Stock Market History is Rhyming Again
The Long Term Chart of the S&P 500 Index
Is History Repeating or Rhyming ?
The Technical Analysts keep telling us that 2012 is a repeat of 2011.
From a fundamental perspective however, the Lost Decade since 9/11 is a repeat of the Lost Decade from 1970 to 1980. For example:
1. Current Middle East Tensions rhyme with the 1969-79 political tune.
2. Ahmadinejad is rhyming with Khomeini's Fundamentalist tune.
3. All fiat currencies are on the rocks; as liberal democracies try and please their voters by printing money.
4. Public sector services are slashed and workers strike.
5. In the UK, there were weak coalitions in the 1970's, which is exactly what there is today.
6. Europe was just starting to coalesce into the Common Market back in the 1970's; in an auspicious precedent of what is happening today.
7. China was undergoing political purges; which it also seems to be having today.
8. Obama is playing the same role after "W", that Carter played back then.
9. Stagflation was the term invented to describe the economic conditions of the time back then, today it is evident in the employment data and the real cost of living.
What's missing is the Cold War; but we even seem about to return to this; with either China and/or Putin as the enemy. Since Bernanke is a student of the Great Depression, it is assumed that this tune is playing today; but the news of today sounds like the same old song from the 1970's.
The sideways move in the S&P since 2000, with a sharp negative spike in 2008, is very reminiscent of the period from 1969-80. Looking at the monetary conditions, all central banks are now doing exactly what they did back then; so investors will ultimately wake up and run for the inflation hedge in equities..
- Valuing the Bernanke Put
Commentators talk about the Bernanke Put. What does it mean in monetary terms; and what is its value?
- After avoiding the Second Great Depression what will Equity Markets do next ?
The Federal Reserve has averted a Second Great Depression; and saved the fortunes of equity investors and corporate balance sheets. What can equity investors expect going forward?