On Black Monday in 1929 the stocks dropped 24 percent and at the lowest point the U.S. stocks had lost more than 80 percent compared to their highest point (recorded in Sept 1929). But it wasn’t until 1932 when it hit the bottom and it took 29 years (1958) for the stock market to climb back to pre-Depression level. It was better during 1974’s Great Bear Market when the U.S. stocks erased more than 50 percent off their peak but compared to 1932 Great Depression, the stocks this time fell gradually. Still with Black Monday, the 1987 crash sent the U.S. stock market down 20 percent but it recovered fairly quickly.

As for the 2008 bear, the stock market has fallen more steeply during the first year than it did during the 1932 Great Depression and so far the stocks are more than 40 percent lower. The U.S. has done her part when the law was passed for the $700-plus billion rescue plan although the Congress felt somewhat foolish when the Bush administration suddenly wanted to buy part ownership in American banks and now it’s Group of Seven (G7) and Group of 20 nations’ (G20) turn. Whether such talks will remain talks and more meeting to be attended without concrete actions shall remains to be seen.

I’ve talked about the silliness in banning the short-selling by the U.S. regulator, SEC. Not only would such action not help to stop the bleeding it actually tantamount to add fuel into the fire. Former dictator via his “Mahathirism” had banned such short-selling during the beginning of 1997-1998 Asia Economic Crisis but the local stock exchange tumbled from more than 1,000-level to 200-plus-level. U.S. SEC tried to do that 10-years later but the Dow Jones is now trying to nose-dive to 7,000-level from 11,000-level. When nine out of ten people are running mad and fear, no short-selling ban can help stop the onslaught. There’s only one thing left to do to stop the global stock markets drop – close the global stock markets, period *grin*.

That was exactly what the G7 finance ministers were mooting when the Italian Prime Minister leaked the story. Strangely these smart ministers thought it was a freaking good idea to suspend the world’s exchanges in order to buy some time to rewrite some rules and enable U.S. Treasury and Federal Reserves to implement the $700 billion bailout plan. Furthermore stock markets around the world such as Iceland, Russia, Indonesia, Romania, Austria, Thailand and Brazil were either forced to halt trading or frozen indefinitely. It would be laughing stock to implement such stock market closure across the boards, no? These geniuses must have thought that once the global stock markets closed and reopen, people will forget about the sub-prime and the financial crisis as if they were being brain-washed. What a joke!

U.S. companies are set to announce their corporate earnings for the season starting this week. All the eyes are set to grill financial institutions such as Citigroup and JPMorgan Chase & Co. Investors are watching and will find tiny excuses to punish any stocks that do not exceed earnings estimate. The emotion is running high and people can be very unreasonable. Next week should be another interesting and great week with lots of surprises.

Other Articles That May Interest You …

• Panic Selling Continues, first Stock Exchange to be Frozen
• Cash is King but do you have the bullets?
• Short-Selling Crackdown on Naked Shorties but will it help?

Tweet

October 12th, 2008 by financetwitter

If you enjoyed this post, what shall you do next? Consider: