There is a 1997 book by William Strauss and Neil Howe called the Fourth Turning in which they describe a multi-generational theory. A WIKI describes a synopsis It is from Strauss and Howe where we get the terms Boomer and Millennial. The notion is there is a 20 year cycle that is generational and each generation follows an archetype sociological code in relationship to their cohort generations. Eventually the cycle completes after 4 generations (80 or so years) and there is a kind of societal destruction and rebirth and that which is reborn is not simply a return around the block cycle but an actual destruction of the last cycle, so instead of a circle across time we see a spiral of generations through time.
Ray Dalio has a similar economic theory. He looks at the business cycle and then looks at a business super cycle. The business cycles is about 8 years but the super cycle is 80 – 90 years. The end of the super cycle marks a destruction. Two entirely different pictures (social science vs economic) reach the same exact conclusion in the same exact time frame. The last super cycle ended in 1929. 1929 happened in 2 stages first a 66% crash, followed sometime later by another 66% crash. 1 x (1-.66) x (1-,66) = 0.1089. So a dollar invested after 2 66% crashes was worth slightly less than 11 cents.
From the Washington Examiner quoting the Prez:
The rising death toll and total number of confirmed cases, which now exceeds 4,600 nationally, has led to a number of states issuing restrictions on public gatherings and venues, including gyms, bars, and restaurants. Additionally, President Trump provided new guidelines on Monday, which included avoiding gatherings of more than 10 people for at least the next two weeks.
“It seems to me that if we do a really good job, we will not only hold the death down to a level that is much lower than the other way … and we have done a good job … but people are talking about July, August something like that,” the president said, indicating that the crisis could last through the summer.” They got guns man. They can force that shit to happen.
That’s 5 months. How many businesses can survive a 5 month closure? Let’s take Donna’s as an example. Donna’s is a sit down with take out with stores in every city. It’s the store I used to go to after a night of bar hopping in every college town I lived in. HEY let’s get steak and eggs and coffee at DONNA’S! If the sit down closes only the take out remains, about 20% of the business. Donna’s is levered such that 80% cash flow is needed to service the debt. Restaurant stocks are off 50%, but you have to ask yourself can Donna survive?. If Donna doesn’t survive that’s thousand of permanent jobs lost.
Let’s take schools. If schools are closed for 5 months why pay teachers? Just end the school year tomorrow and let the teachers enjoy a nice long summer break and save the district some money because there is a ton of disruption that will need some money. Teachers are levered as well. Mortgages come due every month.
What about pensions? Pensions are underfunded by 50% in many places. Many OLD laid off workers if they are old enough will simply retire and claim their pensionssssss. which are ahhhhh 50% underfundeddddddd.
Here is a video I ran across this morning that puts it about as succinctly as it can be put.
If you value your savings consider what this guy is saying. It’s the reason I sold out. I sold my long bonds today. I had an excellent gain in EDV and it’s buy low sell high, and I could sell them in IRA’s and generate no taxes so adios, I’ll book the profit. I have no idea if I’m doing the right thing, but one thing is for sure, I’m NOT going to 0.1089 on the dollar. I got out at 95 cents on the dollar.
The market is up today. That I don’t really get. What part of the closure of the hospitality and school industry and the job loss that happens following don’t they get? Even the whore houses are closed! Is it just thick denial? Is it a failure to understand? Is it the narrative the market always goes up? Buying the dip increases your risk. Is this time to risk on or risk off? Is it time to sell the rally? If I had anything left to sell damn strait I’d sell the rally. If I had any damn sense I’d sell my house while it still has value. There is a part two to this but it’s political and I’m not sure I want any politics on my blog. Best of luck out there!