Last year I started this blog with the intention of informing people that we are headed into a Depression even worse than the Great Depression.
I still believe this to be the case. Technical analysis says so.
Now I know the naysayers will point to last year's failed prediction of a crash ..... They'll also have a good laugh at our expense --- nothing less should be expected. The record is there for everyone to see.
But unlike other blogs,
The 1930's Scenario will never delete bad calls or censor criticism (just don't go overboard!). When we're wrong, we're wrong.
But this time, we're gonna be right.
You see,
The 1930's Scenario now has an even better understanding of the relationship between the 1929 Bear Market and our own.
Keep an eye on this post, and future ones ... we'll show you.
We weren't necessarily wrong last time -- just WAAAY too early.
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With all that out of the way, I'll be posting more charts in the near future.
But first, let's start at the beginning.
Here are two charts leading up to the 1929 and 2007 tops.
From
Prelude to a Depression:
1928-1929:
And 2003-2009:
^^^
As you can see, the charts look the same leading up to the 1929 and 2007 tops.
According to
The 1930's Scenario, the all-time record highs that were reached in September 1929 and October 2007 match up perfectly.
In both cases, you had speculative orgies that were created by macroeconomic imbalances and cheap, easily available (and artificially mispriced!!) credit.
These "bubbles" only lead to short term prosperity and long term pain.
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In future posts, I'll get back to the charts, but for now, consider this:
One of the central beliefs of
The 1930's Scenario is that once a bubble is formed, painful deflation cannot be avoided.
Often you will see history books and professors claim that the Depression only happened because the money supply was allowed to rapidly shrink in the early 1930's, or because new tariffs killed off international trade, etc.
And now ....
Men like Ben Bernanke and Milton Friedman claim to have solved Depressions!
They would have you believe that if they just do THIS ... and THIS ... and then THIS ... we can have prosperity forever!
Rubbish.
Economic collapses are not the result of policy errors on the way down.
They are solely the result of policy errors on the way UP!
Once the bubble forms, painful deflation cannot be avoided.
If you can grasp this central belief, it will help you see that no matter what bailouts are approved, or "kick-the-can" schemes are thought up ---
In the long run, the charts will ALWAYS look the same.
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Until next time, keep an eye on the Market Forecast, bottom of the page.
Beginning this summer,
the markets will resume an inexorable decline back towards their 2010 lows.
Targets:
Dow Jones Industrial Average: Dow 10,000
S&P 500: 1040
It's a very, very long way down to the bottom -- we're just getting started.
