For most Americans, few remember the Great Depression, aside from
our grandparents or, sigh, great grandparents. However, the year 1929
presents some fascinating correlations to what is going on both in the
market and in American pop culture. Four of the last major market
corrections have been preceded by a Hollywood movie featuring Wall
Street: 2000 - Boiler Room, 1987 - Wall Street, 1983 - Trading Places,
and wait for it... 1929 - The Wolf of Wall Street? Why does this
coincidence continue to repeat itself? What is it about the psyche of
humans that produces the perceived need for a movie about Wall Street
timed
perfectly with a stock market correction? The market is all about emotion, two emotions really - FEAR and GREED. Stocks do not trade on fundamentals; they trade on human emotion. After all, humans are the ones pushing the buttons or programming the algorithms. Therefore, at the highs of the market, traders are euphoric and a money-making opportunity is perceived by Hollywood producers to capture the fervor. Is it ironic that the market crash that represented the beginning of the Great Depression was preceded by a movie about a wolf on Wall Street? Scary stuff. Surely a signal for a market top, but not a "tradable" event by itself.
What about the Fed induced boom and bust cycle that seems to be occurring every 6-7 years? In 2000, the tech bubble burst fueled by easy money and obscene speculation in the dot com era (hindsight is 20/20). Seven years later, 2007 the market again topped out on "obscene speculation" in the housing market. In 2014, some may argue, myself included, that the S&P 500 is up on thin air and "obscene speculation" from traders chasing returns. All three scenarios had investors with easy money chasing returns with a euphoric feeling that the stock market cannot go down. Remember the phrase "irrational exuberance" made famous in 1996, by then Fed Chairman Alan Greenspan when discussing current market conditions? We are experiencing those same market conditions today.
For those into numbers, the Great Depression that followed the market crash of 1929 was 84 years ago. 84 has 12 cycles of 7. There are 12 months in a year. At the end of 12 months or the end of the year, we have come full circle and begin again. We look back on what has occurred and look forward on what may be. We are refreshed, reset, and ready to begin again. Is the market ripe for a "reset"?
Ironic? I don't know, only time will tell. I do know the market is at all time highs and the risk is to the downside. Why risk 15-20% trying to chase that last 1-2% of gains? I can sleep at night knowing my money is in the bank, precisely the reason that I am a day and swing trader.
"These are the times that try men's souls." --- Thomas Paine
perfectly with a stock market correction? The market is all about emotion, two emotions really - FEAR and GREED. Stocks do not trade on fundamentals; they trade on human emotion. After all, humans are the ones pushing the buttons or programming the algorithms. Therefore, at the highs of the market, traders are euphoric and a money-making opportunity is perceived by Hollywood producers to capture the fervor. Is it ironic that the market crash that represented the beginning of the Great Depression was preceded by a movie about a wolf on Wall Street? Scary stuff. Surely a signal for a market top, but not a "tradable" event by itself.
What about the Fed induced boom and bust cycle that seems to be occurring every 6-7 years? In 2000, the tech bubble burst fueled by easy money and obscene speculation in the dot com era (hindsight is 20/20). Seven years later, 2007 the market again topped out on "obscene speculation" in the housing market. In 2014, some may argue, myself included, that the S&P 500 is up on thin air and "obscene speculation" from traders chasing returns. All three scenarios had investors with easy money chasing returns with a euphoric feeling that the stock market cannot go down. Remember the phrase "irrational exuberance" made famous in 1996, by then Fed Chairman Alan Greenspan when discussing current market conditions? We are experiencing those same market conditions today.
For those into numbers, the Great Depression that followed the market crash of 1929 was 84 years ago. 84 has 12 cycles of 7. There are 12 months in a year. At the end of 12 months or the end of the year, we have come full circle and begin again. We look back on what has occurred and look forward on what may be. We are refreshed, reset, and ready to begin again. Is the market ripe for a "reset"?
Ironic? I don't know, only time will tell. I do know the market is at all time highs and the risk is to the downside. Why risk 15-20% trying to chase that last 1-2% of gains? I can sleep at night knowing my money is in the bank, precisely the reason that I am a day and swing trader.
"These are the times that try men's souls." --- Thomas Paine
