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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: lurqer who wrote (8733)	11/2/2002 8:27:31 PM
From: lurqer	Read Replies (2) \| Respond to of 89467

The Modern Era Last month in a series of posts, I discussed long term market cycles that are visible on geocities.com In the post From Panic to Mania, Message 18142540 I described the Panic/Bounce/Oscillate from Despair to Disgust/Show Me/Greed/Mania cycle that has been evident since the 1929 panic. In the post The down elevator’s route Message 18142943 I mentioned H. Dents belief that long term secular trends are a function of the spending patterns of large demographic bulges in the population. For those unfamiliar with Dent’s work, he exhibits a graph (function) of the spending of a typical couple (John and Jane Doe) over their lifetimes. According to Dent, the couple will gradually increase their spending as both their income and obligations (large house for the kids) increase. Eventually, the spending peaks (with the empty nest) and declines through retirement. A plot of this spending vs. the age of the couple would exhibit a single peak in the middle age years. For a variety of reasons (immigration patterns, hard economic times, war) the US demographic profile has bulges and troughs. Currently, the largest bulge is the Boomer generation. If you convolute the spending function of a typical couple with the population demographic profile, you get Dent’s generational Spending Wave. Dent exhibited a compellingly strong correlation between the generational Spending Wave and the stock market’s secular bull and bear markets. This past week, in reference to a question from LG, I stated that I believed that the economic cycle prior to the 1920s was “distorted” by the massive immigration that occurred around the beginning of the last century. Upon further reflection, I believe that statement was accurate, but insufficient. Recognizing the effect of immigration, Dent modifies his birth statistics to produce his Immigration-Adjusted Birth Index. But without a good demographic profile of the immigrant population, the adjustment is at best crude. Since the ratio of immigrants to native born peaked with influx in the early 1900s, any economic cycle “distortion” should have a lagged peak soon thereafter. Another great tumultuous event of this era was World War I – or as it was known at the time The Great War. It is hard for us now to realize what and era shattering event that war was. In Europe it marked the beginning of the modern era. It swept away the vestiges of earlier more ancient times. The Austro-Hungarian Empire, a direct lineal descendent of the Holy Roman Empire of the middle ages, was dissolved. The tsarist Russian Empire (that had freed its serfs only fifty years earlier) was revolutionized. The Ottoman Empire (the last great caliphate of Islam’s outward push and the conqueror of the Eastern Roman Empire) was obliterated. In this country, the earlier agrarian period that had marked this country since its origins, came to an end. A popular song of the era said it all. “How are you going to keep them down on the farm after they’ve seen Paree”. With the acceptance of the mass produced automobile in the 1920s, the several millennia era of the horse was finally over. Wide use of the automobile, electrical appliances and lighting, radios and telephones all mark the 1920s as the beginning of the modern era. In summation, I believe 1920 marks an economic threshold. A threshold of sufficient magnitude that no easy comparisons of the period prior to 1920 can be made with the period subsequent to that time. Characterized by the absorption of the earlier immigration, the transition from an agrarian to an urban society and the technologically induced lifestyle changes, this threshold was the beginning of the Modern Era. JMO lurqer