A Tale of Two Cycles

by Martin Weiss
By Martin Weiss

If you thought history doesn’t repeat itself, just roll back the clock to the 1920s.

The stock market in those days would be eerily familiar to you today.

It was enjoying an unusually long, roaring bull, just as it’s been doing in recent years.

And it was out of sync with the tough times that most working American families were experiencing, also much like recent years.

So, when the Dow Jones Industrials kept going up in the first ten months of 1929, my father, a young stockbroker on Wall Street, didn’t trust it.

He didn’t trust the disconnect between the great times on Wall Street and the tough times in the neighborhood where he lived.

He didn’t have many clients yet — just friends and family. But he never hesitated to warn them of the troubles brewing beneath the surface.

In his office, the veteran stockbrokers laughed at him. “Weiss is just a kid,” they said. “What does he know?”

Dad just ignored them. Based on his research, not a single stock in the market was worth buying. So, he told investors to sell everything.

He collected data on as many companies as he could. He put the numbers down on the large, green spreadsheets. And he created a series of formulas that would later become the foundation of our ratings and computer models of today.

Using his formulas, he identified the companies he thought were the riskiest. He called them “Dogs of the Dow.” And sure enough, they were among the stocks that crashed the most in the early 1930s.

But all that changed on March 3, 1933, the last day of trading on Wall Street before President Franklin D. Roosevelt was inaugurated as America’s 32nd President.

The stock market was in a shambles. The shares of some of Americas best companies had been beaten to a pulp. So, instead of a blacklist of companies to sell, Dad focused on a whitelist of companies with tremendous value to buy.

Among them were General Motors (GM), AT&T (T) and RCA, which despite the stock market crash, still had strong balance sheets. And he bought them for pennies on the dollar.

On the very next Monday, March 6, 1933, Roosevelt announced the Emergency Banking Act, shuttering all of the nation’s banks and halting all trading in the stock market.

Most people thought that when markets reopened, they would crash even further. But stocks surged. In fact, it was very close to the all-time bottom of the market, a level never to be seen again.

Now, fast forward seven decades to 1999, the days of the Great Dot-Com Bubble.

By then, we had modernized my father’s system. Instead of his spreadsheet, we had a database. Instead of formulas, we had ratings, the Weiss Stock Ratings.

Using our ratings, we realized that the Nasdaq was a bubble ready to burst, and most tech stocks were grossly overvalued. Again, we identified the companies that we thought were the riskiest. We even wrote them up in a special report called the “7 Horsemen of the Internet Apocalypse.”

Most brokers on Wall Street thought our Weiss Ratings analysts were nuts. “They’re just a small firm in Florida,” they said. “What do they know?”

We just ignored them. Based on the data, not a single stock on the Nasdaq got our “Buy” rating. Almost every single one was a “Sell.”

Sure enough, in early 2000, the Dot-Com Bubble was bursting and …

By 2003, investors had lost three-quarters of their money on average … except, of course, for investors who used our ratings and heeded our warnings.

But after tech stocks hit rock bottom, it was the opposite. That’s when our rating system saw tremendous value. And that’s when we began upgrading the best among them to a “Buy” for the first time.

Like Microsoft (MSFT), up 2,151% since our recommendation

Or Apple (AAPL), which is up 32,571% since our 2004 recommendation.

Overall, there are 28 tech stocks we upgraded to a “Buy” in 2003-2004 and have never downgraded to a “Sell.” Even including the worst performers among them, their average gain to date is 3,316%. Not a single one is a loser.

Now, here we are in a unique moment in time with so many striking parallels to the 1920s.

No, history never repeats itself exactly. But no matter how many times I take a deep dive into the Roaring 20s of the 20th Century, I’m always aghast when I uncover new parallel patterns in the Roaring 20s of the 21st Century.

The influenza pandemic of that era that killed over ten times more people than World War I … the Covid pandemic of this era that killed over ten times more people than the wars of Iraq and Afghanistan.

Severe famines and mass migration in Russia and China back then … severe famines and mass migrations in Africa and South Asia today.

Plus, culture wars: In the 1920s, it was the battle between feminists and anti-feminists. That was ugly. Plus, it was the big battle for and against prohibition. That was even uglier.

Today’s culture wars aren’t just ugly. I think they’re downright dangerous.

What other parallels do you see?

More important, what are the invisible forces lurking beneath the surface?

What might be the final outcome and when?

Most important, what are you doing to prepare?

Think about that for a few days. Send me your answer to [email protected]. Then, I’ll see you here again next Monday, Sept. 25 to comment on your views and give you mine.

Good luck and God bless!

Martin

About the Weiss Ratings Founder

Dr. Weiss is the founder of Weiss Ratings, the nation’s leading provider of 100% independent grades on stocks, mutual funds and financial institutions, as well as the world’s only ratings agency that grades cryptocurrencies. He founded his company in 1971, and thanks largely to his strict independence, has established a 50-year record of accuracy. Forbes called him “Mr. Independence.” The U.S. Government Accountability Office (GAO) reported that his insurance company ratings outperformed those of A.M. Best, S&P and Moody’s by at least three to one. And The Wall Street Journal reported that investors using the Weiss stock ratings could have made more money than those following the grades issued by Merrill Lynch, J.P. Morgan, Goldman Sachs, Standard & Poor’s and every other firm reviewed.

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