Graph courtesy of Elliott Wave. One of the few economic commentators to predict the current economic crisis with deadly accuracy.
300 years of the biggest economic growth spurt in the history of mankind looks incredibly impressive. But what does the future hold?
When it comes to the economy the majority take the current recent trend and extrapolate it off into the distant future.
Just like in 1999 everyone expected the economy to boom beyond belief, in March 2009, the vast majority expected stocks to keep crashing hard. In both cases the exact opposite was true.
At the same time its incredibly to difficult to know when a bubble is going to burst, if it will keep growing, or when an economic collapse will suddenly bottom and turn into rapid growth.
What history teaches is that the more people believe in one direction, the less likely it is true. Don’t believe me? Go look at some newspaper headlines from 1999 or 1929, before the crashes – consensus remained upbeat. People don’t buy a newspaper if they disagree with it – newspapers tend to reflect the general feeling of their target audience.
The lesson is don’t expect the current trend to keep continuing. Sudden changes will quickly unfold and you need to forget the old times, and quickly adapt to the current situation that is unfolding. Don’t get caught in the trap.
Recession, depression or boom – there are major opportunities. Understand what is going on around you, and be prepared to adapt fast.
Don’t take the current trend and exprapolate it off into the far future.
Don’t get caught up in consensus and the general feeling. It is usually wrong at the worst times.