10-19-09

Revolutionary Change

If you can possibly understand and tap into a revolutionary change, you can make a lot of money...

I'm not just talking about investments now like timing the stock and property market right. I'm also talking about business; specifically, either adjusting your current business or starting a new venture with this revolution in mind.

So is there a change out there you can benefit from?

I think there is and it's something of a continuing theme in this letter. You're aware of this change. I'm talking about the big life re-think the population is undergoing now; all around us are signs that we're going back to basic values not just because of a downturn (as the politicians dangerously assume), but also because that we as individuals are continuing our journey of evolution and generational cycles.

This life re-think might be simply demonstrated by saying: we now understand that a bigger house with a bigger flat screen does not make us happier deep down. It's more than just a response to a recession in my view. As someone who's been there and done it all, I can tell you that the grass is definitely not greener in the upscale neighborhoods.

The generational cycle also has a lot to do with this and it influences history. Because each of us are influenced by how we were parented in that we try to correct the flaws we see of our parents with our own children. There are essentially 3 generational types...

The elder generation has high morals and social conscience but experienced real hardship; The Great Depression and World War II, and as a result, they wanted their children to know good times- to live through them. This gave rise to the Baby-Boomers; a generation who as a result, are very self-centered.

The Baby-Boomers were told they were special. They spent like crazy and partied through their decades causing debt explosions and we're now seeing the aftermath.

The children of the Baby-Boomers known as 'Generation X' largely felt detached and somewhat neglected due to the self-centeredness of the Baby-Boomer parents. This gave rise to a generation with its own characteristics; pragmatic and amoral, tormented in the shadow of a generation who claimed to be 'it'.

Generation X gives birth to a new generation and tries to be the exact opposite of the baby-boomers. As a result, this new generation have high morals and social conscience, the results we're now seeing in the aggressive movements to save the planet. And we're now back where we started. This new generation will know hardship and they will spoil their children as a result and give rise to a new generation of baby-boomers (heaven help us).

You should take note of the fact that WARS move in cycles also directly linked to the generational cycle and typically occur around the time baby-boomers become disenfranchised, angry old men (we're getting there...).

But going back to how I began this letter, this younger (and therefore trend-setting) generation (aged approximately mid-twenties and under) is ushering in a new era of frugality coupled with a social conscience of not living too excessively when people in Africa are starving. This combined with the fact that everyone else needs to cut back is giving rise to the life re-think.

Whether voluntary or imposed, we are entering a New Normal regarding consumer's habits.

Businesses who have plenty of profit margin are slashing those margins aggressively and a transfer of wealth is going on from corporations to consumers everywhere.

If you own or are employed by a business that is either not doing this or does not have the profit margin to do this, you are in great danger.

On the other hand, if your business can do this or even better, is directly addressing this newfound frugality, you will do very well. Don't think that everyone suffers in a recession- during recessions is when big empires are often born.

Out of chaos comes order. That new order will be a leaner and meaner economy, but it will be a painful adjustment if you're not making important changes right now.

From last week: "We're now into October and earnings reports are due out. October could well be an 'up' month with earnings reports being released that could reveal some positive 'surprises'. Remember, the market reacts to a company's results based on what was expected; they may be bad, but as long as they're better than expected, that's a reason to buy in their book. Meanwhile, Main St. certainly doesn't feel like this is a recovery."

You're about to get a very important lesson on the art of making money from contrarianism (doing the opposite to the herd)...

Bears (people who bet on the market falling) have had every reason to be right... but they've been absolutely killed since March.

None of the data coming out has been impressive and frankly, the whole thing has been a giant propaganda campaign from the Fed to get people spending and to buy time. In short, the market rise has been irrational.

That's what the bear traders have been saying to themselves since March. But, every day since March, they've got steadily poorer. They are right in my opinion, but they're also wrong where it counts; in their wallets.

Since the big rebound began, I've been coaching you through it, explaining that this was to be expected and that it's just a bear market rally. I told you to expect Dow 10,000 all the while knowing it was a flawed advance.

I've also been explaining how SENTIMENT is what is behind market rises and falls- human emotions- and rarely has anything to do with the fundamental data. When everyone decides that the bear market is over, THAT'S when I'll go short again.

And we may well be approaching that time now. The sillier it feels to be out of this rally, the closer we are getting to shorting time again (making money by falling stocks).

So we patiently wait for the day when everyone believes it's safe to invest again and the bear is declared clinically dead. Be ready.

If your future is tied up in stocks now, you might want to think very carefully about that.

At some point in 2010 I imagine, I'll be sitting at a dinner party when everyone is sharing horror stories about how much they've lost in their stock portfolios (again only this time even worse). I won't have any such story. In fact, I'll have made money from the fall.

But I daren't say anything. I'll just have to shake my head and pretend I got killed too, smiling inside.

Which side of the table would you like to be sitting at when that day comes?

Best Regards,

Mark Patricks

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