Eve Of Financial Collapse 2011, Like 1932?
By: DK Matai
Market Oracle Sep 23, 2011
Is history about to repeat itself or rhyme? They will say, nobody saw it coming. Who could have predicted it…? It is worth noting that the 1932 stock market crash is deemed to be the worst in the 20th century and not the one in 1929. It occurred three years after the first crash. In September 2011, we are now approximately three years after the financial crash of 2008-09, which was triggered by the bankruptcy of Lehman Brothers on September 15th, 2008.
Three years after 1929, on July 8th, 1932, the Dow reached its lowest level of the 20th century and did not return to pre-1929 levels until 23rd November, 1954. The full impact was not felt until the next year. By 1933, the Great Depression was very real and it would take more than 22 years before the market would regain what had been lost. By mid-1930, the market was up 30% from the trough of the 1929 crash. However, by the summer of 1932, the Dow reached a low of just 11% of its high in 1929, or a loss of roughly 89%, trading more than 50% below the low it had reached on October 29th, 1929.
If one had invested $1000 on September 3rd 1929 in the US stock market, and spread it across the Dow Jones components evenly, it would have gone down to $108 by July 8th, 1932 — end of the worst crash — or an 89.2% loss. To recover from that loss, one would have to watch one’s portfolio grow by 825%! This did not happen until a decade after the end of the Second World War in 1945.
All this happened despite assurances from prominent government and business leaders of-the-time that the worst was behind. Here is a news headline that may sound familiar: