If you have been around long enough, you see trends that peak and then fail and I am not talking about the stock market. Except that this idea does also apply to the stock market.
But in the long run, things that today we think are going to last forever don’t. It is like that high-school friendship that was pretty much gone by the end of the first year of college.
In 1969 the first man walked on the moon and here was the dawning of a new age in the history of the human race. What was next? Would we have a permanent base on our nearest space neighbor? Would a trip to Mars soon follow?
Yet, three years and five months later, the last moon landing happened and we have not been back since. All those dreams that kids had in 1969 of going to the moon turned out to be fantasy. Now 45 years later private companies are sending rockets up, and space tourism may soon be a reality. But that young boy or girl who fantasized in 1969 will probably be too old to experience their dream.
Humans by nature are pessimistic, expecting negative trends to continue based on the past and the present. Draw a line between two points and extend it out. But usually just when everyone is on board with the gloom-and-doom, that is the peak.
In May 2016 California Gov. Jerry Brown warned of a “permanent drought” for the state and the New York Times published a “scholarly” article, titled “California Braces for Unending Drought”. By February 2017, the mountain snowpack is 178 percent of normal and the reservoirs are at 125 percent of normal and both are rising.
Neither good times nor bad times last forever, but we always seem to ignore that fact. The prediction in 1968 of hundreds of million people starving because of overpopulation did not happen. In fact—as I said before—the global birth rate peaked in 1970. When crude oil was at $150 per barrel in June 2008 and going to $250 according to the “experts”, that was the peak.
The world is always “self-correcting”. The cure for high oil prices was high prices. The industry developed new technology and found new places to drill. Prices came down. The lesson is that just when you think the trend cannot get any worse and that idea is firmly in the public consciousness, that is usually the end of the trend.
Yes, the US is going to face a recession because that is the way the cycle works. The US economy grew by 4.2 percent in 1988. In 1991 there was a recession. The global political upheaval will continue for another 12 moths and then the reset will create a period of calm. Yes, there will be a sovereign debt default this year or by mid-2018 at the latest, and then debt-based spending will halt.
The Philippine stock market has been in the longest period of “hibernation”—for the past 15 years —with little movement and narrow ranges. We will soon “skyrocket” or “collapse”. I do not have a clue as to which way it will go and I don’t care.
So here is the good news. That umbrella you own is the most effective tool you can possibly have to protect yourself from bad weather. It works both to keep the pouring rain off your head and guards you from the burning sun. There is no permanent trend. There is
permanent preparation.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.