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Is it 1929 all over again?

Why some people are drawing parallels between 2014 and 1929 - and why other people think those people are wrong

When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com

Jan 31, 2014

by Max Fawcett

Are we on the verge of another 1929-esque crash? That’s what some people – fear mongers, more precisely – have been saying, and they’ve been using a chart to prove their point. It overlays the five year period between 1925 and 1929 and the one between 2009 and 2013, and they look awfully similar. The logical conclusion, fear mongers suggest, is that we’re on the verge of something similar to what happened in October of 1929.

Nice try. As Josh Brown points out over on his site, the Reformed Broker, they’ve failed to actually adjust the data to account for things like inflation and where each index was when the charts begin. When you do that, it becomes clear that one of those things is not like the other. “From 1925-1929 the INDU was up over 230 per cent,” Brown writes. “From the 2009 low to the 2013 high, the INDU was up 156 per cent. So the rally in ’29 was much more significant prior to the decline.” Has the recent run been a good one? No doubt. Are markets overvalued right now? Quite possibly. But are we seeing the same kind of irrational exuberance that characterized the markets in 1929. No, we’re not.

Meanwhile, Crescent Point Energy (TSE:CPG) shares just wrapped up their first week on the NYSE. And while the new listing hasn’t materially moved the stock yet, FirstEnergy’s analysis suggests that U.S. investors might want to get on board with the company. “Given the winter drilling program is in full swing and the expectation that we will continue to see strong performance from the company’s assets, we would not be surprised to see increases to corporate guidance as the year unfolds,” Cody Kwong wrote. He has a $48.50 price target and outperform ranking on its shares, which are currently changing hands at $38 and change.

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