Gold - did you know?
Understanding and Re-Assessing Cycles
“The Economic Season has changed; it’s just a matter of time before the crowd wakes up and realizes it!”– Simon Heapes 2002
Last week we looked at larger cycles and in particular cycles which span beyond our lifetime view. When it comes to thinking about 'savings' and then taking it a step further by going on to 'investing,' we have to begin to think with a view which spans beyond our life to be able to grasp such things.
As human beings we have a gift forwarded to all of us that no other creature upon the face of the earth has; this gift is a Free Will. Birds, insects and animals are all locked into seasonal changes with instinct; humans are not. We can override at any time our own carnal instincts when we become aware of them.
‘Where there is a will, there is a way’ as the old cliché goes; however, the will can be very destructive to us individually and collectively as a group. Within the universe there are said given laws that we are all subject to, e.g., the law of gravity.
If you wilfully step off the side of a cliff defiantly expecting to not fall, you will be sadly disappointed. Or try jumping into the air and defiantly holding yourself there suspended indefinitely. Again, it’s not possible without help within the boundaries of the laws of this world. If you defiantly use your Free Will in the wrong way and go against the flow of these said given laws of the universe, you could find yourself in an unfavorable position.
DOING THINGS IN A CERTAIN WAY
The universe is so precise that NASA can land a spacecraft on the moon within one inch of their calculations. However, discovering this process took from 1961 to 1969 before it was achieved. Along the way to discovering the step-by-step process to land a man on the moon, there were setbacks. It cost many billions of dollars, many hours of work, and sadly men lost their lives. Once all the universal laws were conformed to, the objective was finally achieved. To land a man on the moon now is a given process already calculated to provide the desired result.
“The further that you look into the past, the further that you will see into the future.”
- Sir Winston Churchill
By looking at history and, hence, historical cycles, we can begin to grasp a view to see similar patterns, especially repetitive patterns. They say history doesn’t repeat; however, it sure does play a similar tune. The reasons for this are manyfold, but one of the main reasons is because human beings are predictable with their emotional reactions to things, events and given situations. The social order of human beings’ natural response to particular issues is incredibly similar; therefore, it’s one of the reasons we have a similar repetitive pattern played out by history in regard to economic changes.
THE SEASON HAS CHANGED
Free Will is better used by us all to go with the flow (so to speak), not against universal cycles in given areas.
As individuals and also as a group, quite often we find ourselves out of sync with the flow of the universal laws, because we resist change or more commonly are completely unaware that there has been a universal change.
Many long-term thinkers and those who study historical cycles have confirmed similar historically seasonal changes. In last week’s article I gave an example of one such historical researcher’s insight.
Called ‘K–Waves’ after the discoverer, Nikolai Kondratieff, Nikolai proposed a theory stating that Western capitalist economies have long-term 50 to 60 year cycles of boom followed by a bust. The image below is a pie chart describing each section of a full complete wave scenario. I have chosen to use the one we are all currently living in now.
The cycle we find ourselves in today began not too long after the Second World War. Here is a description of the four seasons making up one complete cycle:
SEASON 1 - SPRING
The Dow Jones Industrial average (DJI) being the top thirty blue chip stocks on Wall Street was only 181 points in 1949.
1. Employment and consumer confidence increases steadily2. Inflation starts from low levels and increases steadily3. Stocks rise from low levels
BEST INVESTMENTS: 1) Stocks 2) Real Estate
SEASON 2 - SUMMER
The DJI was at 968.54 points in 1966.
1. Real Estate sours2. Gold price booms3. Commodities prices rise dramatically4. Interest rates rise5. Debt builds6. Capital sector over-builds
BEST INVESTMENTS: 1) Commodities 2) Gold 3) Residential Real Estate
SEASON 3 - AUTUMN
The DJI was at 838.74 points in 1980.
1. Stock market booms2. Interest rates fall3. Commodities prices drop4. Debt rises to unsustainable levels5. Commodities stocks begin to gain value, going unnoticed6. Easy credit assets begin to peak, going unnoticed by the main-stream investor, e.g., Real Estate
BEST INVESTMENTS: 1) Stocks 2) Investment Real Estate
SEASON 4 - WINTER
The DJI was at 11,750 points and the NASDAQ at 5,000 points in the year 2000.
1. Prices begin to rise rapidly, going unnoticed in the beginning2. Consumer confidence drops dramatically if Government does-n’t step in to try and stimulate3. Debt repudiates (bankruptcies begin)4. People begin to run from paper money into Gold, Silver, com-modities and needs-based businesses5. Currency crisis starts to become the normal occurrence be-cause of wild fluctuations caused by massive inflation injec-tions
BEST INVESTMENTS: 1) Gold and Silver 2) Investing into assets that produce something society needs
NO ONE NOTICES
As each section of the cycle plays out, most people are completely oblivious to what is repetitively happening. History is like a grand stage show where the parts play out over and over again in similar fashion. The only thing that’s different is the time and the characters playing the parts as they alternate and change.
When people of one generation become accustomed to a particular economic environment, all future calculations and actions are governed by the current or recent past norm. This is safe providing the economic environment hasn’t changed; however, change is inevitable. Therefore, what might have worked over the last twenty-five year period will not work in the next twenty-five year period.
History recalls that scurvy was originally thought to be an infectious disease, because sailors on long voyages tended to come down with it en masse. By the early 1600s some English naval officers were recognizing that citrus juice could prevent and cure scurvy. Reports to the Admiralty fell on deaf ears. When Dr. James Lind, a British naval surgeon, published a book in 1753 establishing that scurvy was in fact brought about by a nutritional deficiency, it took 40 years for his discovery to be accepted by the prevailing medical orthodoxy of the day.
Finally, the British Navy changed its tactics and provided sailors with scurvy prophylaxis in the form of lime and lemon juice, thus giving rise to the nickname "limeys."
The same is true in the economic realm.
I can remember saying back in the early 2000s that Gold and Silver prices would rise to vastly higher prices from the levels where they were (in the $250s). This was met with audible scepticism coming from the audience. After all this time I don’t hear from those groups or individuals anymore. For the few who are still around, they struggle to look me in the eye when we cross paths.
It’s no different for the current investment strategists whom after almost ten years are just starting to go from scepticism, to silence, and then finally acceptance of Gold and Silver as go-to investments.
A LONG VIEW
Stepping back and taking a look at the longer views can offer even more perspective for the future. Being arrogant or ignorant doesn’t really come into this subject as an excuse for me personally or anyone else. Economic cycles or seasons are larger than one person’s lifetime and/or most adults’ working memory. We cannot reliably draw on personal experience when assessing the future. With this in mind, the protection of one’s family or estate is an issue for consideration.
As recorded in the Old Testament, the ancient Hebrews would build memorials to reflect back on what once was. It helped them to never forget and also to project forward. Looking back is essential in gauging future direction and decisions which need to be assessed accordingly.
The study of Gold in an economic sense is a fascinating subject when you step back to where it can lead you as a catalyst. There is no doubt I will come back to this subject and others surrounding it sometime in the not too distant future.
Until next time,
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