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Thread: no this year was not like 1929 ... it was much worse !!!

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    Default no this year was not like 1929 ... it was much worse !!!

    (snip)"Now, the days dwindle down to a precious few. And if some miracle doesn't happen this will go down as the worst year in Wall Street history.

    Worse than '29? Yes…a lot worse.

    1929 had been a big winner for investors before the crash began in the last quarter. When the champagne was finally poured on New Year's Eve, investors were less than 10% below where they began the year.

    This year has been all bad. Investors are looking at a loss over 40%. The typical investor in the stock market has probably lost half his money.

    The news continues to confirm that a major correction is underway.

    Comes word this morning that Kuwait has cancelled a $9 billion joint venture with Dow Chemical…and that steel production is dropping fast.

    Student loans are becoming a "crushing burden," says the LA Times. When things were moving in the right direction, paying off a student loan seemed like a cinch. But when the only job you can get pays only $20,000 a year…it's hard to start out life with $50,000 in student loans. At 7% interest, that's $3,500 a year…plus, if the poor young fellow wants to be debt free in 10 years, he's got to pay another $5,000 of the principle each year. That will cost him about $700 a month. Let's hope he doesn't have to eat…pay the rent…or buy a car."(snip)


    (snip)""Dad," [College Senior] Jules took the bait, "you keep talking about this worldwide financial meltdown. But I was just in the U.S. last week. I didn't notice anything different. There weren't any soup lines. People didn't seem to be suffering. And even if there were a worldwide financial meltdown, I don't see how will it make any difference in my life."

    "Jules, so far, we've only seen the very first part of this meltdown. It has only affected investors. And even investors don't believe it is serious problem. They expect next year to be better.

    "What we've seen so far is just 1929 - but worse. The real damage…the real pain…is still ahead…those grim years of the '30s. In 1931, stocks fell another 50%. Then in 1937, they went down about 35%. And unemployment reached 25% - one out of every 4 people couldn't get a job.

    "And back then, people had much more of a margin of safety. Much of the population was still living on farms. They might not have had any money, but they still had their own produce they could eat. They were used to gardening…canning food for the winter and making do without a lot of money. And many of them still heated with wood.

    "Now, the typical household needs a job in order to eat. No, they need two jobs. They don't have gardens. They don't know how to can food…or how to dress a pig. They have bills to pay - not just food, but mortgages, insurance, student loans, health care, gasoline, car payments. Today, usually, both husband and wife work…and they've increased their expenses to the point where if they lose either job they're soon going to run out of money.

    "One thing that is almost sure to happen - the workforce is bound to shrink. People are going to leave the world of employment in order to stay at home, take care of children, cook their own meals, and so forth. They may even put in wood stoves and plant a garden.

    "In the '30s, people still had private safety nets. They had stockpiles of money…food…fuel. They could last at least for a while without jobs. Now, we have public safety nets. People can't last long without jobs, but we have unemployment insurance…food stamps…and so forth. These public systems cost a lot of money. It will be interesting to see what happens to them when they are put under the strain of a major meltdown. The government will probably end up just sending people checks. It's the fastest and cheapest way to get money into circulation.

    "As for what difference it will make to you…well, when you get out of school in May you'll probably find it a lot harder to get a job than you would have a year ago…and if you wanted a job on Wall Street, you'd probably be out of luck all together. And if you're able to get a job, it probably won't pay as much as you had hoped…and you won't be able to spend as much money. Or, maybe you won't get a job at all…and you'll have to come and live at home with us. That would be nice for your mother and me, but you may not like it so much."(snip)


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    Default Re: no this year was not like 1929 ... it was much worse !!!

    I think I just shit my pants

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    Default Re: no this year was not like 1929 ... it was much worse !!!

    Very True.

    Don't laugh...but hubby and I are planting a garden and growing our own veggies this year.

    And will short the market big time on the next leg down come April-ish
    Rebecca Avalon







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    Default Re: no this year was not like 1929 ... it was much worse !!!

    ^^^^Yeah, me and my hubby took out all our sod and got our garden ready to fertilize and plant come spring. I've been thinking about doing that for quite some time already and people laugh at me.

    I was raised on a dairy farm, so I know how to tough things out and live off the land. It's just really hard to have a good garden in the desert though. Still wondering how it's going to work out.

    We also built a hydrogen fuel cell for our work truck. It cost us about $230 to build and buy tools and stuff, but it saves over 50% on gas. We built it when gas was $4.21/gal.

    For summer time, I am hoping I can build a hydrogen generator ran on solar panels and a battery for backup. That would save me $400/mo on power bills from July-Oct.

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    Banned Melonie's Avatar
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    Default Re: no this year was not like 1929 ... it was much worse !!!

    ^^^ that's phenominal ( homemade hydrogen !!!). As to growing your own food, several sources have been speculating that food prices are going to take a major jump this summer ... based on the fact that the US was already a net IMPORTER of foods, and the fact that many farmers both in the USA and in food exporting countries are going to have difficulty obtaining financing needed to plant / fertilize / pesticide next year's crops for full 'productivity'.

    In the larger picture, the thing that really sank in from that article is that, unlike we former 'farm girls', when you stop to think about it probably less than 10% of the current population has any clue as to how to grow and preserve food, how to do basic mechanical and electrical and plumbing stuff, etc. ... even how to defend themselves. Thus some 90% of the population is more or less dependent on the continued 'operation' of the supermarket system, the 911 system, the public utility system etc. An ever scarier thought is that, if a currency crisis ever did occur that effectively reintroduced barter as the main means of exchange, a whole lot of girls would really have nothing of 'value' to barter with other than their 'ass'. Granted all of this is pretty extreme Mad Max speculation, but even so it's something to think about given how quickly hurricane Katrina or a week long power outage in certain NYC neighborhoods 'ripped away' the facade of 'civilized life'.

    Even if Mad Max doesn't come close to developing, the author still has a hugely valid point about the 'Albatross' of a typical $50,000 student loan (with an $8,500 per year non-bankruptable cost of debt service) hanging around the necks of many recent graduates. In essence, this means that in order for such a recent graduate to earn one single dollar for themselves, they first need to earn $8,500 AFTER TAX = $10,000+ pre-tax for the student loan payment. Several sources are also pointing out the 'new' moral hazard being created by gov't in this regard. If a new graduate remains unemployed, it is extremely likely that principal and interest payments on student loans can be deferred forever. Similarly, if a new graduate remains unemployed, they are also potentially eligible for medicaid / subsidized rent / subsidized utility benefits. On the other hand, in order to achieve an equal standard of living while paying the full price for medical coverage / rent / utility bills, as well as paying scheduled debt service on their student loans, it's necessary for that new graduate to obtain a job paying well in excess of $40,000 per year. But if that new graduate accepts a job paying only $30,000 per year, and is thus ineligible for medicaid / subsidized rent / subsidized utilities as well as forced to begin making student loan payments, their standard of living will arguably be significantly lower than if they had remained unemployed !!! This 'moral hazard', and the rapidly increasing default rate on student loans thus student loan backed bonds which stem from that 'moral hazard' in a manner very similar to 'subprime' mortgages, is speculated to be one of the next 'shoes to drop' in regard to ongoing US taxpayer bailouts of GSE's ... in this case Sallie Mae ( which is on my 'short' list).

    In essence, the situation is identical to 'subprime' mortgages from a government policy / risk management standpoint. The US gov't encouraged the issuance and essentially guaranteed repayment of student loans granted to all sorts of people, with little regard for the after-the-fact ability of those student loan recipients to actually repay said loans. Well surprise, surprise, between the 20-30% of student loan recipients who failed to graduate, combined with the 50-60% of student loan recipients who obtained college degrees of limited or non-existand 'value' in today's economy, etc. the student loan default rate is now skyrocketing. But unlike 'subprime' mortgages, there is no underlying loan collateral for the lender / gov't to recover (well, short of a newly instituted 'indentured servitude' gov't program for student loan defaulters, anyhow).

    Back on topic, I'm not at all confident that we're going to see much of a 'spring rally' in US markets ... with the likely reason being dismal earnings reports from most US listed companies. Undoubtedly we will see some sort of summer rally, but this will be currency based rather than productivity based (i.e. US dollar denominated stock prices will rise as the US dollar exchange rate falls) ... with the likely reason being the necessity of the US FED to issue and attempt to sell an extra trillion dollars worth of US Treasuries in order to finance an Obama 'stimulus package' into reluctant world debt markets.

    ~
    Last edited by Melonie; 12-30-2008 at 06:33 AM.

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    Default Re: no this year was not like 1929 ... it was much worse !!!

    Liquidated almost 100% of my portfolio over the last few months. Kept utilities, everything else cash- my Canadian Dollar... I've been selling anything I don't use on Craigslist, inluding my gym membership. Reduced my Blackberry cell-phone package to minimum, no data, gone to lite high speed internet, no cable, sat radio, or any other monthly subscriptions.

    The goal here is preserving and saving cash. Working overtime and hardly on SW as of late. Glad to be back, some interesting articles.
    Oh Canada, we stand on cars and freeze...

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    Banned Melonie's Avatar
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    Default Re: no this year was not like 1929 ... it was much worse !!!

    agreed ... 'cash' is still King right now. However, some quarters now seem to be 'buying into' the predicted effects of a massive Obama stimulus package ...

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