The excerpt below is from Liaquat Ahamed in Lords
of Finance, writing about September 1929. It reminded me a little bit
of today’s situation where stocks are close to highs, there is some positive
economic data mixed with weak economic data, and you have some commentators
with decent track records predicting we’re in a recession already while others thoroughly
dismissing that claim. The excerpt below followed a discussion of the back and
forth between Roger Babson (who was very bearish on the market) and Irving
Fisher (who was very bullish on the market).
“The
official chronicler of business cycles in the United States, the National
Bureau of Economic Research, a not-for-profit group founded in 1920, would
declare, though many months later, that a recession had set in that August. But
in September, no one was aware of it. There were the odd signs of economic
slowdown, especially in some of the more interest-rate-sensitive sectors—automobile
sales had peaked and construction had been down all year, but most short-term
indicators, for example, steel production or railroad freight car loadings,
remained exceptionally strong.
By the
middle of the month, the market was back at its highs and Babson’s forecast of
a crash had been thoroughly discredited. The broader indices even set new
records—for example, the most widely used measure of the market, the New York Times index of commons stocks,
reached its all time peak on September 19—though the Dow never did get quite
back to 381.”