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How To Profit From The Coming Great DepressionThat's the title of my new book. If that idea sounds outrageous, consider some of my past forecasts:
Why is my advice so different from the mainstream and why do I get it right more often? I have a massive philosophical difference with mainstream economists and other highly paid "experts" and "analysts" when it comes to forecasting, and even with their "explanations" for market moves after the event. I believe their approach is basically flawed. Economists did not identify the last Great Depression as such until 1933, four years too late to warn the public and save them from massive financial losses and almost universal misery for many years. Their methodology has not changed. They are not likely to be able to warn you about this one either. But they will be quick to criticize negative mavericks like me who do not conform to the "orthodox" consensus view and are "preaching doom and gloom." Actually I am not a negative person. In fact I am a super optimist at heart. But I am also a realist. And the reality is that another depression is inevitable, for two main reasons that cannot be avoided (see later). In fact Wall Street is already reflecting the early stages of a trend change that will lead to a catastrophic economic contraction that will engulf the world (including Australia) and which has the potential to be worse than the 1930's in its wealth-destroying consequences. Why Economists Have a Brilliant Track Record of Getting It WrongAsk an economist what causes house prices to rise and fall. He or she will tell you it's supply and demand, interest rates, the economy, unemployment, immigration, etc. and possibly rattle off even more economic fundamentals. Ask a real estate agent and he or she will echo everything the economist has said, and probably add "shortage of land" and "location, location, location." Well, consider this: Say in January 1987 you owned a four bedroom brick veneer home on a canal on the Gold Coast, and you listed it for sale at $100,000. It probably would have sat there for three months and you would have been lucky to get one nibble from a prospective buyer. Yet 18 months later you could have put that same property back on the market for $200,000 - double the price - and it would probably have been snapped up the day you listed it. Why? What changed, in the way of economic fundamentals, in that 18-month period? Not a thing. Did supply and demand change? No. Did interest rates fall? No. They actually rose - mortgage rates went from 11% to 17%! Did unemployment or immigration change? No. And what about "location, location, location?" In the bust that followed in 1989 to 1992 (which I also predicted) some of the most magnificent waterfront mansions around Sydney Harbour dropped 75% in value! (How quickly we forget). "Location" certainly didn't save them. And as for "shortage of land" - In Australia? You have to be joking. Tell the Japanese that "shortage of land" means property prices can't fall. So what changed? And how did I know it was going to happen? That's what I write about in my newsletter and in my book. I irreverently refer to economists and other "experts" who focus on fundamentals as the "Flat Earth Society." Their basic assumption is that events govern mood, when the opposite is the case. Because that basic assumption is flawed they cannot possibly forecast the future with any accuracy. They have to fluke it sometimes, of course. If you call "heads" often enough you will get the coin toss right sometimes, too. But how does that add value for you? Even after the event they cannot get it right. But they feed you with so much crud through the media that you have been conditioned into never questioning their "explanations" as to why the market went up or why it went down. Let me illustrate that: How often have you heard in recent months that "the share market fell today because the oil price rose yet again to another all-time high" or something similar. Sounds familiar? Have you ever questioned that? Never? Well consider this: In October 2002 the price of oil was about $US28 a barrel and the Dow Jones Index was around 7300 points. By October 2004 the oil price had almost doubled to $US55 a barrel. How far did the Dow fall in that same two year period? It rose nearly 50% to 10,600 points! Yet tomorrow if the Dow falls and the oil price rises you will be told the loss on the share market is "because the oil price rose." And you will believe it. Why? Because you have been conditioned by economists via the media. They are the "experts." They must know. That's why my forecast of a coming Great Depression seems so outrageous to you at this stage. But once you read my stuff I doubt that that will still be the case. Whenever you hear or read of a "bullish" forecast made by an economist, just delete the last syllable. Another popular furphy at the moment is America's current account
deficit (and Australia's). Each time a worse-than-expected deficit
is announced this too is given as a "reason" for falls on the share
market (except on days when the market goes up, in which case the "experts" fall
back on "despite" or "shrugged off," etc.). Do you buy that one?
Does the trade deficit affect the share market? Well, between 1982
and 1987 the U.S. went from being the world's largest creditor nation
to becoming the world's largest debtor nation. The worst trade deterioration
in their history. How far did the share market fall in that period?
Wall Street experienced one of its greatest bull markets of all time
in the five years between 1982 and 1987, as did the Australian share
market. Yet to this day economists believe, as do the suckers who
follow them, that current account deficits are "bad" for the share
market. This is simply more Flat Earth Society nonsense. What drives financial markets, whether it be the share market, the property market, the gold market, bonds, or whatever, is not economic fundamentals. It is the unconscious herding impulse. And the fantastic advantage we have is that the mass social mood has a pattern to it. Human nature never changes. The herd mentality never changes. An ancient philosopher once said that as an individual a human is a basically sane being; but as a member of a crowd he becomes a blockhead, or words to that effect. People go mad in crowds. And markets are simply crowds. As with individuals, crowd sentiment swings in cycles or waves of optimism and pessimism, with periods of complacency in between. At times there is even panic, motivated either by greed (manic boom) or fear (crash). But whereas the behaviour of an individual cannot be predicted with any great accuracy, crowd sentiment can. So if we can deduce from past patterns of crowd behaviour which way the herd is going to jump next, regardless of economic fundamentals, (these follow the mood change; they do not "cause" them - that's why the share market is always 6 to 12 months "ahead" of the economy) we will have an incredible advantage in knowing when to buy and when to sell. I said that human nature never changes. Consider this: If I narrowed all of the rules of investment down to just one rule, what would it be? Simple: buy low - sell high. It's that easy. But it is human nature to do the opposite. Who wanted to buy property in 1987? Nobody. Property values had gone nowhere for almost a decade. Property was a dirty word. Only a lunatic would recommend buying property at that time (I have been called worse than that). Yet 12 to 18 months later, once property prices had doubled, everybody wanted to buy property. In 1987 what was everybody buying? Shares. Yet where was the share market? Sky high. So what should they have been doing? Selling! (Buy low - sell high). It's so simple, yet it is human nature to do the opposite. It will never change. Are you beginning to get my drift? Economists and most others whom the media uses to feed you with their bull(ish) forecasts are part of the herd (as is the media and government). You can stick with them and buy at the top and sell at the bottom. Or you can think outside the box and take a look at the socionomic insight.There are a dozen or so different patterns of human crowd behaviour that keep repeating themselves over and over. And this patterning is "fractal." That is, there are smaller patterns within larger patterns, within even larger patterns, etc. So whether you are looking at a chart of the share market for yesterday or for the last one hundred years you will see the same pattern. The larger the pattern the more serious the consequences. Wall Street indices have just completed a 220-year pattern! Now do you understand why I say this downturn has the potential to be worse than the 1930s? Fractal patterning is seen elsewhere in nature. Take a broccoli bush. Pull off one head of broccoli. What shape is the head? It is exactly the same shape as the bush. Now pull one segment off the head. What shape is it? The same as the head and the bush. Only the size is different. If you look at an atom under a microscope you will see a nucleus and electrons flying around it in orbit. Exactly the same pattern as our solar system. Only the size is different. Should it come as a surprise that patterns of human crowd behaviour are the same? It is the "rhythm of the universe." Why did economists not identify the Great Depression after the 1929 Wall Street crash? Or, better still, why did they not see the crash coming? Because they were looking in the wrong places. As they are now. They do not see this one coming either. To this day economists cannot even explain what "caused" the October 1987 crash - even after the event! Why not? Because they are looking for economic or geopolitical "events" leading up to the crash. But there were none of any consequence. Meanwhile students of the Wave Principle can not only explain why it happened. They were forecasting it - before the event. So who would you rather follow? Our Flawed Debt Money SystemI said there were two reasons why the coming Great Depression cannot be avoided. The massive turn in social mood that has just begun is only one. The other is our fractional reserve banking system. And again economists, though they are taught this in elementary economics at school or in their first year at university, pay no attention to it. There are three chapters in my book devoted to this subject. If you think that discovering that mood governs events, and not the other way around, is like finding out for the first time that the earth is round, when all of your life you have believed it was flat, this will be like finding out that Santa Claus is not true for the first time. The general public has no idea where money comes from. Do you? If twenty years ago there was say $200 billion "in circulation" in Australia and today there is say $400 billion, where did that extra $200 billion come from and on what basis was it created? Who put it there and how did they know how much would be enough to finance the myriads of transactions every day? Was it the government? Was it the Reserve Bank? The Mint? You don't know? Why don't you know? Aha, now there's an interesting question. Maybe you're not meant to know. Be ready for a shock when you read my book or my newsletters. All I will say here is that our current money system, which was foisted on us by the IMF in 1947, when our weak-kneed politicians caved in to the same powers that foisted the Federal Reserve upon Americans in 1913, along with unconstitutional income tax, has sewn within it the seeds of its own destruction. Debt must rise exponentially while the money supply must ever shrink. A system like this has a use-by date. It has to implode in time. The last one expired in the 1930s. The current debt bubble has already surpassed 1929 as a percentage of GDP. Consider the last depression. What caused it? (Apart from the change in social mood, that is). Was there any shortage of goods on the shelves in the shops? No. They were stocked to the rafters. Was there a shortage of manpower? No. Unemployment rose to 25% and more. So why could no-one afford to live? The only thing in short supply was money. Why? Money is not a resource. It merely represents resources. Just enough can be "printed" at any time so that all goods and services can be represented by money. What went wrong? The answers will disturb you, especially when you realize that we are facing a repeat performance right now. But this time you can avoid it if you act now! How was Australia able to finance the first world war effort without any income tax? Why was income tax introduced anyway? You are going to learn that income tax (and the iniquitous GST) is neither legal nor necessary nor moral. The "tax cheats" are not those who try and hang on to the fruits of their own labour, as is their God-given right, "protected" by the "constitution" in most countries. The real "tax cheats" are the ones who impose it dishonestly and collect it and call Aussie Battlers "tax cheats." If this is the first time you have subscribed to my work, welcome aboard. I hope you enjoy the ride Graham Dyer Home Page | Products and Services | Latest News | Useful Links | Contact / Order |