All it takes to unseat the oligarchy is a well-organized revolution. But the brilliance of the oligarchic elite in removing the ability of the masses to organize by distracting us via televised pablum, radio demogogues, Facebook, video games, and emotionally charged issues such as gay marriage, abortion and religion is unmatched.
Incredible post. I have been thinking the same thing for months now. Nobody knows where major growth will come in the future until it's already happening.
The chart by the OP just reflects the fact that the Dow Jones Index was contantly rebalanced over time to eliminate companies that did not survive the hard corrections. It does not reflect anything else and any conclusion of any other sort is based on a deduction that constantly invalidates premises to reach a hypothetical conclusion. It just happened in the past that as soon as one sector was dead, another sector emerged that drove the market up. Will this happen this time around? Do you see the new leader? Certainly it is not the financials, not the transports, sure it is not the biomeds or the high techs. Alternative energy is just a buzzword. I do not see any leader. Do you?
That's the point. We don't know who the leader is or will be. We can speculate all we want on what sector or industry will fuel future growth but we won't know until after the fact. The fact remains that there is always SOMETHING that fuels future growth, we just don't know what......yet.
It most certainly does - the only way the rebalancing "works" is if there is a fundamentally viable economy producing the next round of companies worth tracking in the index. The same trick in a dead economy would not produce the same result.
How about Peter Schiff taking on Dodd? http://www.schiffforsenate.com/index.php/site/news_detail/peter_schiff_announces_bid_for_us_senate/
Doji, isn't it interesting that when Specterx posted the following you can't be certain whether he is speaking of the US or China!? Quote from Specterx: 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. It's indeed curious to me to note that the US is gradually morphing into a country that more and more resembles all those countries that the rotund politicians of the 1950's abhorred.
I find myself having to correct my own post below. It was Not Volcker who was Fed chairman in 1974 but Arthur Burns. Burns was more free with the money than Volcker, after being pushed in that direction by Nixon. The result was some bad inflation helped along by the oil crises. Nixon tried wage and price controls at some point. I don't recall the outcome, but I would guess the economic climate in the US during the 1974 recovery period was distinctly different than during the current period. But it definitely was not Volcker. Sorry if I misled anyone.
Thoughts on the dollar in all of this mess: This is another interesting situation to me, and some have brought it up implicitly or explicitly in this thread. I have to say, sure I am a bit worried about inflation. But only because I'm worried that people are worried about inflation. The same two sentences could be said about the dollar. But the comparison with the 1970's inflation doesn't work at all. In other words, it is not the case that the 1970s were a potential deflationary bust that policymakers turned into an inflationary one with excessive monetary support. The roots of a deflationary bust lie in the expansion of a credit bubble and its subsequent collapse. The roots of an inflationary bust lie in the gradual entrenchment across the economy of expectations of an undesirable pace of inflation, and the supplying of enough money to make those expectations actionable. Hence, the current situation is unique among the three 'supercycle' corrections shown in the original chart in that it aligns, in principle, as a deflationary bust, but unprecedented monetary and fiscal measures have stoked fears of an inflationary outcome. This has opened the door for reasonable fear about the future of the dollar (and a market for the views of those like Peter Schiff and his ilk). But the 1970's were an inflationary bust all the way. The problems were, first, government financing of the Viet Nam war, then the untethering of the currency system from the Bretton-Woods limitations, and then the existence of very very stupid mechanisms that promoted positive feedback loops. For example, labor union strength at the time created contractual obligations in a number of industries to tie wage growth to inflation. This, of course, simply meant that, if inflation increased, then companies would have to raise prices to afford their payrolls, which just gave the wage-earners more money to afford the inflated prices. We know how stupid that was now. There is no doubt in my mind that there will be unintended consequences for the unprecedented policy effort now in effect. But I'm not sold on it being the death of the dollar. In fact, I'm inclined to suggest a long dollar strategy. The dollar has been in a bear market for about a decade. Bear markets of that duration, in any asset, conclude only when everyone is convinced that the end-of-the-world scenario is totally believable for that asset. At this point, we are above the summer 08 lows and sentiment is far worse for the currency, which is a potentially important divergence scenario. In my view, everyone is positioned for the dollar to get decimated and the dollar carry-trade has grown massively in the past 2-5 months, which means a one-sided position of enormous proportion is sitting there just asking for a catalyst to come along and force its unwinding. And there is one rule I have learned well over the years: that major bottoms are made if and only if the market in question is overwhelmingly positioned for continuation lower. Hence, if you believe central banks are not going to waver in their use of the dollar as reserve currency, then we have reached that point for the dollar. Note, I understand that the situation is ripe for some sort of reorganization of the reserve currency mechanics. But the idea that China and Japan are going to "pull the plug" on the US is absurd - it would decrease the value or our debts and their assets...you do the math. They're far more likely to intervene than abandon. The same could be said of the ECB. We're more likely in an age of competitive devaluation than anything else. But the fact that drives my perception most of all is as follows: When you start seeing a clear consensus in public sentiment as expressed by NY Times best-sellers and you-tube popularity that we're heading for a continuation move in a market that has been in a large degree trend for a decade...Watch out!