How Traders and Investors Were Fooled in the 1930 to 1932 Panic

Investors and traders lost money in this great panic because they listened to other people who knew less about the market than they did and who were simply guessing. many so-called wise economists said that the bottoms in November 1929, would not be broken and that this decline had corrected all the weak spots in the market and that the bull market would be resumed. They said the same thing about the breaks in 1930, 1931, and 1932. When the market actually reached bottom they did not know what to say because they had been fooled for so long. They had not studied past history enough to know that after the greatest advance in history and culminated in 1929, the greatest panic in history must follow and that it would require a long time to liquidate stocks.

Every time stocks made a bottom, the newspapers, government officials and economists said that it was the last bottom, but stocks when down, down, down, until people lost faith and hope in everything. They went lower than anybody dreamed they could go. That is what happens when everybody decides that stocks cannot go down or that they cannot go up- they always do the opposite. The public is always wrong because they follow no well-defined rule and are not organized. People believed that the government purchases of cotton, wheat, and loaning money could stop the depression, but when once a cycle is up and prices are due to decline, nothing can stop them until it has run its course. The same is when the main trend turns up, neither government interference nor anything else can stop the advance until it runs its course.

-W.D. Gann
New Stock Trend Detector, 1936