Major Shifts of Wealth Coming

It is always interesting to overlap two bubbles during two different time periods.

Here is a better picture of them below, this one is a continuous chart from 1994 to today of the S&P 500. To the left you will see the tech bubble, followed by the housing bubble, followed by what we are calling the QE bubble.

Are you a consumer of stocks or an investor?

Consumers by definition consume, they buy, when stocks go up, sideways, or down, they buy. Many consumers have bought the buy and never sell mentality, they buy mutual funds, stocks, commodities, and when things aren’t looking up, they go out and buy more. The fear of losing out on gains causes them to buy when it’s down, the greed of wanting more causes them to buy on the way up. Of course we all know consumers who finally reach their breaking points, they buy high and they sell low because emotion takes over their investment decision. Or more than likely they never had an entry or exit plan, they just did what they were told, buy buy buy. A model that actually does work during bull markets, but not so well during bubble peaks and bear markets that over a long period of time trade sideways.

The fact is the bull market that started in 1982 was so epic, that when the trend ended in 2000 no one could accept it. Today, 95% of commentators still won’t accept it, we were going straight up for so long that people began to believe we were on flat ground, that the market was normal.

Let’s look at history for the Dow Jones to put market directions in perspective, how’s the last 111 years sound?

  • The Dow Jones on January 14, 2000, was 11,722.
  • Today, the Dow Jones is 11,139.
  • Now we would like to say that the Dow Jones is only down 5% in the last decade.
  • However, that wouldn’t be very honest since the Dow Jones is priced in dollars, but this may not even be a good example since the dollar has only been 100% fiat since 1971.
  • So to be perfectly honest about the value of the Dow Jones, let’s go take a look at the Dow Jones priced in gold.

Why it is so important to know value.

Yes, it’s that ugly! The Dow Jones may be down 5% in dollars, but priced in gold the Dow Jones since the year 2000 has fallen 86% and if history is any indicator, it’s not done falling. Now do these trends last forever? No, but they do last for a while, so why in the world would anyone want to own the Dow vs. owning gold right now? Especially with the Euro crisis, banking crisis, and the U.S. entitlement/debt/unemployment/baby boomer/dollar crisis.

Our point in this article is that trends change, demographics shift, and money moves. Those that are following conventional wisdom (stock consumers), in our opinion are about to get hit with a once in a century freight train. The ignorance of value and not knowing what money is will cause a massive shift in wealth between entire regions of the world this decade. We see a major shift in wealth happening that has already started and will begin to accelerate in 2011.

A Time of Consequential Decisions

Get ready everyone! Over the next year, is going to present trends and ideas that no one is talking about. We are currently working on a full length documentary that is scheduled to be released in 2012, this will be the most comprehensive macro-economic documentary ever made.