Note to readers, for the next week this post from over a year ago will head our lists of posts. This is so it will be easier for my students to locate this post and read the background on why and what we are doing here.
My Ethics class viewed On the Waterfront and I wanted all to study the three maps and their similarities.
Sunday June 20, 2010
We are launching a market analytic service with this blog. This is an introduction about our market orientation and overall perspective. We distribute the charts along with our comments via e mail using PDF files. Drop us an e mail with your preferred e mail address. We do not share or sell e mail lists.
Dennis Elam is a forty year veteran of the financial markets. He began his career in 1972 working for Ross Perot in the most extensive training program ever undertaken by a Wall Street firm. He was eyewitness to the crushing bear market of 1972-73 as the Dow Jones Industrials slid from 1,000 plus to 577 in two years. He re-entered the brokerage business in the early 1980s. After extensive study of technical analysis including the methods of Wells Wilder, Robert Prechter, John Murphy, and others, he opened his own securities office. He enjoyed considerable success trading fixed income markets for institutional clients. Extensive study of the markets has led to the importance of studying internal market dynamics rather than the often misleading but frequently quoted stock market indices.
He has written extensively on both fixed income and the oil markets for West Texas newspapers. He has provided television and radio commentary on economic markets.
Mr. Elam holds both BBA and MBA from the University of Texas at Austin. His PhD from UT Austin is in Leadership. His dissertation was on stakeholder attitudes towards non-profits.
Past and Present Cycles
Business cycles tend to last about 18 years in the US, the last century saw these cycles.
1912-1930 Bull
1930-1948 Bear
1948-1966 Bull
1966-1982/4 Bear
1982-2000 Bull
2000-Now, We are half way through the current period of economic stagnation and contraction. The fact that it is occurring from some of the highest market levels, valuations, and debt levels means it will likely have far greater consequences than most people imagine, particularly those that think the recession is over.
This view of the Dow from 1966-1984 is emblematic of what to expect now-huge rallies and followed by equally large collapses. Note that the high in 1966 of 898 was never really bettered for 18 years, so much for buy and hold. This of course does not portray the really gruesome fact that many companies simply did not survive this era.
The purpose of a bear market is to clear out the failed strategies of the past. One reason the current downturn is likely to be much worse is that the bear was not allowed to run its course due to government interference. Many failed strategies are still around that should have died a deserved death by 1982. The result is what we call ...
The New Civil War
This is a map of the Union, dark blue, Confederacy, Red, and territories.
This is a map showing 'right to work' states in turquoise. A right to work state has passed a law that prohibits compulsory union membership as a condition of employment. Notice any similarity, yes, the right to work states are the former Territories and Confederacy.
This is the map of the red and blue states as evidenced by the last few elections. Red states vote Republican and blue states vote Democrat. Now compare all the maps, surprise, they are all the same map!. This is not a political blog, but understanding The New Civil War will help one weather non productive government schemes and understand why and how they are happening.
For example, the automotive industry has moved south to right to work states. The result is that Detroit is now bulldozing one third of its residences, GM and Chrysler went bankrupt, and no one is building plants in the north. The last recession saw foreign auto makers simply build new plants here as a result of import restrictions, another unintended consequence of Detroit lobbying for restrictions. Other manifestations are the precarious financial condition of California, Illinois, New York, all union shop states who have over promised public employee unions. Expect these promises to feature prominently in Greek like defaults coming very soon.
Socionomics
Socionomics is the study of social mood and its results in social actions. It studies how waves of endogenously regulated social mood in turn regulate changes in the economy, political preferences, financial markets, pop culture, etc. These mood shifts are evident in in the best and largest social laboratory on display, the stock market. Here millions of moods are reflected in the hope, fear, and greed that characterizes booms and busts. This social mod is evidenced in bull and bear markets, indeed it is the mood shift that gives us the business cycle.
An Accounting Focus
The author is a CPA and will use accounting and finance analytics to demonstrate overbought and over priced financial sectors.
Recommended Reading
The recurrence of cycles makes a grasp of financial history an imperative for proper preparation. We will highlight recommended reading in the sidebar at left.
A Cautionary Note
We welcome constructive comments and can be reached at [email protected] .
Comments are opinions of the author and should be regarded as such. Losses resulting from implementation of part or all of ideas suggested here can occur. Individuals should form their own financial plan with a proper strategy for assuming risk.
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