Thursday, Nov 02, 2006

Are we in 1973

zealllc.com: Dow 30 Record Highs

After reading a few articles about secular bull and bear markets I am beginning to think that our economy is at the same stage as it was in the early to mid 1970's

Posted by sold 2 rent 1 @ 09:14 AM (392 views)
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1. sold 2 rent 1 said...

Look at graph 3 in the article
The Dow indicates that we are 6 years into a secular bear cycle as in late 1972

The graph for gold is also indicating a repeat of the 1970s
http://www.zealllc.com/2004/au3stage.htm

Fred Harrisons Boom and Bust book talks of an 18-year land cycle that places us in the same position as 1971

Even the housing affordability graph used this week in the Sunday Times points us to around 1973
http://www.telegraph.co.uk/money/graphics/2006/10/02/cnhouse02big.gif

Are we headed for a stormy time with stocks and property?
In which case commodities seem to be a safe haven?

Thursday, November 2, 2006 09:29AM Report Comment
 

2. miniftse said...

im not sure about history repeating, but yes i also think we're in a secular bear. I'm disappointed to see the progress the stock markets have made since last May, but they cant climb much higher if it's to prove a secular bear. If you want a play for 5-10 years i dont think you can go wrong looking at commodities, sold 2 rent 1 you seem to like your books, have you read the oil factor. in the short term i am wary of gold as i have also heard the arguement that the cheap money is currently flowing into commodities as it could be the last place to bubble before contraction of supply finally hits home. i was hoping to get back in about 550 USD after the presidentials but it doesnt like im going to get the oppoutunity.

i also like the look of silver over gold, as the ratio between gold and silver prices is currently very favourable looking at historic averages, its also easier to buy in smaller units.

Thursday, November 2, 2006 10:05AM Report Comment
 

3. sold 2 rent 1 said...

Glad to hear someone with the same view

The oil sell off just reflects is natural volatility. The fundamentals of supply and demand that drive long term prices in this secular bull still remain
http://www.zealllc.com/2006/oilcorr.htm

Oil was looking expensive (hence the sell off) but oil stocks are looking cheap (P/E ratio)

Gold is looking cheap (compared to price rises in oil). But gold stocks are looking expensive (P/E ratio)
http://www.zealllc.com/2006/goldvalu3.htm

Both gold and oil have still a long way to go in this secular bull market, but both may face big volatility.

It is only when you hear conversations of gold and oil stocks in the supermarket queue that you know the bubble stage has been entered. Remember the conversation about the Nasdaq.

Your comments about gold/silver ratio are my thoughts too. Do you know a way of buying silver/silver stocks into an ISA wrapper?

I bought 16K of gold mining unit trusts in an ISA wrapper 2 weeks ago. After reading Zealllc I am thinking of switching some to a commodities unit trust. That way the fund manager can do the intelligent switching between oil/gold/metals as the markets show buying opportunities.

Sure cheap money is flowing into commodities. But it is also flowing into stocks and property. If property, stocks and the US dollar are overvalued then when the cheap money is withdrawn, where will this money flow? Commodities

China, India and the other expanding emerging economies are going to continue to use up the worlds resources.

If this world economic expansion leads to inflation and higher IR, where is the best place for your money? Commodities

Thursday, November 2, 2006 11:13AM Report Comment
 

4. sold 2 rent 1 said...

miniftse,

On the subject of gold.
Short term I think the indian wedding season will push prices higher for the rest of this year.
Then I might swictch into general commodities, depending on what the market looks like.

Thursday, November 2, 2006 11:32AM Report Comment
 

5. miniftse said...

I read somewhere commodities dipped as a result of a masssive (none logical) sell off by Goldman Sachs, whose recently departed CEO Paulson is now US Tresaury Secratary. Since comodities tend to be traded together this drove down the price of gas, just in time for the mid terms. Goldman new they would be able to buy the gold back at a lower price after the mid terms...oh conjecture!

Thursday, November 2, 2006 01:06PM Report Comment
 

6. rich said...

Interesting comments, thanks guys. I understand the bull and bear business, but what do secular bull and secular bear mean?

Thursday, November 2, 2006 01:23PM Report Comment
 

7. miniftse said...

long term. so if we have a 5 year cycle, if we look at it over 20 years (lets say 4 cycles) we have a secular trend. if each of the peaks of the 4 cycles is successively higher we have a secular bull, if they are successively lower than the last we have a bear. So we are at the peak of a bull at the moment, but if we assume we are 6 years into a secular bear, we assume the peak of this bull will be lower than the peak of the last one (2000). The 20 years up until 1980 was a secular bull for sure, thats why 20-50 year olds todays think you will always make money in shares, they did so because it was a secular bull, if it's a secular bear the story is different.

Thursday, November 2, 2006 02:24PM Report Comment
 

8. rich said...

Very clear explanation, thanks.

Thursday, November 2, 2006 02:37PM Report Comment
 

9. kpjcomp said...

Talking of the markets, anybody notised what's been happening to them past couple of days.
Yes I know it's only a short period, but if they keep going south and build up momentum, would'nt take long to wipe out last months gains. That would be funny, especially after the recent bonuses. And I did'nt think they had been anything big in the news that would be causing it. Anyone any ideas??

Thursday, November 2, 2006 02:45PM Report Comment
 

10. sold 2 rent 1 said...

Rich,

A secular market trend is a long-term trend that lasts up to 20 years.
Within a secular trend there will be smaller cyclical bull and bear trends.

In a secular bull market the bear markets are smaller than the bull markets. Typically, each bear market does not wipe out the gains of the previous bull market, and the next bull market makes up the losses of the bear market.

Conversely, in a secular bear market, the bull markets are smaller than the bear markets and do not wipe out the losses of the previous bear market.

An example of a secular bear market was seen in gold over the period between January 1980 to June 1999, over which the gold price fell from a high of $850/oz to a low of $253/oz [3], which formed part of the Great Commodities Depression. Conversely, the S&P 500 experienced a secular bull market over a similar time period

See wikipedia
http://en.wikipedia.org/wiki/Bull_market#Secular_market_trends

There is even something called and Grand super cycle
http://en.wikipedia.org/wiki/Grand_supercycle
This Grand super cycle is predicting several hundred years of turmoil but even I am not that pessimistic

Going back to the house price affordability graph
http://www.telegraph.co.uk/money/graphics/2006/10/02/cnhouse02big.gif

It looks like the housing market could be on this 33-36 year cycle too.
The 3 HPCs that have occurred since 1974 have got steadily worse (on affordability terms) until affordability returns to an all time high (for another 14 years).

If future trends follow this graph then we can look forward to a crash in 2008, 2017, and 2026 followed by 14 years of good house price growth.

Thursday, November 2, 2006 02:49PM Report Comment
 

11. sirgoogle said...

What about banks - HBOS (Halifax and Bank of Scotand) is doing really well - but could they sustain it in a down turn? Or wouldthey be the only game in town as they bleed us all dry?

Thursday, November 2, 2006 07:49PM Report Comment
 

12. paolo88888 said...

Amazingly, interest rates varied from 3.29 to 5.33% in 1972 (see http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt) similar to the 5.25% today. And while today is supposed to be a "permanent low-interest environment", the federal reserve rate never exceeded 6% from 1954-1972 except for 1968, 1969 and 1970. Yet it reached 12.92% in July 1974.

Whether one accepts the long-term cycle argument depends though on ignoring the affect on stocks and house prices, and interest rates, of the oil crisis.

Thursday, November 2, 2006 11:50PM Report Comment
 

13. harold said...

kpjcomp,

http://www.bullnotbull.com/archive/shorting-opportunity-2.html

Not for the faint-hearted.

Friday, November 3, 2006 12:19AM Report Comment
 

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