Friday, April 27, 2012

"Decline of the West"

"The last man on the moon left in 1972. The tallest building in the united states was finished in 1974. [...] US electricity production was growing exponentially until 1972. After 1972 it grew more slowly. Per capita electricity consumption seems likely to have peaked around 2007 or so."
This is a Prechterish viewpoint, consistent with his idea that economic improvement in the great bull market since 1982 (i.e. a "wave five formation") has not been commensurate with the stock market increase during that time.

Speaking of decline, see this WSJ opinion piece "The Ugly Brutishness of Modern Britain" by Theodore Dalrymple, who is also the author of Life at the Bottom: The Worldview That Makes the Underclass. He has written a number of books about the decline of the West. He points out,
"Incivility in Britain thus has a militant or ideological edge to it. The uncivil British are not uncivilized by default—they actively hate and repudiate civilization."
Why are we talking about this on an investing blog? All of this has profound investing implications, although subtle ones that you can't just act on right away. More than anything, these trends imply investments that you should avoid buying. In many cases they can't be shorted either due to market constraints (real estate) or because of high cost of carry and forced buyers (think single asset-class investors).

But you can come out ahead, in relative terms (which is all that matters), by not buying most types of real estate which will have steadily falling NOI as far as the eye can see. Unless you are bullish on the rents that landlords can extract from the growing share of the chav population in Britain? Or, if you think local government employee pensions will be paid somehow besides higher property taxes? Note that some states are poised to dramatically increase taxes already. That could start exciting positive feedback loops.


Taylor Conant said...

Nixon closed the gold window in 1971.

America pissed its pants beginning 1972.

Coincidence? I report, you decide.

CP said...

That probably can't be the only explanation. Actually, I think maybe the switch to a weaker currency was to help disguise the underlying decay process that was already taking place?

But it certainly isn't helping.