Simply notice the 'inflation adjusted declines' of 1974 and 1982 and the overall 1970-1982 correction and compare them to the 2002 and 2007 decline from 2000-2009 and see what happened after.
After two massive 50%+ declines, there doesn't "NEED" to be another massive wipeout for a long time. Investors do repeat patterns, so if they continue to repeat this pattern there is some downside risk of 13% and 20% over the near term, but over 150% upside potential which is 11:1 - 7:1 odds. Those are pretty good odds over the long term. For every 1 unit of downside risk you accept the potential for 7-11 units of upside. That's better than bonds by a long shot.
Keep this in mind when making your next investment decision.
All the best,
Tim
12:23AM EST 8/10/2017
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Did anyone realize that I didn't include the word "obvious" after the line "This may seem ridiculous (s/b ridiculously obvious), but humanity is always finding ways to grow and to find new ways to do things more efficiently and cheaply (inexpensively)." I apologize for not catching that before I published it.
Hello Tim, Do the Green & Yellow Bar graphs represent TWO possible outcomes?
timwest
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@Harsha_Kumar, The green is the exact replica of the rally from 1982-2000 and the yellow is the faster version of the same rally sped up by 38% so that it achieves the same rally in 62% of the time of the 1982-2000 rally.
plok
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Thanks for your posts, Tim. I'm always looking forward to reading them. You have a very refreshing and unconventional view on the markets. And you seem to be right more often than not.
Keep up the great work please!
timwest
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@plok, Thank you. I'm glad to contribute. Thanks for your praise.
jeffreyjim
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Thanks for posting your information - chart. (In a very nice way)
"I" think the stock market is also following the "August, 1921 to September, 1929" Bull Market. (See Dow Industrials Chart)
a = November, 1916 top --- August, 1921 bottom is very similar to the
("Dow" --- "SP500" --- "SP100" chart pattern --- January, 2000 top --- March, 2009 low) --- (A-B-C Flat Correction)
b = The August, 1921 to September, 1929 Bull Market. (Just kept going and going like our Bull Market today)
c = The "1929 Bull Market" was in a bad 20 yr cycle. (1922 - 1942 = bad 20 yr cycle) First time ever Bull Market in the Bad 20 yr cycle - 1900 to date.
("I" figured this out about 3 yrs ago.)
d = Our Bull Market today "2009 Low" to date (2017) is also in the bad 20 yr cycle. (2002 - 2022 = bad 20 yr cycle) Second time ever Bull Market in the
Bad 20 yr cycle - 1900 to date. --- ("I" figured this out about 3 yrs ago.)
e = "I" figured this out about 17 to 18 yrs ago. (The good 20 yr and the bad 20 yr cycle thing)
f = The "Great Depression" low in the "Dow" (1932) took out the "August, 1921 low. (The start of the Great Bull Market that ended with the "Great Depression")
g = "I" wonder if we will take out the "2009 Great Recession Low" when this "Bull Market" is over ?
h = "1929" the start of the "Great Depression" plus 90 yrs = "2019" (? Is there a 90 yr cycle top coming ?)
Other cycles topping before the end of "2020" plus or minus one year = 4yr --- 10 yr --- 20 yr--- 40 yr --- ? 90 yr ? --- (Cycles can be tricky)
i = "1932" The Great Depression Low in the "Dow" plus 90 yrs = "2022" (Will this be the next major low plus or minus one year ?)
j = "1932" was a 10 yr cycle low.
k = Other cycles due to bottom in "2022" plus or minus = 4yr --- 10yr --- 20 yr --- 40yr --- ? "90 yr" ?
l = The "Rule of Alternetion" = 2000 was a top --- 2007 was a top --- "2009 was a bottom" --- ? Will the rule of alternation work this time ? --- ("2019" = Top ?)
m = Cycles topping this yr 2017 = ("10 yr cycle") This is the first time 1907 to date this cycle did not top before the end of "October"
n = Cycle lows due next year 2018 = 4 yr cycle (Presidential Cycle)
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When The Big Top Comes The Downside "Will Not" Be Very Nice. "This is not a Joke" (The Big Top Is Coming)
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Check out -- "USDEBTCLOCK.ORG" --- (Per some of our "Lawmakers" --- "Dont Worry It Will Be Free") --- "Free My ASS"
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This is for "Education Only" --- ("I" hope the "Little Guys and Gals are listening.) --- (This is "NOT A BUY OR SELL" Recommendation)
Thanks for listening,
"One Eye Jim"
AndyRoger5
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This pattern assumes that circumstances in the 70's are the same as they are today. Can we take into consideration the changes in investment world -- movement of manufacturing & capital from West to East. The reverse happened and a result the East was stuck in a rut of 5 centuries.
isn't this what has been happening in the West? salaries are stagnating, capital is moving east, manufacturing has moved east. Trump & company would NEVER be able to bring high paying jobs back to the West.
compare p/e today to p/e in the 70s. Huge difference, even considering inflation.
timwest
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@AndyRoger5, The Chinese "stuck in a rut" was on purpose. They did not want to improve and shelved new discoveries. This comparison I am showing here is valid still because we have the greatest efficiency and inflation fighting weapon the world has ever created to date: the internet. In one hour you can get done what used to take 10 hours more than 30 years ago. Possibly even more efficient, but I am being conservative.
If you don't believe that people want to improve their quality of life or improve efficiency, then maybe you could design some tests to show that. There are exceptions: The Amish here in America believe that they should live as simply as life was 2000 years ago. And that's how they live.
The P/E today can be different today than in the 1970's because of the amount of investment required to earn a return on capital is a lot less. It used to take much more capital to start a company "way back then." Today, you can start a business with very little capital and grow it to billions in revenues. The investment required to grow IBM to $1 Billion (way back when) versus AMZN might be an interesting research report.
Salaries "stagnating" doesn't factor in all employee benefits, many of them mandated by Gov't. If they included the spiraling health care costs, the retirement benefits, the stock options packages (priced realistically), and higher quality work environments, the wage "stagnation" would surely show a strong uptrend instead.
As for "bringing jobs back", that requires a shift in taxation since the US now has one of the highest corporate tax rates in the world. Obama didn't seem to understand that which is why so many companies moved jobs overseas. I don't think there has been a clue about economics in the White House for the past 8 years.
The patterns are there for us to look for, find, and study. I was alive through the 1970's and was actively trading after getting a degree in Economics from 1983-1987 = fantastic times economically in the world. I also travelled the world in 1985 to do comparative economic systems analysis (which means "taking Econ classes and traveling). I've watched the Gov't change taxation on real estate in 1986, which caused the S&L crisis in 1988. Then I watched the Gov't hike taxes on capital gains on stocks in 1987 to be enacted in 1988 and the Gov't planned to eliminate to interest deductions used to finance takeovers, so stocks crashed as people took their profits before tax rates hiked from 20% to 28%. I watched the Gov't change taxation on real estate in 1997 to encourage speculation and investment, and that caused the great bubble in real estate ($500,000 tax free capital gains every 2 years for principle residence). I then watched Gov't increase leverage (from 9:1 to 40:1) in the banking system to create a bigger bubble in real estate, but then reduced the leverage (from 40:1 back to 11:1) in the banking system to pop the bubble.
You can read my other "historical chart" about how 10X booms from 1942-1960 and 1982-2000 were similar and what happens afterwards. See if you can find it here. I'll look for the link and add it as a reply to this.