The following chart by Tom DeMark from the McClelland Market Report shown in a right-of-center financial magazine, Money Morning during an interview with Peter Schiff. Schiff feels the US fiscal policy is heading toward a financial collapse similar to the crash in 1929. The following chart was shown during the interview. It compares the behavior of the stock market leading up to the 1929 crash (blue) with current stock behavior red) from September 2007 to today. The parallel lines are eerily similar.
In an earlier post, the mariner alluded to a great shift in wealth that must occur before the US culture can move on. Apparently Schiff feels the chaotic moment will occur very soon.
The issue in 1929 was public debt far beyond what the public has today. Investors had as much as 90 percent margin (unpaid purchases). The effect was very much like the housing collapse in 2008 when there were tens of thousands of mortgages being sold on the stock market (remember derivatives) that had no cash to back them. Eventually, the banks faced a grim future if the US Treasury didn’t step in.
This time, however, conservatives like Peter Schiff and Donald Trump are attacking the Federal Government for having too much debt. Sooner or later, someone must pay the bill. Will the wealthy take a hit on their investments? Yes, says Schiff.
Scare tactics are thrown everywhere. The mariner believes there has been an imbalance for a long time. Two circumstances reflect the entire situation: the Federal Government indeed is in debt because tax laws have not changed and the wealthy are getting wealthier. Beyond that, the current economy hasn’t responded as well as it should. This is blamed by the right on Obama not allowing jobs to be created, and by the left that businesses are sitting on their profits and not investing in new jobs.
Whatever the cause, that chart is a bit scary. Perhaps we should do what was recommended in another post: ”…. get rid of credit card debt fast. Use as much cash for daily expenses as you can; pay cash for gasoline; pay cash for groceries; pay cash at supermarkets, Walmart, Target, and Farm and Home. In other words, live well within your means and do not use the Wall Street banks in lieu of any other option. And save, save, save. The taxes to pay for change are coming….” and you know who will be taxed.