Protect Yourself Now From this Line of Thinking
There’s a dangerous mindset that most of us have.
Very few of us ever challenge it. And not just laypeople. Alleged experts too!
We’re taught at an early age to extrapolate the current environment into the future. You know, an object in motion stays in motion? Or, in the financial world, “the trend is your friend.”
You don’t have to look very far to see how investors are conditioned to embrace this “truth.”
How about these three iconic cases, just from the last few years, that fooled just about everyone, professionals and common folk alike:
In 2020,
Inflation hasn’t been an issue for the last ten years; it shouldn’t be an issue for the NEXT ten years.
In 2021,
Interest rates have been near zero for the last few years; we expect them to stay near zero for the NEXT few years.
OR, who can forget,
HODL baby!!! Bitcoin just hit $60000! One million dollars here we come!! 😀
But that’s not how the world works. Trends DO reverse. From up to down AND from down to up too! But forecasters RARELY forecast turns and they even more rarely stray from the safety of their crowd.
Sound familiar? We’re betting that – just like us – you’ve fallen prey to the same mindset more than once.
BUT, there is another way —
In his groundbreaking report, The Stock Market is Not Physics, Robert Prechter brings sanity and clarity for all investors.
Here’s an excerpt…
The most certain aspect of social history is dramatic change. To get a feel for how useless–even counterproductive–extrapolation can be in social forecasting, consider these questions:
- It is 1886. Project the American railroad industry.
- It is 1970. Project the future of China.
- It is 1963. Project the cost of medical care in the U.S.
- It is 1969. Project the U.S. space program.
- It is 100 A.D. Project the future of Roman civilization.
In 1886, you would have envisioned a future landscape combed with rail lines connecting every city, town and neighborhood. Small trains would roll around to your home to pick you up, and a network of rail lines would help deliver you to your destination efficiently and cheaply. Super-fast trains would make cross-country runs. You could eat, read or sleep along the way.
Is that what happened? Would anyone have predicted, indeed did anyone predict, that trains would often be going slower than they did in 1886, that they would routinely jump the tracks, that they would be inefficient, that they would have little food and few sleeper cars, that the equipment would be old and worn out?
In 1970, the Communist party was entrenched in China. Over 35 million people had been slaughtered, culminating in the Cultural Revolution in which Chinese youths helped exterminate people just because they were smart, successful or capitalist. Would anyone have imagined that China, in just over a single generation, would be out-producing the United States, which was then the world’s premier industrial giant?
In 1963, medical care was cheap and accessible. Doctors made house calls for $20. Hospitals were so accommodating that new mothers typically stayed for a week or more before being sent home, and it was affordable. Would anyone have guessed that forty years later, pills would sell for $2 apiece, a surgical procedure and a week in the hospital could cost one-third of the average annual wage, and people would have to take out expensive insurance policies just in case they got sick?
In the space of just 30 years, rockets had gone from the experimental stage to such sophistication that one of them brought men to the moon and back. In 1969, many people projected the U.S. space program over the next 30 years to include colonies on the moon and trips to Mars. After all, it was only sensible, wasn’t it? By the laws of physics, it was. But in the 35 years since 1969, the space program has relentlessly regressed.
In 100 A.D., would you have predicted that the most powerful culture in the world would be reduced to rubble in a bit over three centuries? If Rome had had a stock market, it would have gone essentially to zero.
Futurists nearly always extrapolate past trends, and they are nearly always wrong. You cannot use extrapolation under the physics paradigm to predict social trends, including macroeconomic, political and financial trends. The most certain aspect of social history is dramatic change. More interesting, social change is a self-induced change.
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Once you understand the EWP and STF, it will give you a sight into the future like no other!
Watch one of Robert Prechter’s most insightful presentations for investors.
Prechter challenges you to consider a radical new perspective on social and financial causality. The perspective will enable you to anticipate, understand and act on developing social trends that nearly all other investors and forecasters fail to see coming.
Learn how most investors’ conventional understanding is not only flawed, but also dangerous, as it influences them to make the worst possible decisions at the worst possible times–such as buying real estate in 2007, gold in 2011 and oil in 2014. These were major ‘turning-point’ years where it literally paid to go against the herd.
Yet a small minority of investors were able to anticipate these “surprise” trend changes in time to take advantage of them. Now you can too.