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.
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!
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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 c
hatted 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
