I’ve posted Entry #106 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Buy-and-Hold Investing Caused the First Great Depression Too.
Juicy Excerpt: Now let’s consider the other factors listed. Aren’t they all things that could well have followed from the crash? Yes, we had bank failures. People had just lost most of their money in a stock crash! So what would you expect? I think it would be fair to say that these purported causes might be only secondary factors, things that themselves were caused by the crash and that then went on to cause the economic crisis. If that were so, it would really be that nasty stock crash that caused all the trouble.
The same general pattern applies today. People say that it was mortgage failures that caused the economic crisis. But wouldn’t a crash in stock prices cause mortgage failures? People say it was the unexpected performance of derivatives. Okay. But wouldn’t derivatives perform in funny ways following a price crash? Could it not well be that all of the factors that we put forward to explain the economic crisis were only secondary factors and that the primary factor was the price crash?