Welcome to the About Words website. Below is a brief audio introduction to this site.
Did you know that one of the most popular words on the internet is God?
In fact, when our attention is outward, there can be many competing attractions. When that happens, we may use labels like the distraction, the priority, or the preference. We can form habits of attention in regard to things that we regularly monitor or inspect. Eventually, we can also form presumptions and expectations in regard to subjects that we do not monitor or inspect. It is possible for our perceptions to match very precisely with the reality of things, or they may be a slight inaccuracy or even a total contrast.
When our attention is on outward things, we can notice contrasts, complexity, as well as possible patterns or orderliness within complexity. How about when our attention is inward?
Internal experience can be very simple. By focusing inward, we withdraw attention away from possible distractions or disturbances. We turn away from external perceptions toward the inner experience in general and even the particular capacity for perceiving (which we might label as “the perceiver”).
Not only can inner experience be elegantly simple, but it can also be complex. There are many types of sensation, such the different physical senses of sight and hearing and smell. There are many types of emotion, with some emotions for socially attracting others (as in pulling) and other emotions for repulsing others (as in pushing).
In some cases, there can be inner conflicts, such as conflicts between what we observe and what we expect to observe. For instance, imagine that I smell one of my favorite foods, but I look around and do not see that food.
If I was not expecting that smell, then I might be quite surprised to smell my favorite food. Then, beyond just surprise, I could be confused about where that smell is coming from. Maybe it is hard for me to see. Maybe I even see some other food instead, perhaps one that I find repulsive or disgusting.
Why do I smell one familiar smell and yet see something else that is also familiar, but not what I expected? Is my vision accurate? Is my brain properly interpreting my sight?
Note that we could say that sight is a function of the eyes while vision in a function of the brain. How is it that people can experience vision during their dreams or while hallucinating, even without any actual physical sight taking place? If someone was not born blind but then lost their eyesight several years ago, can their brain still remembers visual patterns? If so, when we know that vision is quite independent of eyesight.
In some ancient parables, we might be told that many people have eyes, but not everyone who has eyes will be able to see. Eyes cannot see in the dark, right? To be able to see, there must not only be eyes, but light. Further, closed eyes do not see even when there is light.
Next, simply seeing is totally distinct from properly recognizing whatever is seen. That recognition and identification of what is viewed is not a function of the eyes, but of the brain.
For instance, I cannot directly understand the meaning of the following sequence of Greek letters. I can see them. I could even copy their shapes. However, I have absolutely no idea what ideas might be encoded in those shapes.
I believe that the Arabic writing below could be a written code for the same human experience that I would label as “forgiveness.” I have no expertise in that language, so I do not reject the translation shown. Maybe it is a good translation and maybe not. I have no idea.
If we study the word vision, we would find that it has the same origin as the word video and many other words including witness, watch, wise, wizard, wicca, wicked, witch, witty, and even the words idea and identify. Vision is about the brain identifying something based on the sensations transmitted from the eyes. The eyes have sight (they see), but it is the brain that identifies or witnesses whatever is seen.
So, back to my earlier example, perhaps I smell something that my brain identifies as a food that I like, so then I look around (with my eyes), but all that my brain recognizes is some other food that triggers physical sensations in me that I dislike. I may experience confusion, which, if the issue seems important to me, can result in curiosity and exploration. Maybe I begin to wonder “has someone recently eaten my favorite food near here, so I cannot see it but only smell that it used to be here?”
External reality is never “in conflict” with itself. There can be mismatches or contrasts, but there is no actual conflict when there are red letters that spell the word “blue.”
We can even say that “I can see a conflict between the color of the letters and the meaning of the word spelled by those letters.” However, that conflict is *constructed* by the brain. The conflict is “out there” in the sense that many people can recognize it.
However, it is not “out there” in the sense that the letters do not have any inherent meaning. Though social training, some people learn to use those letters to encode ideas. So, if we have been trained to read that alphabet and that language, then the shapes of the letters are symbols that we can “decode” in our brain. In other words, we translate the code symbols in to an idea (which is not out there, but in the brain) and that internal recognition of the meaning of a word can conflict with the color of the letters (that is “out there”).
So, that is not a conflict that is really external. That is a conflict between the external colors and the internal meaning. Just because the same meaning is internally constructed by lots of people does not change the fact that the meaning is not inherent to the shapes.
<===== to the left
“Did you leave the leaves on the left like I asked or have you left them on the right again?”
The word “right” can mean the opposite of left or the opposite of wrong. The meaning is not “out there.” There is no “inherent” meaning to this sequence of shapes: “RIGHT?”
So, we can observe conflicts external to us, like between two animals or two groups of people. We can also observe conflicts between our own inner expectations and what we actually observe externally. Finally, we can observe inner conflicts, like conflicting emotions as in mixed emotions.
As noted before, some emotions involve socially attracting others to us, such as sadly moaning for help. Other emotions involve some type of social repulsion, such as wanting to push others away or wanting to flee from a particular possible threat (like an alarming, unexpected loud noise).
It is very common for emotions to have a social element, although from a medical perspective, it is also clear that emotions can also be measured as internal biological events, like through polygraph machines that can be used to identify phsyical distress and perhaps even distress from telling a lie. A person who is excited or delighted will produce different polygraph results than a person who is bored or a person who is disgusted.
So, emotions are physical events, although often triggered by social interactions. We can see that someone who is asleep and dreaming that they are standing alone at the edge of a cliff will experience biochemical hormonal responses even though there is no cliff and of course no one around. The fear of falling off of an imaginary cliff is not social, right? If the dreaming person was hooked up to a polygraph machine though, then there could be real physical indications of their real fear about an imaginary cliff.
Memories can also trigger fear, even though remembering a cliff is basically the same as imagining a cliff. If you have imagined a cliff at any time in the last few minutes, then your brain might have constructed visual hallucinations of standing at the edge of a cliff and looking over the edge. That is real vision, but not sight.
Vision is a neurological event in the brain and can happen during sleep. Sight, in contrast, is an independent process in the eyes.
Next, imagine someone with a certain kind of brain injury that disconnects one of their eyes from certain parts of their brain. People like that have been studied to establish that what one eye sees (like when they cover or close the other eye) can produce actual physical responses (as in emotion). All of that can happen without the brain actually constructing any conscious vision of the thing seen by the eye.
In those cases, people are literally blind to what one of their eyes is seeing. If they open the other eye, then they can recognize what they have been looking at (and thus explain any emotional response that they already had).
The experiments get even more interesting when the people are given special eyewear which allows the two eyes to be shown two different things. Perhaps they are given two different-colored lens or filters which allow them to see only certain words written in a specific color. In other words, each filter will block out (as functionally invisible) anything written in a certain color.
In that case, only one eye can see some emotionally-stimulating thing (like even a particular word), which produces a measurable physical response in the entire body. Further, the other eye is shown some other word or shape.
Now, what happens if the test subject is asked what their emotional state is? Of course they can typically identify their inner experience. But then what if they are asked to explain the cause of their emotional experience?
Note that these test subjects might not have been fully informed about the purposes and methodology of the brain research. Note also that only a small portion of the brain is involved in conscious awareness.
So, if the test subject is shown two different images (or words), but, because of their brain injury, they are only conscious of what is seen by one of their eyes, they can identify the emotion that is triggered by “what is invisible to their brain.” However, when asked to explain their emotiponal response, they will casually (and sincerely) CONSTRUCT an explanation that corresponds with whatever has been shown to the eye that is connected to the part of the brain that produces conscious awareness. They will rationalize their emotional response AS IF it was produced only by whatever they consciously perceive (as distinct from the different things that their eyes see). They will be just as sincere as someone dreaming.
Their mistake (or delusion) will not register on a polygraph exam. They believe their rationalization with absolute confidence.
We began with the idea of turning attention inward (such as to the internal processes of the brain to construct visual perceptions and rationalizations and other ideas or interpretations). We have gone in to some detail about the contrast between outward focus and inward focus. Next, we will explore the issue of why there would ever be relevance to an instruction or reminder to “return the attention inward.”
So, why would this turning inward ever be an issue that could require the need for an instruction or reminder? Why doesn’t the outward focus naturally return inward?
But what if the colored lenses were removed? Then, both eyes could see all of the words, so the conscious part of the brain could perceive all of the words. There would be no filtering or “unconscious” denial. The person would recognize that their sincere rationalizations from a minute in the past were wildly inaccurate. They might be very surprised, then briefly confused perhaps, but they would eventually understand which words were actually related to the emotional reaction, at which time they would discard their past misunderstanding.
How long would it take for them to update their understanding to match with their new conscious observations? It might be nearly instant. Or, for people with very severe obsessions with social validation, they might be very embarrassed and panic. Typically, test subjects would anxiously emphasize their prior sincerity and basically apologize to the researchers (as if the researchers were going to condemn them for their prior errors or accuse them of insincerity).
What would such anxious apologies evidence? It is proof that there was a background of pre-existing social paranoia in the people tested. Note that not everyone tested was embarrassed (as in anxious about avoiding criticism). Some simply said “wow, I am very surprised at that!”
However, even if a test subject got upset and harshly condemned the researchers for deceiving them, what happens to their old sincerity? Can they still be sincere about their first claim about the source of their emotional response? Once their brains are conscious of the words that were previously “invisible,” their past sincerity is no longer present. Yes, they were sincere, but there sincerity about their prior explanation is over.
So, the normal tendency to “confirmation bias” only is active when people are conscious enough to avoid actually respectfully studying any contrary evidence. If they know in advance that some evidence is contrary to a bias that they hold tightly with deep social paranoia, then they just avoid that evidence (and unconsciously rationalize why that evidence “must be invalid”). But if the “good eye” is suddenly able to see words that previously were filtered out (blocked) by a colored lens, then their prior sincerity is instantly “ruined forever.” Their inaccurate fabrication has been “betrayed.”
They may panic or explode in outrage, but they cannot ever sincerely deceive themselves again. They have been “tricked” in to facing the truth. They may repeat many times that “I cannot believe it!” However, their initial resistance to the new clarity (their “disbelief”) cannot last. They no longer believe what they now directly recognize as invalid. They are conscious of a much more reasonable (rational) connection then their original rationalization.
So, let’s explore the issue that there is commonly an unrecognized background of social paranoia (obsession with social validation). While denying their own emotional state of social paranoia, people may also resist the idea of actually testing whether or not there is any cause for their paranoia. To them, it really does not make sense to test for danger (or safety). To them, there “cannot be” any danger. They are unconscious of their own filtering. They are “in denial.” More precisely, they simply have not yet perceived a connection that they may later perceive.
They will remember their prior sincerity, but they will never return to that sincerity. They recognize that their brain simply “made up” a connection between the emotion that was triggered and the words that “their good eye” could see.
Next, back to the terminology of returning to an inward focus, how easy is to return focus inward? If someone has been effectively trained to have a fixated external focus on social validation, then a socially-delivered permission to return inward might be relevant. Lots of ongoing encouragement might be relevant (especially then is a constant social pressure and bombardment with information, like in many schools).
In fact, as noted already, there may be even a resistance to returning attention inward. Why exactly?
Eventually, the suggestion to turn inward might be received and explored. However, a possible complication is that there may also be a sense of repulsion toward the actual inner experience, which involves a kind of tension or conflict. When there is shame or panic in the background, then turning inward puts that background into focus or even in to the foreground.
Is there a way that I should be and then a contrasting experience that violates how I supposed that I would be? If so, then a simple response would be to update my supposition in order for it to conform to my actual experience. However, when there is an inner experience of enough distress or panic, then I may dismiss or devalue my any problematic observations in favor of maintaining my supposition about how I should be, even if that supposition is a distressed pretense.
I am the one who supposes how I am supposed to be or how I should be. I am supposed by me to be a certain way. I suppose that I should be a certain way.
What happens if I use a model that is not a fit for a particular context? It is likely that eventually I produce the result of frustration or even exhaustion and despair or desperation.
What happens if we practice a new model of attention? Does that alter what we notice and how we interpret what we notice and how we respond to what we interpret and the results of those behavioral responses?
I am conditioned to construct certain perceptions, but the constructing of any perception is a skill. And some contacts, a particular skill will be useful and another context a different skill will be usable and so I may be interested in the skill of constructing a wide variety of different perceptions or experiences. Instead of relating to certain experiences as inherently shameful, I may relate to certain experiences as deserving unusual caution.
I get interested in how attentive I should be to what. I may generally lose interest in how I am supposed by other people to be (unless I am a celebrity or high-profile public figure). Or, I may be only interested in how certain specific people suppose me to be.
Intriguing claim: short people tend to live longer than tall people.
Practical value: acting in alignment with the nature of time can dramatically improve your health (including living closer to the center of the earth, toward lower elevations /sea level).
Clarification: the nature of time is that time is a perceived EFFECT, not a fundamental reality (NOT a constant).
Example: For instance, while sleeping, do you perceive the passage of time differently from when you are awake?
Further clarification: “Gravity bends time.” When light is radiating away from a central point (such as a lamp or a star), the light moving in different directions will all move at a NEARLY identical speed, with the variation in speed controlled by the bending of that light toward massive objects (through the gravitational pull of heavy objects). Note that light has mass. Because light has mass, the mass of other things “pulls” or “bends” light. As light gets closer to a massive object, then the speed of light toward that object tends to increase.
Key issue: Time is a perceived effect that is related to the movement of light. When light is traveling from the sun to the earth, the speed that the light is traveling increases as the light approaches the center of the earth’s gravitational field. Because of that, the taller that an organism is, the more that it will have a potential issue with synchronization.
Tall people, for best health, need to do things that keep the various parts of their body “in synch.” Further, if they live at high elevations, the potential for “timing issues” becomes even bigger.
What is an example of a timing issue outside of the realm of biology? I think of two simple ones: a vehicle and an orchestra.
In an orchestra, does it matter if all of the musicians are playing at the same speed? What if there is a slight difference in the speed of different musicians, and that slight difference continues for 4 minutes or 9 minutes? Before long, the slight difference can be huge if there is no re-calibration.
But it could be much worse. You probably presume that all of the musicians generally started to play whichever song at the same time. What if all of the musicians are playing the same song, but do not start at the same time? One starts and then a few more start a few seconds later and, within the first minute, almost all of them have started to play the song (though of course at slightly different speeds).
Another example would be a vehicle such as a truck. Imagine a truck with not just 2 axles (and 4 wheels), but several axles (9?) and 18 wheels.
Now, how important is it for all of the axles to be rotating at the same rate? Even if all of the tires are identical (the same size, etc), it could be a problem the speed of the axles was more and more inconsistent (unsynchronized) the further back down the vehicle the axle is from the front.
But that is again just the start of the analogy. What if some of the wheels are not inflated well or are not the same size as the others. In that case, then there will be a massive problem with the “alignment” of the vehicle. In minor cases, the vehicle will constantly veer to the left or right. However, if an 18-wheeled vehicle could have tires rotating at lots of different speeds, that would be a major problem. It basically would not work at all.
It would be like a caterpillar (or some other creature with lots of legs) in which the legs were all moving at speeds that did not synchronize with the rest of the legs. Imagine a horse trying to gallop, but with each leg running at a different pace. Now, if you can imagine the disastrous immobility and clumsiness of such a horse, you are starting to respect the value of the issue of synchronicity.
Though are some interesting metaphors, but what is a specific example of a timing issue in the realm of biology? Let’s start with an uncommon but obvious example and then go toward one with more general relevance to all people.
A common word for one type of timing issue is “lag.” Have you heard of people feeling especially weary after flying in a plane? “Jet lag” is not just for people who travel across time zones, but also for people who fly only in north-south directions. The fatigue and sickness that can result from air travel is widely known (and it CAN be relieved or balanced).
Some websites claim that the quality of air on planes can contribute to fatigue. I do not argue with that. However, what about for someone like an astronaut that may have a very high-quality source of air during their space flight? In other words, what about in cases in which the air quality that the pilot or passenger is breathing is far higher than what they would typically get after the flight is over? Do they still experience fatigue (even severe complications lasting weeks or months after a single flight)? If so, why?
Next, here is an example that is constantly present, even for those who do not fly in airplanes. The heart is a set of muscle tissues that form four chambers, each with a valve. These chambers contract in a coordinated sequence. How does that happen?
A sequence of electrical impulses results in a complex series of muscle contractions known as a heart beat. If the different contractions that result in a heart beat are perfectly coordinated, then that produces optimal power. If the different contractions are far out of sequence, then that produces constant “wear and tear.”
Imagine a washing machine that has an unbalanced load of heavy, wet laundry. Instead of just quietly spinning the wet laundry and drying it, a machine with an unbalanced load will waste a lot of energy. It will rock back and forth. It will make noise. It will make slightly more heat than if the load was not unbalanced.
Why all the inefficiency? Because the washing machine is not intelligent and does not slightly alter the speed of the spin to avoid an imbalance. How does the load get unbalanced? Because the washing machine does not correct the speed of it’s rotation to allow for imbalances to naturally balance out. The imbalance starts small and then, because of no alteration to the speed, the imbalance grows and can eventually cause the machine to rock and lurch and thud. In some cases, the laundry in a washing machine will get so unbalanced that the washing machine suddenly stops.
So, the mechanisms for controlling the timing of the contractions in a heart muscle are much more intelligent and self-correcting than what we would find in a washing machine. However, for any creature that keeps a big elevation difference between their head and the rest of their bodies (like a giraffe), it is very important to keep the timing synchronized in regard to things like the electrical signals for contracting the muscle fibers of the chambers of the heart.
Are there ways to throw off biological timing minutely? Yes.
Are there ways to promote synchronicity within an organism (even if it spends a lot of time at high elevations or is unusually tall for its species)? Yes.
What are other examples of timing issues in an organism? The short answer is “illness.” That includes all forms of neuro-degenerative disease, poor quality of sleep, auto-immune disorders, type 2 diabetes, mitochrondial dysfunctions (like multiple sclerosis), systemic inflammation (including fibromyalgia), and even what is generally known as “stress.” In other words, all of those effects can be produced simply through bad timing at the quantum level (by having no ability to correct for the different speeds of the movement of light in different parts of the body). When the timing issue is corrected (similar to when the load of laundry in the unbalanced washing machine is manually balanced by hand), then the effect is no longer produced. The effect discontinues.
All of that was an introduction to the next article (which inspired my comments above). The article contains a few transcription errors and lots of science jargon, but I highly recommend it for “ultra-nerds” like me. For everyone else, you are welcome to contact me for recommendations on how to use these insights to improve your health.
AK wrote to me that: “I am interested in the new way of looking at detox–do you have other texts about this? Very interesting perspective!”
There is no single source that I recommend for learning about detoxification. Most of my learning came “organically,” like from experience, deduction, casual conversations, and Internet research. As an example, I used to think of parasites as “all bad” and never symbiotic, then I was told about “helminthic therapy:” https://jrfibonacci.wordpress.com/2013/12/08/making-peace-with-demonic-possession-by-symbiotic-parasites/
Authors like Wim Hof and Dr Jack Kruse detail various methods for promoting immune functionality though. Wim is big in to cold exposure and controlled breathing (as in the “inner heat” mediations of the Tibetan Buddhist lamas or yogis).
He has some world records relating to health and he has a famous “Ted talk” video.
Dr. Kruse is a bit harder to follow because he uses a lot of biochemistry jargon. He is big in to cold as well. What he focuses on that Wim does not (that I know of) is light and diet. He uses red lights and infrared lights for healing, plus UV for correcting the hormones and circadian rhythms.
Dr. Kruse was an oral surgeon who then became a brain surgeon, so he has a lot of clinical experience (including his own experimentation on himself). I wrote the preface to his second book.
His orientation to “detox” seems to me to be “just promote the functioning of the cells really well and detoxification will take care of itself.”
His dietary recommendations are to eat foods that are high in DHA (in particular) which usually also means high in iodine, since it is marine animals that are highest in both DHA and bio-available forms of iodine. He connects that kind of diet to an increased ability to process common neurotoxins like mercury and aluminum. Unlike people who are extremely concerned about mercury fillings, he says “correct your cellular function and you won’t need to be so worried about mercury poisoning.”
Finally, I literally forgot to mention this next thing until I went to use some this morning…. I actually can give you access to an unusual product which I used to hydrate myself:
Notice the difference in the LEAVES of the rose on the right:
Those 3 roses were from the same bunch and had been sitting in vases for 5 days, but the rose on the right was in water that has been “treated” (I think by using lasers) to make it FAR more bio-available to get inside of cells and cellular mechanisms (not just to irrigate the exterior of cells).
For slightly more info, click here: https://jrfibonacci.wordpress.com/2014/08/13/which-rose-is-in-the-water-engineered-for-hydration/
If interested, contact me (by leaving a comment or however else you know how to do).
My notes (on which the video lecture is based):
When do people have an issue with certain emotions that they label as negative? For a person who has been trained to inhibit the social display of certain emotions (out of terror of social punishment), then there will be an anxiety about showing certain emotions.
Instead of relating to fear as a motivating force to use caution and assess risk and then avoid any actual dangers, some people relate to fear as socially shameful. They don’t want other people to know when they are afraid and so they don’t want people around them to display fear (because that might resonate with them and trigger a surfacing of their own suppressed insecurity). They fear a social recognition of their fear. They are paranoid and anxious, but attempt to hide it.
Instead of relating to disappointment as a motivating force to assess the purpose of one’s own actions and then to assess the effectiveness of one’s own methods and producing those results and then perhaps updating one’s methods, some people also relate to disappointment as shameful. They don’t want other people to know when they are disappointed and they don’t want people around them to be disappointed, so they attempt to protect them from disappointment.
Why? They do not want to be punished for disappointing others and, once again, they don’t want displays of disappointment in their midst because that could resonate with their own buried disappointment, causing their own disappointment to surge to the surface. They fear a social recognition of their disappointment. They are paranoid and anxious, but attempt to hide it.
Instead of relating to anger as a motivating force to recognize one’s own interests and boundaries, finally, people may relate to anger as shameful or negative or disruptive. Anger, just like fear and disappointment, can certainly be disruptive. That is what it is for, right? When someone is ashamed of anger, they do not want to draw attention to themselves and become targets of social bullies who seek to discourage anger with punishment, through guilt trips and ridicule and harassment and of course the organized violence of armed soldiers, as in gangsters, police, armies, and other operations for governing humans through coercion.
Systems for social conditioning conduct rituals to promote shame and compliance in their targeted population of potential human resources (and to minimize or eliminate disruption to the rituals of social programming). In other words, they want to operate their systems for governing humans with the maximum amount of efficiency.
considering the military capacity of various systems that govern humans through coercion, we can respect the intelligence and appropriateness of the ability to inhibit the display of socially targeted emotions such as fear, disappointment, and anger.
We can also respect the rare case of people who seem to us to be safe as witnesses of our full range of emotions. Because of their demonstrations of discretion and perceptiveness and gentleness and communication with others, we made confide in them with comfort and an open trust. For many people, the distress of their paranoia and anxiety will result in them experiencing increased repulsion in regard to communicating with those that they see as unsafe or immature. In contrast, the magnetic appeal of those who demonstrate maturity and trustworthiness maybe, at least temporarily, so disruptive to their normal patterns of inhibiting their own emotions that they recognize their own internal instability and then have a new challenge of finding an appropriate pace for their interactions with the person or people that they find distinctively mature and trustworthy in regard to revealing their own tangles of emotion.
They may wish to drop everything to devote themselves to interacting with that person or those people. They may resist the magnetic attraction that they experience (like resisting by distracting themselves with old familiar habits of socializing and internal dialogue to generate justifications for any emotions that they experience as frighteningly disruptive). They may make their own practices of paranoia and anxiety all the more simple, ironic, and obvious (which serves to help them see it for themselves for what it is, similar to a snake gradually shedding a layer of skin).
You are about to be asked a few simple questions. In fact, to make it as simple as possible, how about the exact same question 5 times? Then, we will explore the size of the advantage that is available from simplicity.
Next, of the 3 statements below, which one is the most simple and which ones are the most complex?
A) The sun radiates the earth with heat.
B) Well, okay, maybe the sun radiates the earth with heat, yes, but the sun does it in the wrong way because sometimes the sun can cause sunburn, which should not exist because I personally do not like to experience sunburn and therefore the sun is an evil villain which we need to prevent from gaining power over us and ruining everything.
C) No, actually, the sun provides the earth with salvation by protecting the earth from the shadows which are attacking the earth with cold and darkness, causing hysteria and panic and antagonism among people.
Next, of the 3 statements below, which one is the most simple and which ones are the most complex?
A) Sometimes when people have dry skin on a certain part of their body, they will put cream on that part of their body to moisturize the skin.
B) The fact that we can find cream in areas where the skin is dry is irrefutable scientific proof that cream causes dryness, therefore, in order to prevent dry skin, it is essential that we make sure that no one ever puts cream on their skin (and certainly does not eat any cream). Also, it is impossible to catch the disease of dry skin if I am vaccinated against cream, so therefore I want everyone around me to be vaccinated against cream so that my vaccinations will protect me from cream and the dryness that it causes.
C) That is clearly ridiculous. The only way for people to have moisturized skin is for everyone to cover their bodies in cream twice every day so that no one ever catches the disease of dry skin from someone else.
Next, of the 3 statements below, which one is the most simple and which ones are the most complex?
A) The bodies of lots of animals have an important organ called a liver that produces an important nutrient (with the chemical structure shown above) that can repair and rebuild damaged tissue.
B) One time, this one really expert researcher noticed that there can be a lot of that so-called “important nutrient” in the areas of the body where there is damaged tissue. So, according to that expert and the pharmaceutical companies that sponsored that very independent research, the presence of that nutrient (cholesterol) near damaged tissue is irrefutable scientific proof (and therefore does not need to be verified by actual tests because I already tested the truth of that idea by writing down that answer on a test in 5th grade and receiving credit for that answer as the only correct one). Therefore, it has been tested by my 5th grade science teacher that cholesterol is the only thing that has ever damaged tissue and therefore obviously people should always completely avoid eating cholesterol. Of course, in extreme cases, people also should attack their liver with expensive statin medications so that their liver can no longer be possessed by the demon of cholesterol which is attacking them and killing them from the inside and eating them away and it is all very, very scary and sad and it should not be like that, so it sure is a good thing that we have smart pharmaceutical companies to protect us from evil, stupid liver organs that make suicidal poison because those livers clearly hate us for our freedom.
C) Really? Seriously? That is like you know the most hysterical thing I have ever heard, right? Here is the truth about cholesterol. It is only natural for livers to make cholesterol! However, it is horrible to eat anything with cholesterol in it (such as cream) because that would be disgusting and immoral and spiritually impure and the healthiest people, like me, are obviously those who avoid hysteria and paranoia by never ever eating any animal products from animals that have a liver that manufactures cholesterol, especially dairy from cows because it is unnatural for mammals like humans to consume dairy products (unless the infant’s mother is breast-feeding the infant in private so that no one can see the disgusting nipples of these naked infants that are ruining everything these days with their ignorant naïveté and hysterical paranoia).
C) Governments should definitely take money from the general public to temporarily redirect toward that particular market of real estate because I borrowed lots of money for high-risk real estate speculation and I do not like the huge losses that my actions produced (in fact, I was not just disappointed but actually terrified and embarrassed about my terror), so now I want governments to do what they obviously should, which is to increase demand for real estate and raise prices so that my past actions will produce better results through government intervention to reward everyone who took the actions that I took because I have compassion for the disabled veterans (or whoever) who deserve a massive subsidy that incidentally will greatly benefit me personally. Also, the temporary bail-out should be made in to a permanent subsidy because otherwise the benefits to me will discontinue… I mean because we need to make more disabled veterans every year in order to justify a permanent subsidy to the most deserving people of them all. The government should make things better for me (I mean, for disabled veterans who really need it and deserve it) because I do not want to change my actions.
Next, of the 3 statements below, which one is the most simple and which ones are the most complex?
A) Governments regulate or limit economic growth by creating disincentives, such as penalizing certain activities with taxes or even criminalizing certain activities.
B) Sure they do, but they should not do that at all because it is always a bad thing.
C) Sure they do, but they should do that even more because it is always a good thing. By the way, we raised your tax rate because we need to spend more of the money that you recently earned for us.
So, there was the same question 5 times. Was it easy for you to see the contrast between simplicity and complexity in all 5 items?
Now, what exactly is the size of the simple advantage?
First, when we understand the simplicity of things, then other people’s confusion will not confuse us. When other people call their confusions “the truth,” we will at least recognize that their “truth” is a tangle of complex presumptions that might not be entirely accurate (or even relevant to us).
When other people are stressed or confused, they can make statements that are based on complex presumptions. In fact, the more hysterically passionate that someone is about their “truths,” then the more likely it is that they are confusing their confusion for “the truth.” By understanding the simplicity of things, we can also recognize the kinds of presumptions that are behind their actions (including the social activity of how they are communicating).
So, what people do say can point to what they are not saying out loud, but are thinking. However, the best way to find out what someone is thinking might be to directly ask or, instead, might be to test them. In fact, testing someone may be a more direct way to identify what they are really thinking than to just ask them. They may not be aware of their own presumptions (since many people confuse mere presumptions for actual established realities). They may even be embarrassed about their presumptiveness and their confusions, so they attempt to hide it from others and even to hide it from themselves.
When people are tangled up in unexamined presumptions and embarrassing confusions, it is possible for someone else to rapidly identify simple points of clear agreement (no controversy). A person who is clear about what is simple (if they wish to take the time to do so) can even help others to get untangled from complex webs of presumptions.
It is one thing to recognize simplicity and a distinct thing to be able to communicate it. Further, to communicate simplicity to someone who is tangled up in confused complications can be… less simple than when interacting with someone who is free of confusing presumptions. However, sometimes, like in important relationships, it can be attractive to find the simplicity that can quickly untangle complex issues and emotions.
So, what is the exact size of the simple advantage? Absolutely every advantage that is available to you will be easier to get when you are using the advantage of simplicity.
Besides simplifying interactions between two or more people, are there other massive benefits available, like for investors who recognize the simplicity of things (or who at least partner with experts who respect the simple fundamentals)? Sure! Also, simplicity can contribute to much more effective (and much less expensive) practices for promoting physical health as well as emotional maturity, healthy communication, and healthy relationships.
The stability program
There are many kinds of stability (and many kinds of change). What kind of stability is most important to you now?
a) financial stability
b) emotional stability
c) political stability
d) physical stability
What is the relationship between these different forms of stability? For instance, when there is a sudden political instability all around one or more people, can that effect emotional stability or even financial stability?
Consider this image with 5 squares. Because the two on the end are so stable (flat), we could imagine that all 5 could be supported by the stability of just the 2 on the ends. However, what would happen to the overall stability of the group if the space between them suddenly increased?
In the top image, each one supports the next because they are all close. In the next image, the instability of the middle 3 is not supported by the 2 on the end.
The 2 blocks next to the ends are unsupported and unbalanced. So, they would immediately be “stabilized” by gravity, right? In other words, they would fall. Without other blocks to keep them raised at an unbalanced angle, they would immediately drop.
Of the 5 squares above, 3 are balanced and 2 are not. Here are the 3 that are balanced:
Balance is distinct from stability. The 2 on the end are stable and balanced. The 1 in the middle is balanced, but would be easily thrown out of balance. It is not stable. It is easily destabilized. It is merely balanced.
Earlier, I asked about a few different types of stability and which is most important to you right now. Then, I presented the issue of relationships between different kinds of stability. Soon, we will connect these issues in a way that may be unfamiliar to you and which may provide you valuable insights for promoting the kind of stability that is most valuable to you now.
Next, I will broadly classify two main types of stability: personal stability and social stability. Social stability is anything that is out of the immediate influence of a particular person, while personal stability is specific to an individual and can be easily influenced by that person.
With all forms of stability, we can observe a cycle. Within the cycle, there is a range of patterns from unstable to stable.
First, there can be a stabilizing of a particular pattern. Eventually, that pattern may stabilize to the point that we can call it stable. Then, whenever there is a stable pattern, it inevitably will destabilize. In some cases, there may be a “total destabilization” leading to such a significant decrease in predictability that observers might say “there has been a collapse in to disorder or chaos.”
When there is a shift in social stability (either a destabilizing of an old pattern or the stabilizing of a new one), then individuals must adapt. The faster and better that individuals adapt, the better results they experience.
One form of social stability is political stability. We are leaving out issues like unstable weather patterns or unstable climate. (Briefly, there are “higher order” patterns which can suddenly alter social patterns and of course the patterns of many individuals all at once.) However, let’s focus on political instability for a moment.
Many people reading this will not be very familiar with the history of Cuba, which might allow for it to be a nice example, since most people will not even really care about the details presented here. As we continue, simply consider the possible consequences of sudden political instability on personal stability.
As a reminder, Cuba is an island near the US state of Florida. In Cuba, there were a series of political upheavals in the 20th century. After the US invaded in 1898, the US Navy established a permanent military base and prisoner-of-war camp there (at Guantanamo Bay in Eastern Cuba) which the US has operated for over a century. In 1933, the political order in Cuba was once again destabilizing and so US President Franklin Roosevelt sent one of his State Department envoys to Cuba, which ultimately led to the political ascension of the military leader Batista. When Batista’s second campaign for the Presidency of Cuba was crumbling in 1952, he canceled the elections, staged a military coup, and began operations as overt military dictator (rather than covertly running things from behind the scenes, like he had in the late 1930s). That was followed by the Communist Revolution in 1959, and then, a few years later, by another invasion of Cuba organized by the US.
So, if we recall all of that political instability, we can imagine that most of the people in the midst of all of that sudden change experienced some periods of emotional stress. In fact, with the various foreign invasions, political assassinations, and campaigns of revolutionary violence, the physical health of a lot of the population was repeatedly threatened (at least).
In relation to financial stability, an extreme case is that of mafia members in Cuba, who experienced wide swings in financial stability. The success of Castro in 1959 led to an almost total collapse of the US mafia’s organized crime activity in Cuba. Prior to that, the US mafia had established a relationship of privileged favoritism with Batista’s regime. While some of the mafia operations may have been officially legal, they created a monopoly not only on hotels and casinos, but on brothels and the smuggling of illegal drugs.
The government of Batista had protected the mafia operations (and probably received generous bribes to sustain the privileges of the US mafia leaders). That all ended rather suddenly with the rise of Castro. Castro not only ended many mafia business operations, but nationalized (seized) other legal businesses that had been owned by US investors.
Naturally, the loss of dominance in Cuba did not please the US mafia leaders. With their allies in the CIA and beyond, certain “special interests” in the US made war on Cuba in a variety of ways: assassination attempts, industrial sabotage targeting railways and factories, the use of chemical warfare against agricultural workers in Cuba, and of course the overt invasion of the Bay of Pigs in 1961.
So, with all of those above examples in mind to add reality to the following question, would you agree that political instability can effect personal stability? For many people, just reviewing a few superficial details can trigger an exposure of underlying emotional instability. Note again that a temporary balance (like a cube that is barely balanced on one of it’s corners) is very distinct from actual stability (like a cube that is resting flat).
For many people, it could reveal significant emotional instability for them to simply read the US government’s own reports on the relationships between the CIA, the mafia, and the various assassination attempts (successful or failed) involving Fidel Castro, JFK, and other leading members of the Kennedy clan. Many people are terrified about government-sponsored violence, but are ashamed of their terror and so they attempt to avoid any social exposure of it.
They may hysterically dismiss claims that disturb their easily destabilized emotional state. They may passionately condemn a few instances of government-sponsored violence and then ignore all others entirely. They may attempt to relieve their panic by repeating slogans about how governments should be or should not be (rather than calmly respecting the observable range of how governments actually can be). They may distract themselves with reform campaigns or campaigns to “urgently wake up the common people.”
Again, they may be operating from distress and panic. Their reform campaigns might occasionally be successful and might even relieve distress, at least temporarily. That is not the point of interest in this discussion. I simply note that, for some people, the mere mention of minor political controversies (or minor religious controversies) can trigger massive eruptions of emotional distress.
Note also that I am referencing so far political events which are at least 50 years in the past. Nevertheless, intense emotional eruptions can be triggered for some people by discussing events that may be even hundreds of years in the past.
Who is most likely to be triggered by the references above? Cubans and Cuban-Americans might be expected to have the strongest reactions to details about mid-20th century Cuban political instability. In contrast, certain members of the groups that perform political violence, like the CIA or the mafia, might be even more familiar with the actual events, though with little or no emotional reaction to any particular version of events.
Some people are extremely sensitive to other people’s perceptions about them (and the possible “moral superiority” of their favorite political factions). In contrast, some people are extremely stable emotionally and, in regard to revealing how much they know about anything that they know might be disturbing or unsettling to average commoners, may be cautious or even deceptive (misleading).
So, I began with references that were over 50 years old and were not even of particular interest to most people who might be reading this. Now, for those who were upset by what I have mentioned so far, feel free to contact me for a gentler immersion in to the subject or simply take a break and settle down before continuing, if you choose to do so at all.
That was all a “warm-up.” Are you ready to discuss the actual trend of social patterns in the US currently? Are you open to greater financial stability as there is a massive social shift in the balance of focus toward actual cash as distinct from credit (the potential to borrow cash)? Are you at least curious about greater emotional stability (and untangling any sources of emotional imbalance)? Are you interested in the subject of personal health including physical balance?
The single take-away point of this entire introduction is this: changes in social stability can effect personal stability. When there is an emerging acceleration in a social trend, which may be the reason that I am writing and sharing this, then there can be a rapid “sorting” of people in to two very distinct groups: those who target mere temporary balance and those who target actual stability. Again, when a set of blocks are stacked closely together, it is possible for some blocks to be “locked” in place without having any “internal” stability. Their apparent stability is merely a result of social conditions.
Last, are you familiar with the game called “musical chairs?” When the music suddenly stops, anyone who is not at a point of safety may suddenly be part of a big panicked competition for a single empty chair.
The two squares on the ends are “internally” stable. The rest are not.
What if the music stops and never begins again? In the game of musical chairs, everyone participating basically has an equal chance of winning. In real life, there might be patterns of systematic privilege, right?
What if you could know in advance when the music was about to stop? Also, what if the stakes were much higher than in a childhood game? What if your personal stability and security could suddenly increase (or decrease)? What if the stability and security of your family could dramatically increase (or decrease)?
What if you could quickly get a precise assessment of your own balance and stability (regarding a variety of important issues)? What if you could get expert assistance at increasing your balance and overall stability? If you are interested in benefiting from live interactions with a dedicated ally, contact me now.
I copied this article (of mine) from here (and some images are missing, but if someone gives me a reason to find them or recreate them, I could):
First, who is the mainstream? Do you think primarily in terms centered on your home nation, the currency of that single nation, and markets specific to that nation? If you answered yes to all of these, then you are definitely among those I mean by “mainstream.” Further, if you think that the 90+ year deterioration of the US currency is a challenge you can address in your life simply by purchasing some gold or silver, this article is also for you, even if you do not think of yourself as “mainstream.” (In fact, those commodity-oriented folks might skip to the article linked here.)
If you think of “the New Economy” as the eternal global dominance of the United States, in which US real estate is the best, US stock markets are the best, US currency is the best, and everything US is the best because the US is the best, then this article is especially for you. Of course, you will need to be willing to recognize that there is life beyond the borders of the “Yankees.”
By looking “across the border,” you may find evidence that the US (or a specific US market) is indeed the best. Or, you may find that the US is not the best in everything- at least not always.
If so, finding an opportunity that is better than the ones you previously recognized may be something you would like to foster. You may also witness a change in perception about certain US markets or the US itself. Since my perceptions have changed over the years, I suggest that there are some common (mainstream) misperceptions or assumptions that may not fit our best interests. Perhaps we can “rescue” ourselves from any such misperceptions simply by carefully exploring a bit of evidence.
I’m going to get right to the primary point now. The mainstream- and not just in the US apparently- is in danger. The extent of this danger is in proportion to the complacency or numbness of the mainstream. Precisely because the mainstream does not perceive the situation realistically, the situation is dangerous for them.
The same circumstances might be an immense opportunity. If clearly witnessed and understood, reality is like a partner. We either collaborate with reality or we neglect to do so (and then perhaps complain about how uncooperative reality has been towards us).
Those who are responsible- as in responsive- accept any confusion as a sign to simplify, to clarify. Many people I know seem confused, especially about financial matters. Most people I know do not seem to me to understand the primary economic developments of their lifetimes in the US much less elsewhere. Some do not even seem interested.
If you know that you do not understand the economic changes of the last several generations, but are interested in first understanding and then responsiveness- even prudence and relevance- than please continue. I will address some very simple principles below, though here’s a little “pop quiz” to start. If you don’t know the answers to these, but would like to, my most recent prior publication answers most of these and it is linked at the conclusion of this article. To me, the questions below are not in themselves so important, but studying the past can be a valuable tool in preparing for the future, which may be rather important to you.
What is the origin of the phrase “that used to be a lot of money?” What is a financial instrument? What is the difference between tangibles and financial instruments? What is a financial market? In major international and national financial markets, what has changed in recent years? Why do price trends begin and why do they end? What does “price” measure?
When there was a major national shift in Japan in the 1990s (and still ongoing), why- and what consequences did this have in the US, especially for the high tech industry, which had been booming in Japan through the 1980s? When there was major national economic shifting in the US in the 1970s, why?
When there was a major international shift around the early 1930s, why- and what consequences did this have in the US? When there was a major international shift around the late 1850s, as in the late 1830s, why- and what consequences did those have in the US? When, in the 1780s, there was a major divergence from a 60+ year trend, why- and what effect did this have on the recently independent former British colonies in “the new world?”
Divergence and Convergence
Actually, I’m not going to focus on macro-economics of those prior centuries, but I will reference “timeless” principles and related patterns that have endured for many centuries or more. For instance, a “megatrend” that goes back to at least the 1780s may be reversing now. What effect could this have on less established trends, like the 90+ year deterioration of the market value of the US currency?
If the currency trend is merely a “branch” or “ripple” or “domino” in the larger trend, then the end or reversal of the parent would be the end or reversal of the subsidiary. On the other hand, when dealing with multi-century trends, a trend of a single century might be like “undertow,” like an emerging challenge to the prior trend . Sometimes the inertia of these counter-balancing patterns can resolve in a rather sudden shift.
Again, I consider recent developments to be very dangerous for the trend-following mainstream. By recent developments, I mean not only things like 90+ year divergences from much longer trends, but changes within the last 7 years or potentials.
I am also concerned about the possible intersections of trendlines that have not yet occurred, but are predictable- at least to some extent. Often, when two trends are converging on a critical limit, one ends. An example of this would be within a single market; when a certain short-term trend diverges from a long-term trend, one or the other must prevail.
For instance, consider 1932 after a new 3-year trend in the US stock market. Either the 90% decline in stock prices would continue or the prior long-term trend of rising stock prices would resume.
Or, consider the biggest financial news of 1999. After centuries of a wide variety of multi-century trends in the various currencies of Europe, those currencies were practically retired and superseded by the Euro. This may seem like a breach of trend to a German or a Spaniard, but that “retiring” of several national currencies actually corresponds to the multi-millenia trend of the centralizing of banking.
Similarly, with the NAFTA bloc countries fostering regional conformity, the “Amero” currency project of [those DBA] the IMF and associates seems like a natural culmination, yes? Was it so long ago that 13 independent governments united under uniform weights and measures as the USA? Are we so far away from regional currencies such as Euro, Amero and Pacifico uniting into a single international currency? Indeed, are not the Federal Reserve’s “US Dollar” instruments already a virtual global currency, especially with their prominence in internet commerce?
Of course, how much further could banking centralize after a global unit of accounting? Every trend that begins… ends- whether that takes centuries or hours.
Some will say of a trend (or it’s ending): “that is very good” or “this is very bad.” I will simply say “trend” or “countertrend,” and perhaps “poised to reverse” or “solid and sustainable.”
The importance of confidence
(“sentiment”) and discounting
I make personal selections based on my perception of circumstances and also based on a particular purpose or value. While my personal values (and purposes) will be somewhat evident throughout this writing, the primary target is simply to offer perspective on circumstances common to you and I, within the US or without.
If there is a single lesson that I would present with this piece, it is the relationship of changes of trend to confidence. Most simply, public confidence or investor confidence tends to extend beyond reversals of trend. In other words, if you have a choice between following the mainstream’s confidence in the market or the market itself, choose the market.
But there is more and it is also quite simple. If you want the best value- the very best investment- would you look among the investments garnering the most confidence from the mainstream… or would you look among what they are generally discounting? Remember, discounts may be very high quality and very useful- but the mainstream is just reducing their demand for that investment for a while.
Consider that you can generally get firewood in summer at a discount compared to winter. This is no reflection whatsoever on the utility of the firewood. In a few months, there is a reasonable possibility that the same people who are selling it to you in the summer might then buy it back for a higher price. The demand changes seasonally, which then effects reserve supplies, but the firewood itself may be exactly the same in terms of heating capacity.
So, would you prefer to invest in trends that may already be over or in trends that may be about to begin? Of course, some of each might be appropriate, but if we know that the confidence and buying activity of the mainstream follows consistent patterns and are thus relatively predictable, then we can invest ahead of trend, instead of only following trend.
Forecasting reversals of trend
Let’s consider that we have identified a pattern in confidence (sentiment): when confidence is very high, the possibility of a sudden or prolonged loss of confidence is highest, and when confidence is very low, the possibility of a sudden or prolonged increase in confidence is highest. These reversals in confidence correspond to reversals of trends in buying and selling. When confidence is rising, folks tend to buy more- which generally pushes prices higher. When confidence is dropping, increased selling generally pushes prices down.
For instance, let’s consider the commodity silver. In the decades following 1979, silver prices declined about 90% in nominal dollar price (before adjusting for inflation). The market confidence in silver was near record lows several years ago.
In one of my first public forecasts a few years ago, I suggested to a small group that silver had enormous potential to rise from it’s price of $4.50. I forecast that silver would very likely continue to produce appealing returns even if purchased at $5.
A few months ago, when silver was rising but just a bit under $8, I saw that confidence in silver had reached rather high levels. In other words, most silver investors were discounting the possibility that silver would drop. I warned many people against buying silver when confidence was at such extremes.
Prices immediately dropped sharply by several percent, enough that many silver investors discounted the possibility that silver would resume it’s rally. That is one factor in my then returning to favor a rally in silver, which has recently approached $9 as already mentioned.
Now, after several years of rally in silver, how might we identify the longer-term potential of silver- looking only at confidence and price data? This perspective, by the way, is known as contrarian investing, that is, counter to the confidence of the mainstream.
One research method would be to look at the longer-term patterns in confidence and compare it to the longer-term patterns in prices. If the surge in confidence of the last few years seems to exceed the surge in price and volume, then we might speculate that there is over-confidence driving silver prices up and thus a long-term decline is likely. This would mean that the rally trend of the last few years might reverse- back to resuming the decline trend of the last few decades.
What would indicate a long-term change of trend in silver prices? If confidence levels fall below the prior lows in confidence while the prices are still higher than the prior lows in price, that would indicate capitulation or despair. That would mean that the potential for a rally was extremely discounted– and thus might be a very good risk. If, on the other hand, confidence in silver was now near the levels in 1979 when the dollar exchange rate for silver was nearly $50/oz, what would that mean?
If you want to know confidence levels in a wide variety of investments, checkwww.marketvane.net, www.sentimentrader.com and AAII. Note that different methods of measuring sentiment for the same investments will vary. The following data is compiled fromwww.investorsintelligence.com.
The light blue line is the dollar price of a broad stock index of the 500 biggest companies in the US. The yellow line is a confidence or sentiment rating concerning that stock index. What does this chart tell you?
The most obvious thing might be that this confidence rating is higher in 2003, 2004 , & 2005 than in prior years. This is despite the fact that the price of the stock index remains down considerably from prior years.
On a few occasions, sentiment has fallen to near 0 or neutral (the number of advisors reporting optimism equaling the number reporting pessimism about the broad US stock market). Look at spring ’01, fall ’01, fall ’02 and spring ’03. What happened next in each case?
I’ve added some thick white lines to highlight the reality that the periods of unusually low confidence were the periods followed by the biggest price rallies. The big surges in price followed brief drops in overall sentiment to neutral (.02 in the first and last ) or slightly pessimistic (-.09, -.15).
For the first three drops, confidence and prices got lower each time. Then, the confidence levels faltered before reaching .3, a key level in prior rallies. The price rally was the weakest yet off a low. Confidence had turned from generally optimistic to neutral. This of course, was the sign that there were enough folks discounting the possibility of a rally that there was enough pessimism to create the potential for a significant increase in confidence, which then produced a major rebound.
Next, despite the 46% percent decline in the dollar price of the broad US stock market, sentiment turned even more overwhelmingly confident. Considering that confidence in the US stock market has recently been far higher than when prices were much higher, what does that divergence mean?
Prices are significantly down over several years while confidence is significantly up. One might think this to be evidence that investors are discounting the possibility of a decline in stock prices- even despite a recent 46% decline of 2.5 years which barely brought confidence levels below neutral. Would you favor following the confidence ratings or the classic correlation suggesting that confidence surging high, far ahead of lagging prices, is a signal to sell?
The amazing fact is that confidence remained quite high even after such a decline- and then surged to even higher levels than before. This is a recipe for a major shift.
Another question for those who are still feeling optimistic about US stocks: if an unprecedented portion of investors (or advisors) are confident about stocks rising, where exactly is the next surge of investment into the stock market going to come from? Since those who invest are already overwhelmingly optimistic, the reality is that there may not be many pessimists left to convert to optimism. How can another rally develop… unless pessimists are converting to optimism and acting on that optimism by changing their market activity?
Remember, it is a trend of pessimists converting to optimism that produces years like 2003. Right now, there are many more optimists than pessimists and that means the potential for a decline is generally discounted and trading for a decline is thus a very reasonable risk.
Most mainstream investors are not familiar with how to benefit from declines in price, despite the prominence in recent years of bearish mutual funds like URPIX and BEARX. With moderate leverage such as 4:1 or 5:1 using ETFs, a 46% price change can produce some rather notable gains (and with much more flexibility than mutual funds).
Relax; the Professional Experts are extremely confident
So, if we clearly understand the basics of how confidence and pricing correlate, let’s move on to an even more clear indication of the present danger: the amazing confidence of a particular advisor. This content may not represent all mainstream advisors in general, yet the nature of the commentary is quite revealing about the consciousness of at least some elements of the mainstream who are so (blindly?) confident about US stocks and so forth.
It is rare that I see something that is so misleading. That may be because I generally ignore mainstream advisors. When I saw this, I thought: “that’s a great example of disinformation- an opportunity to have some fun at least.” My latest study is from a PhD investment advisor of a major Western US Banking Syndicate (which I will reveal for those send an email HERE.)
I find the following amusing, though it is also presented to reinforce the danger of what I call mainstream irrationality or denial. Then, I will expose even more about the reality of markets in recent years.
DO NOT WORRY- EVER
While I don’t recommend worry, I prefer recognizing what is most probable, then acting in accord with that. If the choices are responsibility and neglect, what would you choose?
Again, note that there is nothing distinctive about this forecaster (in my opinion). His comments may simply reflect the desperate logic common throughout the mainstream. But don’t let all my comments bias your interpretation of his words.
Briefly, he points to certain statistics as allegedly indicating the strength of markets. However, he admits that those are the same statistical patterns that preceded the economic contraction from 2000-2002 as measured in US Dollars.
Is such similarity proof of strength- or only proof that folks didn’t learn their lesson with the 46% drop in the dollar pricing of the US S&P 500 stock index? That little tap on the shoulder from the markets may be a followed by a few sharp slaps in the face to snap the mainstream out of their stupor (of socialist imperialist consumerism?).
Quick question: in early 2000, just before the first major 3 year global stock market decline (in dollar pricing) since 1929, didn’t “Professional Experts” almost universally agree that “everything is fine?” Why? Well, because of the “tremendous strength” in these same statistics, of course!Ah, now you are either sweating or laughing or both, right?
Here is some data cited in that piece. One page of it is linked here, where you can see the data charts I reference below. All of this data is for the US only, to the best of my knowledge. (“What do you mean for the US only? Are you saying there is life beyond the US?”)
1) Real Compensation rates (wage levels) are nearing the levels in 2000. So relax. Sure, every time this statistic has reached this level in the 35 years charted, it has dropped dramatically within a few years, but relax! Why? Relax because our accounts at the bank “credit laundering service” are insured by the Federal Government- which means that if anything unexpected happens, the American people will pay for it, not the banks!
2) Accountings of household net worth are at all-time highs, just like 2000. So relax- just like you did in 2000.
3) Total Employee figures are at all-time highs, like in 2000. Of course, if the US population has grown more than 3% over the last few years, which would not surprise me, then the employment RATE would be… down. So relax- just like you did in the early 1970s.
4) There is renewed growth in retail sales, again, just like in 2000. So relax- just like in 1929. In case you missed that: relax- just like in 1929.
5) Consumer Confidence- my favorite- is back up to “normal” levels. Well, it was up prior to that Professional Expert’s September 2005 publication. Here is updated data.
I’ll diverge briefly to note that I actually expect the “retail” holiday boom of the next few months to correspond to renewed confidence at a new bear market high- before reality sets in sharply. [This comment of mine was first published on November 12, 2005- along with almost all of this “DO NOT WORRY” section.] Another seasonally popular topic has been energy prices. Many folks have been afraid of high natural gas prices and such and I think that the recent 10% 1-day increase was an over-reaction (i.e. panic), not to be confused with the 600% steady increase in oil prices over the last 6-7 years.
What if both “over-reactions” and long-term changes are predictable? What if we can generally distinguish- in advance- between long-term changes and short-term excess in confidence (or pessimism)? Even if we do not recognize such distinctions in advance, merely being alert for such things may differentiate us from the mainstream as it is.
If nothing else, the one-day 10% leap in a relatively prominent market like natural gas shows that there is panic in our midst. However, the inertia of mainstream denial/imprudence has to be exhausted before capitulation and panic in primary markets like stocks, currency, or the speculator’s prize: real estate.
Of course, you should relax just as if it is now March 2000. Why? Because this Professional Expert insists the financial markets are booming… again (still):
Hmmm. Where to start?
Here’s something; were you expecting a “trendless” stock market? I wasn’t and I am not. This “trading range” of the last few years (in dollar pricing) is a normal, predictable counter-trend bounce (in dollar pricing) off the 3-year decline of 46% (in dollar pricing). As for the “trendless” stock market (and “recovery”), I imagine he hasn’t seen the stock chart below- adjusted by the market value of US Dollars. That “accounting” shows a rather solid decline in tangible purchasing power for stocks over the last several years.
I see he also just stated that “after mortgage yields have been higher for a period,” the consumer would be more “likely [to] FAIL.” Oh, you mean that the holders of Adjustable Rate Mortgages will default as rates rise? If that is what he is implying, I agree. But I don’t know if he even knows what he is saying….
He titles one piece “what do global stock markets know that bond markets don’t?” In other words, he notes a divergence, then picks one data set that fits his bias and dismisses the other, right? (AGAIN, THIS IS A REAL MAINSTREAM PUBLICATION- NOT A JOKE!) Sure, bond markets may be much bigger than stock markets, why not just dismiss bond markets anyway?
Otherwise, we’d need a headline like this: “what do stock market investors ASSUME that bond investors don’t?” Of course, that might not fit the interests of the publishers of his article, so who can blame him?
Next, he references Price to Earnings ratios, noting that they are far above historical norms, but lower than in 2000, so in this case, is it suddenly GOOD news that things are not as they were in 2000. Of course, he doesn’t emphasize that reduced excess is still excess. The somewhat reduced P:E ratio in US stocks (which means improved valuations as in more discounted) still have a long way to go down to reach normal levels.
Again, it’s not like these folks have any direct stake in the accuracy of their advice, right? Do they earn a decent percentage of your profits… or just commissions? (And, remember, their debt to you is FDIC-insured!)
Yes, the piece continues, world stocks markets are recovering, and some small markets are at all-time highs. Doesn’t that mean that there is more interest in developing markets than ever before- relative to major markets like US and UK and Japan? (The Nikkei is still down, hmmm, about 70% since it’s all time high in 1989. About 70% down reminds me of the US NASDAQ from 2000-2002 as well as the US S&P 500 over the last 6 years… in terms of tangible purchasing power- more on that later.)
Yes, borrowing is up. Now who would consider that a sign of strength? If you are thinking “a bank” (or “an employee of a bank”), you may be right.
Again, business lending is back up to near 2000 levels: a clear sign of positive things to come just like in 2000 and 1929, right? More borrowing is a sign of strength, huh? Maybe that is why your spouse keeps buying more and more things on credit- to put you deeper in debt… so you are financially stronger!
So, the mainstream advertisements and speculations are worth just as much today as they were in 2000. Do you understand what I am saying? Can you “handle the truth?” If not, that’s fine. Why get caught up in the flurry of worries?
Instead, repeat this constantly: “investors should be focusing away from such issues towards the many positive things… yet to occur.” That’s right- just focus exclusively on what is not actually happening.
And by the way, here is an emerging trend that is poised to explode soon: a big boom in a very specialized real estate market. (I tell you this because it is only fair to disclose the investments owned by the author of the above piece, right?) Your favorite Professional Expert has recently purchased some desert property and is selling holes in the sand… just the right size in which for you to stick your head.
I’ll let you draw your own conclusions. Here is one question that you may find relevant:
Consider that when there are 100 people in a locked room, and 90 are sitting down, how long will it take for 11 more people to sit down? Well, since there are only 10 other people, first someone who is already sitting will have to get up to make 11!
No, markets are not locked rooms, and if folks can afford to participate in a given trend, they can pile in even when sentiment percentage are in the 90s. But if there was a big surge in new investment, such things would be measured in volume trends (thus volume is basically the simplest sentiment indicator). If folks are piling in to buy, but in decreasing volume day after day, what does that mean? That may be a hint that the rally will be relatively short. This happened in US stocks around the end of November (though typical of holiday weeks).
So, before I end, let’s look at stock performance from a different perspective. Normally, folks look at stocks only in terms of the local currency. What if we look at US stocks in terms of Euro or Yen pricing? Will the chart look the same? Because currencies fluctuate in value, pricing an investment in a different currency could show a different pattern- some very different.
Therefore, I suggest to you that the mainstream pattern of looking at long-term investment charts in your local currency is not the most revealing choice. Indeed, charting the prices of an investment in terms of any currency is not the most revealing choice.
Those who price an investment in any the ratio of exchange for any single other investment are still using the same basic idea. In other words, all the charts like stocks in terms of gold or silver in terms of gold only illustrate the divergence of the different methods. They do not resolve the basic issue.
I have used dollar charts corrected by a basket of currency forex rates. That is a reasonable idea, but for long-term charts, this doesn’t get around the issue that all popular modern currencies are subject to wild fluctuations, like many currencies in the 1990s (in Mexico, Brazil, Russia, and across Asia), like the German DeutschMark in the mid-20th century, or like the 41% overnight devaluation of the US currency on January 31, 1934.
If you want to measure something’s actual real-world tangible purchasing power, why not use a basket of commodities? The US government uses a certain index of real goods to measure the US currency’s purchasing power. However, for traders concerned with long-term international trends, as well as interested in correcting for mainstream miscalculations, I note the CRB index.
According to www.crbtrader.com, the CRB or Commodity Research Bureau first published in New York City, USA on February 3, 1934 in response to the devaluation of the US Currency. The CRB Index has naturally been adjusted since then, including for the enormous emergence of a certain commodity called oil.
This commodity index is really an indicator of the value of the US currency. CRB simply measures how much the US currency can buy of various commodities, generally a fixed set of commodities of a certain weight. While prices all over the world of course may not match prices at the New York Board of Trade, I ask you to consider that the CRB is simply a tool made by investors for investors (measuring the actual behavior of huge numbers of investors in relation to the buying and selling of a wide range of major commodities).
So, in terms of something tangible like the CRB, how do stocks look? Again, this chart simply shows the relative performance of stocks to a wide range of standard commodities (instead of relative to the fluctuating US Dollar).
Simply, there has been no US stock rally for 2003-2005, but a rather consistent trendline of decline for nearly 6 years. Note that there isn’t much outside of the black trendline for the S & P 500 index of the 500 biggest publicly-traded US companies (blue) and the (green) global DJW index of a balanced group of international stocks. The Dow Jones World index may look so much like the S&P 500 because in the US is indeed a sizable concentration of all the wealth (or at least stock trading) in the world today.
So, what is the point of all this? If stocks were about to make a huge long-term rally, sentiment would be at a major low (which it is not). Neutral sentiment or slightly negative sentiment for a few days is not a major low. In other words, the vast majority of folks would have to be discounting stocks for there to be the significant possibility of a major long-term rally (like that of 1975-2000, for instance).
What about the “discounting” of October 2002? According to the CRB-adjusted chart to above, that was just another step in the middle of a very long stairway. Because the vast majority of investors may focus on dollar pricing and neglect to consider the tangible returns of their investments (like stocks), most got even more optimistic during the dollar pricing rally of 2003- setting things up for a severe panic in the near future.
Please be very clear on my implication. What you see on the chart above is not indication of a major panic by the mainstream, but only a catalyst for a shift in the very near future from complacency to capitulation (outright panic). When this panic is over, you won’t need a chart to tell you there was shift- even if you are a mainstream American. You will know when the vast majority of people have greatly reduced access to tangibles, commodities, real goods- which is already evident in Japan and many less developed places. People may have more access to hyperinflated units of fiat currency credit, but when you are hungry or cold, that is little consolation.
you know the Biblical and Constitutional principle of using fixed measures and weights, you will recognize that the US currency of the last 92 years is not it, as the CRB index specifically shows. Nevertheless, the US Currency is virtually unchallenged as the most popular investment in the world today, at least for the modern mainstream.
Below are two images of US currency from times past, a Federal Reserve Note from 1934 and US currency pre-Federal Reserve. Notice the difference between these two bills, then compare them to the ones that may be in your pocket. Do you notice any words on the below images that are not on your bills?
Here, I am not going to tell you any more on the good news as I see it, nor of the various adjustments that I consider appropriate at this time. I remind you that when the mainstreamdiscounts something, this may present an enormous opportunity. For investors in particular, I also remind you that you can profit from price declines in many ways, including of course buying (or keeping) a deflating currency. Of course, all trends that begin also end.
© 2005 J. R. Fibonacci
J. R. Fibonacci
Horizons Unlimited Investing
Snowflake, AZ USA
This was published here:
And also here: (where it is still hosted)
September 9th, 2005
What could those leading markets be? I know- you just read the subtitle- but let’s think in terms of time. What happened in 1999- you know, right before 2000?
Okay- most of the events in the sequence may be familiar. In the the 90s, a little tiny company called Microsoft got pretty big pretty fast, then some genius engineers there apparently couldn’t predict what would happen after 100 cycles of a two-digit numeric field. Some say the Y2K “bug” was a metaphor for the short-sightedness of the modern marketplace. others say it was a devious plot- maybe just to sell a new operating system called Windows ME. I prefer to think of it as some of both.
That means you could get about 500 barrels of crude oil for one share of everything in the NASDAQ- wildly approximating, but close enough for present purposes. Today, NASDAQ is priced at about 2000 (in dollars). From 5000 to 2000 is a drop of 60% or a factor of 3:5, leaving 2:5 as the remaining portion.
If we couldn’t get cheap oil in abundance, how important would the internet be? Or, think of it this way- if you think computing is a leading market, how leading would it be during a black out (a power outage as modeled for January 1, 2000)?
Sure, computing may have been the top-performer among emerging markets for a few decades, but if we modify the opening question to what is the single most important market in the world today- or the most important market in the last 100 years, would computing be on the short list? I suggest that the reason that e-bay has been so successful is not just the internet itself, but cheap transportation- which currently means cheap oil.
So, let’s be grateful for computing, but realize that your computer may have been designed on one continent, manufactured on another, assembled on a third, and shipped to you on a fourth. How many continents are there again?
Computing is in position to eventually become a dominant market, but not without a certain infrastructure of international trade- which again currently means oil. So, back to the sequence, when the Euro was introduced and oil trends reversed in 1999- were those developments the result of the Y2K bug or the high tech sector collapse of early 2000? Of course not. But when oil trends reversed- and the entire infrastructure of international trade shivered- could that have been a factor in the 76% drop in the NASDAQ from 2000-2002? Sure, as I trust you would agree.
So, let’s say you found some desperate geek that, even during a power failure, is willing to trade you your old computer for 200 gallons of gasoline. After all, maybe the geek has thousands of gallons of gasoline and really doesn’t need that much, but would really like to put a laptop in their “electronic age museum.”
Alright, so now you have 200 gallons of gasoline. However, fuel markets are dependent on physical infrastructure like roads (and automobiles, automotive parts, etc) as well as political infrastructure (wars and so forth). You decide that you think the political scene is getting unstable, so you only want 100 gallons of gasoline, enough to get out of the region in one truckload like in the “Beverly Hillbillies.”
Needing 100 gallons and having 200 means you have 100 gallons to spare- because where you are going, you won’t need any fuel- or it is really cheap and you can get much more there. So, here are your options- you can get a single ounce of gold or… enough food to feed your family very well for a week.
Of course, you go for the gold, because you know the old saying “worth its weight in oil.” Unfortunately, your family includes children AND old people. After you use about five gallons of fuel and these people start going CRAZY (and you are all in one vehicle, remember). Then, you realize that you are not really all that hungry for gold, but could go for some cheese (or whatever).
Okay- I know my presentation is a bit silly, but the point is this: there are two primary “markets”: food and shelter. EVERY other commodity is secondary- even fuel and yes even plastic computers. When there is a food shortage, people will even sell GASOLINE for food.
I know it sounds crazy, but trust me on this- or just ask a four-year old if they will trade you their lunch for… a gallon of refined black gold. Unless the kid has at least two lunches (one to spare), there will be no trade, right?
If there is merely a shortage of fuel- not a total absence, then people might pay $6 a gallon obviously for it. Some folks may think “wow, that sure is a lot to pay.” However, the people who paid that much apparently thought, “wow, I am sure glad this was only a shortage of fuel, because I got an entire gallon of gas- didn’t have to abandon my vehicle and walk home- and only had to give up a few pieces of paper.”
Paper (or electronic currency) is always a “derivative” market. There is little inherent value in the coin or the bill or the paper check or the plastic card, but the contract or human agreement behind the currency is where it derives it’s purchasing power.
My favorite example of the predictability of real estate markets is not the huge drops in the 30s across the modern world or in the 90s in Japan and Russia, but this: the baby boom. Briefly, a bunch of soldiers stopped hanging out with each other exchanging gunfire and went home to their mates and soon there was a big surge in pregnancies. Even folks who were civilians celebrated the decrease in danger by intitiating more pregnancies.
Well, to make a long story short, about twenty or so years later, there were a bunch of young folks ready to move out of their parent’s homes- much more than there had been in previous years. Could that effect real estate prices?
Most developers did not study demographics, but some who did realized that more twenty-somethings meant more demand in the housing sector. They were right- many young adults did indeed move out of their parents homes and start their own households- many more than in prior years. Why? You’e right- because there were just so many more of these young adults to move out than there were in prior years. The baby boom became the twenty-somethings boom.
As many know, the “baby boom” was not just a few years. The real estate surge actually grew as these folks advanced in the job market and soon started purchasing homes in large numbers- again much more first-time homebuyers (and more total homebuyers) than in any prior year- for year after year after year.
So, after a while, many folks noticed this change in real estate and thought- wow real estate is doing so well- look at these prices- doubled already since 1970! Most of these folks didn’t predict the surge, they didn’t understand the surge, and they didn’t know when it was likely to end. They were speculators, and in the worst sense of the word- maybe a better word would be gamblers.
So, they noticed the trend eventually and then starting following the trend. Some did very well… for a few years.
People all over the world increasingly valued this new commodity called oil. Texas was the center of the oil industry. The US, by drilling and refining this black gold and then selling it to people who really valued it- more than a load of wood or ounce of gold or paper currencies, became a superpower.
A barrel of oil sold for $2 in 1970 (not a gallon of fuel, but a barrel of oil). It sold for less than that previously- however, the US sold a LOT of it, so total sales brought the US wealth like it had never before experienced.
Since the US was about the only place to buy oil, everyone else had to convert their currency (or wood or gold, etc) to the US currency, dollars, in order to get oil. So, even though a certain business operation called the Federal Reserve Bank had inflated the dollar dramatically from 1913 to 1970 (especially 1934), this “derivatives contract” called “dollar” was still being exchanged for commodities of real value- even though the “Fed” was creating more at the stroke of a keyboard (they didn’t even have to roll the presses).
By the way, a barrel of oil costs $70 now. Yes, that is a ratio of 35:1 (1:35).
But the point is that even AFTER 1934, people were still using dollars all over the world. There was a HUGE underlying weakness in the fundamentals of the dollar- which was soon revealed.
Here it is in a different order. Some people knew oil was important- including some in Texas. They saw that American purchasers were increasing their consumption of oil faster than Texans were increasing their production of oil- much as the Texans were trying I am sure. The obvious resolution of that- given that many other places were discovering oil deposits and building refineries- was that the US would eventually import oil- after decades of being THE oil monopoly- well almost.
So, while Texas still did rather well as the continuing center of the global oil industry, there was not so much foreign interest in the dollar- because the US wasn’t exporting much anymore. Indeed, some of these other countries strangely did not accept US dollars for oil- or they did not HAVE TO at least- because they had their own currencies.
The dollar’s monopoly on the global oil market shifted from an economic imperative to a political challenge. Many of these foreignors stopped selling their currencies for dollars- how dare they!? Of course, Texans wouldn’t sell the foreignors oil because Americans were willing to pay more than foreignors- so much more that they imported oil from the foreign sources. This was easy because after decades of having a near monopoly on the global oil industry, Americans in general were pretty wealthy- for a while.
American consumers changed the US from the major Oil Producing and Exporting Country to the biggest importer of oil in the world- in just a few years. That single factor, the excess consumption of oil by Americans, may be all that happened to the dollar in the 70s. Sure, there had been underlying weakening since 1913, but here was a predictable trigger.
Of course, Nixon was a convenient guy to blame for the recession of the early 70s and the “demonetization” of the Federal Reserve’s “US Dollar” Note (Promissory Credit), but it actually wasn’t his complicity with his campaign aide (see “Watergate”) that made the difference in the economy. Many Americans were just mad that things had changed and upset that they had been surprised- so why not try a new “figurehead” (leader?)?
Again, the US’s shift from net exporter to net importer of oil may have been a factor. The folks who forecast WHEN the change would occur also forecast the effects- the devaluation (hyper-inflation) of the dollar, the stock market contraction (crash) of the early 70s, and even the predictable political reactions of the Americans; they blamed the very folks who were allowing them to consume more oil than they produced: the NEW Oil Producing and Exporting Countries (“OPEC”).
The pilot episodes of the “Beverly Arabs” were not well received by American audiences. Okay- I am just joking, but the BELIEFS of most Americans are just as ludicrous to me as the idea of such a show might be to you. The Americans found some Arabs to blame, in particular one in Iran, then propagandized themselves with mainstream media including the school system.
Did they admit their complicity in the decline of the dollar? Why would they?
Did they reduce their consumption of oil? Again, why would they- they were rich from exporting it for so long! After decades of being the oil dynasty of the early twentieth century, they were drunk– and not just a few presidential Texans.
Ah, but now let’s jump from 1971 to 1999. A barrel of oil has gone from $2 to $11 (and had actually been much higher). That is, the purchasing power of a single dollar contract has gone from half a barrel of oil down to one tenth of a barrel- a factor of more than 1:5 (5:1).
Now, since 1999, oil production rates in the entire world- not just one country- are growing less and less each year. There is less exploration, less new drilling rigs, less new refineries, less training of new oil industry professionals and so on and on. Even Texans are finally starting to get mad; their pet industry is losing “steam.”
Unlike the 1970s, there are no neighbors to bail out the consumers to allow them to continue expanding consumption. There is no OPEP (Oil Producing and Exporting Planets) to blame.
So, a funny thing happens. Just as some folks had predicted, oil prices sharply reverse trend and start to rise (that was 1999). In few years, the dollar contract has dropped in relative purchasing power to a barrel of oil by a factor of more than 5:1 (from $11 to over $66). Again, from 1971 to 1999, there was a similar multiplication, but that was thiry years and this was six- one fifth the time.
Of course, the $11 figure was a low, not a high, but here’s the twist. In the 1970s, did a barrel of oil rise in yen, pounds, yellow brick OZs, and so on? Remember, that was only a single regional shift from exporter to importer.
Mostly what happened in the 1970s is the dollar lost value. To get an Oz of yellow brick in 1979, for instance you would need more than ten times as many dollar contracts as in 1971. THAT was a high for gold and it has dropped dramatically since then. More importantly, to get ANYTHING in the 1970s, you would need more dollar contracts than you would have in the previous year. The domestic oil market predictably led the international dollar market and everything else was predictably following the first follower.
So consider that today, if you price oil in terms of gold, yen, euro, and so on, oil is still rising in purchasing power dramatically. This is not just a national fluctuation- that is, reflecting merely a drop in the dollar- but a very major change in international oil markets.
Lately, oil markets are really experiencing a major shift in supply and demand- according to international prices. And, once again, the dollar contract is losing purchasing power as it is losing prominence. The dollar was still the unchallenged premier currency in the world…until 1999.
But the dollar’s recent all-time lows are not about the competition from the Euro, folks. That is just the immediate trigger. It’s about oil.
Now, from 2002-2004, if you look at all the dollar prices rising consistently across different markets like gold, stocks, real estate, yen, euros, etc…, what does that tell you? There is no “bull market” in any of those things! They are all moving pretty much in tandem with each other and at the similar rates- oil is the one that stands out as the obvious leader.
For instance, if you price gold in yen, euros, US real estate, US stocks, and so on, it is pretty flat for the last few years. ONLY if it is priced it in dollars, however, is gold “outperforming.” Again, there is no bull market in gold- or only a very weak one- on par with the recent “rallies” in NASDAQ or US real estate. Those “rallies” may have been primarily fluctuations in the dollar; that’s all. Relative to oil, gold is indeed far underperforming.
Now, I start with yellow brick Oz because so many folks seem so hypnotized by the mystique of gold, but remember my prior comments- would you give it away for food? Would you rather have bought gold futures or oil futures several years ago? Do we realize that over the last 25 years, gold has underperformed the dollar (and thus most other markets)? What does the chart below indicate: that in the last few years gold is doing well… or only that it is doing well relative to the dollar?
Now, let’s review a few other markets for comparison. Again, I am focusing on 2002-2004 for the moment.
If you price yen in gold, euros, US real estate or US stocks, the yen was rather flat. It was flat relative to pricing yen in dollars (outperforming) or oil (underperforming).
If you price euros in gold, yen, US real estate or US stocks, the euro was rather flat. It was flat relative to pricing euro in dollars (outperfoming) or oil (underperforming).
If you price US real estate in yen, gold, euros, or US stocks, the US real estate market was rather flat. It was flat relative to pricing it in dollars (outperforming) or oil (underperforming).
If you price US stocks in US real estate, yen, gold, or euros, the US stock market was rather flat. It was flat relative to pricing it in dollars (outperforming) or oil (underperforming).
Don’t you notice a pattern here? There is no major “bull” market (boom) in gold, euro, yen, US real estate or stocks, but ONLY in oil.
However, there is a problem with idea of “the eternal oil boom” (and the eternal dollar decline). Oil is such a fundamental commodity in today’s global marketplace that the end of cheap/abundant oil could bring an end to other trends.
You cannot just pass a law to make more. You cannot buy some paper and ink (petroleum-based of course) to make more. Those DBA “the Fed” cannot stroke their keyboards (plastic derived from oil of course) and make a new deposit… of oil.
The economic expansion of the last FEW CENTURIES may be reversing and contracting. Again, tops are always overpriced, right? The bubble is always over-expanded- or it wouldn’t contract, no?
The boom in expansive oil markets appears to be ending. The Texans are so mad they are calling for a ban on reruns of the TV shows that reminds them of the good old days, even “The Beverly Hillbillies.” (As one of my nephews used to say: “that was a joke…?”)
Are you getting THIS? The expansion of the global marketplace depends on cheap oil. Cheap oil ENDED in 1999. There will be a MAJOR contraction- and it already started effecting the dollar.
Other markets will follow. Again the NASDAQ already fell 76% from 2000- 2002 (then, in international terms, had a small reversal). That slow small rally leaves a lot of room left for it to fall. The broader US stock market, the S&P 500, already fell 46% (then, in international terms, was rather flat). Like NASDAQ and so many other markets, the S & P 500 also has quite a bit of downside potential before much strength there is expected by reliable forecasters.
That’s right- eventually even oil will be overpriced as it gets so expensive that people do something really radical- decrease their use. Then the Texans and even the Arabs may reduce their consumption of everything. Could that effect real estate values in Texas and Arabia?
Now, you are getting this, right? Oil markets do not just drive the dollar, but every international financial market. Of course, when there is a change of this magnitude, there are ALWAYS political scapegoatings and crisis. Remember the little national fuel thing in the 1970s was MINOR- compared to today when there is no OPEP to bail out the earthlings.
So, as odd as this may sound, the dollar contract- because it is a contract that people ASSOCIATE with value- may RISE in purchasing power dramatically (at least temporarily). I’m not going to try to explain this one now in any detail, but consider this: if you had $1,000 or $10,000, would that effect how much you valued each individual one?
Well, just like expanding global trade relies on cheap oil, the inflationary expansion of the US dollar contract (or expansionary inflation) is derived from or dependent on an expanding economy (more or less). When people have less income, they value their savings more. They might even spend less on… real estate.
Anyway, I trust that with the string of clear examples I gave, you will take my word for it when I say that this is not only possible for the dollar to increase in value, but predictable. It just may not be as easy to explain as the baby boom housing surge or traveling with children who are hungry, but not for yellow bricks.
But I think I said it pretty clearly. If you had less income, wouldn’t you value each dollar of that income more? Just like you would value a gallon of gasoline if you knew you wouldn’t have any more for a week?
So, when the entire international trading apparatus is contracting as oil prices peak, what does that mean for consumers? It means you will be doing less international trade and getting more local products and services, plus paying more for shipping and all transportation (and thus traveling less).
(Don’t think you do any international trade? Where was your computer built- not bought, but built?)
Will all this disrupt the internet? Maybe, but more likely, the internet will just get more local- like everything else.
However, there is also a great opportunity from these major transitions- because most people will not predict them but indeed will respond quite predictably as the shift accelerates. In other words, they will panic.
Again, the NASDAQ fell 76% in a few years. The dollar fell in a few years by 1/3- I know, you didn’t notice, but you will.
You didn’t notice because most domestic prices (products/services) did not change- or not in terms of dollars. In international terms, prices in the US fell for almost everything- not just computers and, yes, even real estate. If you weren’t selling internationally, you didn’t notice. But the fact remains.
And like the Texans not long ago, the people in general will not be happy about this. They may not understand, but they will change their behavior. If you are in a position to sustainably provide primary necessities (like nourishing food, economical shelter, or even primary services like efficient transportation), the contraction in international trade may be very good for your business.
Plus, as I said, there will be more panics. Panics means staggering changes in trends. Since so many of these are predictable- not just what, but when- there is a lot of money to be made from these changes in trend. I can help you position yourself (or your assets) in front of the emerging trends- catching the surge of each wave of dominoes, one after another. Realizing the extreme hazard of speculatively following trends is a first step.
Sure, some of the shifts will be easy enough to trade that you can do pretty well yourself. However, if you recognize that some people are more dedicated and diligent in their forecasting and execution, I trust that you will see the value of at least diversifying into my services (and then do so).
September 7th, 2005
©The Anonymous Protected Equity Exchange LLC
NAVIGATING THE NEW ECONOMY
Lesson 1: “Worth its Weight in OIL”
by J. R. Fibonacci
September 6, 2005The dollar performed about the same from 2002-2004 against all other major currencies. Compared to other financial standards like yellow brick OZs, US real estate, and US stocks, the dollar still followed a pretty consistent pattern in all those markets- down about 1/3. That’s right: from 120 to 80 like chart says.Gold went from about $250 to about $450- almost a 1:2 ratio. The dollar exchange rate (price) for British Pounds went from near a 1:1 ratio to nearly 1:2. The price of the 500 biggest US stock shares went from below 800 to over 1200 (a 2:3 ratio). The NASDAQ went from 1200 to over 2000 (a 3:5 ratio- between 1:2 and 2:3). US Real Estate saw a similar rise in price.Okay, so when oil gets much more expensive in terms of only the dollar, but nothing else, that is just a national crisis in that national currency (the 1970s). When oil is rising in value compared to everything, that is quite different (1999-current).Now, from 2002-2004, if you look at all the dollar prices rising consistently across different markets like gold, stocks, real estate, yen, euros, etc…, what does that tell you? There is no “bull market” in any of those things! They are all moving pretty much in tandem with each other and at the similar rates- oil is the one that stands out as the obvious leader.For instance, if you price gold in yen, euros, US real estate, US stocks, and so on, it is pretty flat for the last few years. ONLY if it is priced it in dollars, however, is gold “outperforming.” Again, there is no bull market in gold- or only a very weak one- on par with the recent “rallies” in NASDAQ or US real estate. Those “rallies” may have been primarily fluctuations in the dollar; that’s all. Relative to oil, gold is indeed far underperforming.Now, I start with yellow brick Oz because so many folks seem so hypnotized by the mystique of gold, but remember my prior comments- would you give it away for food? Would you rather have bought gold futures or oil futures several years ago? Do we realize that over the last 25 years, gold has underperformed the dollar (and thus most other markets)? What does the chart below indicate: that in the last few years gold is doing well… or only that it is doing well relative to the dollar?
Now, let’s review a few other markets for comparison. Again, I am focusing on 2002-2004 for the moment.If you price yen in gold, euros, US real estate or US stocks, the yen was rather flat. It was flat relative to pricing yen in dollars (outperforming) or oil (underperforming).If you price euros in gold, yen, US real estate or US stocks, the euro was rather flat. It was flat relative to pricing euro in dollars (outperfoming) or oil (underperforming).If you price US real estate in yen, gold, euros, or US stocks, the US real estate market was rather flat. It was flat relative to pricing it in dollars (outperforming) or oil (underperforming).If you price US stocks in US real estate, yen, gold, or euros, the US stock market was rather flat. It was flat relative to pricing it in dollars (outperforming) or oil (underperforming).Don’t you notice a pattern here? There is no major “bull” market (boom) in gold, euro, yen, US real estate or stocks, but ONLY in oil.Further, the dollar in contrast was in a severe “bear market” from 2002-2004. The “quiet” decline of the dollar is why people who don’t understand markets are STILL optimistic about gold, real estate, stocks and so on- because they saw dollar prices go up in for a few years. Indeed, as the global economy shift has left many of them extremely desperate, this excessive speculative optimism is predictable! (Some contrarians call this phenomenon “denial.”)So, dollar prices going up just means those markets are outperforming the dollar. This is called a nominal gain– for which taxes are often paid. This means that, after taxes, those investors may have even less purchasing power than a few years ago. That is a real loss (in terms ofpurchasing power or value).This is of course good to know, even if it is not what you were hoping to read. Once we accept what is happening, we can understand it and then honor it by redeeming our practices and thus perhaps even profit from the continuing shift.Speaking of continuing shift, frankly, oil markets have been booming for a century. Similarly, the dollar contract has been crashing in purchasing power for 92 years with only relatively minor exceptions.These two items are not very complicated. These trends are even simpler actually than any temporary baby boom in real estate.However, there is a problem with idea of “the eternal oil boom” (and the eternal dollar decline). Oil is such a fundamental commodity in today’s global marketplace that the end of cheap/abundant oil could bring an end to other trends.You cannot just pass a law to make more. You cannot buy some paper and ink (petroleum-based of course) to make more. Those DBA “the Fed” cannot stroke their keyboards (plastic derived from oil of course) and make a new deposit… of oil.The economic expansion of the last FEW CENTURIES may be reversing and contracting. Again, tops are always overpriced, right? The bubble is always over-expanded- or it wouldn’t contract, no?The boom in expansive oil markets appears to be ending. The Texans are so mad they are calling for a ban on reruns of the TV shows that reminds them of the good old days, even “The Beverly Hillbillies.” (As one of my nephews used to say: “that was a joke…?”)Are you getting THIS? The expansion of the global marketplace depends on cheap oil. Cheap oil ENDED in 1999. There will be a MAJOR contraction- and it already started effecting the dollar.Other markets will follow. Again the NASDAQ already fell 76% from 2000- 2002 (then, in international terms, had a small reversal). That slow small rally leaves a lot of room left for it to fall. The broader US stock market, the S&P 500, already fell 46% (then, in international terms, was rather flat). Like NASDAQ and so many other markets, the S & P 500 also has quite a bit of downside potential before much strength there is expected by reliable forecasters.
This decline in US stocks actually resulted in a small rally (in international terms) in the US real estate sector (the blue line in the above chart). Many fleeing stock market investors SPECULATED that US Real Estate was safe- just as astute forecasters predicted. Because so many acted AS IF Real Estate was safe, they have been relatively accurate- so far.Is Hurricane Katrina the trigger for the exposure of an underlying fundamental weakness in US Real Estate markets? If not, another trigger will come. If there is no fundamental economicstrength in the US today, US real estate must decline eventually.Weakness in US stocks or the dollar which leads to a “flight to safety” is not the same asstrength in real estate. Real Estate markets are nowhere near as strong as oil markets.Think about it. Oil is the leader. US stocks followed. The dollar followed them. Real Estate will follow next. Every move is predictable- like a wave coming to shore through the deep markets to the shallow markets.So, it may not be long before gamblers/speculators in US real estate are suddenly exposed to the order that is evident in all this. They may not understand the domino effect, but they will witness the next domino.The recent followers of the real estate boom is just like those who followed the trends near the end of the baby boom housing surge. They were right (by accident) for a few years, then not so right.Actually, though, there is one big difference. This latest boom is a desperation boom as banks were aggressively refinancing in an effort to extend the period before the flood of foreclosures accelerates. (The foreclosure rate increased since 1999… predictably!)Where is the underlying fundamental economic shift that dropped interest rates? What led banks to give interest-only loans and drop down payments rates TO ZERO? What led homeowners to go for all that- a fundamental shift in housing technology and prosperity- or DIFFICULTY paying their existing bills?!Sure, excessive optimism and desperation look a lot alike, but that is much different from a fundamental shift like demographics. The latest real estate binge has not just been a dollar fluctuation, and not even just a predictable response to a global oil shortage and reduction of consumption. Another predictable factor has been how the masses would respond to each stage of the wave- including desperation adjustments.This is like going from the blown down straw house to the log house in a hurricane (or “The Three Little Pigs). The log house MAY be safe, but that depends on the hurricane.Many people may not be emotionally prepared yet to accept the extent of the shift underway. They will react predictably- swarming like a snowball growing on the way down a hill. Recently, they refinanced themselves into an even more unstable position. When a trigger exposes that fundamental instability, the band-aids on the dam will fly along a jet of liquidity.So, how can I possibly suggest that oil markets can effect real estate markets? First, let’s say you commute from your suburban real estate location to work. Let’s imagine that today it costs you three times as much as it did a year ago. Could that effect real estate prices?What if people simply have less money?! What if the local economy contracts- everywhere at once? What if the stock markets, computer industry, gold markets, and even oil markets all contract?That’s right- eventually even oil will be overpriced as it gets so expensive that people do something really radical- decrease their use. Then the Texans and even the Arabs may reduce their consumption of everything. Could that effect real estate values in Texas and Arabia?Now, you are getting this, right? Oil markets do not just drive the dollar, but everyinternational financial market. Of course, when there is a change of this magnitude, there are ALWAYS political scapegoatings and crisis. Remember the little national fuel thing in the 1970s was MINOR- compared to today when there is no OPEP to bail out the earthlings.So, as odd as this may sound, the dollar contract- because it is a contract that people ASSOCIATE with value- may RISE in purchasing power dramatically (at least temporarily). I’m not going to try to explain this one now in any detail, but consider this: if you had $1,000 or $10,000, would that effect how much you valued each individual one?Well, just like expanding global trade relies on cheap oil, the inflationary expansion of the US dollar contract (or expansionary inflation) is derived from or dependent on an expanding economy (more or less). When people have less income, they value their savings more. They might even spend less on… real estate.Anyway, I trust that with the string of clear examples I gave, you will take my word for it when I say that this is not only possible for the dollar to increase in value, but predictable. It just may not be as easy to explain as the baby boom housing surge or traveling with children who are hungry, but not for yellow bricks.But I think I said it pretty clearly. If you had less income, wouldn’t you value each dollar of that income more? Just like you would value a gallon of gasoline if you knew you wouldn’t have any more for a week?So, when the entire international trading apparatus is contracting as oil prices peak, what does that mean for consumers? It means you will be doing less international trade and getting more local products and services, plus paying more for shipping and all transportation (and thus traveling less).(Don’t think you do any international trade? Where was your computer built- not bought, but built?)Will all this disrupt the internet? Maybe, but more likely, the internet will just get more local- like everything else.However, there is also a great opportunity from these major transitions- because most people will not predict them but indeed will respond quite predictably as the shift accelerates. In other words, they will panic.Again, the NASDAQ fell 76% in a few years. The dollar fell in a few years by 1/3- I know, you didn’t notice, but you will.You didn’t notice because most domestic prices (products/services) did not change- or not in terms of dollars. In international terms, prices in the US fell for almost everything- not just computers and, yes, even real estate. If you weren’t selling internationally, you didn’t notice. But the fact remains.And like the Texans not long ago, the people in general will not be happy about this. They may not understand, but they will change their behavior. If you are in a position to sustainably provide primary necessities (like nourishing food, economical shelter, or even primary services like efficient transportation), the contraction in international trade may be very good for your business.Plus, as I said, there will be more panics. Panics means staggering changes in trends. Since so many of these are predictable- not just what, but when- there is a lot of money to be made from these changes in trend. I can help you position yourself (or your assets) in front of the emerging trends- catching the surge of each wave of dominoes, one after another. Realizing the extreme hazard of speculatively following trends is a first step.If you can FEEL the significance of the opportunity in our midst, I have done well in my presentation. If you have assets to invest, you may choose to do so with someone who understands not only the fact that trends form and change, but also why, how and even precisely when.
© 2005 J. R. Fibonacci
Snowflake, AZ USA
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