A really interesting long-term chart that contextualizes this market rally

Discussion in 'Trading' started by brettman9, Sep 15, 2009.

  1. For the record, unemployment peaked in 1982, and the peak rate (about 11%) corresponded with the beginning of the new secular bull. See attached chart.

    That being said, I agree that many things appear to be worse now than in the 1970's, particularly when you think in terms of the likelihood for expanding credit. Household balance sheets are destined to delever for some time.

    But the main point of this thread, I would reiterate, is given by an earlier post:

    "It seems to be the case that, in times such as these, the problem is that certain themes are so visible, so forceful on the intellect, so easy to articulate, that it's almost impossible to see anything else. And, every time a new age of growth develops, it is based on a reorganization of ideas and capital that could not have been foreseen from the fog-of-war of the preceding consolidation phase.

    Hence, the abstract principle is that we will probably find a way to work out the seemingly insurmountable problems and get on with improving our lot. The point of the chart is that we seem to go through periods when we doubt that this is plausible. And that that doubt seems to have a relatively identifiable structure when seen from a bird's eye view."


    I guess I am inclined to believe that the hardest things to see are the least quantifiable. Like the fact that, in the end, the economy is made of a bunch of intelligent agents who want things to be good. Eventually, that force seems to get traction when least expected and the quantifiable themes change qualitatively.

    I'm sure it was an easy sell in 1938 or 1975 (or indeed, 1982) to say that the obstacles to future prosperity were insurmountable.

    That prosperity seems, by all extrapolatable trends, to be implausible is, I think, one of the defining qualities of any such period. At least, that's the thesis I'm running with right now.
     
    #21     Sep 16, 2009
  2. Reasonable people can disagree, and on this I have to disagree. :) Between a complete overhaul of the global monetary system and the de-colonization of the planet's #1 energy source, the structural changes were deep and dramatic.
     
    #22     Sep 16, 2009
  3. I agree.

    Can't speak to 1938, but the late 70s, early 80s were @#$%#$# miserable. It was like hope itself had crawled off to some distant cave to die.

    I don't think we're there yet in this period - but it will only take 2-3 years of real stagnation to get that feeling again. It doesn't need to be outright recession - humans are acutely aware of the lack of meaningful growth.

    And curiously enough, it looks like the "final" bottom in your two analogues is due right around the 4 year mark.
     
    #23     Sep 16, 2009

  4. Yeah. That's the basic idea. The assumption would be that we've suffered a kind of trauma. And there will come a period when people simply aren't going to be able to be swept up in confidence and genuine commitment. Right now begins a period of protecting security and basic needs.

    The conclusion from the key chart in the original post in this thread:

    "This would suggest the long-term picture is a period of disenchantment with the stock market for a few years, and then (hopefully) the beginnings of a new secular bull."

    I would imagine that means sentiment actually deteriorates, but asset prices hold in a range over the next few years.
     
    #24     Sep 16, 2009
  5. Jym

    Jym

    We are due for a fairly large delevering across the board and the longer that's pushed off the harder and farther down that'll push us.
    So it's kind of a give and take....do we go ahead and do it now where i think we could basically stay intact thru the entire long, painful process or do we push it off onto another bubble and enter truly unknown territory when it finally pops?

    I just hope Ron Paul can be anointed as king if we really do collapse.
     
    #25     Sep 17, 2009
  6. S2007S

    S2007S

    Reminds me of mid 2007 when the markets were unstoppable, price targets on all indexes were being raised, commodities were running higher and higher and everything and everyone was more bullish than the next. What confuses me is that analysts continue to raise their price targets as if the economy is going to find new ways of expanding without the help of printed monopoly money, the problem is this economy cannot borrow it's way out of this crisis. Please show me some true organic growth and I will start believing this economy is headed in the right direction, until then borrowing and injecting monopoly money into the system is surely not the answer to job creation or real growth.
     
    #26     Sep 17, 2009
  7. piezoe

    piezoe

    Brettman, you write well-- a refreshing break from the ET standard. I thought the following paragraph to be particularly cogent.

    In considering the nice graphs posted, it has occurred to me that the 1929 plot, with a secondary bear market occurring 4 months after the initial crash, was likely what Bernanke, a student of the Great Depression, was trying to avoid, and that was made possible because we are no longer on the gold standard. This time around there was virtually unlimited bailout and stimulus money available.

    It has also occurred to me that the philosophy of the Fed Chairman in the 1974 recovery period was different from that of either Greenspan or Bernanke. Volcker was a skinflint compared to his successors. I wonder, has the money spigot been opened so wide this time around that we won't see a significant dip in the recovery curve, as in the 1974 recovery, but instead just level out and inch higher into Spring 2010 highs?

    It's anyone's guess, but I'll be watching closely to see if we get a trend-line break as the Fall wears on, or just keep inching higher.

    Thanks for the graph and useful discussion.
     
    #27     Sep 17, 2009
  8. piezoe

    piezoe

    Just as Betty Davis responded to a wheelchair-bound Joan Crawford's pathetic protestation, may I respond by corruptly paraphrasing the great Betty Davis: "But you are Blanche, you are borrowing your way out of the crisis." :p
     
    #28     Sep 17, 2009
  9. Specterx

    Specterx

    The main question that the "stimulus n' bailout-driven recovery" crowd needs to address is why this basic combination of policies failed to avert 20 years (and counting) of bear-market, low-growth, rising-inequality malaise in Japan.

    To my mind, a genuine recovery will not happen until China et al truly do decouple from the USA. There are not many indications that this is taking place and I have a suspicion that it could be decades, or never. I happen to think it's an open question whether a strongly authoritarian, mercantilist, quasi-command-economy can ever emerge as an engine of broad-based global growth, as opposed to an excuse to endlessly devalue labor in favor of a narrow oligarchic elite. It's never happened before.
     
    #29     Sep 17, 2009
  10. bighog

    bighog Guest

    This time is different, believe it. The economic data of past recessions etc are meaningless in this new era. This is not your daddys recession. This is a systemic rejiggering of massive porportions.

    Wall street will be working on new scams to relieve others from their cash but the rest of the world will not be so foolish as before. "Fool me once, shame on you! Fool me twice, shame on me!"

    The next shoe to drop is when the Chinese etc decide they have better uses for their money instead of lending to a declining country of crooks and scam artists.

    The reason low interest rates have been arouind so long is because there is NO REAL economic growth, and central bankers have been fighting a losing battle against DEFLATION of real assets.

    Anyone happen to notice stocks go up as the value of the dollar declines? Sure you have, but many do not want to admit the real meaning of it all. :eek:

    re⋅jig⋅ger  /riˈdʒɪgər/ Show Spelled Pronunciation [ree-jig-er] Show IPA
    Use rejiggering in a Sentence
    See web results for rejiggering
    See images of rejiggering
    –verb (used with object) Informal. to change or rearrange in a new or different way, esp. by the use of techniques not always considered ethical.
    :D
     
    #30     Sep 17, 2009