008

                              Sunday - June 24, 2007      

The 1929 Crash: Could It Happen Again?  
                       Yes- Absolutely.

                                     By  William Schmidt, Ph.D.

Looking back, we can see that the Tiger programs would have easily
  spotted the top as it was being made in the Summer of 1929. 
The Tiger
  "Accumulation Index" had been mostly very negative for months.  Big Money
  was getting out of the market.  They were "distributing" their shares to
  the naive and uninitiated
The amount of distribution is often a very good sign
  of how deep the resulting decline will be.  In 1929 it was massive
.     "Big Money"
  did not have to start dumping their shares until the neckline of the classically bearish
  head and shoulders pattern was violated early in the October 1929 Crash.

If you are lucky, you will never see a chart of a major index showing such heavy
  and steady "distribution" as in 1928-1929, over such a long a period.   But the charts
  of 1969, 1972-1974, 1987 and 1999-2000 do show that when tops take a long time to
  take shape,  the resulting declines are deeper and last longer, too.  All the red
  distribution in the Tiger chart proved quite prescient, as the DJI declined until 1933
  and lost 85% of its value.

                      Origins of TigerSoft's Accumulation Index

     The Tiger Accumulation Index was invented by me (William Schmidt, Ph.D.)
  in 1972. 
Until 2007, I had not looked at the 1929 data.  So, this chart is one
  more important validation of the importance of the Tiger "Accumulation Index".   

  While in graduate school at Columbia University,  I had worked for Smith Barney (then
  Harris, Upham) in their headquarters in NYC and had seen the way institutions
  "distribute" big blocks of shares during the day and at the close. I did the first calculations
  with this tool on a Bowmar calculator late in 1972.  At first, I thought I had made an
  error in the formula, because all the charts showed very heavy distribution (negative
  Accumulation readings).  But  I had not.  The 1973-1974 bear market was about to

At the bottom of this page, see the Peerless charts of 1930-1933.  
  Note how the bearish readings from the TigerSoft Accumulation Index
  when new highs were made and serving as Sell S12s, would have kept
  someone trading back then out of trouble and warned them of a new
  decline about to occur.

  wpe1E.jpg (47475 bytes)


  wpe1F.jpg (12163 bytes)                 Here is a song from February 9, 1930 by George Olsen,
"I'm In The Market For You"
                                                                                                   Play It.
                                                                  (Source:    http://www.btinternet.com/~dreklind/thecrash.htm)

                                                                                   I'll have to see my broker
                                                                                   Find out what he can do.
                                                                                   'Cause I'm in the market for you.

                                                                                  There won't be any joker,
                                                                                  With margin I'm all through.
                                                                                  'Cause I want you outright it's true.

                                                                                  You're going up, up ,up in my estimation.
                                                                                  I want a thousand shares of your caresses too.

                                                                                  We'll count the hugs and kisses,
                                                                                  When dividends are due,
                                                                                  'Cause I'm in the market for you.
   Could A Crash and A Depression like 1929-1933 Happen Again in the US?  Yes!

          Absolutely.  Though you won't see this said very often by orthodox economists or
   politicians.  Keep in mind that the US Government is now much deeper in debt and the US
   has a far worse balance of payments problem than it did in 1929.  True, margin requirements
   for stocks are 50%, not 10%.  But the volume in index related derivatives is enormous and they are
   now factored to double the underlying index's volatility.

        The bursting of the vastly over-extended housing bubble certainly could be the trigger now. 
  Under-consumption and serious maldistribution of wealth were causes for the 1929 Crash and Depression.
  Thus, we have to be concerned about the extent to which middle-class Americans have exhausted their credit
   now.  And we must also note the bearishness inherent in the severe maldistribution of wealth in
  America now, where the top one percent own more than the bottom 95%.  This rivals 1928.

Image-Poverty.jpg (48096 bytes)

          The world bull market has gone largely up, uncorrected since 2003.  A severe world-wide
   equities' decline from a lofty, wildly over-bought condition would savage the buying power
   of many, many businesses and consumers around the globe.  Illegal insider selling has been
   very pronounced.  There will be another round of class-action lawsuits against CEOs
   for dumping their shares on the basis of inside information not yet released to the general public.
   This will hurt investor confidence significantly, just as it did in 2001-2002. 

         The US Federal Reserve Board has, except for brief periods, always been much more
   interested in finding ways to finance the US federal deficit than guarantee reasonable 
   levels of employment.  So,  I would expect them to be very slow to lower interest rates.  
   A "run" on the dollar or a severe oil shortage will make their job much harder.  Too many
   mainstream economists are of the Chicago monetarist school.  As a result, they will

   keep pushing  monetary solutions when more basic problems, like the 3 billion dollar
   Iraq blunder.  The exporting of jobs and maldistribution of wealth will go unaddressed
   by the Republican Bush Administration.  Trickle down monetary solutions will
   not replenish the much diminished purchasing power of middle class and working
   cloass Americans.   T
he quick fixes Bush and Congress develop will not rescue the
   sinking economy.  They will deny the severity of the coming crisis until it is too late.
   They will be too little and too late.  Their failure will underline the crisis of confidnce,
   but not solve it.  Factory orders will be delayed and unemployment will rise sharply,
   thus making matters worse.

           When Congress tries finally to protect American jobs with tariffs, we will be going back to
   the economic nationalism of the Smoot-Hawley Tariff of 1930.  Moreover, note how the
   Democrats have now abandoned Keynesian fiscal  policies as they promise to balance the
   federal budget in order to besmirch Republicans for the massive budget deficits of the Bush

   years. And if the Democrats cut military spending and troops in Iraq, the multiplier effect will
   be working in reverse, as thousands of soldiers become civilians again.

            Many unorthodox economists correctly have pointed out that each US recession
   since 1948 has been deeper and required larger and larger deficit governmental

   spending to end the recession.  
 The US deficits are now so large, it is not clear how,
   other than printing billions and billions more paper money, any Keynesian public
   work program could be funded.  

           Moreover, I doubt if there is another deep turn-downwards in the US economy, 
   that we can we really expect the Japanese and Chinese, who have already financed
   so much of the US debt, to allow  the US to deliberately further unbalance the budget
   to the extent necessary to jump-start a US economic recovery?  Lastly, civil unrest
   would be highly likely, as the difference between the haves and the have nots in the
   US  is now back to levels not seen since the 1920s.  That would send even more
   US capital overseas.   

  wpe1.jpg (15369 bytes)

         George Bush let 9/11 happen, he let New Orleans be destroyed, he has
    destroyed Iraq for millions and millions who have no electricity, no clean water,
    no jobs and no schools.  In his war on Iraq, Bush has wasted three trillion dollars
    (when all the bills come in). Think how much good that would have done spent
    on American infrastructire and education.  Bush is hopelessly stubborn and even
    more arrogant.  (I have met him.  I know whereof I speak!)  His buddies are
    looters.  He is just the man to make a bad situation even worse!   Where will
    Americans go? Four million Iraqui have left Iraq. 

     Sources:  See http://www.commondreams.org/archive/2007/07/30/2860/

                        The Depression Years, The DJI
              and TigerSoft's Accumulation Index

            The famous Peerless Sell S12 would have kept
                  allowed someone back in these years to sell short
                  most of the major tops.  This is the same signal
                  that we use now.  It called the top in
                 October 1987, for example.

DJI1930.BMP (960054 bytes)
DJI1931.BMP (960054 bytes)
DJI1932.BMP (960054 bytes)
DJI1933.BMP (960054 bytes)


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