Hey does Kevin Rudd remind you of James Henry Scullin? Reading up on our Australian History we learned that Scullin, Australia’s 9th prime minister, swept Labor into a victory in 1929. Two days after he was sworn in as PM, Wall Street crashed and the Great Depression began.
Incidentally, the crash in 1929 kicked off the Great Depression. But the stock market itself didn’t bottom until 1932, when it reached the lowly level of 41 (after a high of nearly 400.) The Dow climbed down painfully, making lower lows and lower highs every step of the way.
Looking back, we see 1929 as the first panic of one long, continuous crisis. But at the time, most investors assumed it was just a correction. Many made that assumption all the way to the bottom in 1932. The Dow, by the way, did not close about its 1929 high until 1954. Bear markets in an asset class last at least a generation, just ask Japanese real estate investors.
Are we too dreary to start the week? You wouldn’t have guessed anything bad was happening in the world from reading the Australian press. And really, it’s a fair question. Sure, Australia and John Howard have had a good run the last 11 years. But most marriages don’t even last that long these days. Only sitcoms last more than a decade anymore. Life goes on.
Besides, is anything really different today except the names and faces staring out from the front pages of the paper? The markets got the result they expected. You can expect the stock market’s reaction to Saturday’s Labor landslide to be muted. And truthfully, it’s hard to see how Labor and the Liberals are all that different on the economy.
Australia’s economic fate is tied up with China. Love it or loathe it, the government in Beijing has as much to do with Australia’s prosperity as the government in Canberra. If the boom keeps booming, Kevin Rudd and company should have enough money to pay for that AU$59 billion in promised spending. And maybe the surpluses will keep rolling in.
Or maybe not.
The Daily Reckoning Australia