The years since Y2K

In the last fourteen years the market place has been amazing in its confirmation of the seven year cycle. In each set of seven it would have been wise to unload what was hot early in year six and be out of debt in year seven. In 2000 the internet bubble sprang a leak in March. But though out that spring and summer opportunities to move to safety where available as the Nasdaq rallied back to prices still 25% higher than they had been the previous summer. By fall however the down trend was reconfirmed and by the time terrorists flew our planes into the World Trade center and the Pentagon a year later, no one doubted that the internet bubble was over.  Enron and World Com where shown to be frauds and the whole economy was in a shambles. 

If as I believe the fall of 2001 ended a seven year cycle then the next seven years was overwhelmed by the run up of housing prices.  In the fall of 2002 prices on homes started to move up very quickly. For the first time in recent memory, to buy a home one often needed to offer more than the listing price to become the buyer, if you did not, someone else would offer more, leaving you still looking. As the 00’s ticked by the mortgage market seemed to be in full support of higher housing prices. Indeed banking as a whole was very aggressive at marketing loans for almost any item, housing or otherwise. The excesses are now well known, the exact top of the housing market is thought to be in early 2006 but serious declines did not happen until late summer of 2008 when the world’s banking system nearly melted away. Leading to some of the most non-free-enterprise actions ever taken by western governments.

The result was lower prices for not only homes but stocks and almost any other consumer item. The banking crisis would have a long term de-leveraging effect causing drag in the economy for years.

Now as we come to the end of another set of seven one has to wonder, what is the excess this time? The stock market has had a nice recovery from the 2009 lows, Housing has recovered a bit but is by no means over heated. The one thing that seems impossibly priced is interest rates. That 10 year United States Treasury bonds trade at 2.5% is remarkable. Some have argued that we are in a bond bubble.  Maybe so but I don’t see any excitement to buy 10 year bonds at 2.5%. Unlike the internet bubble or the housing bubble no one is buying these bonds with dreams of riches, rather they are being bought almost as a last resort and mostly by the Federal Reserve. Which is a whole other subject.

My point in all this is, that as I sit here in the late spring of 2014, it seems to me that this cycle may very well pass in similar fashion to the first one I observed after becoming aware of this cycle. Having discovered Deuteronomy 15 in the summer of 1991. At that time I became convinced that fall of 1994 was the end of the second cycle of seven years since the Jubilee of 79/80.

I personally made my preparations and was as far out of debt, as I could reasonably be, at that point. Selling our home and taking a rental for a few years and otherwise simply becoming very conservative until the beginning of the new set of seven years.  Interestingly the years from 1987 to 1994 where very similar to the years of this current cycle. It seemed the combination of the stock crash of 1987 and the first Gulf war had kept most excesses out of the market place and the end of that cycle passed rather uneventfully.

As I pointed out in last week’s post at this point I expect this cycle’s end to pass rather similar to 1994. But you never know and Deuteronomy’s direction to be de- leveraged is still the ideal. The one area of serious risk I see is Geo political, think about the Jubilee cycle and its 50 year pattern for a moment, WW1 started 100 years ago in the summer of 1914 and the US civil war ended in 1865, a little more than 150 years ago. Both these events created a dynamic shift in the economic picture. Of course Vietnam also started to heat up around this time 50 years ago, so some of the world events we are hearing about give me more pause than usual.

On the optimistic side the wars and shake ups we have seen in the Middle East in recent years make me hopeful that a new dynamic emerges in that part of the world which could open a new chapter for Freedom, Justice and Economic expansion for the world. 

If the fall of 2015 does pass uneventfully then I expect the next seven years to pattern 1994 to 2001 in which case some of those internet dreams may actually come to fruition. Pondering again the Jubilee pattern, in the summer of 2019 we will celebrate 50 years since man first walked on the moon. We could see some very interesting things between now and 2022    

While now is the time to be preparing for Smitah.  Once you are prepared for the Sabbatical year it is also wise to be thinking about how to participate in the next seven years. As you can see Deuteronomy 15 really can help you become a long term thinker and goal oriented.