Recessions & Crashes: Memories & Lessons

[winston]

How did the great depression affect Singapore?

Singapore depended largely on entrepot trade for its growth

With lack of trading activities, companies in Singapore had much less trade and profit than before due to international drop in demand for tin and rubber

Companies had to cut costs by retrenching workers to prevent suffering from incurring more losses

Many rich merchants who invested in overseas trade also lost their wealth or became bankrupt

There was widespread unemployment, hardship and poverty

Many shops left empty for many months, nobody wanted to rent them to incur more losses

Due to limited jobs available, hundreds of people would apply for vacant jobs.

By 1931, 1/3 of the population was out of job

Those able to keep their jobs, government passed a law in 1930 to either restrict and reduce immigrants entering Singapore, esp unskilled Chinese laborers or reduce pay of remaining workers

When immigrants no longer able to earn money, they will return to their homeland, government had extra burden, because they had to arrange for them to return home

Government had to use tax payers money of Singaporeans to send them back home

http://www.answers.com/Q/How_did_the_gr ... _Singapore

[winston]

158 years of history say this is when the next recession will hit

The next U.S. recession will be stamped “Made in America” and it’s not looking imminent.

There have been 33 recessions in the U.S. since the late 1850s and all but five followed increases in short-term interest rates. After the Federal Reserve was created in 1913 only the slump of 1945 amid the post-World War II demobilization occurred without a tightening of monetary policy beforehand.

The lesson Michael Darda of MKM Partners LLC draws from his review of history is that this U.S. upswing has legs until Fed Chair Janet Yellen and colleagues tighten monetary policy too much.

No slump in China, deflation in Europe or geopolitical crisis in Russia is going to derail the world’s largest economy in Darda’s opinion. With the Fed still to raise its benchmark interest rate for the first time since 2006, Darda is betting the expansion which began in 2009 won’t end before 2017.

Analysts at the Economist Intelligence Unit say it will even endure through 2018, making it twice the length of the postwar average and matching the record run of the 1990s, albeit at a much weaker pace.

“One reason we are not worried that outside influences will end the U.S. business cycle is that, in nearly every instance, business cycles in the U.S. have only ended when the Fed tightens enough to end them,” said Darda, MKM’s chief economist and market strategist in New York.

Source: Bloomberg

[winston]

The Stock Market Crash of 1929

By TARA CLARKE

Source: Money Morning

http://moneymorning.com/2015/05/27/the- ... -all-time/

[behappyalways]

“What set the great crashes apart from my perspective were changes – before the market dropped – in what I deem the key indicators of fear: the 'Vix' index, widely known as the fear index; the gold price; the US dollar; and the yield on US government debt,” he said.

“In 1987 and 2008 the first three rose, while yields on US government bonds shrank [meaning that their prices rose] as investors fled to safety. Stock markets are driven by fear and greed, and each of these early warning indicators was a reflection of the fear at the time."

Thirty years of stock market crashes – and the signs they were coming
http://www.telegraph.co.uk/finance/pers ... oming.html

[winston]

Don’t Forget The Most Valuable Lesson About Black Monday

By Elena Holodny

Source: Business Insider

http://www.thetradingreport.com/2015/10 ... ck-monday/

[winston]

‘This will be the greatest legal transfer of wealth in history’

The next two or three years are going to be terrible for most investors. But they can be GREAT for you, as he’ll explain over the next three days…

by Porter Stansberry

Source: DailyWealth

http://thecrux.com/porter-stansberry-th ... n-history/

[winston]

The 10 Principles of Bubbles - Show Why the Whole Planet’s on Crack

By Harry S. Dent Jr.

The global markets just reacted to another 7% plunge in Chinese markets – the biggest bubble of our time.

Go on the Internet and look up any article about China’s economy. Nine times out of 10 they’ll acknowledge the problems in overbuilding, real estate vacancies, rising debt and everything else.

But they always take the position that China will be able to have a soft landing. Through government guidance, they’ll be able to transition to a consumer-driven economy like the U.S. instead of a government-driven infrastructure and exporting one.

Meanwhile, very few analysts in the financial media think that stocks are in a bubble, when this rally since early 2009 looks exactly like every bubble in history.

And that’s the problem – when it comes to predicting the future, humans are invariably almost always wrong.

When bubbles get going, everyone gets “high” and no one wants the high to end… so we go into denial.

I recently shared a chart showing the human model of forecasting. At the top, we think we’ll never have another recession – that we’ve reached escape velocity. When it all starts to topple, we assume it’ll be a soft landing. And when it all hits the floor, we think things are so bad they’ll never get better again.

Every time!

We project in straight lines, when reality is cyclical.

The truth is, we don’t like cycles. We love it as the getting gets good, but we hate the downside. So when you start hearing that it’s going to be a soft landing – that is a sure sign that everything’s about to hit splat against the pavement!

That’s why I thought it was a good time to remind you of the 10 principles of bubbles from Chapter 5 of The Demographic Cliff, after the recent reminder of the fragility of global markets.

All growth and evolution is exponential, not linear.

All growth is cyclical, not incremental.

Bubbles always burst; there are no exceptions.

The greater that bubble is, the greater it’s going to burst!

When bubbles burst, they tend to go back to where they started or a bit lower.

Financial bubbles tend to get more extreme over time, as the available credit that fuels them expands as our incomes and wealth expand.

Bubbles become so attractive that eventually they suck in even the skeptics.

No one wants the “high” and easy gains to end, so we go into denial as the bubble evolves, especially in its latter stages.

Major bubbles occur only about once in a human lifetime, so it is easy to forget the lessons from the last one.
And the last one’s my favorite.

Bubbles may seem fruitless and destructive when they burst, but they actually serve a very essential function in the process of innovation and human progress.

So make no mistake – it’s a bubble, damn it! And worse, it’s a global bubble. It’s saturated the whole frickin’ planet to the point where hardly anyone can see it, because you can’t get out of it!

From stocks, to real estate, to bonds – it’s all caught up in the euphoria!

The commodity bubble has already burst, and China’s stock bubble has peaked and will continue to burst, despite government intervention with hundreds of billions to prop it up.

It already fell another 7% Monday and global stocks along with it (though not as bad), as the world’s finally waking up to the fact that China ain’t all it’s cracked up to be – it, like all other markets, is just on crack!

Bubbles don’t correct – they burst! Sure, U.S. stocks might have climbed out of the August correction. But too many small- and mid-cap stocks are in the red to say “the coast is clear.” And these growing divergences in the market are showing that we are very, very close to bursting.

Source: Economy & Markets

[winston]

Revisiting The Greatest Crash In History

By Tyler Durden

Source: Trading Report

http://www.thetradingreport.com/2016/01 ... n-history/

[winston]

10 Bear Market Truths

Source: A Wealth of Common Sense

http://awealthofcommonsense.com/bear-market-truths/

[winston]

Here's what happened the last 10 times the stock market disintegrated into a bear market

By Bob Bryan

Source: Business Insider

http://finance.yahoo.com/news/heres-hap ... 08227.html