1929 Crash: Why Market Crashes Aren’t So Scary

1929 Crash
Why Market Crashes Aren’t So Scary: Lessons from 1929

Let’s start off with an overview:

In times of market turbulence, it’s natural to feel a sense of panic and uncertainty. But it’s important to remember that the stock market is not always a reflection of the underlying economy, and that fear and panic can often create buying opportunities.

By understanding the principles of mass psychology and contrarian investing, we can approach market crashes with a game plan that allows us to take advantage of the opportunities that present themselves. This means keeping a level head, resisting the urge to follow the crowd, and instead looking for opportunities to buy when others are selling.

It’s also important to remember that market crashes can be an opportunity to reevaluate our investment strategies and reallocate our portfolios. By taking a contrarian approach and focusing on undervalued assets with strong fundamentals, we can position ourselves to weather the storm and emerge stronger on the other side.

Ultimately, the key to surviving and thriving in times of market turbulence is to maintain a long-term perspective, stay disciplined in our investment strategies, and remain mindful of the principles of mass psychology and contrarian investing. By doing so, we can navigate even the most challenging market conditions with confidence and resilience.

Surviving a Market Crash: A Tactical Approach

Market crashes are not scary because they are always a prelude to Bull runs. Stock market crashes can be viewed as an opportunity for those who are willing to take a contrarian approach to invest. This requires a shift in perspective and an understanding of mass psychology. While a crash may be viewed as a tragic event for those who invested at the top, it can be a splendid opportunity for those who got in early and banked some of their profits.

Crisis investing dictates that disasters are nothing but opportunities, and changing the lens through which we view a crash can change the picture entirely. So, instead of fearing a crash, one can prepare a game plan to take advantage of the opportunity presented by the market’s pullback, potentially leading to a massive bull run.

Stock Market crashes from 1929 onwards proved to buying opportunities

The Bullish View of Market Crashes, Including the 1929 Crash

The uptrend line is indicated by the solid blue line, but we put in a dotted navy blue line for those who would insist that the uptrend line could be drawn through a secondary point. Whichever uptrend line you choose, you can see that this point holds true, the greater the deviation, the better the buying opportunity.

Look at the chart above; who won from 1990-2016, the bears or the bulls? This chart is a clear illustration that the Doctors of Doom only make their money by selling the masses crap they would never dream of using. They’re always trying to scare you with their doom and gloom predictions, but the truth is, crises represent opportunities for those who are willing to take the contrarian approach. The purple dotted line provides a guideline as to future market price action. However, to be conservative, we drew in two lines. The navy blue one indicates that the Dow should easily trade to the 19,500 plus range in the not-too-distant future as long as the trend is up.

The purple dotted line suggests that the Dow could trade past 25,000 before this bull market is over. Note that we base everything we do on in-house trend indicators: all other indicators even if some message appeared in the sky stating that the Dow would crash tomorrow take on a secondary role.

In Concluding

One should remember, markets spend more time trending upwards. Even the terrible and devastating crash of 1987 turned out to be a buying opportunity and not a disaster. The naysayers and Doctors of Doom were wrong once again. Hence, you have clear proof that the contrarian approach is the way to go. While others panic and sell, contrarian investors see the opportunity to buy low and sell high, taking advantage of the market’s natural tendency to recover and climb higher.

1929 Crash: A Historic Buying Opportunity for Stocks

Market crashes are actually historic buying opportunities, provided you’re prepared. Avoid deploying all your funds into a mature bull market; wait for a pullback before getting in. Be wary when the masses are happy and have stops in place just in case. As profits roll in, bank some gains and set money aside for future opportunities, such as buying after a correction. By staying smart and contrarian, you can take advantage of market trends and come out ahead

When blood is flowing in the streets as is the case right now during this coronavirus pandemic, one should consider nibbling at stocks if one has a long-term perspective. Do not deploy all your funds in one short but deploy them in lots this way if the stock dips lower your average entry price drops.  Tactical Investor March 2020 

In times of market turmoil, one must take a long-term perspective and approach stocks with cautious optimism. Deploying funds in increments can help to lower the average entry price and increase potential profits. At the Tactical Investor, our minimum holding time is typically several months. However, under current conditions, we extend our time frames for the potential of larger gains. While it may be a bloodbath in the short term, it is precisely in such times of turmoil that exceptional opportunities arise, leading the way to the next bull market. One must be willing to seek out the hidden gems, rather than chase overvalued stocks during market booms.

Every crisis offers you extra desired power.
William Moulton Marston

Navigating Another 1929-Type Market Crash

The COVID-19 crash, in hindsight, was a blessing in disguise. As early as July 2019, we suggested that the markets needed a sharp pullback to release the excess steam. The crowd was already overly exuberant. Our foresight was proven correct, and the crash provided the much-needed correction to balance the market.

This group could be getting ahead of themselves;  the investors that are already invested could be over-allocating funds because they have moved from the bullish phase to almost the euphoric stage. We already know that a large percentage are just sitting on the sidelines or betting against the market. 

It is not a long term negative development, but if our hypothesis is valid, it could result in a sharp pullback over a short period, as over-exuberant individuals are the first ones to get nervous the moment it looks like the situation is changing.  However, this pullback will be a blessing in disguise as there is not enough firepower to crash the markets, and the sentiment is far from bullish.  Net-Net this is a long term positive development.  Market Update July 2, 2019

The current market pullback offers a rare opportunity for 87-level stock prices. What makes this pullback unique is that it occurred in a state of uncertainty, without the support of bullish sentiment. Such circumstances have never existed before, and it is these uncertain moments that often lead to great opportunities. The melt-up that will follow this event is going to be equally spectacular, offering the potential for huge profits.

 It’s unprecedented as that has never occurred before, which means that the melt-up is going to be equally spectacular. Sol Palha

Covid and the 1929 crash

During the COVID market crash, fear reeked so strongly that the masses sold top-notch companies for next to nothing. We witnessed the baby being thrown out with the bathwater. Our observations around March 2020 showed that the market was oversold, and we saw an opportunity.

Fear is in the air, and many strong companies are trading at attractive levels. The ball is in your court,  compile a list of strong companies you always wanted to get into and slowly commit some funds to them.  Or you could sit down and do what you have been doing all along and hope for a different outcome.  Doing the same thing over and over again and hoping for a new outcome could be construed as being insane. Hence any crash that bears resemblance to the 1929 Crash  should be embraced with gusto. Tactical Investor March 2020

Summary of Investing in Times of Market Uncertainty

  • Market crashes = buying opportunities for prepared investors.
  • Don’t over-invest in bull markets, wait for pullbacks.
  • Cautious when masses are euphoric, vice versa.
  • Stop-loss orders crucial to protect investments.
  • Bank some gains, set aside for future opportunities.
  • Long-term view key for contrarian investors.
  • Ignore short-term market noise, focus on growth.
  • Prepare for volatility, position for future opportunities.

Throughout history, market crashes provided buying opportunities. Don’t put all your funds into a mature bull market. Wait for a pullback. Crowd psychology suggests being wary of the masses’ euphoria. Have stop-loss orders in place. Bank some profits, and set some aside for future opportunities.

Take a long-term view, ignore short-term market noise, and prepare for volatility. Market crashes have followed robust growth. Be prepared to take advantage of the opportunities ahead

Other Articles of Interest:

Financial Markets Gripped by Panic & masses stampeding  (Feb 23)

Interest rate wars-Fed stuck between a hard place and a grenade  (Feb 23)

Mob Psychology: Market Crash of 2016 buying opportunity (Feb 21)

People’s QE: Central bankers forcing the public to speculate (Feb 18)

Currency wars explode: Negative interest rate wars start (Feb 15)

Medvedev states Merkel’s immigrant policy quite simply stupid (Feb 12)

Male vs Female investors: Do They Have Different Mindsets

Stock Market Crash 2017