Hi Nickoo,Yet again, your logic sees things in an isolated...

Hi Nickoo,

Yet again, your logic sees things in an isolated bubble. It amazes me that people can call things down in this way without seeing out the full extent of what they are saying.

At 1000-, or anything else remotely near to it, the current world order would collapse in its entirety and life would return to a chaotic, medieval order of isolationism, feudalism and survival of the fittest. Neither gold, shares in gold companies, Puts, nor any other means, or forms of exchange, would survive in such an environment. In such circumstances, life itself would became the basic essential, as would survival from day to day.

Under such a societal setting, I would see some /all of the following occurring:
1)
isolated states surviving in their own right (such as North America and perhaps Australia);
2)
connected states breaking down and being run over (such as in Europe, throughout Africa, and in much of Asia);
3)
under 2), Australia would be at direct risk;
4)
the potential rise of a 3-pronged world order comprising North America, Japan and China;
5)
a return to the basic agrarian system of survival, with the return of the feudal landlord, the pastoralist, and the merchant;
6)
the rise of those classes of people who seem to be adept at handling the feudal-merchant connection (ie: in this regard, the Japanese, the Chinese and the Jewish cultures all spring to mind);
7)
the rise of barterism, followed by the complete and utter failure of 90+% of the population in being able to offer anything of value other than their labour (which would be in excessive supply); and
8)
if one belives in the notion of the old Planet of the Apes scenario, the breakdown in human behaviour to such a level that uncontrollable war eventually breaks out which, over time, destroys society, renders the human species impotent, and leads to the rise of a new world order (presumably of another species).

Whenever one considers the future and the dire possibilities of today, anything is possible. But even in the deepest, darkest, days of despair, the resilience of human activity and behaviour demonstrates the reason why we are an evolving species, and will continue to be so in the future.

Nickoo, your arguments are quite foretelling of the future, but also at risk of being flawed. Neither the Dow, the Nasdaq, nor anything else out there sits at the centre of the financial universe.

If, therefore, you are going to use the Dow of the last 100 years to devine today's and tomorrow's behaviour, then I would also have expected you to also embrace the following:
1)
an accurate assessment of European sharemarket /exchange market behaviour over the last 3 -400 years (not just over the last 100 years);
2)
an assessment of the impact that the withdrawal of funds from the US will have on the fortunes of the Japanese and the Chinese in particular (both cultures being currently the world's largest proxy group of savers);
3)
a comparative assessment of the Dow mix over the last 100 years, including how the variables have changed to reflect changing popularity (as opposed to changing patterns in human activity and behaviour);
4)
a comparative assessment of how the US and global economies are actually faring, as opposed to how the Dow is reacting to sentiment; and
5)
given your obvious university qualifications, and skillsets at hand, an accurate assessment of what is happening in the Dow (and in the broader US markets) cleared of all the associated noise (ie: fundamentals vs sentiment vs herd mentality vs confidence vs greed vs the lack of confidence in management, etc).

Nickoo, I have always enjoyed your posts and respect very much your callings on the down draft that we are experiencing in the market. However, the primary premise of your arguments seem to have always revolved around a tie-up between historical and current p/e ratios (broadly based, or specifically mentioned).

Going forward, I would, therefore, appreciate the benefit of your views on the following:
1)
movements in the Dow (etc) adjusted for inflation over the decades;
2)
movements in the Dow compared to overall performance in the US economy over time (ie: a Dow vs GDP type of analysis, for instance);
3)
a comparative analysis of the proportional wealth effect associated with the value of GDP vs the capitalised value of the US stockmarket over time, etc;
4)
a comparative analysis of the Dow's performance compared to the (arguably) more accurate p/eg ratio; and
5)
a comparative analysis of the Dow's performance adjusted for sentiment over time.

As you and I have previously debated on many an occasion, you are a Bear (and I recognise that), and I am a business realist (recognising that the market is in a downleg at this time). Overall, however, this does not place us all that far apart, except that my views are at the more moderated end of the spectrum, compared to your own.

Throughout the current debate, however, I have consistently been arguing that we are dealing with a world where:
1)
the economic fundamentals are stacking up (and are positive, to improving);
2)
the business fundamentals are changing (such that market consolidation will be an inevitable outcome of the current state of play);
3)
the crisis that we are dealing with is one of competence, management, accountability and governance (in other words, being responsible for one's own conduct, and being accountable for one's own efforts);
4)
the proliferation of greed by all concerned out there has brought about a level of societal intolerance that now pervades us all and is likely to widen the class distinctions going forward in the future; and
5)
the notion of anonymity has become such that people no longer consider that they need to explain themselves in any circumstance.

The cisis in confidence, management and in accountability that we are currently dealing with will eventually see out the following:
1)
the demise in excessive corporate remuneration packages, and in unaccounted for bonuses;
2)
the rise in the number and extent of independent directors sitting on many Boards;
3)
the demise in the blended CEO /MD /Chairman concept that currently exists in the US (and, to a lesser extent here in Australia, where it is more known as the role of the Executive Chairman);
4)
the demise in reality based TV programming which distort people's understanding and belief in the need to be self accountable for their conduct;
5)
"truth in forecasting" such that the future release of financial forecasts (etc) may require certification as to their accuracy (at least from a preparation, reliance on assumptions, perspective, etc); and
6)
the increased regulation (and quite possibly, over-extended regulation) of companies, analysts, the media, etc in commenting about, reporting on, investment activity and behaviour.

Given that some, or all of this, is now being recognised within the global marketplace, I would submit that stability in the markets should soon return. In the meantime though, I am proposing to look more closely at what is happening on a daily basis on the Dow in an effort to devine some of the influences in behaviour (whether they be publicity linked, governance influence, moneyflow oriented, media driven, or politically infused). One thing though in closing, I would hate for it to be a case of the media soliciting stories, spooking confidence, and driving markets down.

If that be the case, then accountability towards, regulation of, and the re-emergence of controls over, the reporting media will become inevitable (and that would prove a blow to freedom of speech, but not to the need for there to be reporting with accountability, expression with meaning (ie: back-up)).

For now, that's all for tonight. Nickoo, all the best in your future market assessments.