Understanding the Falling Dominoes
The banking crises in Europe is only the latest tell in our current Long Wave. In the prior phase of the current Long Wave, the market grew to expect double digit annual returns on investments. However ever since the crash of the dot bombs (coms), investors having been furiously scurrying from pillar to post to find a way to extend unsustainable gains.
The subsequent bubbles which have been created flowing from Dot coms, to housing and now sovereign European debt are the signature dance moves in the Inflection Point of the Long Wave where investors will eventually capitulate and cease in their futile efforts to sustain double digit returns. The expectations will simply stop. They will stop because they are forced to. The backlash for these antics becomes so pronounced that the large investment house executives will start to be jailed. We have already witnessed the start of the backlash.
The following chart shows the Inflection Point activity of the DOW since January 2000. The market highs have been punctuated with new century lows as this model predicts. The markets moved sideways and lower over that span. The chart immediately following the graph spanning the Inflection Point (labeled current Wave 1971-20xx) is provided to show how the market has moved from the inception of the current wave into the Inflection Point. To be clear the market will move lower through a series of peaks and valleys - the market will not simply drop lower as we saw in wave four during the Great Depression.
Because the model projects considerable sell offs as well as substantial rallies to take place, we don't want you to get caught up in defective Modern Portfolio Theory or "Off" Target Date Funds which do not take how a long wave functions into consideration when your hard earned money is invested in those failing models.
Explaining the Long Waves.
