My boss is a very well-read person, and he, like me, is a fan of history. Sometimes in the wee hours of the morning, he and I will kick emails back and forth musing about books we are reading or what we think is happening in the markets, and I wrote him an email today I thought I'd just make into this morning's blog post (lazy, aren't I?). Here goes:
Well, this probably comes as no big surprise, but I tend to view history
through the eyes of charts, and my speculation about the big moves in store for
the equity markets are aligned with what I also think will be those political
shifts. Something like these lines:
Wave A: (what we are almost completing, from January 2000 through some
point in 2009) measured in true dollar terms (e.g. gold), a sweeping plunge
in asset values, providing the government an opportunity for core changes in
civil and economic liberties and, as we approach the end of Wave A, a strong
anti-capitalist sentiment and the stepping-up of wealth-redistribution. We'll
just say for now this terminates with S&P in the low- to mid-600s.
Wave B: Hearty and sustained
countertrend rally, providing widespread relief to asset prices and a general
return to normalization in business. This will be a period of time when people
will say to themselves, Hey, this is working! Obama's popularity and power
will increase, since it will seem his policies are having positive effects on a
wide scale; he will thus push through even broader changes (surely nationalized
health care will be one of these, in additional to a nationalized mortgage
market and banking system).
Wave C: Now here is where it gets really interesting. The trillions of
dollars poured into the system to save it come back to haunt it. Inflation
starts appearing, and it becomes a runaway train. The market re-collapses,
and Obama gets swept out of office by someone even more politically extreme
(not necessarily the classic liberal extreme, but perhaps someone far more
dangerous). This will probably be the most revolutionary and dangerous point
the nation will have faced since 1861 and the early 1930s.
