Re: [CANSLIM] Today's IBD Front Page Graphic...

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Today's IBD Front Page Graphic...
Date: Wed, 3 Jul 2002 13:44:16 EDT

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Bill:

     I also thought the similarity in the two graphs was remarkable.  
Analyzing why this should be so, I've come up with these two (and I believe 
valid) analogies:  

     1) IBD points out consumer confidence in banks nosedived, as many banks 
folded-financially suffocating many of those who had accounts with them.  One 
of the ways the rampant fear was dealt with was by FDR declaring a bank 
holiday (wherein no banks had to give out money at the teller window).  This 
restored confidence in the banking system (apparently, FDR believed the 
banking system was running down the same path as the stock market-and 
unthinking fear was holding sway).  
     Now, I liken this banking situation to the current accounting scandals 
we are having.  Few investors trust the numbers (especially as compiled by 
the big 5 accounting firms).  Like FDR in the banking situation, I believe 
President Bush will have to take a hand in order to diminish the unblinking 
fear investors have toward the stock market.  Because, I believe, the 
President appreciates this tidal wave of fear, his administration will be 
very hard on the miscreants and the malefactors.  And once this becomes 
apparent, the fear will dissipate.

     2)  In order to avert more horrible consequences of the Crash, the 
government created the SEC.  It also passed laws outlawing certain security 
activities (eg. I believe "shorting" on upticks was disallowed at this time). 
 
     I liken the government in the 30s of taking the upper hand to ease the 
fear of the capitalistic system crushing the ordinary American, to today's 
War on Terrorism:  In the terrorism case  government legislation is needed to 
assure that our democratic/republic can protect us.  In the '30s case, 
government legislation was needed to protect and re-nourish our capitalistic 
system. In both case, necessary legislation was (and is) needed to preserve 
our form of government.  (Also, notice an interesting sidelight of this 
analogy:  Around the early 30s the Great Depression began, and in late 1940 
WWll was declared.  However, today things seem to move quicker nowadays, ie. 
there is no 8 year gap, as there was in the 30-40 period, between today's 2-3 
Year Crash and The War On Terror). 

     Also, and this touches on the economic impact of the Great Depression, 
what defeated the Great Depression was not legislation (in some cases it 
probably helped and in some cases it undoubtedly hurt), but the onslaught of 
WWll-as industry and labor geared up to fight it .

     That, in my opinion, is why the graphs have similar formations.  Also, 
IBD mentions a salient point (attention: Ernie):  The present Bear has 6 more 
months to run before it will equal the duration of the 1930s Bear.

jans


In a message dated 7/3/2002 11:46:50 AM Eastern Daylight Time, 
btriffet@earthlink.net writes:

<< Anyone have any thoughts on today's IBD graphic of the 1992-2002 market
 overlaid on the 1921-1932 market? While it is highly proclaimed by all that
 today's markets are much more protected from disaster (as is the economy),
 it's still quite amazing to see how similar the graphs look.
 
 -Bill >>

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