DOW INDUSTRIALS MONTHLY - 10X BOOMS and AFTERMATH
Enjoy my analog and look at my previous posts about the long term patterns in the Dow Jones Industrials. Note how similar the structure is on the 10-fold booms and the similar technological advances that made the boom so powerful. The next boom will likely be in "energy efficiency" and continued "internet boom", but for now we don't have a demographic boom to support the next advance.
Note the only substantial difference is that in the late 1970's inflation and interest rates exploded higher, reaching 18%-20% before the Fed succeeded in shutting down inflation expectations. The current scenario flip-flopped and the Fed is keeping rates artificially low to reflate the economy and prevent deflation.
So, do we go DOWN to catch up to the past model? Or do we go sideways for 5 years, or is it a combination?
Tim 1:02AM Wednesday, January 28, 2015 DJIA 17387 -291
Note the only substantial difference is that in the late 1970's inflation and interest rates exploded higher, reaching 18%-20% before the Fed succeeded in shutting down inflation expectations. The current scenario flip-flopped and the Fed is keeping rates artificially low to reflate the economy and prevent deflation.
So, do we go DOWN to catch up to the past model? Or do we go sideways for 5 years, or is it a combination?
Tim 1:02AM Wednesday, January 28, 2015 DJIA 17387 -291
Comment:
I didn't add the NIFTY-FIFTY stocks that reached 50-times earnings at the peak in 1973, which I had theorized in speeches in 2002 when I found this pattern, was similar to the REAL-ESTATE which hit 50-times earnings in 2006. After 10-fold booms and a crash, people then gravitate to invest in assets they can touch and understand. Also after booms and crashes, people like to create a bull market. OPEC was formed in the 1970's to create a bull market in the price of oil. OIL formed a similar pattern in the 2000's as well.
Comment:
I also didn't include the "merger-mania" phases which also matched up perfectly in both cycles. The tax laws encouraged companies to use leverage to buy each other out to generate earnings growth. The first cycle ended because the Gov't threatened to take away the deduction of interest from mergers, since it was similar to companies using leverage like a margin account to buy stocks. It was considered manipulation.
Comment:
I also didn't include a major storm which destroyed 100,000 homes: 1 of those storms was "Katrina" that we all remember that wiped out New Orleans. The parallel storm in the pattern came up the East Coast of the US and hit major cities. See if you can find the name from Googling which caused the same damage in dollars (real$) and the same homeless count.
Comment:
In 2002 I used this to project that a "Down home southern style, easy-going, pacifist would win the Presidency in 2008", much like Jimmy Carter in 1976. This was LONG BEFORE Obama was even running for President. It was my most interesting forecast. I then projected a "strong, likeable, moral, resolute man" would win in 1980 to mirror Reagan and it looked like Romney was that man for 2008, but he wasn't likeable. So, trends are uniquely predictable with the right perspective.
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