Harry S. Dent | Wednesday, April 03, 2013 >>
It should shape nearly every important decision you make in life.
What is it? The four season cycle, of course.
Just think about it. Practically everything has four season cycles…
Take kids for example…
They’re ugly and utterly dependent on you when they’re born (spring).
They’re cute when they’re toddlers, learning about the world around them… hanging onto your every word as if you know everything (summer).
They’re interesting and challenging, but still likeable when they’re in their pre-teens (fall).
And they’re downright nasty beasts when they’re moving through adolescence (winter).
Relationships are another good example…
We start out in the honeymoon phase where neither can do any wrong and we have sex like rabbits (spring)…
We build a life together and overcome challenges (summer)…
Then we get used to each other, the shine wears off, and we realize we don’t really like each other all that much (fall)…
Finally we barely talk to each other, with sex nothing but a distant memory (winter).
There are technology and product cycles.
Even orgasm cycles.
You name it and it’s likely following a long-term or short-term, four season cycle.
And that should be the most information you ever read because it means you never have to guess again what’s coming next. You just need to find out where we (or you) are in any given cycle and you have everything you need to make smart financial, business or life decisions.
Lucky for you, we’ve done most of the hard work already… at least on several seasonal cycles crucial to your finances and business. We already know where we are in the most critical one, which we call the 80-year New Economic Cycle.
The 80-Year, Four Season Economic Cycle
This cycle, identified by Soviet economist Nikolai Kondratieff back in the early ’20s – once spanned only 50 – 60 years. It’s called the Kondratieff Wave, for obvious reasons.
But, since then our life expectancies have expanded and so this wave has morphed accordingly. Now it spans an 80 year period, which we’ve tracked, plotted and branded the New Economic Cycle (Dent Wave, anyone?).
Many experts following this wave, assuming a 60-year cycle, were sadly wrong when they predicted a depression for the 1990s… a time when we were predicting the greatest boom in history.
In this cycle, we emerged from the last winter deflation and shakeout season, which extended from 1930 to 1942, into a spring boom – a result of the Bob Hope generation’s spending and productivity – which ran from 1942 – 1968. Then the Hopers’ spending predictably declined, while the larger baby boom generation entered the workforce, at great expense (a.k.a. inflation), into the late 1970s.
You see, inflation is like temperatures in the traditional weather cycle first noted by the Egyptians when they were building the pyramids. High inflation is like the hot temperatures of summer. Deflation is like the declining and freezing temperatures of winter. Mild inflation comes in spring and fall.
Inflation is also a result of productivity. When a new generation is entering the work force, it costs more money to train them and accommodate them, so inflation rises (but more on that another time).
This is important to note because that’s when the economy does the best – during spring and fall – because productivity rises during those seasons. And during the challenging winter and summer seasons, we see the greatest innovations.
The baby boomer generation created a fall bubble boom from 1983 into 2007 when it moved into the workforce, adopted the information revolution into the mainstream and then peaked in its spending and productivity.
Now we’re in the winter season where we deleverage the debt and speculation borne during the fall bubble boom. We force businesses to consolidate. To get lean and mean. We shift market share to the long-term winners who have greater scale to bring even lower prices for consumers in the future. To survive, businesses have to adopt the new business models innovated by the few in the fall boom.
That sets the stage for the next spring boom, which will start around 2023. That’s when the next generation (the echo boomers) and the massive numbers of new middle class citizens in emerging countries will drive the next global boom.
Yes, the winter season is the most challenging of the four, but it is also the most opportune for the businesses and investors that see it coming.
All this means that now’s the time to be the most selective when picking stocks. Find companies that show the most potential to become shakeout winners. And stay agile. The buy and hold mentality does not work during this season.
In your business, focus on your customer. Change your approach from top down to bottom up, where your customers, not your management, dictate your next move.
Finally, shed any personal debt burden you’re carrying. Cut back on unnecessary expenses. Unload the excess weight.
And easy to survive and prosper ahead.
Ahead of the Curve with Adam O’Dell
I was flipping through a J.P. Morgan Asset Management report this morning when a chart on correlations caught my eye. It reminded me of a view I shared with Boom & Bust subscribers when we wrapped up our January forecast issue.