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As I sat down to write I realized I had not thought about the 1930s in many years. It comes to mind only when I see a period movie on TV.
I was five and a half when the market crashed. I don't remember the event itself; I recall certain changes in my life. My father was the branch manager of Mack Truck Company in Chicago and doing pretty well. I later found that his best custom-ers were gangsters who had cash to pay for the heavy trucks they used to haul beer.
Anyway, Christmas 1929 was different for me mainly because the huge boxes of candy, glazed fruit, plum puddings, and hampers of expensive delicacies that used to arrive on our doorstep suddenly stopped. I never heard my parents talk about money or financial problems because people didn't discuss such things openly. Also Dad's business was good and -- more importantly -- he'd got out of the stock market only weeks before the Crash with what would be around a million dollars today.
Much later, I learned from Dad's brother that his withdrawal from the market was almost as much anger as foresight. Dad decided to cut way back on his stock portfolio that fall and told his broker to sell a lot of positions. The broker refused, saying the market was going to continue to climb and he didn't want to be blamed for getting a good customer out too early. Dad blew up and told the guy to sell every-thing or he'd come down and punch him out. Unfortunately, he went back into stocks in 1930-31 and lost a lot because the market kept falling. He used much of what was left to buy two farms and a small lake in Michigan - total maybe 400 acres. He got a local farmer to work them for a 50-50 split of any profits. I used to spend my summers there.
I remember the Bank Holiday because our local bank reopened a few days later with no losses at all while many others in the neighborhood went under. At the same time as the banks were closed, Roosevelt called in all privately-held gold. Dad showed me a stack of $20 gold pieces that he proudly said he would not give up. He kept them wrapped in cloth in one of his riding boots. The $10 and $20 bills were printed in orange on the back signifying that they could be exchanged for gold. In those days an uncle used to give me a $2.50 gold piece for Christmas. It was the size of a dime and easy to lose.
We lived comfortably, but saved money whenever possible. Once a week we'd drive to Dawson's Trading Post, a giant supermarket in an old factory building in an industrial district. They sold stuff in large sizes: olives in #10 cans, wheels of cheese, bags of hot dogs. It was nearly a block square and they gave away samples of food like little cubes of cheese or baloney. We'd come home with the trunk of the car full.
When we were driving in hilly country Dad would turn off the engine going down a hill so he could save a thimbleful of gasoline and, as he'd say, cheat John D. Rockefeller out of a penny or so. He traded the car in every two years and always paid cash. We drove Plymouths or Dodges because Dad said Chrysler products were better-engineered than GM. I and all my friends thought GM cars looked neater. A distant relative drove an air-cooled Franklin with bud vases between the back windows. We kids loved to spot cars with whitewall tires and Auburns with their nickel-plated supercharger pipes. The dash of that model always had a brass plate that said, "Driven over 100 m.p.h. by Ab Jenkins."
I remember the 1932 campaign for president because Dad was upset when Roosevelt won. He used to mutter that FDR had been assistant secretary of the Navy in the War and he was no damn good. The conventions that year were unlike those of today - there were dozens and dozens of ballots as the nomination swung back and forth and the radio announcer managed to make it sound as exciting as a baseball game. The rest of the campaign was a few boring speeches on radio. Most speech making was still done in person from the platform of a railroad bar car.
In 1933, Prohibition was repealed and the day it was announced a young man rang the back doorbell and asked what kind of beer or liquor we wanted. Dad slammed the door in his face. Not because he didn't drink but because it was an FDR thing. Dad rarely drank but kept a supply of liquor in the pantry and would mix cocktails when people came over to play bridge. A neighbor decided to make his own wine the year before repeal, but the corks in most bottles exploded out and the wine made everyone sick.
The high point of that year for me was the Chicago World's Fair, called "A Century of Progress." When the Fair opened Germany had a large pavil-lion, the Soviet Union did also, and Italy topped them all by having a fleet of flying boats come across the Atlantic and land in Lake Michigan. They showed air conditioners and primitive TV and safety glass and lots of other neat things. The idea was to give people a lift in spirit and I think it did. The site of the Fair remains today as Meigs Field, a small airstrip for company planes on an island in Lake Michigan. I was nine years old and once got separated from my parents at the Fair and walked many miles home along the Outer Drive to where we lived, an area near the University of Chicago campus. Mother was hysterical and naturally I couldn't understand what all the fuss was about.
That same year Mayor Cermak of Chicago caught a bullet meant for FDR and the newspapers reported his dying words as: "I'm glad it was me instead of you."
Hitler was chancellor of Germany and his speeches were carried on radio regularly and commanded a sizable audience in the mid-30s. I didn't understand what he was talking about. And of course there were the regular radio broadcasts of Father Coughlan, priest of the Shrine of the Little Flower, who was a hatemonger of the day.He appealed to latent anti-semitism in Chicago, as did Hitler. A favorite remark vis-a-vis Jews was that they were never farmers or factory workers, but always bankers or lawyers or doctors. [Jews value education highly. This is bad? /Nick]
Hollywood ground out happy musicals in dozens and the movie house in our neighborhood offered a double feature with cartoon, newsreel, sitcom seg-ment, edge-of-the-seat serial, and free dinnerware (now called Depression Glass by collectors) for 35 cents. I was not allowed to see Dracula or Frankenstein.
Comisky Park featured the Chicago Cubs and Dad took me to Soldier's Field to see what may have been the last honest wrestling match: Jim Londos vs. Strangler Lewis. Can't remember who won.
The heavily-publicized violence then came from so-called outlaws: Dillinger, Nelson. Floyd, and a whole slew of other bank robbers whose exploits filled the newspapers.I remember the day Dillinger was shot: I was trying to read Anthony Adverse in a friend's back yard and extra editions of the Tribune were on the street. Hoover made the FBI glamorous. I had a trench coat with metal FBI labels on the shoulders.
People who enforced the law were admired by almost everyone.There was absolutely no sympathy for crooks; the "unhappy childhood" defense wasn't even used. Even if it had been, there were plenty of examples of a guy gone wrong who had a priest or a cop for a brother. Insanity pleas were also rare.
There was also the mob, people like the Al Capone gang in Chicago. They didn't rob banks, they sold beer and whiskey and rarely got into trouble with the law but they did get into fights with each other. "Polack Joe" Saltus was the leading Polish gangster and Edward "Spike" O'Donnell led an Irish mob. In 1938 I entered Morgan Park Military Academy on the far South where the sons of Saltus and O'Donnell were students. We all knew who their fathers were and we envied their flashy convertibles.
For some reason the Chicago gangsters were more flamboyant than the New York mobs. They shot at rivals with machine guns in broad daylight and liked to toss hand grenades into the windows of difficult customers. There were never any witnesses and as long as no ordinary citizen was hurt it seemed like something out of a movie. No one ever shot a cop unless he was on the take and double-crossed a gang. And anyone stupid enough to rob a church or rape an old woman was caught by the mob and dealt with harshly. The shooting of Jake Lingle, a local newspaper reporter, was a sensation until it was learned that he'd been on a gang payroll for years.
Outlaws and gangsters were regular and popular grist for the newspapers. Every gangland murder was covered and the tabloid in town (can't recall the name) ran gory pictures. Mob funerals were news if they were well attended and plenty of flowers were displayed. Chicago was sort of proud of its gangsters. Dad liked to drive out of town visitors to the Clark Street garage where the St. Valentine's Day massacre took place. And the florist shop where Dion O'Banion got it.
The Tribune started keeping a log of unsolved murders in those days and over the years it ran into several thousand names, all of them presumed to be gang-related. Most people seemed to have a sneaking sympathy and admiration for the outlaws and even some gangsters. They were seen as guys who were fighting the system and getting away with it. And since they avoided shooting "civilians" most of the time they were easy to admire. There were even a few folk songs about them. One had the line, "some will rob you with a six gun and some with a fountain pen."
The police shot strikers at Ford Motor and Republic Steel and the Chicago Tribune called them all Communists. The "bonus army" of unemployed veterans marched on Washington demanding money promised after the War. They set up a camp of boxes and canvas on the Mall -- and were attacked with tear gas and dispersed by the Army with Douglas MacArthur in command. Some kind of bonus was handed out a few years later. I think it came as U.S. Treasury bonds. The newsreels of strikers being shot made a lot of people angry. It was one thing to hit 'em with a club and quite another to shoot.
It seemed that the powers that be were worried that strikers, Okies, bonus marchers and such were the signs of coming revolution. The reality was that the annual American Legion parade down Michigan Avenue attracted huge crowds. And the military marched on Armistice Day. People were patriotic and surviving, not plotting revolt. I don't remember anyone ever discussing such a thing except in terms of recalling the Russian Revolution.
The news media -- newspapers, radio, magazines, newsreels -- were pretty much all conservative. They preached law and order not revolution. The movies were the only really liberal medium and they were pretty careful not to go too far. Still, rich people kept a low profile to discourage kidnappers. But, the Chicago auto show in the mid-thirties offered a hand-built Deusenberg for something like $50,000 or $75,000. The Cord was the sexiest car going.
There were beggars, but not nearly as many as now. People were simply too embarrassed to beg. I saw a photo some time back that had run in a New York paper back in 1932 or so. It showed a bunch of so-called "homeless" men in the 69th Regiment Armory at 25th Street. The picture was unusual by today's standards: all the men were sitting playing cards or checkers, all were white, all wore overcoats and felt hats, and according to the story none of them expected to be there more than a few weeks.
Of course the same story was true of welfare, which they called "relief." All of it was temporary. Even Roosevelt said that constantly. The people who were suffering were invisible not because officials were hiding them but because they were ashamed to be out of work and poor. They didn't think anyone "owed" them anything and many were too proud to take handouts. Lots of middle class people had menial jobs but they knew it was temporary. The young man who drove the Good Humor ice cream truck through the neighborhood was said to be a college graduate.
The CCC was widely approved and I heard of families who sent older sons to camp where they lived in barracks, wore blue Army fatigues and spent their days carving roads out of forests, building log bridges and such. The WPA guys built post offices and armories. And Republicans said, "If Roosevelt is re-elected I'll move to Canada." The Tribune warned that FDR was bankrupting the country with his spending schemes. Grandpa got a WPA job putting slate roofs on schools. He was near 80 but was very agile and strong and lied about his age.
I never really thought much about or understood the alphabet agencies that came out of Washington: the WPA, CCC, REA, RFC, NRA, PWA, etc. As the Depression went on and on the unlucky or lazy guys who were still digging ditches for the WPA became figures of fun: jokes about how many WPA workers it took to change a light bulb, or how many supervisors there were for every man with a shovel. In later life I realized that they had built many post offices, bridges, schools and other things that still stand, but this was not really driven home at the time.
The people really hurt by the Depression that I saw up close were bankrupt farmers. A farm sale is the saddest scene: a farmhouse surrounded by every stick of furniture the family owned and boxes of kitchen utensils, dishes, tools, books, rolled up rugs, oil lamps, canned goods. And out by the barn were rusty cultivators, spiked drags, horse harness, wagons and such. And mostly the wives and kids were somewhere else and the farmer stood there in his clean bib overalls and set his jaw and tried to hold back the tears as the auctioneer hammered his life away. What happened to them? Well, they usually drifted into some factory job or became a hired hand on a successful farm.
The newspapers rarely reported much about poor people. The fact is I don't remember any great outpouring of public sympathy for them. For one thing no one expected to stay poor forever; they all seemed to find ways of hanging on while they looked for a job or tried to start some kind of business. Life being much simpler then, it wasn't as hard as it would be today to get along with enough food, clothing and shelter. There always seemed to be relatives to help out, the kind that used to make up the extended family.
The kind of random drive-by shooting and looting you describe [in last month's fictional "Aftermath, Part 2"] simply didn't happen during the Depression. For one thing the bad guys were looking for money, not thrills. Also,the cops enforced the law with enthusiasm and public approval. A drive-by shooter who got caught would not likely make it to the police station alive. There was no civilian complaint review board.
After several bank robberies in a small town near Chicago the local businessmen organized and arranged that offices and stores overlooking the bank be ready for the next robber. As it happened, a dentist was filling teeth in his second-story office when he heard gunshots. Picking up his 30-06 Springfield rifle from the corner he leaned out the window and killed one of the robbers with a single shot.
Everyone knew who the bad guys were and were happy to see them gunned down or go to the gas chamber. The time between conviction and execution for murder was months, not years or decades. There was no anti-capital-punishment movement. The idea that shooting a robber was overreacting would have been laughed at. If you caught someone breaking into your home and killed him I don't think there was even an inquest.
At the same, time it was unusual for a cop to draw his revolver and rare for him to shoot. They used their nightsticks instead, and most people accepted that it was better to be hit than shot. Part of the reason for not pulling a gun was the fact that outside of major robbers the bad guys usually didn't carry one.
Also, the police got a lot of respect: part fear and part esteem. I never heard of a kid who would think of being mouthy to a cop, much less cursing or throwing rocks. They knew he'd back of the hand to you and no one would object. (But, one of our jokes was: "Does your Pop work? Hell no, he's a cop.") Even ghetto kids were pretty well behaved. Kids liked to soap store windows at Halloween. One time I used wax and a storekeeper caught me and kicked my behind. I never told my folks; they would have seen nothing wrong.
My Dad was held up one night as he put the car in a garage. He was upset but said the man was apolo-getic for needing the money to feed his family. Also, the robber was a veteran of the War and Dad sympathized. Still, he bought a .380 auto pistol the following week and carried it for years. Getting a gun then was pretty much the same as it is now: you walked into a working class bar and offered cash. Gun control was just not a subject that appealed to anyone. Largely this was because street crime as we know it did not exist.
Considering all the flap about gun control these days it's interesting to note that a Mauser machine pistol could be bought over the counter almost any place but New York City. In most places there either were no gun laws or they were rarely enforced. Almost every man Dad knew still had a gun or two brought back from France. A newspaper story told about a Texas rancher who used to hunt coyotes with a Tommy gun. Guns were almost universal but crime was low.
We knew people who were on the margin. The public school teachers were given City IOUs instead of cash for nearly a year. They called it scrip. But there didn't seem to be the sense of victimization that prevails today. School lunch in grade school was cinnamon bread-and-butter sandwiches, apples, and milk all provided by the mothers of the kids who came to the school. The Moms came around 11:00 a.m. and put it all together. We did not feel deprived or badly treated.
The father of one of my closest friends was a teacher at George Williams College, a YMCA school. I knew he made much less money than Dad but every summer he and his wife and son got in their Model A Ford and drove to Yellowstone Park. Driving across country involved staying in roadside cabins, or rented rooms in people's houses and eating in diners.
Entertainment was simple. No one was actually starving and "Prosperity is Just Around the Corner" was a popular slogan -- often said ironically. The plotting I overheard always seemed to be about starting some kind of business. Dad and a friend tried spring steel porch furniture and a mink farm. The furniture wasn't well designed and the mink were always chewing each other's legs and ears off. They were kept in cages by a farmer who knew nothing of mink and was drunk most of the time on homemade beer.
Civil rights lay many years ahead and black people never, ever caused trouble. I didn't realize it as a kid, but the police kept them safely segregated in a particular part of town: Garfield Park, I think. Ironically, it was located near White City, an amusement park relic from the Fair of 1893. Looking back, it's amazing to me that I didn't realize that black people weren't all happy with their lot. But, nothing was ever said about race in school, in the newspapers, the magazines, books or whatever. It was a subject that just didn't exist. There were a few black kids in Ray School where I went for 6th to 8th grade. Looking back, I am stunned that I never saw anything wrong with segregation, but no one I knew did.
In Kozminski School where I was earlier, my main memory was of an older boy thrust into our class. We were eight or so and he was maybe fourteen. He was a refugee from Germany who spoke no English and for awhile he amused the class. But, by the end of that school year he was not only fluent he used big
words. Special education and English as a second language was unknown.
By today's standards my grade school was dangerous: no rubber pads under the swings or jungle gym, long steep metal shod stairs that we ran up and down in lines, plenty of fist fights between the boys, a game to see how close you could throw a Scout knife at someone's shoe without hitting it. Kids were expected to get hurt in growing up. And if you missed school for a week without a written excuse from Mom a Truant Officer appeared at the door.
When I got diphtheria our apartment was quarantined, meaning yellow signs were tacked to the front and back doors and nobody was supposed to come in. Dad stayed at the Hotel Windermere for two weeks.
I guess it was to save money, but Dad pulled some of my baby teeth with a pair of pliers with the jaws padded with cloth.
By the mid-thirties war was the subject of daily news: Ethiopia, China, Spain, and the Germans re-occupying the Rhineland. The Chicago Daily News ran weeks of rotogravure Sunday sections with photographs from the Great War: men going over the top, gassed soldiers, exploding shells, airplanes, warships and so on. It was peace propaganda of course, but we red-blooded kids studied the pictures closely wishing we'd been in the War and hoping that another Big One would come along.
Young people today find it bizarre to learn that my generation worried most that the war would be over before we got in it. Without daily TV footage the wars of those days had a remote feel about them, as though they'd happened in another century. In the late 'thirties we used to frequent a couple of junk shops that had WWI stuff: rusty bayonets, trench knives, moth-eaten uniforms, gas masks. We all had collections and fondled them lovingly. We thought war was incredibly romantic. We wished we were old enough to go to Spain.
Looking backward the Depression era seems an innocent and friendly period. Times were hard but people helped each other and in a deflationary economy prices were low and signs of poverty (like old shoes or worn shirts) were nothing to be ashamed of. As I grew from six to seven to eight and so on I began to get an inkling that something was wrong with the economy but not having known the 'twenties in any detailed way I really didn't get it. Everyone we knew seemed to be getting along somehow. A friend of Dad's who had been a corporate executive sold aluminum pressure cookers at the World's Fair and then door to door. Bankruptcy was pretty common and if a bank was stuck no one minded very much.
We moved into an old Victorian house about 1932. It was right smack in the Jackson Park residential area and I remember watching Dad rewire the place. The gas lamp fixtures were still there and though it did have electric lights they were small and dim, so Dad bought reels of BX cable and did the whole damn place himself. I watched and learned and never realized that he was doing it to save money and that he had the time because he was between jobs. He moved from Mack Truck to Autocar with a hiatus in between.
It's only now that such realizations hit me; I didn't know what they meant at the time. It seemed that everyone we knew was involved in some kind of business deal that would hopefully make them some money. Even doctors and dentists were almost unemployed because people were treating themselves. The automobile was a great boon because it enabled people to get away from their problems if only for a day or so. By today's standards the highways were empty and most people obeyed the "Not over 50 Club" rule.
I used to pore over the ads in National Geographic wishing that I could board the SS Mariposa for a cruise to South America or take the North German Lloyd Line to Egypt and Palestine. The thing was that teachers seemed to be the only world travelers in those days because they had all summer off and could travel on the freighters of Moore McCormack or Grace Line for relatively little money. My stamp collection was full of colorful stamps from China, Italy, South Africa and other places that I'd never be able to visit.
Everyone spent a lot of time at the movies. On Saturday the Frolic Theatre in Jackson Park was the neighborhood babysitter. The place would be packed with screaming kids from early afternoon to near dark. My group hated the Fred Astaire musicals and went for All Quiet on the Western Front, endless cowboy movies, the wild animal pictures made by Frank Buck, and even Charlie Chan mysteries. I remember The Count of Monte Cristo vividly, as well as Treasure Island, Robin Hood, and Beau Geste.
The Klu Klux Klan operated in the South and occasional lynchings still took place. Hugo Black, whom FDR put on the Supreme Court, had been a Klan member, but there was no firestorm of anger. The northern version of the Klan was called The Black Legion, but no one took it seriously. The German-American Bund marched around the woods in New Jersey and Long Island but made no threats and never did anything violent. The Bund simply stood for American neutrality in the war that was looming. I had a relative who joined the Klan in New Jersey, but it seemed like some sort of lodge.
I guess what I'm saying is that the Great Crash was a seminal event, but the great American middle class survived it pretty well and violence was rare. Many people I've talked with since remember it as a period of great artistic and intellectual ferment when they were happy with little in the way of material things. A picnic in the country. A day at the beach. A cruise across Lake Michigan in a car ferry. I knew a man in the Army who had helped design some of the New Haven railroad yards and was amused a few years later to be riding the rods as a hobo and be on a train that stopped in a yard he worked on.
With 17 million or so unemployed there must have been suffering, but little of it came to my notice. That was a time when the extended family was a reality. It's almost unbelievable now, but young marrieds lived with one or the other's family, sometimes for years until they could afford a house or apartment of their own. This was not considered unusual or cruel. Divorce was so rare that I only knew one kid who had no father, and none of us ever mentioned it. And when people got old they moved upstairs or into a back bedroom and let their kids take the rest.
My overall memory is that very few people complained. They got weary of hearing that next year would be better, but they never seemed to blame anyone or anything for their lot in life. If anything, they blamed themselves since they felt responsible for their lives. It seems a strange contrast with the widespread feeling of being victims that so many display today. Above all, everybody seemed to be doing something even if it was raking leaves. The habit of just hanging out did not seem to exist. There seemed to be fewer laws then, or maybe it was because most people obeyed and no one tried to challenged the legality of a law.
Talk of family values would have seemed peculiar. What more do you need than the Ten Commandments? Laws on sexual harassment, hate crimes, age, sex, or ethnic discrimination didn't exist. And laws against walking on the grass, smoking in a theatre, not driving over 60, spitting in a subway car were not considered repressive or an interference with one's freedom. The thing is that parents, school teachers, movies, newspapers, Sunday school classes, and athletic coaches all had a hand in molding one's character and by teenage time no one had to tell you right from wrong because you knew it in your bones.
Reading what I've written makes me realize that my childhood was much closer to that of Tom Sawyer than Holden Caulfield. It seems a bit odd for me to remember that the ice man delivered blocks of the stuff from his horse drawn wagon and that the milk man did the same. You put a sign in the kitchen window indicating whether you wanted 25, 50 or more pounds of ice. And of course the milk bottles were glass and in winter they sometimes froze and broke.
I don't remember the Depression years as lacking in freedom. I never felt repressed by the fact that there was no nudity in movies and profanity wasn't heard on radio and public urination was discouraged. There were no product safety laws and parents were expected to keep kids from hurting themselves. I nearly chopped off my left thumb with a new Boy Scout hatchet.
A friend and I used to make cast lead soldiers by heating balls of lead foil on the kitchen stove in an iron ladle and pouring the melt into a mold they sold at Woolworth's. One day I accidentally spilled a glass of water into the molten lead and, of course, it spattered all over the place. Neither of us was hurt and we managed to clean up enough so parents never knew. I had a Daisy air rifle and used to shoot at distant windows because I was too chicken to aim at a bird.
At grade school age we all wanted to do bad things and as the local phrase had it, "get in Dutch." I was awed by Dad's tales of being a kid in New York early in the century and going with his gang to the Jerome Park Reservoir then being built. They'd find dynamite charges that hadn't gone off and take them out of the holes and blow up trees in Van Cortlandt Park. And the horse drawn police wagon would come and the kids would hide. Dad's father was one of those cops. But none of us in the 'thirties could think of anything to do that was that daring. I still can't.
John Tompkins writes a column called Portfolio in the e-zine Money Talks, which can be found at: www.talks.com
Let it be said, though, that this is not something new in the world of foreign policy, for foreign policy is based on influencing the behavior of other nations. I am not defending what the Clinton administration did - it looks like a sellout. However, America regularly tries to influence policies and even elections in other nations - someone care to explain what George Stephanopoulos is doing as a political consultant to Tony Blair of the Labor (i.e. liberal) Party in England? Or Clinton's endorsement of Peres in the Israeli elections?
But the focus on illegal political contributions diverts attention from a bigger problem - our national debt. John Crudele, columnist for the New York Post, points out that China is the fifth-largest buyer of US securities, only behind Japan, Britain, Germany, and the Netherlands Antilles. In 1994, China held $20.5 billion in US government. securities. In 1996, this doubled to $45.4 billion. While Japan leads in holding 7.9% of our outstanding Federal securities, China only holds 1.6%. Not a lot, but enough to make waves in Washington.
So what? Well, countries which buy our national securities can influence our policies greatly, more so than if they donated money to any political party or candidate. Drying up political contributions from foreign nations would affect one party or candidate - drying up debt purchases from foreign nations to prop up our national debt would force the US to raise its rates to attract investors, causing interest rates all across America to go up. This affects stock holders, bond holders, credit card holders, mortgage holders, anyone with debt.
In the years of 1995 and 1996, leading up to the elections, there were reports of big US trade deficits, but it got little attention. The Democrats, the party of labor, would always point out this trade deficit during the Reagan years as a sign of economic weakness, a sign that Americans were losing their jobs. Of course, that "explanation" isn't that simple or correct but now, the Democrats are strangely silent on the problem of trade deficits.
The trade deficit has been sizeable since 1994. Part of that was due to the fact that the US economy was good and thus creating demand for imported goods while German and Japanese economies were in the tank and could not generate demand for US exports. But part of it was a deal between the Clinton administration and the Japanese government. When the US started talking tough about trade, the Japanese would threaten to sell off their holdings of US securities, forcing the US to either raise rates or make painful budget cuts. I believe that Clinton made a deal with the Japanese - the US would not pursue fair-trade practices aggressively. In return, the Japanese would hold on to US bonds even though many Japanese officials and corporate officers preferred to reduce foreign holdings and bring the money home to Japan because of the Japanese recession. Thus, Clinton made sure that there would be no sudden move by the Japanese that would raise interest rates and perhaps kill his reelection chances.
Conceivably, China could do the same. It could hold a sizeable amount of US securities and influence US policies by threatening to sell them off. This would be equivalent to a corporation being "leveraged" into a certain behavior.
What's the answer? Prohibiting foreigners from buying US securities would not be the answer. This would force the Feds to raise rates prohibitively. No, the answer is slower and more painful - balancing the budget. With a $5 trillion debt, our debt and annual deficit has become an issue of national security. We need to make some painful cuts or face having more and more of our national sovereignty compromised.
- John Pak
....History demonstrates that participants in financial markets are susceptible to waves of optimism which... foster a general process of asset price inflation that can feed through into markets for goods and services. Excessive optimism sows the seeds of its own reversal in the form of imbalances that tend to grow over time. When unwarranted expectations ultimately are not realized, the unwinding of these financial excesses can act to amplify a downturn in economic activity, much as they can amplify an upswing....
....Is it possible that there is something fundamentally new about this current period that would warrant such complacency? Yes, it is possible. Markets may have become more efficient, competition is more global, and information technology has doubtless enhanced the stability of business operations. But, regrettably, history is strewn with visions of such "new eras" that, in the end, have proven to be a mirage. In short, history counsels caution.
Such caution seems especially warranted with regard to the sharp rise in equity prices during the past two years. These gains have obviously raised questions of sustainability.... - Alan Greenspan (testifying before Congress, February 26, 1997)
....I became very concerned when I saw this extreme proliferation in the number of these [mutual] funds until today we have over 8000 of them. I could only see such growth as tracing out a huge parabolic curve heading toward certain collapse.
I was wrong, very wrong. Now I see that this astounding growth is an epochal change, such as the steam engine, the automobile, the airplane, the computer, and the internet. Mutual funds are here to stay and their continued existence is as certain as death and taxes. Now I see them as a stabilizing factor. - Joe Granville, 2/97
It's nice to know America Online has faith in the youth of America. My 12-year old daughter recently was offered a Platinum Visa Card with a credit line of $25,000. She only gets $2 a week allowance, so she might want to take them up on the offer. - John Crudele
Worse, perhaps, is that so many people have a distorted view of the "typical" rewards of investing. They think it's cause for complaint now if the real return on their money is "only" 10%. What they don't know is that over long periods of history, the real return was never anywhere near that high. - Joan Lappin in Barron's, March 17, 1997
Quotes from the Depression era:
The present economic disturbance has been so severe that it has made even some changes in our language. No longer is it an apt metaphor to say that anything is "safe as a bank". The word "securities" has almost become obsolete. An investment that drops in price to a tenth or, perhaps, even to a twentieth of its former range is not a security; it is a jeopardy. The page of stock-and-bond quotations might well be headed Quotations of Risks and Hazards. To call them securities in the light of their fluctuations is ironical. - Frank A Vanderlip in The Saturday Evening Post, November 5, 1932
Russia's experience with her vagabond youth should prove a warning to us. The shelterless, or bezprizorni, as they were called, came into being after the overthrow of the Russian monarchy in 1917 and increased so rapidly that they were estimated in a few years' time to number from 2,000,000 to 3,000,000 boys and girls. This army of children, many of them as young as 10 years, terrorized whole villages and cities and became known for their murders, robberies and other acts of violence. The "wild children of Russia" the press termed them.... - Newton D. Baker in The New York Times, December 11, 1932
Mrs. Clare, after her husband's death, took to speculating. An extremely thrifty person in all respects, her initial successes convinced this delicate, quiet woman that she was a second Hetty Green. She pyramided her winnings with what might be considered the coolness of a professional gambler, except that events showed it to be merely the courage of ignorance. At the peak of stock prices she might have sold out for close to a million, but she could not let go.... Her bank wisely sandbagged her out of the market at a point where she still had a choice home and enough income left to finance a standard of living well above her desires or needs. But she would not stay out. Presently she was back in the market on broker's margins, and in the end lost everything, even her home.... She was in the grasp of the spirit of a mad time, when even men deemed wise talked of a New Era, when foolish youngsters actually believed in the stocks they were selling, when everyone with an axe to grind tried to make us believe that his cutlery was responsible for Prosperity. - Arthur Pound in The Atlantic Monthly, February 1932
OKLAHOMA CITY - A crowd of men and women, shouting that they were hungry and jobless, raided a grocery store near the City Hall today.... The raiders disregarded efforts of H.A. Shaw, the store manager, to quiet them. "It is too late to bargain with us," the leaders shouted, as they stripped the shelves.... The windows of the store were smashed as the raiders attempted to flee.... - The New York Times, January 21, 1931
CHICAGO - Shortly after a check-up of the city schools revealed today that 11,000 hungry children were being fed by teachers, Superintendent William J. Bogan dispatched a plea to Frank Loomis, secretary of Governor Emerson's Relief Committee, pleading "for God's sake, help us feed these children during the Summer".... In the meantime teachers are seriously handicapped by the failure of the Board of Education to pay them. - The New York Times, June 19, 1931
Ordinarily, many landlords do not expect to get any rent. Men have houses and the choice is between leaving them vacant or allowing somebody to live in them free of charge. When they are vacant long they are subjected to vandalism and frequently the landlord prefers to have somebody living there free of charge rather than to have the house torn down or burned up for fuel. - Rep. George Huddleston (D-Ala.) before a Senate hearing, January 5, 1932
FATHER OF TEN DROWNS SELF - Out of work two years, Charles Wayne, aged 57, father of ten children, stood on the Spring Common bridge this morning, watching hundreds of other persons moving by on their way to work. Then he took off his coat, folded it carefully, and jumped into the swirling Mahoning River.... "We were about to lose our home," sobbed Mrs. Wayne. "And the gas and electric companies had threatened to shut off the service." - May 1932 news report from Youngstown, Ohio
MIDDLETOWN, N.Y. - Attracted by smoke from the chimney of a supposedly empty summer cottage near Anwana Lake in Sullivan County, Constable Simon Glauser found a young couple starving. Three days without food, the wife, who is 23 years old, was hardly able to walk. The couple, Mr. and Mrs. Wilfred Wild of New York, had been unemployed since their formerly wealthy employer lost his money, and several days ago they invested all they had, except 25 cents for food, in bus fare to this region in search of work. Finding none, they went into the cottage, preferring to starve rather than beg. They said they had resigned themselves to dying together. - The New York Times, December 25, 1931
Conventional wisdom is that the 1929 Crash triggered (or occurred at the same time as) a recession, and that the economy would have recovered if the politicians had not done stupid things, like pass the Smoot-Hawley tariff bill, and if the Federal Reserve had not "allowed" the money supply to shrink. In short, the Crash did not trigger the Depression.
I think the conventional-wisdom apologists are too enamored of the ability of government to reflate. My reading has convinced me: Of course the Crash triggered the Depression. The preceding boom, like the current one, came at the end of a long period of credit growth, with the excess working its way into stocks. The Crash was the popping of the bubble, not just in stocks but also of the 1920s credit bubble, which first collapsed consumer credit and finally worked its way back to the banks.
It's not that the majority of people (unlike today) owned stocks.... far from it. It's that stocks had captured the public's fancy. They were seen as a guaranteed way to riches, if you had the money to put into them in the first place. When the Crash came, the impact on the public psyche was too great not to have an impact on the willingness to take on more credit. Perhaps the average American was not in the stock market in 1929, but almost certainly he or she knew somebody who was, probably on margin, and who got wiped out. The leveraged investment trusts dropped 98% in the Crash, 99% at the bottom in 1932.... that's about as close to a total wipeout of a supposedly "diversified" investment as you can get.
My worry today is the impact that the coming market meltdown could have on the psyches of the current "no fear" generation of "investors". It could have the same effect as in 1929.... a sudden change in enthusiasm for equity investments.... but more importantly, a sudden new caution, a sudden unwillingness to take on more debt; in short, the peaking and rapid decline of the credit bubble along with the stock-market bubble. For sure, the effectiveness of Keynsian economics (as applied by the politicians) to keep things afloat in the crunch will be tested to the max. The results of previous encounters are not encouraging; complete failure in 1929-32, and very limited success in Japan today. A stock market crash affects (for the short term) only those who are invested in stocks and those who make a living off the markets; but if we get a depression as an aftermath, that affects everybody, even people who never were in stocks. Why is life so cruel that those who live prudently must pay for the follies of the gamblers?
For the short term, it would appear as I write these words (mid-day on March 31, with a blizzard bearing down on us) that the bear market in small-cap stocks (since last May) and the utilities has finally spread to the large-cap stocks and the indexers' favorites. The "danger period" for the market meltdown is still May through July, with mid- to late May the most likely period for the meltdown to occur. So far, events are pretty well following the timeline I laid out in the January issue. Our portfolios are secure, mostly in cash or Rydex Ursa.... now we watch and wait. If you plan to buy LEAP or other puts, do so on the next big rally.
A. "Phoenix" -real portfolio, begun on October 1, 1995.
Original cost: $ 8,090.45
Present value: $ 7,294.32
Increase: $ -796.13 [-9.13%]
The performance of this portfolio and its predecessors ("Hedger's Delight", "Present and Future Income", "Crapshooter's Folly") from January 1987 to the present is +2.24%, for a compound annual rate of return of 0.21%.
B. "Professors' Investment Group (PIG)" - investment club portfolio.
COMMENT on "PIG": Our treasurer, Fred Fay, died suddenly from a stroke while he was in Germany to deliver a medical paper, so there may not be any trades for awhile. The PIGs now have their own Web page at
http://www.assumption.edu/HTML/Faculty/Kantar/WPigs.html, where you can follow the progress of the portfolio on a daily basis.
C. Fidelity IRA - real portfolio, includes commissions:
SUMMARY - IRA:
Original (1983-86) cost: $ 8,326.19
Present value: $17,865.07
Increase: $ 9,538.88 [114.56%]
The performance of this portfolio (including its predecessors) from January 1, 1987 to the present is +71.10%, for a compound annual rate of return of 5.39%.
D. CREF Pension plan; I switch between indexed stock/bond/money funds:
Date Sold Bought
13Mar92 stock @ 56.65 MM @ 13.41
29Apr92 MM @ 13.48 bond @ 31.19
19Jun92 bond @ 32.14 MM @ 13.55
29Jun92 MM @ 13.57 stock @ 56.74
24Jul92 stock @ 56.76 MM @ 13.61
29Oct92 MM @ 13.72 stock @ 58.61
23Dec92 stock @ 61.48 MM @ 13.78
16Jan95 MM @ 14.83 equity-index @ 26.44
20Jan95 eq-index @ 26.19 MM @ 14.84
Values, 27Mar97: stock, 111.42; MM, 16.69
Gain, 1988: 18.91%; 1989: 14.48%; 1990: 8.28%; 1991: 27.93%; 1992: 10.20%; 1993: 3.08%; 1994: 4.07%; 1995: 4.80%
Gain, January 1 through December 31, 1996: 5.28%
Total gain since January 1, 1988 (9 years): 145.96%
Compound annual rate of return: 10.52% (My long-term target: in excess of 15%)
Gain shown excludes the impact of additional monthly cash contributions.
Buying CREF stock on January 1, 1988 and holding it gained 249.17%, for a compound annual rate of return of 14.91%.
COMMENT on "Timer's Trend" : We're currently on a SELL signal given March 18, and it appears to me that the bear market (in big-cap stocks, the small-caps having been in a bear market since May 1996) is now underway.
{, } = "Timer's Trend" (4% and 10% exponential) SELL ({) or BUY (}) signal
=============================TIMER'S TREND===========================
Wed 2 Oct 96 . | . # | 5933.97 | . + *
Wed 2 Oct 96 . | . # | 5933.97 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 3 Oct 96 . | .# | 5932.85 | . + *
Fri 4 Oct 96 . | . # | 5992.86 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 7 Oct 96 . | . # | 5979.81 | . + *
Tue 8 Oct 96 . | # | 5966.77 | . + *
Wed 9 Oct 96 . |# . | 5930.62 | . + *
Thu 10 Oct 96 . | #. | 5921.67 | .+ *
Fri 11 Oct 96 . | . # | 5969.38 | .+ *
Mon 14 Oct 96 . | . # | 6010.00 | .+ *
Tue 15 Oct 96 . | # | 6004.78 | .+ *
Wed 16 Oct 96 . | # | 6020.81 | .+ *
Thu 17 Oct 96 . | . # | 6059.20 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 18 Oct 96 . | . # | 6094.23 | . + *
Mon 21 Oct 96 . | # | 6090.87 | .+ *
Tue 22 Oct 96 . |# . | 6061.80 | .+ *
Wed 23 Oct 96 . |# . | 6036.46 | .+ *
Thu 24 Oct 96 . I# . | 5992.48 | + *
Fri 25 Oct 96 . I #. | 6007.02 |+. *
Mon 28 Oct 96 . I# . | 5972.73 |+. *
Tue 29 Oct 96 . I # | 6007.02 |+. *
Wed 30 Oct 96 . I #. | 5993.23 |+. *
Thu 31 Oct 96 . | # | 6029.38 | + *
Fri 1 Nov 96 . | # | 6021.93 | + *
Mon 4 Nov 96 . | # | 6041.68 | + *
Tue 5 Nov 96 . | . # | 6081.18 | .+ *
Wed 6 Nov 96 . | . # | 6177.71 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 7 Nov 96 . | . # | 6206.04 | . + *
Fri 8 Nov 96 . | . # | 6219.82 | . + *
Mon 11 Nov 96 . | . # | 6255.60 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 12 Nov 96 . | .# | 6266.04 | . + *
Wed 13 Nov 96 . | .# | 6274.24 | . + *
Thu 14 Nov 96 . | . # | 6313.00 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 15 Nov 96 . | . # | 6348.03 | . + *
Mon 18 Nov 96 . | .# | 6346.91 | . + *
Tue 19 Nov 96 . | . # | 6397.60 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 20 Nov 96 . | . # | 6430.02 | . + *
Thu 21 Nov 96 . | # | 6418.47 | . + *
Fri 22 Nov 96 . | . # | 6471.76 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 25 Nov 96 . | . # | 6547.79 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 26 Nov 96 . | .# | 6528.41 | . + *
Wed 27 Nov 96 . | .# | 6499.34 | . + *
Fri 29 Nov 96 . | . # | 6521.70 | . + *
Mon 2 Dec 96 . | .# | 6521.70 | . + *
Tue 3 Dec 96 . | # | 6442.69 |~*~ +~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 4 Dec 96 . | # | 6422.94 |~.~ +*~~~~~~~~~~~~~~~~~~~~~~~~
Thu 5 Dec 96 . | .# | 6437.10 | . + *
Fri 6 Dec 96 .# I . | 6381.94 *~ +~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 9 Dec 96 . | . # | 6463.94 | .+ *
Tue 10 Dec 96 . | .# | 6473.25 | .+ *
Wed 11 Dec 96 # I . | 6402.52 | + *
Thu 12 Dec 96 . & . | 6303.71 | +.~~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 13 Dec 96 . & . | 6304.87 |+. *
Mon 16 Dec 96 .# I . {| 6268.35 |-*~~~~~~~~~~~~~~~~~~~~~~~~~~
Tue 17 Dec 96 . #I . | 6308.33 | - *
Wed 18 Dec 96 . I #. ]| 6346.77 |-. *
Thu 19 Dec 96 . | . # }| 6473.64 +~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 20 Dec 96 . | .# | 6484.40 |+. *
Mon 23 Dec 96 . | #. | 6489.02 | + *
Tue 24 Dec 96 . | . # | 6522.85 |~. +~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 26 Dec 96 . | . # | 6546.68 | . + *
Fri 27 Dec 96 . | . # | 6560.91 | . + *
Mon 30 Dec 96 . | .# | 6549.37 | . + *
Tue 31 Dec 96 . | #. | 6448.27 | . + *
Thu 2 Jan 97 . |# . | 6442.49 | .+ *
Fri 3 Jan 97 . | . # | 6544.09 | .+ *
Mon 6 Jan 97 . | # | 6567.18 | .+ *
Tue 7 Jan 97 . | . # | 6600.66 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 8 Jan 97 . | # | 6549.48 | .+ *
Thu 9 Jan 97 . | . # | 6625.67 | . + *
Fri 10 Jan 97 . | . # | 6703.79 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 13 Jan 97 . | .# | 6709.18 | . + *
Tue 14 Jan 97 . | . # | 6762.29 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 15 Jan 97 . | .# | 6726.88 | . + *
Thu 16 Jan 97 . | . # | 6765.37 | . + *
Fri 17 Jan 97 . | . # | 6833.10 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 20 Jan 97 . | . # | 6843.87 | . + *
Tue 21 Jan 97 . | . # | 6883.90 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 22 Jan 97 . | .# | 6850.03 | . + *
Thu 23 Jan 97 . | .# | 6755.75 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 25 Jan 97 . # . | 6696.48 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 27 Jan 97 . I# . | 6660.69 |*+~~~~~~~~~~~~~~~~~
Tue 28 Jan 97 . | .# | 6656.08 | + *
Wed 29 Jan 97 . | # | 6740.74 | + *
Thu 30 Jan 97 . | . # | 6823.86 |~ +~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 31 Jan 97 . | .# | 6813.09 | .+ *
Mon 3 Feb 97 . | .# | 6806.16 | . + *
Tue 4 Feb 97 . | .# | 6833.48 | . + *
Wed 5 Feb 97 . | #. | 6746.90 | . + *
Thu 6 Feb 97 . | # | 6773.06 | .+ *
Fri 7 Feb 97 . | . # | 6855.80 | .+ *
Mon 10 Feb 97 . | # | 6806.54 | .+ *
Tue 11 Feb 97 . | .# | 6858.11 | .+ *
Wed 12 Feb 97 . | . # | 6961.13 |~.~+~~~~~~~~~~~~~~~~~
Thu 13 Feb 97 . | . # | 7022.44 |~.~~ +~~~~~~~~~~~~~~~~~~~~~~~*
Fri 14 Feb 97 . | . # | 6988.96 | . + *
Tue 18 Feb 97 . | . # | 7067.46 | . + *
Wed 19 Feb 97 . | # | 7020.13 | . + *
Thu 20 Feb 97 . |# . | 6927.38 |~. *+~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 21 Feb 97 . | .# | 6931.62 | .+ *
Mon 24 Feb 97 . | . # | 7008.20 | . + *
Tue 25 Feb 97 . | . # | 7038.21 | .+ *
Wed 26 Feb 97 . | #. | 6983.18 | .+ *
Thu 27 Feb 97 . & . | 6925.07 | .+ *
Fri 28 Feb 97 . I# . | 6877.74 *|~ +~~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 3 Mar 97 . I .# | 6918.92 | + *
Tue 4 Mar 97 . I .# | 6852.72 |~+~ *~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 5 Mar 97 . | . # | 6945.85 | .+ *
Thu 6 Mar 97 . | .# | 6944.70 | . + *
Fri 7 Mar 97 . | . # | 7000.89 |~.~~ +~~~~~~~~~~~~~~~~~~~~~~~*
Mon 10 Mar 97 . | . # | 7079.39 |~.~~ +~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 11 Mar 97 . | .# | 7085.16 | . + *
Wed 12 Mar 97 . | #. | 7039.37 | . + *
Thu 13 Mar 97 . #I . * | 6878.89 |~. +~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 14 Mar 97 . I #. | 6955.48 | + *
Mon 17 Mar 97 . #I . | 6935.46 |+. *
Tue 18 Mar 97 .# I . {| 6896.56 + . *
Wed 19 Mar 97 .# I . | 6877.68 |-. *
Thu 20 Mar 97 .# I . | 6820.28 |-.~~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 21 Mar 97 . I# . | 6790.06 |~ *~~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 24 Mar 97 . & . | 6905.25 |-. *
Tue 25 Mar 97 . I# . | 6876.17 |-. *
Wed 26 Mar 97 . I #. | 6880.70 + . *
Thu 27 Mar 97 #. I . | 6740.59 +.~~~~~~~~~~~~
=====================================================================
[, ] = 4% exponential change unconfirmed by 10% exponential (not a signal).
@ = market overbought or oversold. I or & (on baseline) = 10% exponential SELL.