Six weeks ago, i asked this question in a post, Are we facing another Great Depression?
Today the Wall Street Journal, asked if market history will repeat itself looking at 2008 and 1931.
“””””Over the two weeks ended Nov. 20, 2008, the Dow Jones Industrial Average fell 16%. Over the two weeks ended Nov. 20, 1931, the Dow fell 16%.
If you think that is scary, consider this: In the final five weeks of 1931, the Dow fell 20% further. Then it went on to lose yet another 47% before it finally hit rock-bottom on July 8, 1932.””””
“”””””It is vital to realize that markets are never under some obligation to stop falling merely because they have already fallen by an ungodly amount. It also is vital to explore how bad the worst-case scenario can get and to think about how you would respond if it comes to pass.””””
When the Dow finally stopped going down, in July 1932, it had lost 88% in 36 months. At that point, only five of the roughly 800 companies that still survived on the New York Stock Exchange had lost less than two-thirds of their value from their peak in 1929.
In 1931, one out of every six Americans was unemployed; today, one in 16 is out of work.
And I think that is will determine how bad the economy gets, whether the recession turns into to a depression and how long before there is a recovery.
For the past several week, jobless claims have been over 500,000 per week, higher than estimates (last week 540,000), the highest in 16 years.
At that rate its over 2,000,000 people a month and over 6,000,000 people a quarter.
Here’s the wild card.
There is a train of thought that almost 1 in 10 of all US jobs are directly or indirectly effected by the US auto industry.
If the big three go bye-bye, the 500,000 a week job loss may hit 1,000,000 or more.
If the unemployment rate gets above 15%, we are going to find ourselves looking back to 2008 as the good old days.