Originally Posted by Peter Gibbons

Originally Posted by Tim Walker

What if the old Civics were to advise the new Civics...as to which Prophet faction to follow?

It would be interesting. ...I don't think that will be too much of a concern this time 'round. In coming turnings we may have more to worry about old Artists talking to new Artists, and even more interestingly, Prophets talking to Prophets.

Prophets of old and new are not of a kind. There will be rancor and bile aplenty! Everyone knows that the highly opinionated are not likely to share the spotlight with one another ... if they can help it. 8)

Originally Posted by Sam I Am

Originally Posted by Peter Gibbons

Originally Posted by Tim Walker

What if the old Civics were to advise the new Civics...as to which Prophet faction to follow?

It would be interesting. ...I don't think that will be too much of a concern this time 'round. In coming turnings we may have more to worry about old Artists talking to new Artists, and even more interestingly, Prophets talking to Prophets.

Prophets of old and new are not of a kind. There will be rancor and bile aplenty! Everyone knows that the highly opinionated are not likely to share the spotlight with one another ... if they can help it. 8)

What a potential for cross-pollenization of narcissism!

Originally Posted by Peter Gibbons

I don't think that will be too much of a concern this time 'round. In coming turnings we may have more to worry about old Artists talking to new Artists, and even more interestingly, Prophets talking to Prophets.

Would this constitute channel conflict in the generational configuration? That is, similar prophet schemes offered by two different gens? Seems to me that they would have such different agendas that they wouldn't even engage...

Personally, I don't think you can go beyond four gens or the whole scheme falls apart. Consider literature: Who were the cult authors of the bulk of the young prophets during the Awakening? Vonnegut, Heller, Kerouac...GI's all. People seem willing and able to look back a couple of generations...after that it's "History." I notice lots of GenXers have, as their favorite authors, these counterculture warhouses. It will be interesting to see if Millennials will feel the same way.

My suspicion is that just as all eight year olds - prophets or nomads -are pretty much the same- so too are people at the other end of the scale...

Originally Posted by lexpat

Originally Posted by Peter Gibbons

I don't think that will be too much of a concern this time 'round. In coming turnings we may have more to worry about old Artists talking to new Artists, and even more interestingly, Prophets talking to Prophets.

Would this constitute channel conflict in the generational configuration? That is, similar prophet schemes offered by two different gens? Seems to me that they would have such different agendas that they wouldn't even engage...

Personally, I don't think you can go beyond four gens or the whole scheme falls apart. Consider literature: Who were the cult authors of the bulk of the young prophets during the Awakening? Vonnegut, Heller, Kerouac...GI's all. People seem willing and able to look back a couple of generations...after that it's "History." I notice lots of GenXers have, as their favorite authors, these counterculture warhouses. It will be interesting to see if Millennials will feel the same way.

My suspicion is that just as all eight year olds - prophets or nomads -are pretty much the same- so too are people at the other end of the scale...

One of the whole points of S&H's theory is that there are distinct differences between 8 year olds growing up at in one decade, and 8 year old growing up 2 or 4 decades later. Sure, there are similarities, but it's the differences that make the theory run.

Yes, Saeculum II would be put under considerable strain if the fourth phase keeps strengthening and a fifth phase becomes viable. It is difficult for me to even muse about the effects.

Take a 1T where an old Prophet is hanging on and a new Prophet is being born and raised. The Hero and Artist would be bearing the new Prophet and the Hero would be in charge of the institutions of their upbringing. What would the ?berelder Prophet, or elder Nomad for that matter, have to add to the story? Well, in terms of raising the new Prophet, probably not much. But the overall societal effect of an ?berelder Prophet would probably reverberate on down to the new one.

Back in the last 1T when MacArthur tried a new crusade, Truman showed him the door. Does anyone remember S&H's Atlantic Monthly article in the early 90's about a "New Generation Gap" between fortysomething Boomers and twentysomething Xers? It seems some of the "roar" of 3T's comes from quarrelling between Prophets and Nomads, with the Prophets obviously having more leverage and therefore the upper hand. But said upper hand does not mean the Prophets automatically "win".

Step ahead two turnings to an 80 year old Prophet buttin' heads with a 60 year old Nomad. Last time, the Prophet did indeed lose. But if enough of them stick around and retain strong cultural influence we would have the 3T generation gap all over again, but this time way up the age ladder. What kind of "roar" would that entail, if any? Would that change the nature of a first turning? What exact kind of stress would that put on the saecular mechanism currently in place (Saeculum II)?

The really interesting part would be when the younger Prophet starts to come of age at the 1T/2T transition. Not only would he/she have to face their shadow (the Hero), but perhaps their ghost as well, at least for a short time.
Five phase 2T's are somewhat easier to predict. I'm sure the ?berelder Nomad and the child Nomad would have a blast teaming up with one another to take on the pompous ones in the middle.

And so on . . .

Originally Posted by Peter Gibbons

One of the whole points of S&H's theory is that there are distinct differences between 8 year olds growing up at in one decade, and 8 year old growing up 2 or 4 decades later. Sure, there are similarities, but it's the differences that make the theory run.

Of course. Child rearing differences are one of the few possible culprits when it comes to explaining the shifts. I just don't think these are all that apparent at eight, nor do I think that most people carry their generational character deep into old age. Hey, but I understand you want to take this theory out on the road and really open up the throttle...but I also think the possiblities for cross saeculum conversation via corresponding archetypes is not suggested by the sorts of literature people read. At least, I haven't seen much support for the idea of Prophet affinity for Prophets of the past, or Nomad attraction to Nomad writers. If anything, its all the other way. Lost writers seem much less of interest to Nomads than they did to Prophets (lots more Fitzgerald/Hemingway fanatics among the Prophets than among Nomads).

Originally Posted by lexpat

Originally Posted by Peter Gibbons

One of the whole points of S&H's theory is that there are distinct differences between 8 year olds growing up at in one decade, and 8 year old growing up 2 or 4 decades later. Sure, there are similarities, but it's the differences that make the theory run.

Of course. Child rearing differences are one of the few possible culprits when it comes to explaining the shifts. I just don't think these are all that apparent at eight, nor do I think that most people carry their generational character deep into old age. Hey, but I understand you want to take this theory out on the road and really open up the throttle...

Then here we just have a difference of opinion on how applicable saecular theory is.

Originally Posted by lexpat

. . . but I also think the possiblities for cross saeculum conversation via corresponding archetypes is not suggested by the sorts of literature people read. At least, I haven't seen much support for the idea of Prophet affinity for Prophets of the past, or Nomad attraction to Nomad writers. If anything, its all the other way. Lost writers seem much less of interest to Nomads than they did to Prophets (lots more Fitzgerald/Hemingway fanatics among the Prophets than among Nomads).

What makes the proposed situation different is that the "cross-saeculum conversation" (good term) will be taking place in real time, and sometimes very directly. Until this current 3T, we haven't had all that many members of same-archetype generations existing at the same time. This new phenomenon is likely to get more intense. Perhaps there will be no meaningful consequence. Then again, it could change everything, or have some impact in between.

I've wondered if the cusps/transition periods-before a turning mood has completely gelled-might be more affected than the core decades of turnings. There might be overlap in time as post-elder gens make post-seasonal(?) endowments while a new gen starts to come of age.

Another thought...I can only speculate about the effects. But I imagine that the more generations active, or even semi-active, the more complicated the period. With more generations there are more opportunities for cross-generational relationships.

Originally Posted by Tim Walker

I've wondered if the cusps/transition periods-before a turning mood has completely gelled-might be more affected than the core decades of turnings. There might be overlap in time as post-elder gens make post-seasonal(?) endowments while a new gen starts to come of age.

Another thought...I can only speculate about the effects. But I imagine that the more generations active, or even semi-active, the more complicated the period. With more generations there are more opportunities for cross-generational relationships.

Good points! Can you flesh that out?

I based this speculation partly on the aging of older generations. Obviously, the deeper one gets into a turning the older the older people get. Their ranks are thinning...and at what point are surviving post-elders just too old to participate?

There is also the tendency for younger generations to push aside an older generation, at least during a 1T. By the start of the Korean War the 1T mood had fully gelled in the USA. However, an aging Prophet-MacCarthur-tried to turn the war into a crusade. Truman fired him. Later, of course, the G.I.s shoved the Lost out of power.

Originally Posted by Tim Walker

I based this speculation partly on the aging of older generations. Obviously, the deeper one gets into a turning the older the older people get. Their ranks are thinning...and at what point are surviving post-elders just too old to participate?

There is also the tendency for younger generations to push aside an older generation, at least during a 1T. By the start of the Korean War the 1T mood had fully gelled in the USA. However, an aging Prophet-MacCarthur-tried to turn the war into a crusade. Truman fired him. Later, of course, the G.I.s shoved the Lost out of power.

Let's take your 1T example. The Missionaries were not doing to well by c. 1951, but in 2031 the Boomers might still have a strong presence and possibly not bend so easily.

Originally Posted by Peter Gibbons

Originally Posted by Tim Walker

I based this speculation partly on the aging of older generations. Obviously, the deeper one gets into a turning the older the older people get. Their ranks are thinning...and at what point are surviving post-elders just too old to participate?

There is also the tendency for younger generations to push aside an older generation, at least during a 1T. By the start of the Korean War the 1T mood had fully gelled in the USA. However, an aging Prophet-MacCarthur-tried to turn the war into a crusade. Truman fired him. Later, of course, the G.I.s shoved the Lost out of power.

Let's take your 1T example. The Missionaries were not doing to well by c. 1951, but in 2031 the Boomers might still have a strong presence and possibly not bend so easily.

Perhaps. If I inherited my Lost grandfather's good genes I may not kick the bucket until around 2051 :-)

Originally Posted by Roadbldr '59

Originally Posted by Peter Gibbons

Originally Posted by Tim Walker

I based this speculation partly on the aging of older generations. Obviously, the deeper one gets into a turning the older the older people get. Their ranks are thinning...and at what point are surviving post-elders just too old to participate?

There is also the tendency for younger generations to push aside an older generation, at least during a 1T. By the start of the Korean War the 1T mood had fully gelled in the USA. However, an aging Prophet-MacCarthur-tried to turn the war into a crusade. Truman fired him. Later, of course, the G.I.s shoved the Lost out of power.

Let's take your 1T example. The Missionaries were not doing to well by c. 1951, but in 2031 the Boomers might still have a strong presence and possibly not bend so easily.

Perhaps. If I inherited my Lost grandfather's good genes I may not kick the bucket until around 2051 :-)

Well, at least you're a Joneser. We can probably put up with you! :wink:

Though the details differ, in the English speaking countries this change seems to have occurred during a Crisis period.

Could it be possible for this transition to occur during a different turning? And if so, could this explain some previously unexplained anomolous periods?

Originally Posted by Tim Walker

Though the details differ, in the English speaking countries this change seems to have occurred during a Crisis period.

Could it be possible for this transition to occur during a different turning? And if so, could this explain some previously unexplained anomolous periods?

I think it's entirely possible that it can happen in different turnings. I'm just not sure how and when it happened. We need someone to look at recent non-Western saeculae with the modal shift in mind.

Steve Barrera posted some interesting data on generations and political power. First the table showing generational leadership share in Generations is updated to 2005. Also the average age of people in these leadership positions is given for each year. This second variable is the same as my Amax parameter in my paradigm model. Now there is only one adjustable parameter, the age at which paradigms are formed (Apar). I can now work out the political saeculum starting with the Revolution by assuming Apar = 25 years:

The Revolutionary War (1775-81) produces a set of dominant generational cohorts born 1750-1756 (I simply subtract 25). This group reaches age 46 (Amax from the S&H data) in 1796-1802. The result is the "Revolution of 1800" which launches the Jeffersonian era, which ends with the War of 1812.

The Age of Jefferson (1800-1812) produces a generation (1775-1787) which reaches age 46 in 1821-1833. The result is the critical election in 1828, which launches the Age of Jackson.

The Age of Jackson (1828-1840) produces a generation (1803-1815) which reaches age 47 in 1850-1862. The result is the growing sectionalism after the Compromise of 1850, which culminates in the critical election of 1860, which launches the Civil War.

Civil War and Reconstruction (1861-1872) produces a generation (1836-1847) which reaches age 52 in 1888-1899. The result is the Populist movement which culminates in the election of 1896. The movement is defeated. Nevertheless many of the goals of the populists are carried on by the Progressives, a different group that rise to prominence shortly after the election of 1896--though not because of it.

The Progressive Era (1900-1916) produces a generation (1875-1891) which reaches age 55 in 1931-1946. The results is the critical election of 1932 and the subsequent New Deal.

New Deal & WW II (1932-1945) produces a generation (1907-1920) which reaches age 53 in 1960-1973. The critical election of 1968 is a result, which reflected the hubris of Vietnam. Following Vietnam came a loss in faith in the government due to political scandal (Watergate) and failure of economic policy making (stagflation).

Vietnam, Watergate & Stagflation (1967-1978) produces a generation (1942-1953) which reaches age 56 in 1998-2009. During this period should come the next critical election, which may have been 2004, and a crisis era that will form the next paradigmic generation.

Note the various ages at which power is reached. These were obtained by averaging the values provided by S&H for the years of interest. For example, the average age of leaders over 1960-73 was 53, less than the average age of 55 for the 1931-1946 period. This is why these values were used.

It is useful to look at 1998-2009 window compared to the previous windows:

1960-1973 - social moment turning began in 1964, 4 years into period.
1931-1946 - social moment turning began 2 years before period began
1888-1899 - depending on dating for the 3rd Great Awakening (1886-1908 or 1896-1917), social moment turning had either begun 2 years before or 8 years after start of period.
1850-1862 - social moment turning began in 1860, 10 years into period
1821-1833 - social moment turning began in 1822, 1 year into period

In summary, the 3T/4T transition should occur from two years before 1998 to ten years after 1998. The average value is 3 years after the period began, or in 2001. There is a 1/3 probability of the transition occuring in 2006 or later A political test is now possible. If the GOP wins easily in 2008, this rules out 2008 as a critical election and makes the case for 2004 as a critical election pretty much of a slam-dunk. Note the relation between critical relctions and the social momment turings they are in:

Turning start --> election
1822 -----------> 1828
1860 -----------> 1860
1886 or 1896 -> 1896
1929 -----------> 1932
1964 -----------> 1968

In all cases the turning begins at or before the critical election. Hence assignment of 2004 as a critical election puts the latest date for the start of the crisis at 2004 (and it probably began earlier). On average it has occurred 4 years before the critical election, which would suggest 2000, assuming 2004 is a critical election.

One of the themes I advance is the idea of a "stealth 4T". There is nothing in S&H that indicates that a turning change should be evident in real time. All previous turnings have been identified in retrospect. Take the last crisis. S&H have it start with a stock market crash. That is nothing special, we had a bigger crash in 1987 and that didn't denote a turning change. The crash was followed by a depression in the industrial economy. This depression was long (43 months) but no where near as long as the 1873-79 depression (65 months). Both depressions showed roughly similar severity in the industrial economy, the 1929-1933 depression had a bigger impact on the economy as a whole because just about the whole economy was industrial in the 1930's as compared to a small fraction in the 1870's. So there is a severity factor.

But what made the 1930's really different was the fact that the country did not emerge from bad times in the subsequent expansion. At the crest of this expansion in 1937, unemployment was still above the level normally seen at depression bottoms. This was unprecented, a "depression" that lasts through an entire business cycle and into the next recession. Truly what happened after 1929 can be called the Great Depression. But it wasn't clear until after 1937 that there was going to be a Great Depression. Only by then was it clear, in retrospect, that something unique had happened.

One can imagine a 1933 equivalent of Sean Love arguing that we haven't had the doozy factor yet since longer depressions (1873-9) have happened before during a High for Pete's sake, all the post-1929 fallout (so far) represents is a strong 3T reaction. However, dooziness was coming due to FDR's reckless fiscal policies.

But there is another reason for the idea of a stealth 4T. This is the competitive observer feedback effect or what George Soros calls "reflexivity". These refer to the tendency for human beings to anticipate the future and modify their behavior accordingly. To the extent that today's behavior causes the future, this means that "what happens depends on what happens", that is the future feedbacks onto the present helping to give birth to itself. This is "reflexivity". It is similar to what Douglas Hofstadter referred to as "strange loops" in his book Godel Escher Bach.

It follows from the principle of reflexivity that the future is indeterminate, since knowledge about the futrue would change present behavior, thus changing what the future will be to something different from what it was originally going to be. It is like the time travel paradox.

For example, John X has been caling for a major stock market decline because of above trend valuations. He is right, it is obvious that a major decline is in the works. Back in late 1996 many bearish commentators were calling for a major decline for the same reasons. They were right too, it was obvious that a major declince was in the works. In fact, no less an authority than Alan Greenspan spoke out on this issue with his famous Irrational Exuberance speech in December 1996.

And the forecasted decline came to pass; the stock market as measured by the benchmarket S&P500 index, fell 50%. The high-flying NASDAQ stocks fell even harder. However, this does not mean that heeding the Chairman in 1996 would have been a great strategy. Let's compare a prudent investor to a "bubblehead". The prudent investor, heeding the Chairman, shifted from an S&P50 index fund to a money market fund in December 1996, where has had obtained a safe return of 3.5% in the 8+ years since then. The bubblehead left his money in the index fund, where it languishes today. Yet his return over this same 8+ year period has been just over 7%, twice the return of his prudent colleague, despite the crash. As a result the bubblehead's 401(k) is worth 30% more than the prudent investor, despite the reckless choice of riding it out.

What happened? The forecasted crash did occur, but it did so in a way that made it impossible for a prudent investor to take advantage of the forecast. This is a direct example of how reflexivity works. The market advanced beyond the Dec 1996 levels, because today's knowledge of the good returns available after that date fed back into investor beliefs in Dec 1996, causing the very "irrational exuberance" to which the Chairman called attention.

How did those investors in 1996 know to be exuberant? Consciously, of course, they didn't know. But unconsciously they did. It is the unconscious behavior of masses of people that produces the cycles we discuss here. We can say that the refusal of investors to heed the Chairman may reflect the saeculum--it was too early for a 4T, the generational constellation was not right and so the 3T irrational exuberance had to continue. Indeed, there was a popular narrative produced by Harry Dent which applied this very sort of saecular thinking to the stock market and which forecast the continuation of the bull market to the 2007-2010 period--after which a depression would. That is, a repeat of the last crisis, eighty years later, was in store.

Dent's forecast made use of 20-year generations, because this is the length S&H favor. It follows directly from their concept of a Civil War Anomaly. There is an alternate interpretation of 18-year generations, which would call for Dent's peak to happen around 2000. Like Dent's spending wave, thihs model can be combined with a novel valuation metric (P/R) that called for a market peak in 1999.

Imagine a prudent investor, who heeding the signal of P/R and the 18-year generation model, moved from the index fund to the money market in December 1998. Since then his money marekt investment woud have earned a measly 3%. Now consider the bubblehead, who following Dent's narrative remained in the stock fund after December 1998 to this very day. He would have earned a 0.6% return. In this case the prudent investor has 15% more money than the bubblehead.

What happened? Here today's knowledge of the poor returns available from investments in 1999 and 2000 fed back to investors of that time, creating more prudent investors and fewer bubbleheads. In 2000, the market finally ran out of bubbleheads and the decline began., years after the prudent investors of 1996 had expected, but years before the Dentians believed.

But Dent's narrative is not yet dead. Jim Goulding for one favors it. And since this narrarive is closely joined with the "we be 3T" narrative, it has a lot of support. Enough support that prospects for stocks may be far more bullish than what valuation arguments like those of John X would forecast. Remember, people do not have to consciously know what a 3T is in order to be able to act on the belief that "we be 3T". The belief is subconscious.

Dear Mike,

Originally Posted by Mike Alexander '59

> One of the themes I advance is the idea of a "stealth 4T". There
> is nothing in S&H that indicates that a turning change should be
> evident in real time. All previous turnings have been identified
> in retrospect. Take the last crisis. S&H have it start with a
> stock market crash. That is nothing special, we had a bigger crash
> in 1987 and that didn't denote a turning change. The crash was
> followed by a depression in the industrial economy. This
> depression was long (43 months) but no where near as long as the
> 1873-79 depression (65 months). Both depressions showed roughly
> similar severity in the industrial economy, the 1929-1933
> depression had a bigger impact on the economy as a whole because
> just about the whole economy was industrial in the 1930's as
> compared to a small fraction in the 1870's. So there is a severity
> factor.

> But what made the 1930's really different was the fact that the
> country did not emerge from bad times in the subsequent expansion.
> At the crest of this expansion in 1937, unemployment was still
> above the level normally seen at depression bottoms. This was
> unprecented, a "depression" that lasts through an entire business
> cycle and into the next recession. Truly what happened after 1929
> can be called the Great Depression. But it wasn't clear until
> after 1937 that there was going to be a Great Depression. Only by
> then was it clear, in retrospect, that something unique had
> happened.

I think that this concept of a "stealth 4T" is extremely valuable,
and your analysis of the 1930s very interesting.

My recollection is that S&H never addressed this issue of whether a
4T can be identified in "real time." But it's possible that the
nature of 4T requires that it be "stealth," because if the general
public knew how bad things really were, then they would do something
about it before it's too late.

Once upon a time, I was talking on the phone to someone I was dating,
and she asked me, "Are we having an affair?" I always am a romantic
silver-tongued orator with the girls, and I said, "Well, there's no
way to tell, because, strictly speaking, I don't know if we're ever
going to be together again. If we're never together again, then the
affair ended the last time we were together, and we're not having an
affair now. But if we're together again in the future, it's only
then that we can say that we were still having an affair today." Yes
sir, I was a regular Don Juan.

Anyway, the same reasoning can even apply to a crisis war. I now
believe that we'll be in Iraq until the "clash of civilizations"
world war begins. If that's true, the historials will have to look
back and say that the new world war began on 9/11, since that led
immediately to the war in Afghanistan, and then to the war in Iraq,
and then to whatever the next battle is. So it's possible that we're
even in a "stealth world war," and we don't even know it.

Originally Posted by Mike Alexander '59

> And the forecasted decline came to pass; the stock market as
> measured by the benchmarket S&P500 index, fell 50%. The
> high-flying NASDAQ stocks fell even harder. However, this does not
> mean that heeding the Chairman in 1996 would have been a great
> strategy. Let's compare a prudent investor to a "bubblehead". The
> prudent investor, heeding the Chairman, shifted from an S&P50
> index fund to a money market fund in December 1996, where has had
> obtained a safe return of 3.5% in the 8+ years since then. The
> bubblehead left his money in the index fund, where it languishes
> today. Yet his return over this same 8+ year period has been just
> over 7%, twice the return of his prudent colleague, despite the
> crash. As a result the bubblehead's 401(k) is worth 30% more than
> the prudent investor, despite the reckless choice of riding it
> out.

The argument you're making is that it's ok to invest during a bubble,
as long as you get out in time. That's like saying that it's easy to
do well in the stock market: Just buy low and sell high.

Your analysis applies to long-term investors, but the fact remains
that an awful lot of people were wiped out by the Nasdaq crash in
2000. Presumably these people followed your advice, but didn't
realize that 7% return.

In another thread, I wrote a lengthy analysis indicating a problem.
http://fourthturning.com/forums/view...=119489#119489
It comes from the fact that I've spoken to a lot of people, and seen
a lot of commentary, that indicates that there are many, many people
today who know that "something's wrong" in the stock market today,
but they plan to get out in time. The problem is that "getting out
in time" is a zero-sum game, and since everybody's going to be
trying, it means that the stock market collapse is going to come much
more quickly than anyone expects, resulting in perhaps a 50-75% fall
in a single day.

So when you point to the 7% increase by staying in the market, you
have to do a more sophisticated risk analysis. What's the chance
that you're going to "get out in time?" Let's say it's 20%. What do
you stand to gain if you get out in time? Let's say 25%. What do
you stand to lose if you don't get out in time? Let's say 65%. Then
your expected gain if you stay in the market is:

20% x 25% + 80% x (-65%) = -47%

So your expected loss from staying in the market is 47%.

What's your expected gain if you exit the market? 0%. Well, a 0%
gain is a hell of a lot better than a 47% loss. That's the part that
you left out.

Incidentally, I'm no Kondratieff guru, but here's an article that
that uses Kondratieff Wave analysis to conclude that a major crash
could come any day now.
http://www.howestreet.com/story.php?ArticleId=897

Originally Posted by Mike Alexander '59

> Indeed, there was a popular narrative produced by Harry Dent which
> applied this very sort of saecular thinking to the stock market
> and which forecast the continuation of the bull market to the
> 2007-2010 period--after which a depression would. That is, a
> repeat of the last crisis, eighty years later, was in store.

I really think that Harry Dent is a major charlatan. He's done the
generational analysis, and in his new book, The Next Great Bubble
Boom: How to Profit from the Greatest Boom in History, 2005-2009,
he concludes that our current state is similar to 1921, and that
we're about to have a five year bubble economy like in the 1920s. He
predicts the dow hitting 40,000 by the end of the decade.

There are only two possibilities: Either he's really dumb, or he's
purposely lying. I vote for the latter.

If you look at the graph at the end of this message, you can easily
see that today is nothing like 1921. If the Dow went up to 40000 by
the end of the decade, the price/earnings ratios would be above 60.
Like I said, either he's a moron, or he's purposely lying.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com



[End of message]

Originally Posted by John J. Xenakis

The argument you're making is that it's ok to invest during a bubble, as long as you get out in time. That's like saying that it's easy to do well in the stock market: Just buy low and sell high.

No. It's OK to invest in a bubble as long as you don't buy near the top. You don't have "to get out" at all. My point was that if one had bought in Dec 1996, when Shiller's P/E said the market was dangerously overvalued and held for the long term, he would have earned 7% (up to the present)--twice the return available from the money market alternative. In other words, he would be fully exposed to the crash in 2000-2002, but it didn't matter because the market went up so much before the crash that after it crashed, it was still above where he got in.

Your analysis applies to long-term investors, but the fact remains
that an awful lot of people were wiped out by the Nasdaq crash in
2000. Presumably these people followed your advice, but didn't
realize that 7% return.

Relatively view people seem to have been wiped out in the Nasdaq crash. If they were, they would not have been any support for reducing capital gains taxes and a groundswell for increasing the amount of losses one can take against regular income instead. I didn't get killed in the crash, but I did get killed in 1999 from two poor investments in stocks that went bankrupt and a bad trade (a short position in late 1999 trying to profit from the coming crash). I haven't paid a dime in capital gains taxes since 1999 and won't for many years, so the rate is of no interest to me, it could be 50%--I don't give a shit. What I would like is to offset more than a measly $3000 of losses against my regular income--but there was no movement on that issue in any of Bush's tax initiatives. If so many investors (mostly Republicans) were hurt so badly by the crash (i.e. have lots of losses that they can't use as a tax deduction) you would think they would have demanded some tax relief, instead of a capital gains tax cut that does them no good.

[quote]So when you point to the 7% increase by staying in the market, you have to do a more sophisticated risk analysis. [quote]
No! The comparison was between someone who got out in Dec 1996 with one who never got out at all. The prudent investor was the one you knows that trees don't grow to the sky and so he got out of the market in time. The bubblehead fully believed the hype and stayed in--never selling. Yet the bubblehead did better.

The reason why is that the Dow did NOT go to 4000 as you projected in early 2003. The same sort of analysis that projected Dow 4000 also said you should get out in Dec 1996. Had the Dow gone to 4000 then the bubblehead in my example would not have gotten the 7% return and the prudent investor would have done better. But that didn't happen.

The bubbleheads in Dec 1996 were betting that Dow 4000 wasn't in their future. The prudent investors were betting that Dow 4000 was going to appear. It's been eight years, the bubbleheads were right and the prudent investors wrong.

In my example a bubblehead is one who buys stocks at a particular level and holds on through thick and thin. The prudent investor is one who sells stocks and holds on to money markets afterward through thick and thin. Both are long term investors. Neither is trying to get out at the top or any such nonsense.

Now consider the bubblehead, who following Dent's narrative remained in the stock fund after December 1998 to this very day. He would have earned a 0.6% return. In this case the prudent investor has 15% more money than the bubblehead.

There were two major deals that occured as the result of the 1929 market crash: 1) The deliberate integration of the federal government into the economic engine as a regulator (social security being its chief cornerstone) and, 2) the establishment of the U.S. as a "great power" (with a rebuke to it's isolationist past as established by George Washington). These two institutions formulated the new liberalism, or paradigm, of the post WW II era.

Charting a subsequent course for these two institutions over this post-WW II period, noting how they've evolved and matured, ought to guide the historian along a cyclical or linear path. That today, post E2.004, a political party that essentially created these two institutions, yet finds itself opposing a war and any modification to social security while decidedly in the minority should say something about either these institutions or the path chosen by their creators.

Is Bush, by his policies, serving as wrecking ball to these two institutions, while the Democrats strive to save them? Or is it the other way around? Is Bush seeking to save and improve these institutions while the Democrats serve are mere reactionaries in their defense?

One simply falls into one of two camps, here. Charting a cyclical nature to these kinds of institutions would suggest that they are indeed need of tinkering or outright overhaul. Charting a linear path would determine that these institutions are strong and not in any need of tinkering.

Given the competing nature of our political system, one ought to conclude that one party is doing the fixing while the other is "standing athwart history, yelling "Stop!" Or, I suppose, both parties are nuts and we're all bubbleheads doomed to die a wretched death. :wink:

Originally Posted by Devil's Advocate

Now consider the bubblehead, who following Dent's narrative remained in the stock fund after December 1998 to this very day. He would have earned a 0.6% return. In this case the prudent investor has 15% more money than the bubblehead.

There were two major deals that occured as the result of the 1929 market crash: 1) The deliberate integration of the federal government into the economic engine as a regulator (social security being its chief cornerstone) and, 2) the establishment of the U.S. as a "great power" (with a rebuke to it's isolationist past as established by George Washington). These two institutions formulated the new liberalism, or paradigm, of the post WW II era.

Charting a subsequent course for these two institutions over this post-WW II period, noting how they've evolved and matured, ought to guide the historian along a cyclical or linear path. That today, post E2.004, a political party that essentially created these two institutions, yet finds itself opposing a war and any modification to social security while decidedly in the minority should say something about either these institutions or the path chosen by their creators.

Is Bush, by his policies, serving as wrecking ball to these two institutions, while the Democrats strive to save them? Or is it the other way around? Is Bush seeking to save and improve these institutions while the Democrats serve are mere reactionaries in their defense?

One simply falls into one of two camps, here. Charting a cyclical nature to these kinds of institutions would suggest that they are indeed need of tinkering or outright overhaul. Charting a linear path would determine that these institutions are strong and not in any need of tinkering.

Given the competing nature of our political system, one ought to conclude that one party is doing the fixing while the other is "standing athwart history, yelling "Stop!" Or, I suppose, both parties are nuts and we're all bubbleheads doomed to die a wretched death. :wink:

That was actually a very thoughtful post, Marc. I knew you had it in you...somewhere :-)

At any rate, I'd say that I fall into the cyclical camp view that the system needs tinkering, even an overhaul. The issue is whether the Pubs (the party doing the fixing) are doing what is prudent, or whether the Dems (the obstructionists) would implement anything better if they had the chance. My opinion is that the answers to both questions are definitely no for the Republicans, and probably not for the Democrats.

SS needs fixing so that there is actually something for people our age when we retire circa 2025, should it turn out we need it. It's an insurance policy, not an entitlement...as such it should be means tested so that rich farts who don't need SS to get by in their old age don't get it....which is not something either the GOP or the Democrats are proposing. As far as privatising SS...do we really want a nation of armchair stockbrokers, who know about as much about investing as I do about brain surgery, doing with the Nation's SS money however they see fit? I see a great potential for long-term disaster along the route Bush is proposing...and I don't see any short-term benefit for anyone.

Bush's economic policy seems to be ultra-laissez-faire, to get government out of their regulatory role completely and let Big Business do whatever it wishes. Fine. I suppose that works for people who believe in the intrinsic decency and wisdom of Corporate America...as most do in Ohio. Except they are wrong. The Captains of Industry are at least as morally depraved as the rest of us, certainly not less... and if given absolute power over the economy with no check-and-balance from We The People they will do what anyone else would...consolidate that power for their own benefit at the expense of everyone else. This is human nature at its worst, and I'm not convinced that the current Democratic leadership would reverse this trend...they didn't under Clinton.

So I partially agree with your last statement...that both parties are nuts. I don't feel we are doomed to die a wretched death, however...only that the current party leadership isn't really up to the task of doing what needs to be done. But somebody else may...we're likely to see that in '08 or '12. The new leadership could be Democrat or Republican, or a completely new party altogether. We shall see.

Xenakis:
Interesting graph. I think nanotechnology will be the equivalent of electricity/factory assembly/personal computers, with biotechnology perhaps the most critical sub-field.

Originally Posted by Devil's Advocate

There were two major deals that occured as the result of the 1929 market crash: 1) The deliberate integration of the federal government into the economic engine as a regulator (social security being its chief cornerstone)

Social Security doesn't act as an economic regulator, unemployment insurance does. Other important aspects of integration of the Federal government into the economy include the decision to leave the Gold Standard during peacetime in 1933 and its eventual replacement with the Bretton Woods system, the pegging of interest rates during and after WW II, and the Employment Act of 1946.

2) the establishment of the U.S. as a "great power" (with a rebuke to it's isolationist past as established by George Washington). These two institutions formulated the new liberalism, or paradigm, of the post WW II era.

I wouldn't say this. One of the arms of the new American Great Power was the intelligence agency, which from its very start was a Republican institution. "Wild Bill" Donovan was a rightwing Republican, and the entire postwar intelligence service was filled with Eastern establishment Republicans. My Dad was in the CIA for six years in the 1950's. One of the reasons he eventually left was there was no future for a guy w/o a college degree. A bigger reason was he simply didn't fit in with the moneyed crowd that staffed the agency in those days (although he certainly was a Republican!). When you consider that he went from being a GS 12 to a cutlery salesman, he must have not been too happy in the Agency.

The other great arm of American power was the military that has always been a conservative insitution. Consider the number of military men the Republicans and Whigs have run for President compared to those the Democrats have run. There is no reason to believe that the great power apparatus was ever a Democratic bailiwick.

Given the competing nature of our political system, one ought to conclude that one party is doing the fixing while the other is "standing athwart history, yelling "Stop!"

Exactly, and I would argue that it is the Democrats who are those standing athwart history yelling Stop. This is the key of the "Republicans as progressives" meme.

Originally Posted by John J. Xenakis

Dear Mike,

Originally Posted by Mike Alexander '59

> One of the themes I advance is the idea of a "stealth 4T". There
> is nothing in S&H that indicates that a turning change should be
> evident in real time. All previous turnings have been identified
> in retrospect. Take the last crisis. S&H have it start with a
> stock market crash. That is nothing special, we had a bigger crash
> in 1987 and that didn't denote a turning change. The crash was
> followed by a depression in the industrial economy. This
> depression was long (43 months) but no where near as long as the
> 1873-79 depression (65 months). Both depressions showed roughly
> similar severity in the industrial economy, the 1929-1933
> depression had a bigger impact on the economy as a whole because
> just about the whole economy was industrial in the 1930's as
> compared to a small fraction in the 1870's. So there is a severity
> factor.

> But what made the 1930's really different was the fact that the
> country did not emerge from bad times in the subsequent expansion.
> At the crest of this expansion in 1937, unemployment was still
> above the level normally seen at depression bottoms. This was
> unprecented, a "depression" that lasts through an entire business
> cycle and into the next recession. Truly what happened after 1929
> can be called the Great Depression. But it wasn't clear until
> after 1937 that there was going to be a Great Depression. Only by
> then was it clear, in retrospect, that something unique had
> happened.

I think that this concept of a "stealth 4T" is extremely valuable,
and your analysis of the 1930s very interesting.

My recollection is that S&H never addressed this issue of whether a
4T can be identified in "real time." But it's possible that the
nature of 4T requires that it be "stealth," because if the general
public knew how bad things really were, then they would do something
about it before it's too late.

That would result in a re-ordering of secular institutions, but it wouldn't be seen as a crisis at the time.

Once upon a time, I was talking on the phone to someone I was dating,
and she asked me, "Are we having an affair?" I always am a romantic
silver-tongued orator with the girls, and I said, "Well, there's no
way to tell, because, strictly speaking, I don't know if we're ever
going to be together again. If we're never together again, then the
affair ended the last time we were together, and we're not having an
affair now. But if we're together again in the future, it's only
then that we can say that we were still having an affair today." Yes
sir, I was a regular Don Juan.

:lol:

And what was her response?

On a more serious note...

Anyway, the same reasoning can even apply to a crisis war. I now
believe that we'll be in Iraq until the "clash of civilizations"
world war begins. If that's true, the historials will have to look
back and say that the new world war began on 9/11, since that led
immediately to the war in Afghanistan, and then to the war in Iraq,
and then to whatever the next battle is. So it's possible that we're
even in a "stealth world war," and we don't even know it.

By that reasoning, a case could be made that WWII started when Japan invaded Manchuria in 1931, but that no one realized that a world war had started until 1939. Would you consider that to be a parallel to what you see going on today?

2) the establishment of the U.S. as a "great power" (with a rebuke to it's isolationist past as established by George Washington). These two institutions formulated the new liberalism, or paradigm, of the post WW II era.

I wouldn't say this. One of the arms of the new American Great Power was the intelligence agency, which from its very start was a Republican institution. The other great arm of American power was the military that has always been a conservative insitution.

If this is indeed true, then the foundation of FDR's New Deal was entirely conservative:

• Fifteen years ago my public duty called me to an active part in a great national emergency, the World War. Success then was due to a leadership whose vision carried beyond the timorous and futile gesture of sending a tiny army of 150,000 trained soldiers and the regular navy to the aid of our allies. The generalship of that moment conceived of a whole Nation mobilized for war, economic, industrial, social and military resources gathered into a vast unit capable of and actually in the process of throwing into the scales ten million men equipped with physical needs and sustained by the realization that behind them were the united efforts of 110,000,000 human beings. It was a great plan because it was built from bottom to top and not from top to bottom.
  
  In my calm judgment, the Nation faces today a more grave emergency than in 1917.
  
  It is said that Napoleon lost the battle of Waterloo because he forgot his infantry--he staked too much upon the more spectacular but less substantial cavalry. The present administration in Washington provides a close parallel. It has either forgotten or it does not want to remember the infantry of our economic army.
  
  These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power, for plans like those of 1917 that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.

This is not a wartime speech, but rather FDR's address to the nation in April of 1932, as he tossed his hat into the presidential election ring.

While attempting to define conservatism as an ideology which embraces the military far more than does "liberalism," one should remain consistent , and conclude that FDR's prescription for what ailed the "economic man" required a military-like response, and thus that remedy was conservative, not liberal in nature.

Originally Posted by Devil's Advocate

If this is indeed true, then the foundation of FDR's New Deal was entirely conservative:

The precursor to the CIA was Donovan's OSS, which he shaped. Wild Bill certainly was a conservative Republican.
It's absolutely true that the OSS and CIA were begun under liberal Democratic administrations, but they weren't liberal organizations.

While attempting to define conservatism as an ideology which embraces the military far more than does "liberalism," one should remain consistent , and conclude that FDR's prescription for what ailed the "economic man" required a military-like response, and thus that remedy was conservative, not liberal in nature.

I did not say that conservatism was an ideology that embraces militarism. I said that the military is a conservative institution. I also implied that the conservative party liked to trot out military heroes to win elections. Conservatives have always approved of the use of military force to accomplish sensible (and limited) objectives. Traditionally, they avoided foreign entanglements and eschwed "going abroad in search of monsters to slay". It was liberals who first sought to slay monsters. But this does not make the military a liberal institution. Indeed FDR's own CINC Europe chose to run for president in the opposite party, because as a military man he felt more at home in that party--not the one who had done so much to increase the size and status of the military.

Once the reality of the postwar world made it clear that the US would have to become a world power, Republicans embraced the apparatus of world power. As I said, military men were more comfortable with Republicans than Democrats. The major business firms that would get the contracts to build and maintain US power tended to be run by Republicans. The intelligence community spent their formative years under the tutelage of the Republican Dononan and his appointees.

The institutions supporting American's great power status have always been more amenable to conservative objectives. These institutions are not things, they are made up of people who have views of what should be done and what should not. Policy they agree with will be pursued vigorously. Policy that they are opposed to will be pursued less vigorously.

In the last 4T, the liberal FDR had to employ/create conservative institutions to defeat Hitler. Making war is inherently an illiberal activity. It's what you resort to when liberal approaches are rejected.

In this 4T, the conservative Republican adminstrations (if they wish to remain in power) will have to deal with social welfare issues. Any policy that allows them to stay in power will necessarily make use of institutions that are inherently unconservative. Conservative approaches will lose elections. Watch as the Republicans introduce universal health care during this crisis--not because they want to or think its a peachy keen idea, but because they will find it politically necessary in order to stay in power.