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Wednesday, January 26, 2011

Brief history of US Stock Market- 1928-1941

A very brief history lesson of the Stock Market 1928-1941

By the beginning of 1928, the nation was in the midst of an economically vibrant period known as the 'Roaring 20's' and the Dow was at around 200.  By year's end it would go up to around 290 and just before the Crash of '29, it had a High of 381.

To put the numbers into perspective since they seem so puny by the standards of the currently over-inflated Dow at 11,985, in a span of 22 months from Jan '28 to Oct '29, the Dow rose 90% which was unheard of then. If today's market spiked 90%, the Dow would be just over 20,000.

When the Market did crash on October 24, 1929, it eventually fell to 198 before it settled just below where it was in early 1928, a total decline of 52%

The investor class, banks and government then conspired to rally the markets by pumping lots and lots of money into it, and eventually by mid 1930, it hit a 'dead cat bounce' peak of 294, quickly pushing up another 90% to get it to early 1929 levels.

But this didn't last.

And in spite of many little rallies, the Dow steadily fell more and more over two years.  And by the middle of 1932, just about 4 years into the Depression, the markets did finally settle--  at 41...  yes I said 41! -- a decline in 2 years of 86% from the mid-1930 rally-point, and an ultimate Dow decline of about 91% from the mid-1929 Highs of 394.

The last time the Dow was at 41 prior to 1932, was in 1904-  28yrs.

Eventually the Dow would rise very incrementally with many fall backs for another nine years, finishing at 138 by the end of December, 1941, a few weeks after Pearl Harbor was attacked by Japan.

From mid 1932 to late 1941, the Dow grew by only 97 points.

World War II got the US out of the Great Depression.

We're currently in a 21st century Depression though no politician will admit it.  This is month 29.  The major market crash of 1932 took place about 45 months into the last Depression.  When the other shoe drops and the market crashes even further than 2008, what will get us out of this current mess?

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