The Depression 2008 vs. the Depression 1929

The first Great Depression started with the October crash of 1929, but the market didn’t hit bottom until 1932. So far in 2008, the market hasn’t crashed; however, this year, similarly, will mark the end of an economic up-cycle, and that’s putting it mildly. The Dow is down 46%, falling unrelentingly from the peak of 14,165 in October 2007 to Friday’s close of 8,046 (and that was up 494 from the previous session). This is a greater percentage loss than on October 24, 1929. In addition, the rate of decline of the Dow 2008 has accelerated (see chart below).

Last week, Nouriel Roubini, professor of economics at NYU’s business school and advisor to central banks and governments, in making a case for stag-deflation said, “. . . we are in a severe recession. . .” Early to point out the housing crash, he is in good company with George Soros and Paul Volker, both of whom predict that this depression will be worse than the previous one (see G20 Meeting a Non-Event Depression Full Speed Ahead, November 16, 2008).

The 2008 Dow looks a lot worse than the Dow during any of the previous major correction. Its fall-off is far more precipitous then even the crash of 1929.

Here’s a time-compressed picture courtesy of dshort.com comparing the four worst corrections.


According to this chart, we’ve got several years and another 40% drop to go before reaching bottom.

Here’s some more perspective. Last Friday, the market was up 494 points. I think CNBC was calling the bottom in … again. Here’s a chart of the day’s performance.


No wonder they were so excited; and it happened so fast. We’ve been getting last-hour-of-the-trading-day action the way we had been getting financial-Armageddon news over weekends. Friday was a good day, but how does it fit into the overall trend? Let’s put Friday’s move into trailing-12-month perspective.