BEST 6-MONTH RALLY FOR STOCKS SINCE 1933...

But: The Dow plunged 33% in 1937 and began a five-year bear market until 1942. In 1933 unemployment was at 23.2% and people were living in cardboard boxes, but the Dow was at 90 and by 1934 it was up to 100 and unemployment was 21.2%. Of course a lot of people, about 9000 were working just on the TVA, not to mention the CCC, and WPA. But just as now, there were no new businesses starting up and FDR was in the process of putting Commonwealth and Southern Power Company out of the private energy business. Government power was taking over competition. The SEC was created and Joseph Kennedy was its President. Just more government regulation designed to "help" the economy and the average unemployed American.

By November of 1934 unemployment was back up to 23.2% and the Dow was back down to 93. The Schechter brothers who sold kosher chickens were being prosecuted by FDR’s henchmen for selling too cheap; naturally the government knew that not everyone could afford to buy a chicken, but the law was the law and someone had to go to jail for it, so why not a family of Jews on East Fifty-second Street and Rockaway. Not even the shochtim was spared the embarrassment for trying to keep Kashruth.  The FDR administration would not allow a buyer to pick out the chicken they wanted. One of the brothers had to reach his hand in and pick one at random. For that they were sent to jail because maybe they looked. But the Schechter brothers were small potatoes. FDR had bigger fish to fry. The New Deal put the Associated Gas and Electric Company in the red to the tune of $500 million, at a time when a million was a lot of money.

By July 1935 a lot of people were earning money, but not contributing to the Gross Domestic Product. One in five were still not working, but the government’s WPA employed 26,000 idle artists, musicians, and actors. Brilliant idea, but not one of them contribute a single solitary commodity that anyone could eat, sleep on, or drink. But they could sing, dance and play Kum-Bay-Yah to the cardboard box inhabitants. Meanwhile 11.7 million Americans were looking for real work in factories, just as they are today, but there were then and are now no jobs, which accounts for the fact that unemployment rose and is rising today. The wealthy that might have built factories didn’t want to see more than 75% of their income go to a government that was wasting tax money on useless programs that didn’t’ benefit them. That was about the year when Social Security started to take three cents on a dollar up to $3000 to fund the system. Government circulars promised “that would be the most you will ever have to pay”.

Things started to look good. 15% unemployment, but people were used to starving by now and didn’t expect more. By August of 1937 only 13.5% were still out of jobs, and the Dow was up to 187 and the bulls were running wild.  But while the stock market was high, every thing else was low. FDR had passed a retained earning tax to force companies to declare dividends so that the government could collect the tax on the distributions. The result was that companies didn’t have reserves for bad days, and that day came as black Tuesday in the middle of August. Bond prices plummeted further than they had on any single day in three years. Businesses didn’t want to borrow. They had nothing to use it on. At any rate, banks didn’t have it to lend because the Fed’s upped the reserve requirement. Payments into the new Social Security program were taking money out of the economy. It was just another tax that was going to generate money for more largesse. The Wagner Act that guaranteed high union wages, made it more expensive to produce domestic goods. In the steel industry, which is now practically non existent, wages rose 33% from October to May, along with higher taxes. If anyone knows how to screw the pooch, government wizards in Washington D.C. do. Not much has changed in the Democrat party, only the names.