Pictures Of The Big Picture

Where there is no strife, there is decay:
The mixture which is not shaken decomposes.

—Heraclitus

Business is good in this seaside village. Record tourist visits during the winter season. Real estate action brisk.  Lots of construction, but mostly renovations and teardown/rebuilds of existing properties, which has a less speculative feel to it than ten years ago. New restaurant openings every week, lots of jobs for waiters and bartenders. A cautiously happy vibe, all-round.

All of which masks the less than healthy national economy. Week after week, month after month, the economic data goes steadily south. Retail sales are soft. Corporate profits, long dependent on stock buybacks which lower the number of shares to report diminished per share earnings against, are no longer pushing stock prices up.  And, globally, oil gluts are developing as consumption flattens out with slowing economies.

To my mind, the most telling piece of data for a glimpse of the what’s ahead is Gallop’s poll of Americans’ preference for saving over spending. At the bottom of the recession in 2009, 62% of Americans said they preferred to save over spend, and 35% reported preferring to spend. After a short trend the other way in the first two years of the “recovery,” the trend reversed and now more people, 65%, say they prefer to save, and fewer people, 31%, prefer to spend than in the middle of the worst recession since the thirties.

Elliott Wave Principal studies strongly suggest that, after one more new high in the Dow Jones Industrial Average, both the U.S. stock market and economy will decline severely, taking both into a depression. The comparisons of the markets of the late twenties and the recent past are worth noting. Starting in 1924, a steady progression of market tops: Norway, Denmark, Italy, India, Spain, Poland, Germany Belgium, Switzerland, Austria, Sweden Australia, France, Czechoslovakia and Netherlands all peaked sequentially by 1928, leaving the UK, Canada and the U.S to finally top in 1929.

This time around, Japan peaked early-1989. Then, beginning in 2000, Italy, Netherlands, France, Belgium, Switzerland, Austria, Poland, Czechoslovakia, Spain, Australia, Canada, India, UK, Sweden, Germany, Norway and Denmark topped by 2015, along with numerous developing country markets. The U.S. market is once again the last market in a bull phase.

The topping phase has taken much longer than present day Wave Principle analysts have imagined. But the Wave Principle, initially the work of Ralph Elliott eighty years ago, says nothing about the amplitude of the waves, and, given that the imminent top is a Grand Supercycle top-one higher degree of trend than the Supercycle top of 1929, we should not take the forecast lightly. As I’ve said before, forewarned is better.

Cheers,

Rod

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