CAN'T BE DONE
Wait a minute. Who says? There are tens of thousands of skilled economists around the world, perhaps more--thoroughly professional, Nobel prize winners, humble but proud--highly paid, to tell you otherwise.
Their prognostications remain a coin toss. If you are a foreteller of the future, the old adage is: tell 'em what's going to happen, but not when, or tell them when something big is going to happen but not what.
The Yin and the Yang crowd have it right. The past and the present blend seamlessly into the future which becomes the opposite of the past.
The clever Romans had twenty or more gods in their pantheon. Jupiter was the boss. Early on, Januarius outranked Jupiter as top god. Januarius specifically could see past and future. Apparently the rest could not. Note there were no gods or goddesses of confidence.
January is the month of beginnings and endings and beginnings again, ad infinitum. A time to see what truly happened in the past and therefore understand and see what will happen in the future.
Actually, there is only the present. The past no longer exists. It leaves shards and artifacts from yesterday's world but lacks totally the immediate, powerful awareness that the present induces in the human animal. And the future does not exist yet. Therefore, we have only the present, pulsing through us instant by instant systolicly impelling us to act.
That's where memory's role comes in. Memory serves to carry forward salient impressions of varying strengths from the past that tempt judgement to accede to emotion's impulsions to act in the present. Memory, through the emotions, impels judgement to act. Usually in times of panic wrongly (we are in one such global, public panic today), for the following reason. Its efficient cause is the widespread lack of confidence. What is the cause of that is the key question.
Market panic is a chthonic phenomenon, surging up from the dark world beneath into our Jungian collective unconscious where it overwhelms individual reason and spills into mass action.
Simply, we give up and throw in the towel because everyone else is doing it. Except the buyers. What do they know that we do not know? Perhaps a metric that measures the contextual impact of cycles at work. Thus, the ~36-year cycle that offers regularly the conditions of big, protracted market declines (even panics, as in the cases of 1893 and 1929) which devastate the financial and economic environments for multiple years to come.
With these previous templates, the earliest resolution to the rolling panic we are in today will be summer-fall of 2010 with a secondary finale in the fall of 2012. See background here, and for the current picture here.
I will talk more about 2012 after we journey past the 2010 outposts of expected price change.
Which brings us to the present Congress and Administration, attempting to see ahead and fix what they see with the analyses and tools of the past. CAN'T BE DONE, the headline above says. Really, folks. And that is not defeatist, nor intended to be defeatist. Consider that what they are looking at, all the king's economists and all the king's financial consultants, are symptoms. Symptoms tell you that you are sick, not what the cause of your sickness is.
Without that knowledge, cure and wellness are improbable.
In medicine, a syndrome of symptoms lets you select from the myriad taxonomy of diseases. Symptoms are not causes. You must treat the cause to cure the disease. It is noteable that all the king's men have never, at least publicly, identified, or attempted to identify, the cause or causes of financial panics and devastation. Oh sure, there is explanation after explanation of subprime this and housing defaults that and unconstrained lending and securitization by banks and so on. But all that is a syndrome of symptions, not an efficient cause of 'causes'.
The base answer lies not with economics or financial processes. They are, in my view, symptoms of heretofore unidentified, unaddressed causes or conditions which may lie in the realm of physics and chemistry or, more particularly, biophysics (electromagnetism, hydraulics, optics, mechanics) and biochemistry and the interactions among these domains. These factors affect the human environment, us, internally, in ways we do not understand yet.
Ideas change the world. With all due reverent humility and subordination to Divine Providence, the spreading knowledge and publication of my De revolutionibus orbium coelestium (The Revolution of the Heavenly Spheres) in the year 1543 transformed how mankind thinks about the universe. Then followed Kepler, Newton, Men on the Moon, and Hubble.
Great King Canute, seated on his throne on the seashore in the year 1035, with the surf lapping around his ankles, commanded the ocean waves to turn back. They didn't. Perhaps all the king's men in Washington today in their wisdom could take a mini-fraction of the bailout-budget trillions and fund a handful of academic study groups to explore the science of astrophysics and cross disciplines to discover, if there are any, their direct effect on human individual and mass emotions, decisions, and actions.
Provable discoveries from the new science could not divert the arrival and departure of the relevant cycles, but awareness of them could provide the foreknowledge to enable preparations to offset or remediate effects when they occur as anticipated--even as we are attempting to do here in our riff on Januarius.
What to do Monday morning? Stay with the trend. If you follow two trends, and they are opposite, hedge one against the other with equal amounts of money in each, buying the strongest ETFs or stocks and shorting the weakest--or stay in cash pending a trend resolution to unanimity.
Notes. There are two U.S. GAAP accounting principles that have contributed mightily to the venom of the onset and durability of the rolling disaster continuing to unfold globally as we write. One is the 'mark-to-the-market' method of valuing long-term assets like 30-year fixed mortgages. That should be replaced by an acceptable alternative method which does not require marking to the market when there is no market to mark to.
The other is pension-fund accounting which impacts the value of corporate and public-sector assets directly and their quarterly cash and accrual statements indirectly (adversely when asset values are falling). This should be thrown out and replaced by 40-year incremental accounting which would reduce the impact of annual assets valuations by 97.5%.
The usual Caveat. Five observations of the ~36-year cycle hardly make a basis to assert a law of Physics or Chemistry. But said observations can be subject to the laws of Physics and Chemistry, absent proof to the contrary.
Written
1/23/2009 11:58 am EST
Posted
1/25/2009 1:27 pm EST
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