Current Market Mirroring 1930s With 0.8 Correlation

According to Ron Coby, an investment manager at Coby Lamson in Oregon the current stock market is mirroring the market of the 1930s with a 0.8 correlation.

This is in fact astounding as Graham Summers points out in his article "in finance, you’re lucky if you get a correlation above 0.6. (gold and the dollar are only 0.28 inversely correlated). A 0.8 correlation is virtually unheard of. But that’s exactly how closely today’s market is mirroring that of the ‘30s."

Read Graham's latest "Why Another Stock Market Collapse Could Be Imminent."

So if we are in fact at the top of the next peak on the financial roller coaster that is the second great depression, the folks in the front few cars are probably just now hanging over the next precipice. Deutsche Bank in their latest report About Half of U.S. Mortgages Seen Underwater By 2011 seems to be leading the way.

The problem with the next trough, as opposed to those the US and World economies have endured in the past, is that the downward trajectory has no bottom as the gravity of the world of debt we live in is pulling us all towards the core of default, currency devaluation and conflict on personal and governmental levels. There are no savings, there is no productive capacity and no capital effectively rendering "capital-ism" dead.

In 2007 and 2008 most could not put a finger on what was weighing on them much as a horse forgets the load it carries on its back. Americans had come to a state of complacency for so long and had suffered from delusional existence: as Thomas Paine put it, we developed and felt "A long habit of not thinking a thing wrong gives it a superficial appearance of being right."

That is changing and changing quickly in 2009. Anger and despair are at boiling points here in the United States as evidenced by the explosive town hall meetings and disturbing murder/suicide wave that has hit this summer. These emotions build up on a national level to the point that powder kegs of frustration mount creating dozens of Archduke Ferdinands across the globe.

Let us pray that we do not await a similar fate as our forefathers did in the years leading up to 1939 and avoid conflict through our tradition of "Common Sense" here in the United States. Reason and Peace shall be our guiding light.