Jim Puplava Interviews Gold Expert Eric Sprott and Neil Howe, Author of The Fourth Turning

Jim Puplava recently sat down with Eric Sprott, one of Canada's top fund managers, to talk about the global economy and gold, at Casey Research's recent investment conference.  Here's a link to the interview below...

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Looking at the out-of-control printing of fiat money and the irresponsibility of central banks and treasuries, Eric Sprott tells Jim Puplava of Financial Sense Newshour, it is obvious to smart investors that gold is the asset to own. Listen to Eric, one of Canada’s most highly regarded asset managers, explain the dire straits the global economy is in and how to protect yourself.

The crisis we’re in today has been absolutely foreseeable, says Neil Howe, co-author of the famous book The Fourth Turning, in the second half of this interview. These recurring “turnings” are driven, he states, by generational aging and are a manifestation of the prevailing social mood. Hear his predictions about what’s yet to come and how long the current “fourth turning” will last.

You can listen to both interviews here.

Eric and Neil are just two of dozens of experts who presented their views, insights, and top stock picks at Casey’s Gold & Resource Summit in October. You can hear all their invaluable advice in 17 hours of audio on CD… details here.

Ed. Note: I am a Casey Research affiliate and subscriber.

An Insightful Interview With Fourth Turning Co-Author Neil Howe

We've been discussing market and societal cycles in great detail this year, as we try to uncover clues as to how this current mess is going to continue to unfold. History may not always repeat, but to quote Mark Twain, it certainly rhymes.

Nothing like a little history reading to shed some light...earlier this year I became fascinated with The Fourth Turning, a fantastic book about societal cycles in America (check out my recent review and summary here). It was a topic that even came up at our 4th of July BBQ!

Thus I was quite excited when David Galland interviewed Neil Howe, co-author of The Fourth Turning, in a recent installment of The Casey Report (one of the my fav pubs).

I'm fortunate to be able to present part of that interview here. It was really cool for me to see Howe's latest opinion and take on where we are at in terms of "Turnings"...hope you enjoy!

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Into the Fourth Turning

A Casey Research interview with Neil Howe, co-author of The Fourth Turning

The Fourth Turning is an amazingly prescient book Neil Howe wrote with the late William Strauss in 1997. The work, which describes generational archetypes and the cyclical patterns created by these archetypes, has been an eye-opener to anyone able to entertain the notion that history may repeat itself. At the time the book was published, the Boston Globe stated, “If Howe and Strauss are right, they will take their place among the great American prophets.” Read this visionary interview published in The Casey Report, and see for yourself.

DAVID GALLAND: Could you provide us a quick introduction to generational research?

NEIL HOWE: We think that generations move history along and prevent society from suffering too long under the excesses of any particular generation. People often assume that every new generation will be a linear extension of the last one. You know, that after Generation X comes Generation Y. They might further expect Generation Y to be like Gen X on steroids – even more willing to take risk and with even more edginess in the culture. Yet the Millennial Generation that followed Gen X is not like that at all. In fact, no generation is like the generation that immediately precedes it.

Instead, every generation turns the corner and to some extent compensates for the excesses and mistakes of the midlife generation that is in charge when they come of age. This is necessary, because if generations kept on going in the same direction as their predecessors, civilization would have gone off a cliff thousands of years ago.

So this is a necessary process, a process that is particularly important in modern nontraditional societies, where generations are free to transform institutions according to their own styles and proclivities.

In our research we have found that, in modern societies, four basic types of generations tend to recur in the same order.

DAVID: The four generational archetypes. Can you provide a sketch of each for those of our readers unfamiliar with your work?

HOWE: Absolutely.

The first is what we call the Hero archetype. Hero generations are usually protectively raised as kids. They come of age at a time of emergency or Crisis and become known as young adults for helping society resolve the Crisis, hopefully successfully. Once the Crisis is resolved, they become institutionally powerful in midlife and remain focused on outer-world challenges and solutions. In their old age, they are greeted by a spiritual Awakening, a cultural upheaval fired by the young. This is the typical life story of a Hero generation.

One example of the Hero archetype is the G.I. Generation, the soldiers of World War II, who became an institutional powerhouse after the war and then in old age confronted the young hippies and protesters of the 1960s. Going back in American history, we have seen many other Hero archetypes, for example the generation of Thomas Jefferson, and James Madison, and President Monroe. These were the heroes of the American Revolution, who in old age were greeted by the second Great Awakening and a new youth generation of fiery Prophets.

After the Hero archetype comes the Artist archetype. Artist generations have a very different location in history -- they are the children of the Crisis. For Hero generations, child protection rises from first cohort to last. By the time Artists come along, child protection reaches suffocating levels. Artists come of age as young adults during the post-Crisis era, when conformity seems like the best path to success, and they tend to be collectively risk averse. Artists see themselves as providing the expertise and refinement that can both improve and adorn the enormous new institutional innovations that have been forged during the Crisis. They typically experience a cultural Awakening in midlife, and their lives speed up as the culture transforms.

A great example of the Artist archetype is the so-called “Silent” Generation, the post World War II young adults who married early and moved into gleaming new suburbs in the 1950s, went through their midlife crises in the ‘70s and ‘80s, and are today the very affluent, active seniors retiring into gated lifestyle communities.

The third archetype is what we call a Prophet archetype. The most recent example of this archetype is the Baby Boom Generation. Prophet generations grow up as children during a period of post-Crisis affluence and come of age during a period of cultural upheaval. They become moralistic and values-obsessed midlife leaders and parents, and as they enter old age, they steer the country into the next great outer-world social or political Crisis. Boomers, for example, grew up during the Postwar American High, came of age during the Consciousness Revolution of the 1960s and ‘70s, and are now entering old age.

Finally there is what we call a Nomad archetype. Nomads are typically raised as children during Awakenings, the great cultural upheavals of our history. Whereas the Prophet archetype is indulgently raised as children, the Nomad archetype is underprotected and completely exposed as children. They learn early that they can’t trust basic institutions to look out for their best interests and come of age as free agents whose watchword is individualism. They are the great realists and pragmatists in our nation's history.

The most recent example of the Nomad archetype is Generation X. This generation grew up during the social turmoil of the 1960s and ‘70s and are now beginning to enter midlife. They are the ones that know how to get things done on the ground. They are the stay-at-home dads and security moms trying to give their kids more of a childhood than they themselves had. Their burden is that they tend not to trust large institutions and do not have a strong connection to public life. They forge their identity and value system by “going it alone” and staying off the radar screen of government. It could be very interesting to see the rest of the life story of this generation, particularly as they take over leadership positions.

DAVID: Could you tell us the general age ranges of these archetypes now?

HOWE: One Hero generation that is alive today is the G.I. Generation, born between 1901 and 1924. They came of age with the New Deal, World War II, and the Great Depression. They are today in their mid-80s and beyond, and their influence is waning.

Today’s other example of a Hero archetype is the Millennial Generation, born from 1982 to about 2003 or 2004. These are today's young people, who are just beginning to be well known to most Americans. They fill K-12 schools, colleges, graduate schools, and have recently begun entering the workplace. We associate them with dramatic improvements in youth behaviors, which are often underreported by the media. Since Millennials have come along, we’ve seen huge declines in violent crime, teen pregnancy, and the most damaging forms of drug abuse, as well as higher rates of community service and volunteering. This is a generation that reminds us in many respects of the young G.I.s nearly a century ago, back when they were the first boy scouts and girl scouts between 1910 and 1920.

DAVID: Then following the Hero, we have the Artist, right?

HOWE: Yes. As I mentioned earlier, one example of that archetype is the Silent Generation, born between 1925 and 1942. This generation was too young to remember anything about America before the Great Crash of 1929, and too young to be of fighting age during World War II.

That 1925 birth year is filled with people like William F. Buckley and Bobby Kennedy, first-wave Silent who just missed World War II. Many of them were actually in the camps in California waiting for the invasion of Japan when they heard that the war was over. Part of their generational experience is that sense of just barely missing something big. Surveys show that this generation does not like to call themselves “senior citizens.” They did not fight in World War II. They did not build the A bomb. They are more like “senior partners.” Unlike G.I.s, they are flexible elders, focused on the needs of others. Many of them are highly engaged in the family activities of their children and grandchildren. In politics, they are today’s elder advisors, not powerhouse leaders.

There is a new generation of the Artist archetype just now beginning to arrive. They started being born, we think, around 2004 or 2005. We did a contest on our website to choose a name for this new generation, and the winner was Homeland Generation, reflecting the fact that they are being incredibly well protected. So we are tentatively calling them the Homelanders.

This generation will have no memory of anything before the financial meltdown of 2008 and the events that are about to unfold in America. If our research is correct, this generation’s childhood will be a time of urgency and rapid historical change. Unlike the Millennials, who will remember childhood during the good times of 1980s and ‘90s, the Homelanders will recall their childhood as a time of national crisis.

So, those are the two examples today of the Hero archetype, and two examples of the Artist archetype.

DAVID: What about the Prophet and the Nomad generations?

HOWE: There is only one Prophet archetype generation alive today: the Boomer Generation. We define them as being born between 1943 and 1960. Those born in 1943 would have been part of the free-speech movement at Berkeley in 1964, the first fiery class whose peers include Bill Bradley, Newt Gingrich, and Oliver North. The last cohorts of this generation came of age with President Carter in the Iran Hostage Crisis.

For the Nomad archetype, we again have only one example alive today, and that is Generation X. We define Gen Xers as being born between 1961 and 1981. Actually, there may be a few members of the earlier Nomad generation still around – those of the Lost Generation born from 1883 to 1900, but today they would be around 110. This was the generation that grew up during the third Great Awakening, the doughboys who went through World War I. They were the generation that put the “roar” into the “Roaring ‘20s” – the rum runners, barnstormers, and entrepreneurs of that period. They were big risk-takers.

DAVID: Is the Millennial Generation the next group up in terms of controlling or being a powerful force in society?

HOWE: It depends what you mean by a powerful force in society.

DAVID: Who is going to be in the driver's seat?

HOWE: Let me put it this way. The generation that is about to be in the driver's seat in terms of leadership is Generation X, the group born 1961 to 1981. In fact, we now have our first Gen-X President, Barack Obama, who was born in 1961 and who is in every way a Gen Xer, despite being born at the very early edge of his generation. His fragmented family upbringing, with his father leaving while he was young and his mother moving all over the world, is typical of the Gen X life story. A telling anecdote from his biography is that, when he arrived at Columbia University, he spent his first night in New York sleeping in an alley because no one had arranged to have an apartment open for him.

His life story has a “dazed and confused” aspect. He made his own way against a background of adult neglect and lack of structure. It’s interesting that he is the first leader in America to call himself “post-Boomer.” As a matter of fact, he talks regularly about how he intends to put an end to everything dysfunctional about Boomer politics: the polarization, the culture wars, the scorched-earth rhetoric, the identity politics, all of that. I understand a lot of people do not believe he can actually do this, but it’s interesting that this is the rhetoric he chooses. That rhetoric is one reason why the vast majority of Millennials voted for him.

Obama is the opening wedge of Gen Xers who will assume very high leadership posts. They are not yet the senior generals in control of the military, but they are taking over the reins of government and, of course, the top spots in American businesses.

Ed. Note: If you want to know what Neil Howe foresees for the U.S. economy, future investment opportunities, and American society in general, sign up here to read the rest of this 17-page, FREE Special Report - Click Here.

Goldman CEO Tells Employees To Be Humble, Don't Be Such A-Holes

Goldman Sachs CEO Lloyd Blankfein took a page from the preachings of the world's leading religions, as he warned his employees to avoid making "big-ticket, high-profile purchases."

Laying low and playing down wealth is probably a best practice even when times are good. During tough times like this, it's a must, as the public opinion on Goldman is beginning to resemble that of a lynch mob.

Not fun watching guys get million dollar bonuses when you're working your butt off for much less. Even less cool to see the same when you're unemployed and your tax dollars are going to bail them out.

According to the NY Post article:

"This is a sensitive time for us, and [Blankfein] wants to make sure that we're not being seen living high on the hog," said one Goldman exec."

What I find most interesting about this story is that even though the DOW and S&P have rallied about 50% off their lows, the social mood of this country appears to be permanently altered. Wealth and flash are out for now...and I don't see them coming back into style anytime soon.

To get a good feel for the shifting societal mood, take a look at the summary I wrote about The Fourth Turning. The book is a fantastic read...and I hope my cliff notes will provide some food for thought about market and mood cycles.

Bottom line is that times are changing, and the playbook from the 80's and 90's that "greed is good" and "stocks always go up in the long run" just will not work today. We need to adjust our thinking and get ahead of the new curve that's been thrust upon us.

Further reading on cycles and turnings:

• The Fourth Turning...Into the Greater Depression? (my cliff notes)

• Latest thoughts from Fourth Turning author Neil Howe - very insightful, would highly recommend this one.

Closing thoughts on this while I'm excited - The Fourth Turning always does that to me - Howe says that you must invest the opposite way from how you'd invest in a Third Turning.

And I read that he's put his money where his mouth is - he's been in cash for the last two years, which we all know, has been the safest place to be. Ah if only I had read his book two years ago!

How Long Do Bear Markets Typically Last?

We've been discussing market and societal cycles in great detail recently, as we try to uncover clues as to how this current mess is going to continue to unfold. History may not always repeat, but to quote Mark Twain, it certainly rhymes.

I have little doubt that we are now in a secular bear market - so the key question for me is, based on previous market cycles, how long is this one likey to last?

Nothing like a little history reading to shed some light...I recently became fascinated with The Fourth Turning, a fantastic book about societal cycles in America (check out my recent review and summary here). It was a topic that even came up at our 4th of July BBQ!

Thus I was quite excited when David Galland interviewed Neil Howe, co-author of The Fourth Turning, in June's installment of The Casey Report (one of the my two fav pubs).

So I'm fortunate to be able to present a guest article by David, where he gives a great synopsis of his chat with Howe. It was really cool for me to see Howe's latest opinion and take on where we are at in terms of "Turnings"...hope you enjoy!

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A 20-Year Bear Market?
By David Galland, Casey Research

In November of 1997, my partner and co-editor of The Casey Report, Doug Casey, wrote an article titled “Foundations of Crisis,” which leaned heavily on the research of Neil Howe and the late William Strauss.

Howe and Strauss have written many books on how generations determine the course of history and how they will shape America’s future. Their forecasts on a wide variety of indicators have turned out to be amazingly accurate. They were among the first to predict (back in the late 1980s) the rise of Boomer-driven culture wars and the simultaneous rise of Gen-X-driven free agency and distrust of government. And they were completely alone back then in predicting, for the post-X “Millennial Generation” (a label they coined), a decline in youth crime and risk taking and an increase in youth civic engagement that would first become apparent around the year 2000. Guess what? For the last ten years, everyone has been noticing exactly these trends among teens and 20somethings.

Howe and Strauss also made extensive predictions, based on generational aging, on how America’s entire social mood would likely change, in dramatic fashion, during our current 2000-2010 decade. To quote Doug’s prescient 1997 article:

“… an excellent case can be made the U.S. is approaching another time of secular crisis, a Fourth Turning, with an expected due date of 2005 – seven years from now – plus or minus a few years in either direction.

The Stamp Acts catalyzed the American Revolution, the election of Lincoln catalyzed the Civil War, the Crash of ‘29 catalyzed the Depression/WW II era. What might precipitate the elements now floating in solution? The answer is practically any random event that's sufficiently traumatic. Any of the theses of current disaster/action novels and movies will do nicely. Perhaps the accidental or intentional release of a super plague vector. The crashing of an airliner into the Capitol during a joint session. An all-out assault on the IRS computers by an armed group – or perhaps the computers just melting down due to the Year 2000 Problem. Perhaps a financial disaster that cascades into the Greater Depression. In any of these, or a hundred other scenarios, the federal government would almost certainly act precipitously and with a heavy hand, which would bring on a whole other set of consequences.

There's no way of telling where the Crisis will lead, or how it will end. That's going to depend not only on exactly who's in control, but what they do, who they're up against, and a hundred other variables we can't even anticipate.

One thing that seems certain is that real crisis brings out strong leadership. Because of its age and size, it will come from the Boomer generation, and it will be in the mold of Roosevelt or Lincoln – both very dangerous precedents. The boomers in elderhood will be dogmatic, harsh, puritanical, and quite willing to burn down the barn in order to destroy whatever rats they see. Admix that attitude to a time resembling the Revolution, the Civil War, or WW II, overlain with today's ethnic strife, urbanization, financial overextension, and powerful, compact new weaponry in the hands of foreign fanatics out to teach the Great Satan a lesson and it's a real witch's brew.

(Click to read the full article)

As eye-opening as Doug’s predictions were, they brought us only to the onset of the current crisis. Consequently, we thought it both timely and important to check back with the source of much of the research he relied on. And so it was that I spent several hours talking with Neil Howe, co-author of the seminal work on generational cycles, The Fourth Turning, and, just recently, the subject of the DVD “The Winter of History.” Howe is not just an historian, but also a Washington DC-based economist and demographer. While our conversation covered a great many topics, the overriding focus was on how things are likely to unfold from here.
Many bullish readers won’t be thrilled to hear Howe’s latest findings about the future, but given his predictive track record, dismissing them out of hand could be a costly mistake.

The summary outlook, according to Howe, is that we are in the very early stages of a 20-year period of economic and institutional upheaval – an era denominated by a crisis during which we’ll likely witness the tearing down and reconstruction of many aspects of society as we know it.

As individuals, understanding Howe’s views and taking some reasonable precautions makes a lot of sense. As investors, those views also have the potential to make us a lot of money.

Following is my high-level recap of my long conversation with Neil Howe, along with some general thoughts on the investment implications of a 20-year bear market.

Remember the Sixties?

If you’re old enough -- or possess even a rudimentary sense of history -- think back to the 1950s, with roller-skating waitresses, crew cuts, and nuclear families of the sort represented by the iconic Leave it to Beaver. Fathers worked, while many mothers stayed home. Life had a certain predictable quality and, as far as anyone knew, would continue along the same lines for time immemorial.

But then something happened… the 1960s. Literally no one saw it coming. It was as if someone had flipped a switch that electrified America and, quickly, the world. Most everything changed, and a society accustomed to conformity was blown away with a fierce individualism expressed with long hair, sex, drugs, and rock and roll, topped off with civil disobedience and bloody riots in the streets.

What happened?

According to Neil Howe, in the mid-1960s, generational change pushed society around a dramatic corner as idealistic, individualistic young Baby Boomers (born 1943 to 1960) rebelled against the midlife leadership of their G.I. Generation parents (born 1901 to 1924).

These periods of transitions are part of a larger cyclical pattern made up of four distinct eras, or “Turnings,” each lasting approximately 20 years. It can be helpful to think of the four turnings as you might think of the four seasons, repeating predictably in their own natural rhythm. A full cycle of turnings takes place over a period of about 80 to 90 years -- roughly the span of a long human life. A new turning begins as a new youth generation comes of age, bringing a new social ethic that compensates for the excesses of the midlife generation then in power.

While we don't have the space here to go into the full details of Howe’s research, it’s important to the topic at hand that we quickly recap the Four Turnings.

The First Turning is referred to by Howe as a High. As this follows a period of crisis, one of the hallmarks of a First Turning is a heightened sense of community and collective optimism, driven in part by the fact that the society has just come through a difficult and challenging time. Consequently, during First Turnings, societal institutions tend to be strong while individualism is weak. The post-World War II “High” of the mid-1940s through early ‘60s is the most recent example of a First Turning.

The Second Turning, called an Awakening, typically starts out feeling like the high tide of a High, with signs of progress and prosperity everywhere. But just as everything seems to be going along swimmingly, large swaths of society begin to chaff under the social conformity of the High, beginning to gravitate to more individualistic pursuits and demanding that their personal interests come first. You may recognize the “Consciousness Revolution” of the mid-1960s through early 1980s, correctly, as the Second Turning.

Next up, the Third Turning, which Howe calls an Unraveling, is much the opposite of a High. To wit, individualism dominates, while institutions are increasingly weak and discredited. Quoting Howe on the Unraveling…

"This is a time when social authority feels inconsequential, the culture feels exhausted, and people feel bewildered by the number of options available to them. It is a time of celebrity circuses and a tremendous amount of freedom and creativity in our personal lives, but very little sense of public purpose.

The most recent Third Turning began in the mid-‘80s with Morning in America, and continued through the ‘90s. Previous periods of Unraveling in American history were also decades of cynicism and bad manners. Think of the 1920s, the 1850s, the 1760s. And history teaches us that the Third Turnings inevitably end in Fourth Turnings.

Finally, there is the Fourth Turning, called a Crisis. The recent Third Turning appears to be winding down, and we are currently on the cusp of a Fourth Turning. This is a time of great turmoil, when society’s basic institutions are torn down and rebuilt, and seemingly insurmountable problems are addressed. During Fourth Turnings, America engages in a struggle for its very survival and redefines its identity as a nation. Large wars are often a part of this process. The American Revolution, Civil War, Great Depression, and World War II were all features of past Fourth Turnings.

In sum, Howe’s research has shown that, with remarkable predictability, history is not a straight line extending toward a better and brighter (or increasingly awful) future, but rather a repeating cycle of the four distinct social eras. These four turnings have recurred with remarkable consistency throughout Anglo-American history, as Neil Howe outlines at length in Generations and The Fourth Turning. It is therefore no accident that America has experienced great cataclysms or “Crises” about every 80 years. Travel back eighty years from Pearl Harbor Day, and you land in the middle of the Civil War. Eighty years before that takes you to the Revolutionary War. If the rhythms of history hold, America is now poised to enter another Fourth Turning.

Bad News, Potentially Good News

You don't need me to tell you that the United States and in fact the world are now facing a plethora of intractable problems. The world's former powerhouse economy, the U.S., is now the world's largest debtor nation – and by a wide margin. The nation has trillions in unpayable liabilities coming due on Social Security and Medicare, to name just two of many broken government programs weighing on the country. And our much vaunted democracy is increasingly dysfunctional – rotten to the core, truth be known – thanks largely to entrenched special interests and a voting public clamoring for their own piece of the pie, while trying to hand the bill off to somebody else.

Meanwhile, the economy – despite rigorous jawboning by the government and its many friends in the large banking institutions -- is in serious trouble, with the housing market buffeted by tsunami-like waves of defaults, foreclosures, overvaluations, historic levels of personal debt, and tight credit that has left the U.S. government as the sole lender in many markets.

Bernanke and his ilk may see green shoots, but what they're really seeing is the deep, green sea rising up once again to bury the economy.

That's the bad news.

The potentially good news, if you credit Howe’s research, is that the Crisis we’re now entering will change pretty much everything. While this change will entail a great deal of pain and a reduced standard of living for a large number of people, by the time the Crisis subsides, society will have pretty much remade itself in ways that no one can predict at this point.

Put another way, today's intractable problems will be solved... one way or another.

What's Next

When discussing what's likely to follow next, Neil Howe turns to his generational profiles and points out that the rising societal power today belongs to the generation he calls the Millennials, individuals born between 1982 and 2004. They are a “Hero” generation, just like the G.I. Generation that coped so well with the turmoil of the Great Depression and World War II -- the last Fourth Turning. Coddled as children, the G.I.s were ultimately called upon to help society through a dark and dangerous period and rose to the occasion. Again, quoting Howe on the Millennials…

“These are today's young people, who are just beginning to be well known to most Americans. They fill K-12 schools, colleges, graduate schools, and have recently begun entering the workplace. We associate them with dramatic improvements in youth behaviors, which are often underreported by the media. Since Millennials have come along, we’ve seen huge declines in violent crime, teen pregnancy, and the most damaging forms of drug abuse, as well as higher rates of community service and volunteering. This is a generation that reminds us in many respects of the young G.I.s nearly a century ago, back when they were the first boy scouts and girl scouts between 1910 and 1920.

Unlike the Baby Boomers, who are largely individualistic and anti-establishment, the Millennials are good team players. We hear a lot these days about working together for a common cause, volunteerism, and the need for stronger government institutions, largely because these are the new priorities of the Millennial Generation.

As you may recall, out of the devastation of World War II, a spate of transnational political and economic institutions were born, including the United Nations, the World Bank, the World Health Organization, and the International Monetary Fund. By the time the current Fourth Turning is over, expect more of the same -- but probably even bigger and more ambitious.

What Does This Mean to You?

Most importantly, if Howe is right, this crisis is far from over. In fact, when I asked him where we are today on a scale from 1 to 10 -- with 10 representing as bad as the crisis will get -- he replied that we are at either 2 or 3. In other words, the worst is very much yet to come. And, per above, he expects this period of turmoil to take 20 years to play out. Thus, if nothing else, you may want to continue approaching matters of personal finance cautiously.

Secondly, if you're the type of individual that tends to get steamed up by larger and more intrusive government programs, you may want to take a few deep breaths and resolve yourself to the fact that this phenomenon is likely to get far worse before we see a return to celebration of individual rights. (And the cycle shows that we will see such a return -- about 40 to 50 years from now, when the next Second Turning comes around.)

If it is any consolation, the Millennial Generation places a great deal of weight on teamwork and the notion of doing things "smart." That doesn't mean, of course, that the various programs that are kicked off in an attempt to fix the many problems now confronting society will in fact turn out to be technically smart. But they will almost certainly be better thought out than some of the numbskull initiatives we've seen over the last 20 years.

You can also take some comfort in the fact that Millennials are builders, not destroyers. By contrast, the individualistic Boomers that dominate today’s aging political class are world-class dissenters, radio talk show aficionados always ready to scrap it out for their beliefs. Millennials want to skip the philosophical debate and get straight to fixing things.

Other insights about Fourth Turning periods gained from my conversation with Neil Howe…

• Government grows powerful, and sweeping new legislation is enacted. The old 1990s rule was: just compete and stay off the state’s radar screen. The new 2010s rule will be: better have a presence in Washington so you’re not dealt out of the “new” new deal. One political party tends to dominate. The Democrats under FDR during the last Fourth Turning offer a good example. While Neil Howe doesn't think it will necessarily be the Democrats this time around, they are certainly in the pole position at this point.

• While public history speeds up, personal life slows down. Families will spend more time together, like in the old Frank Capra movies. Ever more households will be multi-generational, a trend now spurred by Boomers with large, empty McMansions and Millennials without jobs. There will be a blanding of the pop culture, with the entertainment of the young (put Miley Cyrus or “High School Musical” on fast forward) increasingly regarded as tamer than the entertainment of the old.

• Innovation tends to stagnate, while a few new technologies will be chosen to be adopted on a large scale. We will see the equivalent of canals or railroads or interstates being built across America. To borrow from Carlotta Perez’ four-stage description of technological revolutions, we are moving from the “innovation” to the “implementation” stage.

• New laws and regulations will do less to referee a free market and more to pursue one or another national priority. They will increasingly favor the large producer over the retail buyer, investment over consumption, planning over risk, debt over equity. Businesses will hustle to reposition themselves. Anti-trust will weaken.

• The authority and obligations of community will strengthen at all levels, from local to national and possibly beyond (if our alliances prove durable). Personal reputation and membership will matter more. A “new localism” will reshape town and urban planning. A global slide toward national or regional protectionism will loom as a real danger.

• It is too early to tell whether the crisis will ultimately be inflationary or deflationary, though we at Casey Research come down on the side of inflation for the simple reason that the government possesses the means to inflate. Due to the gold standard, that was not the case early in the Great Depression.

• In the past, Fourth Turning periods have always resulted in the nation redefining who we are in some essential way. That was certainly the case during the American Revolution, when we transitioned from a British colony into a collection of independent states -- and the Civil War, when those states were hammered into a single nation. And, again, after World War II, when the U.S. went from being a relatively isolated nation to a global empire. A wild card, for instance a terrorist nuke going off in a city anywhere on the planet, could similarly take the country, and the world, into unforeseeable new directions.

• Baby Boomers will continue to be respected for their cultural achievements (it’s not a fluke of history that Boomer music and other entertainments are still wildly popular among the young), but will be increasingly ignored in the political debate. The term “senior citizen,” already in decline, will disappear entirely. And if push comes to shove, Boomer’s financial interests – including Social Security – will be subjugated “for the greater good.”

• There will be a growing push to rebuild the middle class. The wealthy and the impoverished alike will both come under pressure thanks to new pro-middle class initiatives. If you are a high-income earner, it’s a certainty your taxes are going up, and likely by a lot. If you want to make a fortune, don’t pursue the niche or the “long tail.” Invent the next big brand that will appeal to Everyman.

Don’t Worry, Be Happy

That is, at best, a sketch of my long conversation with Neil Howe and doesn't do justice to his research. If nothing else, however, I hope I’ve succeeded in giving you at least some sense of the man and his unique research and encouraged you to think outside the box about the nature of today’s crisis.

A couple of final observations.

First, Neil Howe is not a negative person, nor a professional doomsayer. Rather, he is a social scientist and historian with decades of experience in the social sciences. As you speak to him, you get the sense that he doesn’t view the world through any particular philosophical bias, but rather is simply reporting what his research is telling him about the current players on the global stage, and which act we are currently in.

Secondly, speaking as a Baby Boomer and someone with a lifelong distrust of government and its meddling institutions, talking to Neil left me feeling oddly relaxed -- letting go, if you will, of some of the frustration that has been building within me as I watch the nanny state grow more and more bloated.

That is not to say we won't continue to speak out against government waste and prolificacy. We will. But it seems increasingly clear that we’re now caught up in a powerful trend toward bigger, not smaller, societal institutions -- and that these institutions will, over the period ahead, change the world as we know it.

Of course, being active investors, at the same time we raise our voices in protest, we’ll deal with the reality of the situation by strategically positioning our portfolios to profit from the coming changes.

And so, like the Rockefellers and J.P. Morgan during the Great Depression, we’ll make the trend -- to matter how negative -- our friend. You may want to consider doing so yourself.

Making the trend your friend is more important than ever, if your assets are to make it through the Fourth Turning intact. The Casey Report discovers and analyzes budding economic trends and turns them into hands-on, actionable recommendations for its subscribers. Read the latest report from Casey Chief Economist Bud Conrad about our favorite investment of 2009… a play on an all but inevitable economic development. Click here to read more.

BBQ, Beer, and Contrarian Investment Indicators

Welcome back from the long weekend - I hope you had a great 4th celebration. Even us folks who are not so keen on the Federal Government can appreciate many of the founding values of our country...despite how frustrated it is when Constitution seems to be a forgotten document...in a world where "whatever it takes" is Uncle Sam's new mantra!

After a great weekend of beer, BBQ, and socializing, I thought it'd be interesting to reflect on some data points I gathered from folks...to discern the social mood and outlook from the people I spoke with. Of course this is a completely ad hoc sample...the qualification being that these folks either had a beer with me, or served me a beer, over the last two days!

I hope these anecdotes will be entertaining, and perhaps even a bit insightful, as we engage in the challenging, humbling exercise of trying to figure out where the world is heading...so that we can invest accordingly.

If you have any anecdotal stories, I'd love to hear them - drop a comment below, and let's see what we come up with!

The Hot Bartender Who Disapproves of Money Printing

Regular readers know that we've been on a deflationist kick over the last couple of weeks - simply due to the contrarian appeal of it all. Since the collapse hit, I've believed that inflation - more specifically hyperinflation - would be the end result, mostly because the government can print as much money as it wants.

Honestly, though, what the hell do I know? The common sense consequence of money printing is price inflation...but what if common wisdom is incorrect here (as it often is!)

Anyway this Friday evening, some friends and I were at a new bar (with a fantastic happy hour, and an even better bartender, "Shelley" (stage name to protect the innocent :) ) - very good looking, and quite patron friendly).

Shelley's a very nice girl who you'd initially surmise to be a "knee jerk liberal". Lives in Northern California...into raw foods and organic farms...all that good stuff.

We got into a conversation about some boondoggle going on a few blocks away at the State Capitol (Sacramento), and I figured I'd toss a pseudo-libertarian comment into the fray, see if we kick start anything interesting.

Me: The only way to fund that idiotic program would be to print up the money.

Shelley: Ha, yeah, and then comes hyperinflation.

My heart skipped about four beats...best bartender ever.

Now I thought it was very interesting she didn't say merely "inflation", but "hyperinflation." Pretty impressive financial acumen - and also another hyperinflation data point.

We'll keep our ears open for deflation talk from bartenders...right now it's 1-0 in favor of IN-flation.

Renting: The New Buying

Markets don't bottom when everyone is looking for the bottom. They bottom when there is a

final capituation in which the market basically vomits all over itself.

When nobody wants to talk about stocks, that's when you want to back up the truck.

The housing market has been in free fall for about 4 years now, and I've been intrigued to watch the shift in social mood.

Back in 2004, I recall riding the MUNI in San Francisco, and overhearing a conversation between two other riders about how "housing never went down". The common mantra in the Bay Area at the time was that even if housing goes down in some locations, it never goes down in the Bay Area, because there's such limited supply.

Bay Area home prices are now down over 50% from the peak.

The first year or two of the downturn, we heard a lot of the "now is a great time to buy" bad advice. Home buyers were trying to catch the bottom of the market before it went back up again. In reality, all they caught was a falling knife.

Yesterday we hosted a 4th of July BBQ in our backyard (of our rental). I recall when we moved into it nearly 3 years ago, and we had people over, often the first question was around when we would buy our own place.

This year, I noticed a lot of the shine seems to have come off home ownership. When I mentioned that we rented the place and didn't own it, the feedback around renting was more positive than I remember. Several of my friends who are home owners even said they wouldn't mind being renters themselves.

Not necessarily a bottom in the real estate market, but maybe we're getting closer.

As an aside - real estate is often a terrible investment during a depression. The first thing folks do when they hit hard times is they bunk up together, cutting their own housing costs, and sending a lot of supply on the market.

During the salad days of the 80's and 90's, you had people really "spreading out" across the country. Times were good, money was flush - hey let's go grab our own place.

Today in 2009 - maybe not so bad to stay with family. If unemployment continues to worsen, this could be a wild card in the real estate market that I don't hear many people talking about...another potential monkey wrench in a recovery. Why buy two homes when one cozy place will suffice?

So it seems like we are starting to see a bit of a shift in the social mood about renting and home ownership, but we may have a ways to go.

How Long Do Turnings Last?

For the past month or two, one of my favorite discussion topics has been The Fourth Turning - the book/concept that society goes through cycles. And every 80 years in the US, a crisis hits - The Revolutionary War, the Civil War, the Great Depression/WWII, and potentially the mess we're in now.

I'll tell you, this has been a real hit at weddings and cocktail hours - people think I'm nuts when I say "Hey, we're in the 4th Turning...get used to it, we're screwed!"

Again yesterday, I had a few friends who I had previously floated this "odd ball" idea to come up to me and start asking me about these societal cycles! How long did you say Turnings last? Are we almost out of this one?

To me it seems like people are beginning to resign themselves to the fact that this is a depression, not a recession, and that things are going to be bad for awhile.

This is very important because the stock market could have a hard time maintaining these levels when folks start to accept the cold, hard reality that the recent "green shoots" rally was built on optimism that just isn't materializing.

And we may have gotten a taste of this at the end of last week, with the disappointing unemployment numbers. Maybe "less bad" is no longer a good thing.

Quick Reader Survey - Please Share Your Thoughs!

I tossed together a quick 3-question reader survey, and I'd appreciate it if you could take a minute or two to share your thoughts and suggestions with me using the survey link here.

It's always great to connect with you, and your feedback and input help me figure out where to focus my energies...namely on stuff you like, and stuff you'd like to see more of.

The Week's 3 Most Popular Posts...

1. Is Deflation "So 2008"? Hyperinflation Trade Looking Crowded
2. Why Silver and Gold "in the Ground" is Seriousy Undervalued Right Now
3. Marc Faber: You Don't Want to be in Cash
   

Positions Update

No trades this week...I'm watching the trailing stops on each position (A$ and sugar), and will sell on a 15-day low.

Honestly I don't know whether the A$ is correcting or out of gas - so I'll let the market tell me.

If you're looking at either of these trades, I personally wouldn't initiate a position here...I'd wait for a breakout to a new high to confirm that the trend is still UP!

Current Account Value: $30,499.46

Cashed out: $20,000.00

Total value: $50,499.46

Weekly return:

2009 YTD return: -38.0% (I like to think it takes skill to lose this much money in 6-months :) )

Prior year's results: --> Don't try this at home...this is what is known as wreckless trading

2008: -8%

2007: 175%

2006: 60%

2005: 805%

Initial stake: $2,000.00

Is it (Gasp) Time to Short Gold? This Week in Commodities

Daily Crux Editor Brian Hunt reports that bullish sentiment for gold in investment newsletters is very high - "near extreme levels that marked the previous three tops in gold."

When everyone is bullish, that's trouble for longs...at least in the short term.

Need another data point? How about an insurance company hopping on the gold bandwagon!

The Crux also reports:

Northwestern Mutual, the third-largest U.S. life insurer by 2008 sales, bought gold for the first time in the company's 152-year history.

Gold is already down over $20 since these reports came out. Perhaps the old addage "sell in May and go away" should now be heeded. Short term traders may want to stay on the sidelines gold winds up for another run at the elusive $1,000 this fall...when it is seasonally stronger.

Gold keeps bumping its head on the $1,000 ceiling.

(Source: Barchart.com)

Dollar Rally Overdue

The dollar is a bit oversold as of late, and appears to be due for a short term pop. This may have begun last week. How long and far this will go is anyone's guess - but I'd imagine it won't last for too long.

The long term trend of the US dollar is unmistakeably down. Check out the chart below for a little perspective - since 2002, it's been a fairly orderly march downwards for the dollar:

The long-term trend of the dollar is still down.

(Source: Barchart.com)

Sure puts the recent dollar rally in perspective, doesn't it?

With fundamentals worse than ever, it's hard to picture the dollar mounting a sustained offensive.

The Fourth Turning...Am I Insightful, or a Complete Dumbass?

My review and discussion of The Fourth Turning last weekend has sparked quite the discussion over at Seeking Alpha. Some folks enjoyed the review, while others think I need my head examined! Let us know what you think!

Subscribe By Email

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In addition, you can subscribe to all posts by using the form on the left side...just below the ads. This is managed by Feedburner - each time we post, you'll receive it via email.

In Case You Missed It...This Week's 5 Most Popular Posts...

1. The Fourth Turning...Into the Greater Depression? (Also published by Seeking Alpha)
2. Doug Casey: Foundations of Crisis
3. Chinese students laugh Tim Geithner out of town
4. How do gold stocks perform in deflationary depressions?
5. How geography drives the global economy
   

Positions Update

This week would have worked out fine for me, had it not been for...not just one...but TWO ill-fated attempts at pyramidding my Aussie dollar position.

Monday I added another position after the A$ began the morning strong. All looked good, until that evening, when I made the cardinal sin of checking the Asian markets! I panicked and sold the position.

Then later in the week, Australia reported strong GDP numbers (maybe not too strong, but certainly much "less bad" than much of the rest of the developed word). The A$ cleared $0.82, and seemed destined for $0.85!

So what happened? Profit taking and a rally in the US dollar! I had to cover and the A$ continued to drop, settling slightly down on the week.

Moral of the story - I had no business adding to this position, because I don't have enough dry powder to comfortably take it on. "Sell to the sleeping point" is the old maxim, and I can sleep comfortably with one long position in the A$.

To mollify my inner need to pyramid, I did pick up another mini beans contract :)

Current open positions:

Current Account Value: $32,534.24

Cashed out: $20,000.00
Total value: $52,534.24
Weekly return: -5.3%
2009 YTD return: -36.0% (Don't call it a comeback??)

Prior year's results:
2008: -8%
2007: 175%
2006: 60%
2005: 805%

Initial stake: $2,000.00

The Fourth Turning...Into the Greater Depression?

Take a minute to think about your view of human history, and our continued progression as a species.

Do you believe human history is linear...always getting better...onward and upwards to a better existence?

Is it chaotic...stuff happens, people react, then more stuff happens...but there's no pattern to it?

Or...is human history cyclical...with those who neglect history destined to repeat it?

Most of the Western world subscribes to the linear school of thought. Things are always moving in a general direction - sometimes good, sometimes bad, but always moving. And I'd assume that most people believe the general trend of progress is up.

Your individual opinion may depend on your generation. Old timers are often pining for the "good old days" when morals and values "meant" something in America, you could go to the movies for a nickel, etc.

On the other hand, today's youth wants nothing to do with their parents or grandparents generational values and culture. I'm 27 years old...and the though of growing up in a 1950s Leave It To Beaver household isn't too alluring for me.

For the longest time, I held a predominantly linear view of history's progression. This very well may be biased by my own personal experiences. I run a software startup by day, and blog and trade online as a hobby...none of which would have been possible 10+ years ago. What the heck would I have done then?

On our Honeymoon a couple of years ago, my wife and I were staying in a remote hotel in Costa Rica. Very limited TV, no internet...for 3 whole days. By the time we got to a modern hotel, I was soaking up as much CNBC Europe as I possibly could...my wife asked why we had to spend our evenings with Larry Kudlow...but hey, I'm just not going to sit outside under a coconut tree and chill out. Not my thing. I like being plugged in.

So in my eyes, there's no doubt about the progression of the world...I wouldn't want to live at any other time...there are more plugs today than ever before, after all...and I'm always excited what the next 5-10 years will bring.

But are there setbacks in human progress? I mean, the world did basically nothing from 500 - 1500...except hang out in castles, work the land, pray, and tithe. That's 1000 freaking years!

How can that happen? How can the world stop moving forward for that long?

And there are more recent examples of setbacks and stalls. The Great Depression wasn't really that long ago. From 1929-1945, the US was in a major depression, then a world war. Not fun.

Can history repeat...or as Mark Twain said, rhyme? Are we "beyond" these setbacks...or are we arrogant to think so?

The Fourth Turning, by Neil Howe and William Strauss, is a fantastic book that explores US history, drawing definite cyclical patterns that date all the way back to the War of the Roses. Here's the crux of it.

A human life lasts roughly 80 years. Even though humans are living longer on average today, a full life has always been about 80 years...averages were skewed downwards in earlier times, because there were more premature deaths, but a "full life" has always been about 80 years.

At any given time, you've got about 4 generations of people inhabiting the US, separated by about 20 years each. These generations are shaped by their shared experiences...so their beliefs, their actions, etc, are really a function of the country they grow up and live in.

Now here's where it gets interesting - roughly every 20 years...going back to The War of the Roses in England, and carrying through to the Glorious Revolution in the New World...all the way to the present day...a new era dawns in America.

These eras fit into one of four categories which always repeat in the same successive order. Sounds wild...I couldn't picture it until reading the book...but here are the four eras that Howe and Strauss define:

Crisis - Oftened defined by a major war, calamity, depression, etc. Think Revolutionary War, Civil War, and Great Depression/WWII.

High - What follows the Crisis. Hey, we got through it, now things are looking up, up, and up. I think this is what Jim Rogers says he sees in Sri Lanka - the war is almost over, Crisis phase nearing an end, what a great time to invest. In the US, the post WWII baby boom, suburban migration, and Leave it to Beaver would make up the High. We can go to the moon, we can do anything we put our minds to!

Awakening - A younger generation comes of age, and resents all the rules set by The Man during the High period. Since Highs follow Crises, they are characterized by rules and structure. Think 60's America as the resistance to this - Woodstock, Tie Dye, and Free Love.

Unraveling - The Awakening uprising is integrated into mainstream culture, and society starts to split apart at the seams...hence the name. The individual rules the day. It's "me first." Old timers lament the lack of virtue and civic spirit. Prime time for Wall Street and Las Vegas.

According to The Fourth Turning, each generation is shaped by the era it was born in. I grew up during an Unraveling...so according to How and Strauss, that has shaped my beliefs. The only world I know is one of relative peace and prosperity. Depressions and major wars are things I've only read about.

So the theory goes that the farther you get away from a Crisis, the more likely you are to repeat it...because the younger generations don't actually believe it can happen again. They think the ills of the past have been fixed...and often very limited knowledge of the last Crisis in the first place...so in fact, they have the perfect personality for causing the next crisis!

Remind you of today's economists spouting off about why we can divert depressions this day in age?

Unfortunately for us...the timer's starting to tick down, and the next batch of crisis cookies are about due out of the oven here in America.

• 1773 - 1794: American Revolution

• 1860 - 1685: American Civil War

• 1929 - 1946: Great Depression...leading to WWII

• 2007 - ??? : Credit Crisis...leading to recession...leading to ???

About every 80 years, America is really put to the test. And remember, history is not predetermined. There was a genuine threat to our nation during each of these preceding crises.

Strauss and Howe believe that these crises are not only unavoidable, but that they are also necessary...to cleanse society, shake out the excesses that have built up over the past three eras, and set everything on a new course going forward.

For further reading on this topic, I'd highly recommend you check out Doug Casey's essay Foundations of Crisis. Doug is one of my absolutely favorite writers and speculators, and he does a great job at breaking down the generational roles referred to in The Fourth Turning.

It's well worth a read - an interesting, well thought out hypothesis, backed up by historical anecdotes and stories. As an investor, it's important to understand potential cycles, so that you don't get blindsided. Protect yourself and your investments, and pick up a copy.

It's Official...Government Motors

The US continues to complete the transition to a centrally planned economy. Like all socialist experiments in history, this one will not end well.

Perhaps the climax of the Crisis stage will see the complete collapse of socialism and big government in the United States. Get your popcorn ready!

In Case You Missed It...This Week's 5 Most Popular Posts...

1. This ain't your grandpa's deflation...This Week in Commodities
2. Marc Faber sees US inflation eventually nearing Zimbabwe levels
3. Jim Rogers' favorite country (surprise - it's not China)
4. Wheat, corn stocks still near 30-year lows
5. How to time the gold market

Positions Update

Big, big week for commodities! The "inflation trades" look like they are on in full earnest - the dollar is hurting, the long bond continues to rise, and the usual cast of commodity characters are all looking very strong.

I didn't make any trades this week, but am giving a hard look at adding an Aussie dollar position. We chatted on May 20th about this...with the A$ at $0.77, we thought it could keep rallying. Well...it has!

Another 3-cents in a couple of weeks - en fuego!

The trend for the A$ is up, up, up.

(Source: Barchart.com)

Current open positions:

Current Account Value: $34,358.15

Cashed out: $20,000.00
Total value: $54,358.15
Weekly return: 7.9%
2009 YTD return: -32.4% (Don't call it a comeback??)

Prior year's results:
2008: -8%
2007: 175%
2006: 60%
2005: 805%

Initial stake: $2,000.00