The Greatest Sucker's Rally In History, Play By Play

In the past six months, we’ve written a lot about the similarity between the rally of early 1930 and the one we’re having today.

The early 1930 rally came after the market had fallen nearly 50% in the fall of 1929.  That rally took the market up nearly 50% again, to a level that was only about 20% below the previous peak.  

That rally, of course, was also the biggest sucker’s rally in history.  After the market peaked in April 1930, it crashed again, eventually ending up down 89% from the 1929 high and more than 80% from the 1930 high.  The market did not reach the 1930 high again for another quarter of a century.

Our current rally came after a crash that was actually slightly more severe than the 1929 crash (53% versus 48%).  It has taken the market up more than 50% from the low.  Our current rally has also lasted slightly longer than the 1930 rally did.

Today’s rally, of course, may actually be the start of a great new bull market, one that will climb the “wall of worry” back toward the previous record highs.  On the other hand, it may yet also be another version of what happened in 1930.

We won’t know for sure what today’s market is until we look at it with the genius of 20/20 hindsight.  As yet another reminder of how similar the patterns up to this point have been, check out this excellent compilation of New York Times clippings from early 1930 put together by Dan Alpert of Westwood Capital.

Dan’s complete compilation is contained in a broader research piece, which we’ve embedded at the end.  The slides below contain excerpts from February-April, 1930:

The Greatest Sucker’s Rally In History, Play By Play >

February 2, 1930: Market Recovering Faster Than Expected

February 2, 1930: Banks Have Started Hiring Again

February 5, 1930: The Cash On The Sidelines Is Coming Back!

February 7, 1930: Easy Money Driving Recovery

February 14, 1930: More Green Shoots!

February 16, 1930: Speculators And IPOs Come Back

February 28, 1930: Uh Oh, The Market's Getting Overbought

March 2, 1930: Loving The Volatility

March 4, 1930: That Wasn't A Crash--It Was Just A Dip!

March 6-7, 1930: More Easy Money

March 7, 1930: The Crash Wasn't So Bad After All

March 9, 1930: Unemployment Is Finally Under Control

March 12, 1930: But What Happens If Foreigners Stop Financing Us?

March 14, 1930: Even More Easy Money

March 22, 1930: Is It A New Bull Market Or A Sucker's Rally?

'Traders found the action of the stock market yesterday answerable to the description of the gentleman who mounted his horse and rode madly off in all directions...

As to whether the present is a bull or bear market and whether it is of the creeping or roaring variety, depends large on what stocks are being held. A case could be made for any one of the four hypotheses.

Source: New York Times
Compiled By Dan Alpert of Westwood Capital

March 25, 1930: More Green Shoots!

Wall Street was in a cheerful frame of mind as a result of numerous vague reports of improvement in business and industry, but the strength in stocks was generally ascribed to the more aggressive activity of professional interests committed to the advance.

Source: New York Times
Compiled By Dan Alpert of Westwood Capital

March 26, 1930: The New Bull Market Is Great For Business

The boisterous conduct of the stock market lately has given rise to apprehension in some quarters that a new and unbridled wave of speculation is about to start. The specter of a voracious market which once more will gobble up all available credit, nullifying the efforts of the Federal Reserve Bank to provide business with easy money, is being paraded.

Leading bankers profess to see no such alarming symptoms, however. They say a rampant bull market
can hardly be expected with business conditions as they now are. On the other hand, a buoyant market will have a valuable effect in lifting public morale and stimulating business optimism.

Source: New York Times
Compiled By Dan Alpert of Westwood Capital

April 16, 1930: But Wait, Are The Fundamentals Really That Good?

The appearance of several reports of quarterly earning in the last few days, with the expected appearance of many other in the net few weeks has had a decided effect on the market action of numerous issues, according to brokers. Weakness in certain stocks is believed to be in anticipation of poor quarterly reports, while other issues, which are showing strength, may make an even better showing than they did in the first quarter of 1929, the brokers say.

On the whole, Wall Street has discounted the effect of smaller earning during the first quarter of this year, it is contended, while an increase in the earning of certain companies would be decidedly encouraging in view of the slower trade this year. The fact that several of the most important corporations have been able to show an increase in share earning in the face of these conditions has been reassuring to a large section of the financial community.

Source: New York Times
Compiled By Dan Alpert of Westwood Capital

April 17, 1930: The End

The sucker's rally peaks.

The DOW hits a level it will not see again until July, 1954.

Haven't We Been To This Show Before?

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