Expect a 1929-style Disaster? Sell These Stocks


SellIf you thought the 6% pullback in the market was stressful,  just wait to see what’s in store over the next month or so.

By now you’ve probably seen that “scary” market chart that compares today’s market to that of 1929. The chart, produced by Tom McClellan of the McClellan Market Report, shows market movement from July 2012 to today, overlayed on a chart of the market for the months before October 1929. The eerie similarities seem to predict a 1929 style crash to occur in March or April.

In looking at the picture, it would be hard to argue with that conclusion. The two parallels are uncanny and include — you guessed it — a pullback in the market similar to what we just witnessed followed by a brief spike higher.

Then it’s down she goes and down she goes hard!

I’m reluctant to take this chart too seriously, but considering the parallels continued after I first saw it in November, it is a bit spooky.

Rationally speaking there is nothing about today that is remotely similar to 1929. We have more transparency, liquidity, and regulations in place to protect against a crash similar to what transpired then.


scary chart

But, you can’t argue with the chart.

Or can you?

I can make up a chart to look pretty much like anything I want it to look like. To draw conclusions from such fanciful artwork would be foolhardy.

Even understanding the nonsensical nature of comparing today to 1929, I can’t help to be a bit concerned.

I won’t go nuts suggesting everyone pull out of all stock positions and put the cash in mattresses, but I will say that it is always a good idea to shed your portfolio of stocks that are overvalued.

On the following pages are 3 stocks I would jettison immediately before we are hit by a 1929-style crash.

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James (Jamie) Dlugosch is a contributing editor to MSN Money, The Street.com, InvestorPlace.com and Traders Reserve. He has a long and distinguished career in the investment industry that includes editorial and publishing stints with the highly rated Rational Investor, The Prudent Speculator and the current Penny Stock Winners. Jamie was a contributing editor to InvestorPlace Media where his content was syndicated to numerous on-line financial sites including MSN Money and AOL Finance. At the turn of the Millennium he was the President and CEO of Al Frank Asset Management where he honed his skills under the tutelage of the well respected guru, Al Frank. With The Rational Investor Jamie adapted Al Frank’s long-term market beating strategy to reduce risk and increase ease of use for subscribers. He was quickly rewarded for his efforts by compiling the second highest total return of all investment newsletters in 2004 according to The Hulbert Financial Digest. His investment approach has produced winning returns in competitions held by MSN Money in their long running Strategy Lab. He also has successfully raised private capital for a variety of private ventures including the purchase of Al Frank Asset Management, an investment now worth many times its original cost. Jamie is frequent guest and contributor to a wide range of financial television, radio and internet broadcasts including CNBC, Market Watch and MSNMoney. Jamie holds a B.A. in Political Science from UCLA and a Masters in Business Administration (MBA) from the University of North Carolina, Chapel Hill. He resides in Minneapolis, MN with his wife Sarah and two daughters, Julia and Ellie.

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