We are already in the Recession and most of the people compare the current recession period with 1929 Recession. Then Do you know what happened in 1930 's year? Started from 1929 , the US GDP dropped continuously for 4 years and the figure is double digit. in 1930 dropped 9%, 1931 - 8% and 1932 - 14 and 1933 is - 16%. This double digit is far more than any time before 2007. In 1929, the whole economy activities is retreating, the money supply reduce 1/3, over 20% of commercial banking in US stop operation. The bank also operated with force holiday to stop customer to withdraw money and many companies were force to file bankruptcy. In 1933, March, The FED announced to stop bank operation for one week.
In the prospective of government policy, in 1930 the government restrict on taxation on international trade which weaker the farming business, In 1932, the government even raised taxes heavily. All these create the loom heavily in 1930's
Now the new Obrama's team are so experience and having the history of 1930 and Japan's recession as reference. The whole world is providing all stimultus plan as soon as possible. It is for sure that this recession will not be the same like 1930. But it is for sure that Dec of 2008 till 1st Quarter of 2009 will not be the starting of the new initial economic cycle.
From my own opinion and the information in the market, the current green data of Dow, HS Index and Shanghai Index are such rebounce. It is still not the time for bull market. Whether I am sure, the time will be the prove.
For letting us the know the experience of last cycle of DOW , two charts was attached for your reference.
For every further down, there must be a rebounce. Besides, the current PE of DOW is around 12, however, the PE in USD under recession are usually at 10x and even 7x. Then do u think it is the right time for long?
Comments
The DOW future is -141, 8677, S&P -17.5 877.50. The US market may be dropped after the holiday. If you want to trade, aware the DXD for short DOW tonight.
2008/12/01 6:01 pm GMT +8
The World Economic Crisis initiated from the USA, but DOW only dropped 40% from the top; where as HS index dropped 60% more. A friend said that it would be close to the bottom if the stock market dropped around 66%. Does it mean that there is still room for the US market to drop?