If you're asking about pure theory, you have a set of tools thatMarshAviator wrote: > What I am wondering is: Does the crash have to start with the
> market or can the economy actually collapse first?
> With all the manipulation, corruption and perma-optimism is it
> possible for equity markets to lag the larger "real" economy.
> It wouldn't surprise me if one day our debit cards didn't work,
> credit cards didn't work (even if you think you have money in your
> account, credit limit left etc.) and the whole thing ground to a
> halt.
> At some point the books will have to balance, the Enron trick of
> creating multiple cows only works until you actually try to milk
> it, then no mater how many you have on paper, there is just the
> actual one in the barn.
> Is the GD theory silent on which will lead?
provide approximate answers, but nothing as specific as you're
asking.
First, there's the pure generational analysis tool. The debauchery
and excesses of the Unraveling and post-unraveling eras lead to a
crisis that's triggered by one or more "regenerational events" --
events that cause a regeneration of civic unity.
We have not yet seen a major regenerational event, and we must --
which is why I keep saying that we still have to have a generational
stock market panic and crash.
When discussing economic trends, there are other tools that one can
use -- the law of exponential growth, the law of diminishing returns,
the law of regression to the mean, and the law of mean reversion.
I talk about the law of mean reversion all the time, and often make
the joke that neither Congress nor the Obama administration has yet
repealed the law of mean reversion. As I've said many times, the
DJIA has been substantially above trend value since 1995, and is
still overpriced by a factor of 150%. By the law of mean reversion,
that means that the DJIA will have to fall well below the trend value
for roughly the same length of time.
** How to compute the 'real value' of the stock market.
** http://www.generationaldynamics.com/cgi ... anic070820
Using these two tools gives you a "long-range prediction." It tells
us where we're going, but it doesn't give us any details about how
we'll get there, or how long it will take us to get there.
That brings us to the heart of the Generational Dynamics forecasting
methodology. You analyze day to day events and match them up with
the long-range prediction to get an estimate of what path we're
taking, and how close we are to the end point.
And so, we know that there's going to be a major financial crisis,
but we can only guess when it will occur. We know that it has to
occur, and we know that the longer the stock market bubble continues,
the worse the crisis will be.
Another thing that we know from generational theory is that what I
call the "lethal combination of greedy, nihilistic Gen-Xers, together
with greedy, stupid Boomers" will lead to greater abuse and criminal
activities. At a time when there are many things to worry about,
these criminal activities are perhaps the most worrisome things of
our time, because it means that things will continue to get worse for
a long time.
** The outlook for 2009
** http://www.generationaldynamics.com/cgi ... look090105
Generational Dynamics is a historically-based methodology, soburt wrote: > I go back to PER- Why is john so oriented towards PAST PER? (that
> was THE point of this entry)
naturally we look at historical trends. Price/earnings ratios are a
very valuable way of measuring the size of the current stock market
bubble, and for estimating how long it will take to recover. (See
"How to compute the 'real value' of the stock market" referenced
above.)
Sincerely,
John