Monday, October 4, 2010

Not Doom & Gloom; Cyclical & Opportunity

From an investment standpoint a lot has changed from the relatively cool 80’s and 90’s. The above chart shows us the current decade long bear market in stocks.
The warning signs of instability are everywhere and this is devastating for stock prices.
1) Trillion dollar currency markets that are thrashing up and down like small cap equities.
2) A soaring bond market with near zero interest rates. (investors seeking safety)
3) A skyrocketing gold price. (investors seeking safety)
4) An increase in the number of corporate scandals.
5) More corporate bankruptcies.
6) More unemployment.
7) Less available credit for consumers.
8) A devastated real-estate market in some nations and wounded markets in others.
9) Entire nations imploding and falling into bankruptcy.
10) An aging population wanting to retire, consequently there will be less of the population producing wealth.
11) An aging population requiring more medical attention, resulting in higher economic costs.
12) More government intervention in markets in the form of bailouts and regulations.
13) More government social programs.
14) More open frank and open discussion of market intervention by policy makers.
15) Wars.
16) A public that is more heavily dependent on the government to “fix” these problems, transfer wealth and intervene.
The warning signs are there. The bells are ringing for those who are paying attention. None of these things are evidence of an environment that supports an expanding stock market.

The world’s largest, trillion dollar currency markets bouncing around is not a sign of stability. In the above chart the US dollar, as represented by the black line, clearly trends sharply higher as the first green arrow illustrates, then down as the red arrow points out, and then again up.

Investors are fleeing stocks and putting money into bonds no matter what the return is. We believe this is clearly defensive and out of fear of the current market environment.

People are looking for work at a time when it is harder to get credit. Clearly this makes it harder for the public to invest in stocks.
Investors are looking for the safety of hard assets such as gold.
The important message in this article is that one needs to recognize:
1) Markets are cyclical and not linear. Change is inevitable.
2) Investors must learn to recognize change in market conditions.
3) Investors must learn to adapt to change to protect their wealth and possibly profit from it.


  1. I'm going to pass on his view of opportunity. I'm studying many things right now which will boost my quality as a future citizen. I'm also getting into shape like hell. I stopped watching television, don't play video games, I don't use the internet outside of checking this site, I'm removing gradually all impulsive tendencies as well.

    I'm reading the dictionary to accumulate a stronger lexicon, I'm mastering calculus, learning number theory, and gettng into quantum mechanics. Relativity, electromagnetics, organic chemistry, hyperspace, and chaos theory are other sciences that I'm eruditing with the mathematics.

    I just learned how to shoot today. I'm learning about water too, you know, like how to get some when the fabric of society is wasted.

    Wallstreet and other blinded-by-money fools seem to enjoy telling people about future investments, trends, and booms. Sorry for anybody listening to them. There will be no return to the old world. Things are looking incredibly beautiful for those looking in the right direction, but for those looking in the wrong direction it's horrifying.

    Everything happening is a miracle! The world will flip upside down, rendering it rightside up.

  2. 1:27 you are doing many good things and I encourage you to keep going on that path.

  3. I don't buy cyclical theory at all. I believe markets grow, shrink, or remain stable. They are only cyclical when someone is there to keep pulling the rug out.

  4. 11:14 that makes no sense. EVERYTHING goes in cycles. Housing, Gold, changing seasons, people wear clothing from days gone by, cars get copied from the past, music from the past, it all comes back to cycles. Even weather patterns over time.

  5. 1:36
    Tell that to the Roman Empire.

    Every now and then, a change so big comes along that a new era is ushered in.
    Ever heard of the Dark Ages?


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