Stop arguing and ADAPT!

First a brief and funny video distinguishing what I mean by “arguing:”

This next video is an audio of the content below:

Okay, you may already know that I have held tightly to some rather strong political opinions. If you have known me for even just a few decades (or perhaps even just a few minutes), then you know that I think my opinions are the very best, at least until I change my mind and then my old opinions are just opinions and my new opinions are then the very best.

I have been a sincere and even stubborn political activist. I have campaigned for clean water, I have campaigned against at least one war, and I have campaigned door to door as a volunteer for former US Senator Mark Foley (of Florida). If you recognize that name, by the way, you may know that his political career ended rather quickly in a scandal.

So, I have campaigned and won but then been disappointed even with how that went. I have also campaigned and lost but then been grateful for the thing that I previously condemned and opposed.

Some of you may already be able to relate to that. Some of you may not relate to that yet, but may eventually.

I’m not really writing though about how stubborn I have been or how sincerely I have argued. I’m just mentioning all of that to establish a possible common link between you and I, plus to contrast something quite distinct from all of that sincere arguing that I previously have done about conflicts of political opinions.

When I was focusing of what other people should do and how they should do it (according to me), that was one possible investment of my time. If I was the owner of a big company or even worked as a supervisor over others, than it might be very important for me to focus on what other people should do and how. However, when I focused my time on arguing with other people about what they should do and what they should not do, I found that such an investment of my time could be frustrating, exhausting, and even disturbing.

Let me put it another way. I could get furious. I could get very upset. I could get defensive and condescending and argumentative and bitter.

Those were the results available to me from focusing on arguing with others. So, when I recognized the pattern connecting the behavior and the apparent results of the behavior- like an experience of something between disappointment and burning outrage- I stopped arguing. Maybe I argued again about the same topic or about some other topic, but my experience was that arguing was aggressive, like being pushy. Maybe I just was not very good at being pushy, but when I notice a lot of people arguing and then being upset by their own behavior of arguing, I wonder if a lot of us are not very good at being pushy. We must not be if we just keep pushing and pushing and pushing, right?

I was an opinion pusher. Further, I really wasn’t very good at it. I didn’t especially value the resulting experience produced by my behavior of pushing opinions. I was open to new results and new methods.

So, I began to study things like how people form their opinions- first studying particular opinions but eventually studying the whole process of the forming of opinions from the perspective of psychology and neuro-linguistics (NLP). I also studied behavior in general- and not just pushy arguing and not even just various forms of communication and language patterns. I studied trends in behavior and that led to studying the forecasting of trends in behavior.

In mid-2002, I was researching trends in general and got interested in economic trends in particular- or certain ones at least. I got interested in some unusual trends in the lending behavior of investors who were lending money to the US government (as in “buying” US Treasury debt). Actually, I was not exactly interested in those trends so much as some historical correlations that fit with those lending trends. That lending behavior corresponded to a high probability of recession.

I do not have the data that I saw in 2002 to show you, but I was looking at the US treasury yield curve and the following chart is of the simpler US treausry yield spread, yet this chart shows a distinct correlation as well. I do not know the source of this shart, but it implies that the spread (range) between the yield rates of various maturity periods of US Treasury was such that in the early 1980s, there was nearly a 90% probability of a recession (and official recessions are shown in gray). I do not know the background of this chart, but this gives you an idea of the kind of thing that folks like me were looking at, for instance, in 2002.

So, the author of that particular report that I was reading in 2002 was connecting the lending behavior relating to lending money to the US Treasury to things like the future of real estate lending in the US. He forecast a real estate crash. So did other authors that I had read by 2002.

I read forecasts of a continuing rise in commodities, especially fuel prices. By 2004, my published articles focused particularly on the growing US dependency on foreign-source oil, as well as the reasons that I expected a continuing rise in fuel prices and what I expected it to do to the economics of the US and EU (and continue to do to Japan).

In 2005, I was monitoring real estate trends and soon after the decline in mid-2005 in the real estate markets of Phoenix and Las Vegas, I published an article labeling that as the first wave of a much bigger trend that would spread throughout the US. Later, I asserted that the reasons that the two sprawling desert metros of Phoenix and Las Vegas had done so well and then so suddenly done so poorly was directly related to fuel prices.

Downtown Las Vegas, Nevada and Red Rock Canyon...

Image via Wikipedia

Sprawling desert metros are especially sensitive to fuel prices. When energy prices were at all-time inflation-adjusted lows in 1999 and were expected (by many people at least) to continue to drop, it was already cheaper than ever to live in the desert, even through the searing summers. By 2005, many new large homes in the outskirts of the sprawling metros had monthly energy bills of $400 or $500 or more- and that was just for a single residence. As energy costs rose, the costs for cooling the buildings of large businesses ballooned. Further, as gas prices quickly passed $2, $3, and even $4 per gallon, the long commutes from the distant outskirts in SUVs went up right along with the energy bill: like hundreds of dollars per month in expenses for commuting (rather than $100 per month as in the 1990s).

Did those ballooning energy costs have any relationship to the overall budgets and spending behaviors of those households (and businesses)? Did such energy costs effect the willingness of people to enter new big mortgages to live in huge distant homes that would cost hundreds of dollars extra per month in energy bills and commuting costs? Note that a big part of the real estate boom of the sprawling desert metros was internal to those metros- people moving further and further out to bigger and bigger homes. Could it be that eventually the huge portion of their budgets that they were spending on rising energy costs brought the real estate booms to and end?

In 2004, that is precisely what I forecast, along with many other competent forecasters. By 2006, I began promoting videos online that specified the implications of the emerging real estate crash on the mortgage industry and financial insitutions (lenders including banks but also FNMA, FDMC, and Countrywide). By 2008, as there was a wave of bankruptcies in the US financial sector (and in Europe also), I was looking for signs of the inevitable rebound.

In early March 2009, only a few days before the reversal and rebound in the US stock market, myself (and many others looking at similar data and correlations) published explicit forecasts of, in my case, “a multi-month rally” in US stocks. It lasted dozens of months, far exceeding the minimum targets that I forecast, but I have never had any reason to shift my long-term forecast that the rally of 2009-2011 was just a rebound within a much larger decline. I interpret data like the following two charts to support my published conclusions from 2003 for a long-term shift (not just what we have seen so far). The first one shows a conspicuous absence of any rebound in consumer confidence in the US in 2009 or 2010:

The second chart shows that the US economy’s new highs are based on all-time highs in government spending (and borrowing). While Democrats may celebrate the new all-time highs in the GDP of the US, they may not know that so much of it is from government spending, much of which was paid with borrowed money.

Of course, much of the private spending was also with borrowed money, including huge amounts borrowed from foreignors. While many Replublicans and Libertarians complain about the possibility of hyper-inflation, they may fail to assess the simple reality of the source of much of the increasing spending of the Obama administration: foreign-source lenders.

Huge government debts or deficits do not always resolve as hyperinflation (and I repeatedly have noted that the US government does not have authority over the US Dollar anyway, which is the private currency of a private business, the Federal Reserve central banking syndicate). Government “excess” also resolves by things like rocketing tax rates and, in some cases, default.

As a forecaster, one of my concerns was that the US economy has been relying on “too much borrowing.” First, there was too much private borrowing for things like real estate mortgages (and, according to me, there still is). Next, status quo politicians (of whatever party) produced what I consider too much public borrowing (for things like bailing out the owners AKA shareholders of financial institutions that got involved with the excess of the mortgage mania).

The solution for too much borrowing is not more borrowing. That has already been tried, such as in Japan in the 1990s and since then. Here is how that went for them:

In conclusion, let’s stop arguing politics and adapt to the reality of markets. We’re going to have to do that anyway eventually- just like the folks did in 2005 in sprawling desert metros with $400 per month electricity bills and $300 per month commuting costs. They got more fuel efficient cars and moved closer to where they work, even if that meant a smaller home and hundreds of dollars less per month in bills for “overhead.”

The people of Japan have adapted. So have everyone everywhere that has ever experienced a wave of economic conservatism. By the way, the decline in borrowing and the resulting decline in prices is simply a wave of economic conservatism. As for people who accuse me of negativity, I do not consider conservatism to be negativity, but if you do, that may effect your behaviors and the natural results of your behaviors- like whether markets reward conservatism most or reward something else most.

Here is a hilarious video about the kind of excuses people give for not adapting:

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