Saturday, October 06, 2007

1929 and 2007

A couple of great weekend reading materials:

The first one focus on the issue between 1929 and 2007.
The Alarming Parallels Between 1929 and 2007. The author, Robert Kuttner, co-founder and co-editor of The American Prospect, draws out the parallels between now and 1929.

And here is one of them.

  • One last parallel: I am chilled, as I'm sure you are, every time I hear a high public official or a Wall Street eminence utter the reassuring words, "The economic fundamentals are sound." Those same words were used by President Hoover and the captains of finance, in the deepening chill of the winter of 1929-1930. They didn't restore confidence, or revive the asset bubbles.

    The fact is that the economic fundamentals are sound -- if you look at the real economy of factories and farms, and internet entrepreneurs, and retailing innovation and scientific research laboratories. It is the financial economy that is dangerously unsound. And as every student of economic history knows, depressions, ever since the South Sea bubble, originate in excesses in the financial economy, and go on to ruin the real economy.

    It remains to be seen whether we have dodged the bullet for now. If markets do calm down, and lower interest bail out excesses once again, then we have bought precious time. The worst thing of all would be to conclude that markets self corrected once again, and let the bubble economy continue to fester. Congress has a window in which restore prudential regulation, and we should use that window before the next crisis turns out to be a mortal one.

The other interesting reading article is Unlike Any Other (So Far) - A Look at P/E Ratios During Bull Markets

A Great Quote for the weekend.

  • "After eating an entire bull, a mountain lion felt so good he started roaring. He kept it up until a hunter came along and shot him. The moral: When you're full of bull, keep your mouth shut." - A Cowboy's Guide To Life