Here is a chart showing how the Dow Jones Industrial Index ended down last week. See a similar chart below that shows why this could be good news for many.
Since it is Monday, let’s start this week by recognizing that this correction has been suspected and that historical research suggests that this is the darkest hour before the light at the end the global economic tunnel appears.
You’ll see below that the current stock market volatility and economic slow down are to be expected…are completely natural and in perfect order. This is a time of great opportunity…not of disaster.
This site has continually reviewed the 15 to 17 year economic cycle as outline by Austrian economist, Joseph Shumpeter. The global economy (and US stock market) enjoys an approximately 15 year bull…. then about a 15 year bear (a period of no growth) and then moves back to start a 15 year bull. These stock market bull and bear cycles are based on cycles of human interaction, war, technology and productivity.
At our June 2011 International Investing & Business seminar we looked at how the US equity market is currently about 12 years into the 15 year trend.
We then compared the last 15 year bear cycle That began in 1968 and saw that after 12 years from October 1968 to April 1980 the US stock S&P index had dropped -7.7% in 138 Months.
Then we saw how from the beginning of this bear cycle from December 1999 to June 2011 the S& P was down -11% in 138 Months.
Then we looked at this chart from Moore Research Center, Inc. to see what to expect from June 2011 to June 2013 if that period compares with June 1980 to 1982. The historical story tells us to expect a large drop.
Notice the similarities between the market in early 1980 (Blue Line) and the current Dow above. There is a strong synchronicity.
A strong 1999 to 2013 bear?
See how to get a FREE recording of the June seminar and how to attend our October 7-8-9, 2011 International Investing and Business Seminar.
If history is our guide, some great new innovation or innovations will then ignite 15 year bull beginning in 2013 to 2014.
This is good news for retiring boomers who manage not to be wiped out from the next several years of sideways and downwards motion.
This is great news for long term investors who can pick up incredible bargains now.
Here is how these cycles seem to work.
Step #1: An economic downturn enhances a war or threat of war. Struggles for survival in the war (like the Civil War, WWI, WWII and the Cold War (WWIII), super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine, production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the Internet.
Step #2: Each new invention helped win a war. Shifting the technology to domestic use… after the war… created a boom.
Step #3: Each boom leads to excess.
Step #4: Each excess led to a correction. The correction creates an economic downturn.
Step #5: The economic downturn enhances a war or threat of war.
Here we are… in the correction… at the correct time when we should expect that another war (or threat of war such as the Cold War) should begin to build! This latest downturn started almost exactly (1998), 16 years after the last boom began (1982)…which began after the last great human struggle called the Cold War.
If the cycle repeats, the struggle should build now due to the poor economy. If the cycles repeat then the bottom is around 2013. Everything will seem bleakest… darkest…blackest and this will be the best time of all to invest… hence my light suit!
This Morgan Stanley graph shows these cycles.
The key for spotting the greatest investment opportunities is to spot the next big invention… the technology that will spin out of WWIV.
The key is that a problem must have such severe consequences (such as losing the war and being destroyed) that all stops… all logics of return on investment are ignored. Technology and research are pushed full steam ahead regardless of cost.
The key to great success now is spotting the war. It could be against global warming. The battle could be against a plague…. new bacteria that resists antibiotics. A bad year of crops could create famine and the war would be on hunger.
The solutions could be the small stuff (nano tubes) or large sun reflectors tied to earth that generate energy. Whatever, large or small, the opportunity they create will be huge.
We are betting on water, natural health, agricultural real estate, good value US real estate and Ecuador real estate… because we understand these.
You should look for innovations that you understand that could rock the world.
If markets continue to fall. If the global economy stalls. If there is increased unemployment and turmoil… we cannot do much about this.
We can… if we see what is likely to come, be prepared so we can think out of the box and invest and do business in places most likely to be at the forefront of the next social economic expansion.
These are the times of greatest opportunity for the small guy when the old order that has taken advantage of the system lets go and a new order led by new blood continues humanity’s evolution.