We laughed and learned some things about surfing (and local bars). The surfers paddle out to look for the waves, and the good ones tend to come in patterns. True surfers will communicate on a network to find great waves and drive 400-500 miles down to Mexico to ride them. Sometimes, waves can converge, or meet. If the crest of a wave meets the trough of another one, they cancel out. If the crest of one wave meets the crest of another, hey converge and the height of the wave doubles. Waves tend to travel in triads, and the frequency of the wave is the distance between them. Since the frequency can vary, sometimes these packs of waves meet and either cancel or converge. Many waves of different frequencies can converge as well. They create ‘rogue wave’ or monsters. The guys I was hanging out with called them ‘Raouls’. “When there’s a Raoul, dude, the whole ocean seems small and this monster comes in and gives you a ride of your life!” This was peppered with surfer-speak and gestures of total excitement.
Physics confirm the Raoul theory, and you can see it for yourself by plopping yourself on a beach and watching the waves (while wearing sunscreen, of course). It’s easier to watch waves if you have a refreshing drink with local libations. An umbrella in the drink seems to help. I recommend this academic exercise.
Now, to finances. I’ve watched, studied and taught economics and finance since 1977. I’ve also been a student of history. In history, there are a series of documented waves of human activity. For example, in the great book The Fourth Turning, the authors (Neil Howe and William Strauss) very accurately render the 26 generations of Anglo-American culture into a series of archetypes. In general, we’re in what the book refers to as the Fourth Turning (Crisis). There are a variety of other waves as well including:
- Waves of economic activity (Kondrotieff, Goldstein)
- Waves of political control (Schlesinger, Burnham)
- Waves of War (Toyenbee, Wright)
- Waves of Religion (Wallace)
The market just gave us the biggest 5 month gain since 1983. Look back in history: that was followed by another 1900% gain over the next 17 years. When the surf’s up, you get the big ride. And on the horizon, there’s something big…
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