by Bob Stokes
Updated: September 06, 2017
Historically, financially themed Hollywood productions have often coincided with trend changes in the DJIA. Now, a motion picture that is based on one of the biggest financial bubbles of all time has just opened at theaters. The movie tells a "financial story that's fascinating ... ."
[Editor's Note: The text version of the story is below.]
Motion pictures often reflect the financial spirit of the times.
An example is the 1987 film Wall Street with its main character, Gordon Gekko. You'll probably recall his famous phrase "greed, for lack of a better word, is good."
That phrase encapsulated the animal spirits of mid-1980s Wall Street. The film went into production before the October 1987 market crash.
Interestingly, another movie titled Wall Street was released just after the 1929 crash.
And, going even further back, the movie Wall Street Tragedy came out in 1916, just as the Dow was completing a multi-year counter-trend rally.
Today, with stocks near all-time highs after years of a seemingly unstoppable bull market, the whiff of yet another financial mania is in the air. And, once again, a financially themed movie has hit the big screen (Bloomberg, Sept. 1):
Tulip Fever tells the story of a wealthy Dutchman, and his beautiful, bored young wife, who falls in love with a painter commissioned to make the couple's portrait.
You might expect the love aspects of the plot to predominate and the markets part to get short shrift. But in Tulip Fever it's the financial story that's fascinating ... .
I won't give away the ending to the movie here, but I will show you how Tulip Mania ended. Take a look at this chart from the book, Mania Chronicles:
As the book notes:
Tulip bulb prices had been substantial for years and then soared in 1634-1637, reaching thousands of guilders. Just one year later, city councils in Holland passed regulations allowing tulip bulb futures contracts to be paid off at 3.5% of the contract price. A footnote in the book Crashes and Panics by Eugene N. White adds that the decline in prices was probably greater than 96.5% because many of these contracts were not fulfilled even at that price. A few decades later, a bulb could be had for 10 cents.
Does the just-released movie Tulip Fever signal that a big crash is just ahead for the DJIA?
Well, no one has a crystal ball, but the timing of other financially themed movies is something to keep in mind.
Of course, in our experience, the most important factor in forecasting the DJIA is the index's Elliott wave structure, which reflects -- and predicts -- the psychology of market participants.
And, our just-published September Elliott Wave Financial Forecast gives you the details that you need to know now.