I just wanted to stop by and tell you how grateful I am for your book Stock Cycles. My father bought me the book back in the early 2000s and I let it sit on the shelf for several years because I thought from the title it had something to do with technical analysis, which I wasn't interested in at the time. When I finally read it circa 2003, it blew my mind. The recognition that the causes of the secular bear and bull cycles alternate between low/high real earnings growth and high/dis-inflation is, in my opinion, one of the most valuable insights any investor could ever have. What's even more incredible is that you wrote the book in 2000 and the patterns have repeated just as you laid out. From 2000-2010-ish, we were in a secular bear driven by low real earnings growth (no earnings in Dotcom bust or GFC). Then from 2010-2021-ish, real earnings growth for the S&P 500 was 23% (including the COVID period) and we had a secular bull. From January 2022 onward it looks as though we have been in a secular bear driven by high inflation: Inflation's been high, stocks are outperforming inflation by only single digit percentages annually since that time (versus double digits annually during secular bulls) and to do so have had to take on the worst valuations of all time. Moreover, the assets one would expect to outperform in a secular bear driven by high inflation--gold, silver, gold miners, bitcoin, energy stocks, etc.--have greatly outperformed the S&P, while those we would expect to underperform--long-duration bonds--have gotten crushed. The fact these cycles tend to last 9-20 years, suggests we have at least until the end of the decade before the current cycle ends (if not mid-2030s). You essentially gave all of us a roadmap to align ourselves with the larger secular forces in play at any given time and what to look for to identify the cycles. Stock Cycles could possibly be the most overlooked, underrated book in all of human history. Thank you for your gift to humanity.
Thank you for your kind words. I am glad you found it of value.
I don’t see how one can have an expectation for how bitcoin will behave in one or another market environment simply because it hasn’t been around long enough to go through a real recession (assuming business cycles are still a thing). Although the NBER sees the 2020 downturn as a recession, it was entirely induced and the stock quickly popped back up and went much higher--while the downturn was still going on--as if nothing had happened. So, as I see it, we haven't had a recession since 2008-2009 and what bitcoin does in an actual recession/bear market is unknown.
Anyway, for me the key takeaway from Stock Cycles was the P/R valuation too, which was invalidated in 2014, which led me to move from long cycles to Turchin’s secular cycle. I describe how this happened here.
It has occurred to me than someone who just read Stock Cycles and none of my other stuff, could interpret it in a way that would be useful for them, as you have done. I am glad it worked out well for you. The real versus inflationary cycles was what led me to the relationship between the Stock Cycle and the Kondratiev cycle as I described in one of the chapters. After I wrote Stock Cycles I did a lot more work with K-cycles, for which they was a sizable literature. Based on that work I had a more explicit interpretation of things that I wrote about later that did not happen the way I anticipated, as I mention in the piece above. Much later I learned why P/R valuation failed after having been valid for 200 years:
I just wanted to stop by and tell you how grateful I am for your book Stock Cycles. My father bought me the book back in the early 2000s and I let it sit on the shelf for several years because I thought from the title it had something to do with technical analysis, which I wasn't interested in at the time. When I finally read it circa 2003, it blew my mind. The recognition that the causes of the secular bear and bull cycles alternate between low/high real earnings growth and high/dis-inflation is, in my opinion, one of the most valuable insights any investor could ever have. What's even more incredible is that you wrote the book in 2000 and the patterns have repeated just as you laid out. From 2000-2010-ish, we were in a secular bear driven by low real earnings growth (no earnings in Dotcom bust or GFC). Then from 2010-2021-ish, real earnings growth for the S&P 500 was 23% (including the COVID period) and we had a secular bull. From January 2022 onward it looks as though we have been in a secular bear driven by high inflation: Inflation's been high, stocks are outperforming inflation by only single digit percentages annually since that time (versus double digits annually during secular bulls) and to do so have had to take on the worst valuations of all time. Moreover, the assets one would expect to outperform in a secular bear driven by high inflation--gold, silver, gold miners, bitcoin, energy stocks, etc.--have greatly outperformed the S&P, while those we would expect to underperform--long-duration bonds--have gotten crushed. The fact these cycles tend to last 9-20 years, suggests we have at least until the end of the decade before the current cycle ends (if not mid-2030s). You essentially gave all of us a roadmap to align ourselves with the larger secular forces in play at any given time and what to look for to identify the cycles. Stock Cycles could possibly be the most overlooked, underrated book in all of human history. Thank you for your gift to humanity.
Thank you for your kind words. I am glad you found it of value.
I don’t see how one can have an expectation for how bitcoin will behave in one or another market environment simply because it hasn’t been around long enough to go through a real recession (assuming business cycles are still a thing). Although the NBER sees the 2020 downturn as a recession, it was entirely induced and the stock quickly popped back up and went much higher--while the downturn was still going on--as if nothing had happened. So, as I see it, we haven't had a recession since 2008-2009 and what bitcoin does in an actual recession/bear market is unknown.
Anyway, for me the key takeaway from Stock Cycles was the P/R valuation too, which was invalidated in 2014, which led me to move from long cycles to Turchin’s secular cycle. I describe how this happened here.
https://mikealexander.substack.com/p/how-anomalies-drove-my-social-science
It has occurred to me than someone who just read Stock Cycles and none of my other stuff, could interpret it in a way that would be useful for them, as you have done. I am glad it worked out well for you. The real versus inflationary cycles was what led me to the relationship between the Stock Cycle and the Kondratiev cycle as I described in one of the chapters. After I wrote Stock Cycles I did a lot more work with K-cycles, for which they was a sizable literature. Based on that work I had a more explicit interpretation of things that I wrote about later that did not happen the way I anticipated, as I mention in the piece above. Much later I learned why P/R valuation failed after having been valid for 200 years:
https://mikealexander.substack.com/p/ziggurats-of-finance
I find Strauss Howe generational theory very interesting and have read both fourth turning books