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It’s easy to assume that we’d never see a crash as big as 1929 again. But Cramer sees more than just a few similarities between then and now.
Here are just a few: Auto companies were on the edge of collapse and many banks already had. The Federal Reserve was more concerned with inflation than saving the economy, even though we were in the middle of huge deflationary spiral. And the whole time the president and his administration were guaranteeing Americans “the fundamentals of the economy are strong.”
Sound familiar?
Now Cramer wasn’t saying this was definitely going to happen. He just wanted to make sure investors had their eyes wide open. This market has more in common with 1929 than it does with 1987, and that crash was bad enough.
Cramer had talked about how the market rebounded a year after the crash of 1987, but it took 25 years for pre-’29 levels to be regained. The bottom alone didn’t come until 1932. The Dow dropped 89%, to 41.22 from 381.17. Montgomery Ward plummeted to $4 from $138. U.S. Steel [X
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] fell to $22 from $262. GM [GM
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] to $8 from $73.
What’s even worse, though, is that a lot of the safeguards Franklin D. Roosevelt put in place to stop another Great Depression are gone. SEC Chairman Christopher Cox did away with the uptick rule, which prevented short sellers from shorting a stock until it first ticked up in price. The result is a group of bear raiders virtually unchecked and able to drive down the market at will.
So the message here is caution. Cramer wasn’t assuming another Great Depression is coming. He just wanted to investors to be careful if they buy stocks next week. Cramer had said that there might be buying opportunities if the market dips enough. But regardless, buyers don’t want to jump in with both feet.
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