Secular Bull And Bear Markets

Below is an email I sent to a friend this a.m. – in response to an article that he sent me that can be accessed at:

http://advisorperspectives.com/dshort/updates/Secular-Bull-and-Bear-Markets.php

The following may be of some interest in this context:

Decades ago, when I was studying for an MBA, our Human and Organization professor devised an experiment to demonstrate the power of peer group pressure. He gave a group of students the task of reaching unanimous agreement in a negotiating exercise. Unbeknown to the rest of the group, he had instructed one of the group to refuse to agree to anything. The purpose was to demonstrate the behavior of the rest of the group towards him. The following was the (rough) sequence of “emotionally driven” behaviour:

1.       Highly focused reason

2.       Pressure

3.       Frustration

4.       Anger

5.       Ignoring the arguments of the recalcitrant

6.       Pleading

7.       Extreme anger, belligerence and bullying

8.       Indifference as they abandoned the task and turned their backs on the recalcitrant as if he did not exist.

Except for 6 and 7, the above is roughly what is experienced by the non conformist financial/economic commentator by way of reader feedback when he “dares” to express an opinion that is inconsistent with that of the group.

I learned early that if one is to survive peer group pressure – and continue to be able to think straight – one cannot become a socially accepted member of any group. Independent thought is impossible within the confines of a social group. That is different from having a capacity to be a professional Team Player. One can be a professional team player in respect of realizing a specific objective, without merging one’s identity with that of the group in order to satisfy the drive to belong to a social group.

In my view, the views of the gold-philes and doomsayers have crystallized into a social group-think that is diametrically opposed to the social group-think of mainstream finance/economics. But, at the end of the day, it is still “group-think” and that is potentially dangerous, because objective reason becomes a casualty  – see 8. above

This will be my last email. It’s time to move on.

Kind Regards,

Brian Bloom

Author, Beyond Neanderthal and The Last Finesse

www.beyond.neanderthal.com

Hi            ,

This seems to me to be an extremely important article that Mr.Short has written. As I have observed before, he is damned good. I recommend that we keep our minds open to all possibilities.

Two observations:

1.       If we are about to enter a secular bull market then there is something BIG happening out there that is not yet visible

2.       Watch the Shanghai market. It is currently resting on a rising trend line. If it breaks down, we can expect a  vertical down movement in markets, world-wide. However, if it bounces up then this may support the view that we are entering  secular bull market.

To my way of thinking, a break down in the charts at this point would presage an unravelling of the entire financial system. I can’t see that happening. There has been an enormous amount of R&D in various disciplines, world-wide over the past decade or so.

Assuming that underlying earnings of the S&P hold, then the current level of the S&P represents “fair value” . The key question is: Will economic activity stabilise at/grow from these levels? Conventional wisdom says “no”. But a further deterioration in activity would imply a rise in US unemployment/underemployment above 20%. If that happens recovery will be exponentially more difficult because failure would feed on itself.

You have sent us the quote below many times:

The root of all superstition is that men observe when a thing hits, but not when it misses. -Francis Bacon, essayist, philosopher, and statesman (1561-1626)

We are all watching legacy industries dying. But how many of us are paying attention to the emergence of new industries and the positive economic impact thereof? J

·         Non fossil fuel derived energy

·         Medicine

·         Micro electronic engineering

·         High temperature superconductrors

·         Genetic engineering

·         Software/artificial intelligence

·         The Cloud

·         Alternative methods of agriculture – above ground and in artificial environments

·         Alternative sources of food (mushrooms, seaweed, algae, hybrids)

·         Soil beneficiation technologies

·         Re-forestation and forest husbandry

·         New construction materials

·         Energy efficient construction techniques

·         Telecommunications

·         Electric motor cars

·         Mag-lev bullet trains

Add to all this, the emerging changes in attitudes to population growth rates – that began to emerge in China a couple of decades ago; and also the fact that climate change has had some POSITIVE consequences. Lake Eyre and one or two others in Australia are full for only the second time in recorded history. (That’s since Australia was colonised). There has been an EXPLOSION of bird and other animal life in the immediately surrounding areas.

In my view, the direction of the Shanghai Index chart will point the way for the world economy. I will be watching that very carefully for the next few weeks. Note the angle of decline as it headed towards the rising trend line – which it has now reached.

THIS is the power of technical analysis! “The markets” will decide; not the analysts.

Source: Yahoo.com

BB

Brian Bloom

Author, Beyond Neanderthal and The Last Finesse

beyondneanderthal.com