Change

Every now and then I have to stop and smell the coffee and look at the big picture.


As usual, it's easy to see everything clearly in hindsight.


In October 1982 I left Australia to live in the U.K. My first stop was Switzerland for a CompuTrac conference sponsored by the Swiss Commodities something or other. I can't remember the exact name of the organisation.


What I do remember, however, is that the main presentation was by a guy expounding what was coming, basing his views on the Kodratieff wave. The Dow Jones 30 Index was at about 883 on the day of the conference.


We had just gone through a major change in the world as the Gold price went from a regulated (Bretton Woods agreement) $35/ounce to an unregulated $900/ounce and then a crash after the Hunt Brothers debacle. But it wasn't just the Hunt Brothers. Back in 1972, Nixon has changed the law allowing U.S. citizens to hold Gold. That was after he unpegged the U.S. Dollar from the Gold Standard in 1971. This was my first major world financial realignment experience.


Well, back to the professor and the Kondratieff wave. He laid out a whole set of arguments why the Dow Jones 30 index would more than double in the near future - I can't remember the time frame. The U.S. stock market had been in the doldrums for years. There were no S and P futures until 1982. How timely, in retrospect. One of the people at the conference was a guy called Dr Richard Sandor, an academic who had invented financial futures - 30 Year T-Bond. He was working for Donaldson Lufkin and Jenrette, a major, major broking house of the day. He had a younger guy there with him from the firm who also made a presentation, mainly to get brokerage business from the attendees.


All three of us ended up in my new office on Saville Row in London, smoking Cuban cigars, the favourite of both Richard Sandor and me. I guess I had an inflated view of myself at the time. I opened an account with DLJ and we spoke about the Dow and the Kondratieff wave prediction. None of us saw what was to be the biggest stock market boom in history. See the chart below.

That was my second major world financial realignment experience.


In April 2007 I sold all my real estate as I thought the stock market was way over heated and I knew the cycle would be stock market down and then real estate down.  I did not foresee the extent of the carnage, but I did foresee a big down move. That was my next major world financial realignment.


There has been another realignment going on for quite a while. In 1970 I bought a bunch of shoes for myself at the Bally shoe shop on the Bahnhoffstrasse in Zurich. They were very kind and delivered them to my hotel at the Baur au Lac at the end of the same street and on the Zurichsee. The exchange rate at the time was around 4.5 Swiss Francs for every $US. Now the two currencies are around par. What a change. The $US has been in a steady decline. There is a hidden inflation in the U.S. as the cost of both imported goods and now even locally grown, mined commodities increase dramatically.


The chart below is the $US Index. This is a current major world financial realignment still underway.

Today's DAX was very kind. Taming this market takes a little more time than others, but it's worth it.