A summary of John's forecasts and explanations

[protagonist]

The economic crisis happened because after years of economic prosperity, people started believing in the illusion that the economy will grow forever. This means that they started heavily borrowing and investing money from each other, and from this illusion, the economy became more and more inefficient as it (the supply) adapted to the people's illusions (the demand). Eventually, the investments were not making the returns that people expected, so the illusion was dispelled, which meant that unnecessary spending, investments, borrowing and lending was no longer justified. This meant that the inefficient economy was forced to become efficient. This means that a lot of it is "trimmed off", but this is talking about real people. These unemployed cannot find meaningful work, so the government feeds them to do meaningless work. Soon enough, the government realises that the ever efficient economy (with illusions dispelled) needs more resources. So the government now drafts the people doing the useless work into the army to obtain more resources for the economy. And then, it's war.
I'll expand a bit on the war later.

[John]

That's a pretty informal description of the generational cycle, but
it seems to be pretty accurate.

The only thing that is "controversial" is: "So the government now
drafts the people doing the useless work into the army to obtain more
resources for the economy." This seems to be saying that the
government decides to go to war in order to feed people. This is way
too rational.

An important part of the crisis era is panic. Some event triggers a
panic that bursts a bubble or causes a country to go to war.

Sincerely,

John

[ridgel]

John, quite honestly, you're going to have to do better than predicting future trouble between Israel and Palestine to impress anyone. Of the list you posted from 2003:

1. Macro economy (2003): We're entering a new 1930s style Great Depression, and the stock market will fall to Dow 4000 or lower.
6500 was the 2009 low on the Dow. So six years after your prediction the Dow fell to 150% of your prediction. No one's making any money by following you on that one.

2. Macro economy (2003): We're in a deflationary spiral, not a hyperinflationary period, and prices will fall significantly.
"prices" have not fallen significantly since 2003, even as measured by the CPI. U.S. labor costs less because of foreign competition. Electronics cost less. Just about everything else, from oil to gold to government to health care to education costs significantly more.

3. Palestine/Israel (2003): The "Roadmap to Peace" would fail. Once Yasser Arafat and Ariel Sharon disappeared, the region would descend into chaos, leading to a new genocidal war between Jews and Arabs.
There is no peace in the region, but certainly no genocidal war either. Nothing much has changed in the Middle East - it might as well be the 1980s for all the progress that's occurred.

4. Iraq (2003): There would be no civil war and no anti-American uprising, and any that start would fizzle quickly.
You were right about the civil war. As far as anti-american uprising goes, there's still daily/weekly mass bombings, and I doubt many Americans dare leave the Green Zone without an armed escort.

5. # Iran (2003): Pro-American and pro-Western student demonstrations (like America in the 60s) would continue.
I don't know a lot about Iran. Whatever awakening is happening, it doesn't seem to have removed the Iranian president from power or stopped them from trying to build nukes.

6. America (2003): Unlike the 60s, there would be almost no student antiwar demonstrations, and any that start would fizzle quickly.
This is true. Americans seem surprisingly complacent about any numbers of evils. The Greeks set their streets on fire over losing a few jobs for bureaucrats. Americans have seen trilions stolen by the bankers but just live with it.

So out of that list, 4 and 6 are undeniably correct. The rest are ambiguous. Not enough to qualify for the best predictions on the web. I would count "The Housing Bubble Blog", started around 2005 as a very predictive site (less interesting lately of course) including predicting timing based on what types of mortgages were issued when, and on predicting that the sand states would be hit hardest. "The Oil Drum" has been very useful in predicting peak oil timing and relative pricing of oil, gas, coal. Richard Russel was dead on on gold prices - $300 when I started reading him in 2002, $1200 now. No one that I know of predicted the timing of the 2008 stock meltdown. Many were bearish for a long time, too long to be any use in investing. No one that I know of predicted the 60% Dow rise from 2009 march lows.

[John]

> So out of that list, 4 and 6 are undeniably correct. The rest are
> ambiguous.

With all due respect, all six of these predictions will turn out to be
correct. With regard to #3, in May, 2003, everyone was saying that
the only thing blocking a two-state solution in the Middle East was
Yasser Arafat. Go back to 2003 archives of newspapers and see for
yourself. I said something completely different, and I turned out to
be right. Whenever I get something right, there are always people
around to claim that either "it was a lucky guess," or "it was
obvious." Neither of those claims is true in the above cases.

> I would count "The Housing Bubble Blog", started around 2005 as a
> very predictive site (less interesting lately of course) including
> predicting timing based on what types of mortgages were issued
> when, and on predicting that the sand states would be hit
> hardest. "The Oil Drum" has been very useful in predicting peak
> oil timing and relative pricing of oil, gas, coal. Richard Russel
> was dead on on gold prices - $300 when I started reading him in
> 2002, $1200 now. No one that I know of predicted the timing of the
> 2008 stock meltdown. Many were bearish for a long time, too long
> to be any use in investing. No one that I know of predicted the
> 60% Dow rise from 2009 march lows.

There are two issues here. You claim that all these blogs made
correct predictions about prices.

First, I sometimes predict long term price trends, but I can't predict
specific prices, because they're determined by unpredictable chaotic
events.

Second, are you claiming that these web sites were correct
significantly more than 50% of the time? That would be an amazing
record, if true.

All I know is that I kept talking about a stock market bubble in
2005-2007, and that people were writing to me and calling me crazy.
Then, after the bubble burst, I saw these ridiculous arguments by
Roubini and other bloggers about U shaped, V shaped and W shaped
recessions. Today, people like you still think I'm crazy. We'll see.

John

[ridgel]

All I know is that I kept talking about a stock market bubble in
2005-2007, and that people were writing to me and calling me crazy.
Then, after the bubble burst, I saw these ridiculous arguments by
Roubini and other bloggers about U shaped, V shaped and W shaped
recessions. Today, people like you still think I'm crazy. We'll see.

John, I never called you crazy and think you're far from it. But your predictions aren't specific enough in time or details to be very useful. You've been predicting a crisis for the last decade, and you're very good at finding evidence for a coming crisis. But you've been unspecific or wrong about the progression of the crisis. The Dow is not at 4000. It's at 10,000. Maybe it will hit 4000 at some time in the future. But anyone who invested the last 7 years based on the Dow going to 4000 has not done very well. You predict a crisis war. Well unfortunately you will probably be right at some time in the future. But years after your first predictions there still isn't any evidence of an impending mass war, and most of the world is progressing rapidly into becoming as prosperous, soft, and obese as the West already is.

[ridgel]

Second, are you claiming that these web sites were correct
significantly more than 50% of the time? That would be an amazing
record, if true

Yes, I'm claiming that. Because of Russell's reasoning and specific predictions I've made a fair amount of money without a lot of risk. Ditto with The Housing Bubble blog, which collected stories of Sand State house price (and mortgage) insanity and posted detailed charts of when particular slices of ARMs, liar loans, etc. were set to reset (starting in 2007, huge in 2008, 2009). I probably could have made a lot more money if I'd made the connection between the mortgages and the collapsing financial institutions like WM. The next big question in my mind is when the dollar is going to collapse. I know enough history to know that fiat currencies only last as long as the discipline of the government that issues them, and it's pretty obvious to anyone that looks that our government is being run by the criminally insane ( or short term greedy, take your pick). I know you differ there, and predict that the currency of a disfunctional nation will only increase in value. But in my mind it's just a matter of time, and any deflation event is used simply as an excuse by the current government to print up more money and hand it out to their benefactors.

[vincecate]

The next big question in my mind is when the dollar is going to collapse. I know enough history to know that fiat currencies only last as long as the discipline of the government that issues them, and it's pretty obvious to anyone that looks that our government is being run by the criminally insane ( or short term greedy, take your pick). I know you differ there, and predict that the currency of a disfunctional nation will only increase in value. But in my mind it's just a matter of time, and any deflation event is used simply as an excuse by the current government to print up more money and hand it out to their benefactors.

I think this inflation vs deflation prediction is about the most important one for us to correctly protect our wealth. So getting this wrong would be really bad. I think John has it wrong.

Historically when governments and companies are getting disfunctional and dishonest you are better off to have your wealth in gold coins than in stocks or bonds. In most busts before 1971 money was tied to gold or silver, not just fiat. So the question is, do we read history as saying money gets more valuable or that gold gets more valuable? It is not the same thing any more and it is important to know which is the correct interpretation.

My research so far:
http://pair.offshore.ai/38yearcycle/#deflation

-- Vince

[vincecate]

I know enough history to know that fiat currencies only last as long as the discipline of the government that issues them, and it's pretty obvious to anyone that looks that our government is being run by the criminally insane ( or short term greedy, take your pick).

So the US government is now operating without a budget. If it was not obvious that discipline was out the window before, it should be now.

http://www.washingtontimes.com/news/201 ... ntasyland/

[rushye]

I don't think you're crazy John.
You're predictions are great.
Keep them coming.

[John]

I don't think you're crazy John.
Your predictions are great.
Keep them coming.

Thanks, but it sounds like you're more certain of my sanity than I am.

John