Lessons Learned from 1929 Crash Predictions

In a 1929, pre-crash speech, esteemed economist Irving Fisher became notorious for declaring that U.S. stock prices had reached “what looks like a permanently high plateau,” writes Jason Zweig of The Wall Street Journal. Citing data from then-renowned statistician Karl Karsten, Fisher argued that the stock market was “up to 25% overvalued by early 1929.” In 1931, however, Karsten wrote a book outlining the flaws in his prediction method and warned against forecasting in general, the article says. And after a subsequent, deeper analysis of his data, Zweig writes, Karsten “made discoveries that anticipated many of the ideas behind hedge […]

Are We Partying Like its 1999?

By Jack M. Forehand (@practicalquant) —  One of the most common comparisons I hear for the current state of the stock market is the bubble of the late 90s. With the market seemingly setting new highs every day, valuations stretched, and technology stocks leading the way, there appear to be many similarities on the surface. When you look deeper, however, there are also some clear differences. Given that the 90s rally ended on a bad note and that many predict the same ending to the current bull market, I wanted to take a look at the similarities and differences between […]

Nifty Fifty and the FAANG Stocks

After the parabolic rise of the “Nifty Fifty” stocks in the 1960s and early 1970s, this group of 50 large-cap, blue chips equities “proceeded to dive and lose more than half their value in the ensuing bear markets of the mid-1970s.” This, according to a recent article in CNBC, should serve as a “historical warning to generations of investors of the heavy price to pay for unbridled, uncritical enthusiasm.” At their peak, the article says, the Nifty Fifty (which included names such as Coca-Cola, Xerox and General Electric) were trading at 42 times earnings. “Some of these stocks, “it says, […]

The Markets and Economy Under Past Presidents

There’s a tendency among the masses to judge our presidents on the state of the economy during their terms. However, says a recent article by Morgan Housel of The Motley Fool, jumping to conclusions based on four or eight years of an administration (both of which, he argues, are “blips”) may not be well-founded. “No matter who lives in the White House,” Housel writes, “business cycles come and go, the Federal Reserve flexes with unmatched power, and the 78% of the global economy that is not the United States pushes and pulls everything around.” He offers historical data regarding economic […]