RIP: Wall Street, Main Street, and any other street.

I guess that there will be no value in business after this week.

Maybe every ounce of value is gone. No company that has a ticker symbol will make it through even the next few months. It's all just over.

Maybe we have reached a point that is unrecoverable. Not in terms of a short term stock market hit where a lot of people get scared out of stocks, but a point much worse. A point where everyone gets scared and freezes up.

Maybe we've decided collectively, as a species, that it's over. That we need to end any kind of good thing that is going on and just stop.

Probably some companies during this earnings season will report good numbers. But all forward guidance given by any intelligent CFO will be cut "just in case" anyway so any good won't matter.

Oh well.

Guess what. It's not even Wall street that is the real problem. Wall Street is just an indicator of what is to come. Wall Street will probably recover pretty soon and start making more money for all of the people who still have money. But based on what is going on in the market right now, this next 2 to 5 years will be a real shit-storm for Main Street. As they say, "You ain't seen nothing yet"

But how bad could it be?

Enough of the bad news has leaked out into the general population that "Everyday Joe" everywhere will now cut back because they are now scared and it takes a long time for "Everyday Joe" to recover. Anyone who has not lost a house is battening down whatever hatches they still have.

This is a self fulfilling prophecy of the worst kind and I don't think that we'll see a good indication of a recovery for many years. I think it's truly possible that we are actually going to see the worst.

A better question is "did anyone see this coming?"

This is where this gets interesting. I sort of did, but I didn't want to believe it. I read about this back in 2005 in books that foretold this very thing. I even made a point about talking about it to anyone who would listen.

One of the books that I read at that time was a book by a crazy man named Harry Dent.

Not Harvey Dent (the Two Face) or Arthur Dent (the galactic traveler), but some whack job called Harry Dent. Read the reviews on Amazon and it will seem that the world hates him. (but do they hate him now?)

What makes this interesting is that despite some timing differences (He's off by a about a year) the book was written years before this cycle really got underway.

His book is based on a theory called the Kondratiev Wave, or the "Long Wave". (If you haven't guessed, it's a theory by a Russian economist named Kondratiev.)

Long Wave theory is nutty stuff that states simply there is a season for everything and everything must have it's season. It goes on to state that these seasons are cyclical in nature and that there are many cycles that overlap. 4 Year cycles that follow presidential elections, Ten year cycles that follow decades and even 20, 40, 80 and even hundred year cycles.

These waves bring up and down times and right now, all of them, every last one, is lined up at the perfect low. The last time this was set up like this? The great depression, this chart shows a few seemingly perfectly spaced dips, with each following a spike. This alignment of cycles is called the Grand Supercycle in Harry's book.

Pretty Ominous really. But it made a lot of sense to me when I read it. The charts were what really scared me. They make a bit too much visual sense.

I've been trying to figure out whether this is all crap or not for the last few years of my life. I guess that the next year will make me a believer or show me that this is all bunk.

So how does all of this affect you and me?

As I said before, the stock market is a great indicator of what will happen to the economy going forward. Stocks drop before main street feels the pain. The great depression didn't happen during the course of a single day on Wall Street, it happened over ten years after everyone went home that day. We may well face that same situation right now. And if so, I'm not looking forward to what comes next after the size of the train that is in process of running us over right now.

I sincerely hope that things do not get this bad, but it's possible that we could be facing a time when the best investments are food and guns.

Me, I'm crossing my fingers that this will turn around and hoping beyond hope that wave theory turns out to be the aforementioned bunk. Because If I'm wrong, not much matters anyway.

Holding and buying (selectively).


If you are interested in the Kondratiev wave or Harry Dent's book, here are some helpful links:

Wikipedia page on the Kordnatiev Wave

Long Wave Analyst

Google books has a great preview of the book.

And of course, I have no idea where I found this chart, but it's great. I have had it for several years and it shows wave theory very well in many aspects. Use your right mouse button to zoom in and your mouse to pan around once you have. Awesome stuff.

1 comment:

  1. I cant agree! I'm on main street New Zealand. Some people are frightened and the market is similarly down but milk prices are still quite high and China will have growth and want our stuff and yours.

    I have for a long time run a school visits business with ( mostly Japanese)high school groups visiting New Zealand small country high schools for a week or three in a cultural and language exchange. Core elements of the success of this business are that New Zealand high schools are operating when northern hemisphere schools are on holiday, and that New Zealand high schools view carefully planned brief visits from northern hemisphere groups as educative for our students.

    Recently I have joined with choral authorities in New Zealand to establish an annual schools choral festival in Auckland from July-August 2009. Our website was established in June and advertising went up in subsequent months in northern hemisphere choral journals and websites. We had some early correspondence which has dried up recently.

    Unfortunately we are providing an expensive discretionary item, so demand may drop right off.

    We have some sunk costs and some more fixed costs, for professionals and the venue etc, whether or not anyone comes from the northern hemisphere and these are significant but not huge, as long as the sky doesn't fall in.

    There are at least three choices.

    one Go ahead 2009, 2010, which I guess is the bullish option

    two Establish 2010 as the inaugural year which saves some of the uncompensated costs of 2009 (if northern hemisphere choirs don't come) and gives the world economy time to catch its breath.

    three Decide that we will not be able to support the festival for the several years it now may take before it breaks even, and cut our loses and cancel all future events.

    I guess many businesses across the US and the world face similar uncertainties.

    We are going ahead with a, the bullish option, ie from 2009. First we said we would and showing a certain commitment may be unusual and helpful in such times. Some of our competitive festivals may close or take an option like two, which may give us a lift.

    Much has been said about the role of confidence in the events and we don't want to show a lack of confidence before we've begun.

    We've got to get back on the horse; there's no other way out of this desert.

    Owen Sharpe
    Festival Director
    New Zealand Schools Choral Festival