fwd: period of distress

John K. Taber jktaber at onramp.net
Sun Oct 4 05:07:52 PDT 1998

Rosser Jr, John Barkley wrote:
> --- Begin Forwarded Message ---
> Date: Fri, 2 Oct 1998 10:41:10 -0400 (Eastern Daylight Time)
> From: "Rosser Jr, John Barkley" <rosserjb at jmu.edu>
> Subject: period of distress
> Sender: owner-pkt at csf.colorado.edu
> To: POST-KEYNESIAN THOUGHT <pkt at csf.colorado.edu>
> Reply-To: pkt at csf.colorado.edu
> Message-ID: <SIMEON.9810021010.B at rosserjb-7958.jmu.edu>
> The late Hyman Minsky invented the term "period of
> distress" to describe a period after a bubble peaks but
> before it really crashes seriously. Such periods can last
> for several months. In his _Manias, Panics, and Crashes_,
> Charles Kindleberger documents for historical bubbles over
> the last several centuries the gaps between peaks and
> crashes, and thus documents the widespread existence of
> this phenomenon, a phenomenon predicted in the models of
> DeLong, Shleifer, Summers, and Waldmann.
> The US stock market peaked on July 17 and has been
> sliding since basically. The Fed's cut was supposed to
> prop it up. It doesn't look like it's working. Indeed, it
> is October, the historical month of great crashes, and
> panic finally seems to be seriously setting in. Hold your
> hats, folks.

For what it's worth, I like Mark Hulbert's metaphor. He described a bull market as "climbing a wall of fear", and a bear market as "descending a wall of hope."

Each upturn in a bear market makes one hope that this is it, this is the end of the bear. But as time passes, investors gradually give up hope. The market is at its bottom when the last one quits and takes his losses.

Each downturn in a bull market makes one fear that this is the end of the bull market. As time passes, more and more of the public lose their fear and become investors. The market is at its top when most of the public is invested.

Hulbert used gold for his example, which has been in an 18 year bear market.

-- I've been able to string more words into fewer ideas than anybody I know, and I'm continuing to do that.

- Alan Greenspan to the Senate Budget Committee, Sept 23, 1998

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