Are We Fated to Live 1929-1930 All Over Again?

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recession 1929

September 3, 1929 -- The Dow surges to a record high of 381.17. Months later, years later, decades later, I wonder, "Will the Dow ever reach its 1929 high again?" All during the Depression years of the '30s I wonder, all during the War Years of the 1940s I wonder, all during the early '50s I wonder, and then on November 23, 1954, the Dow finally rallies above its "impossible" 1929 high of 381.17. I blink my eyes in excitement. I can't believe it. It's finally happened after 25 years of waiting.

On October 9, 2007, the Dow rallied to a record high of 14164.53. Three years have passed since then, and I wonder, "Will the Dow ever climb back to its 2007 peak again?" Following the 1929 peak, it took 25 years to reach the 1929 high again. How many years will it take to better the 2007 high? Memories -- memories and comparisons.

Forgive me, but I can't seem to get the fateful period of 1929 to 1930 out of my mind.

We don't have many economic or business indices covering the period of the 1930s, but I'm going to use Barron's Monthly Index of Physical Volume of Industrial Production (I have those figures).

Interestingly, this widely-used Barron's Index hit a peak of 115.1 in June of 1929. Are you taking this in?! -- Barron's Business Index hit its high in June, which was three months BEFORE the Dow recorded its 1929 record high! After June 1929, Barron's Index headed down. But wait -- the Dow continued higher, recording its record high three months later on September 3, 1929. Following the Dow's September high came the famous 1929 crash, which only two months later took the Dow to a temporary bottom of 198.69 on November 13, 1929.

From there, the post-crash stock market corrected upward, roaring higher, and reaching a peak of 294.07 in April of 1930. So powerful and convincing was the rally from the November 1929 low that many participants were convinced that they were seeing a return of the bull market. The great corrective rally lured many investors back into the market as they sought to recoup some of their 1929 losses.

What I found in my research causes me to catch my breath. All during the huge rebound from the November 1929 low, Barron's Index of economic activity was actually declining. The Index registered 99.8 in November with the Dow at its 1929 low. In January 1930 (with the Dow substantially higher) the Index had dropped to 95.2. By April with the Dow at its rally high of 294.07, Barron's Index had declined to 94.2.

In other words, during the powerful post-crash rally, the US economy was fading...

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