Updated: May 27
“Wait a minute, Doc. Are you telling me you built a time machine...?" - Marty McFly
As a kid of the early 80's, I was obsessed with time travel. If only I could go back to the past and figure this shit out... You know... Sell shovels during the California Gold rush, get a chance to ask Lee Harvey Oswald, WHY? and maybe even get a chance to save pre-medieval Rome from the Bubonic plague. Ah well! I guess I have to just settle for now.
My point is, unlike Doc and Marty, we won't be building any time machines, we won't be going back to the past and we can't change a damn thing that's going to happen. The best we can do is the heed the lessons of the past. People will tell you stories of progress through an infinite number of linear paths, where one thing leads to the next; just follow the lights and you will be fine. What a load of bullshit!
Wait for it... I can hear you already. I like to think of history as a prediction of the future. If you have ever read Strauss and Howe, I am sure you are starting to get that eerie feeling you are not in control and progress is certainly not linear. Oh! and if you haven't read it, then you should. Human history occurs in cycles. In the 15th century, medieval England was in the throws of the Wool boom, this increased wealth, that led to accidental land reforms (Or if you prefer, progress), 999 year leases were born, yes... a way to own shit, without owning it. The 16th century saw a revival mood, the surplus of Henry VII was soon laid to waste by Henry VIII, sweeping religious ideas like Lutheranism, led to religious reform (Or if you prefer, progress), England decoupled from the Church, became protestant and Henry beheaded a couple wives. By the mid to end of the 16th century, England was broke, an unravelling, every man for himself mood had taken hold, African immigrants numbering 40,000 in London at the time were set upon and by the turn of the century England was facing the Spanish Armada and mysteriously this period was called the Golden age (I smell a Brexit story here). Well, it was a time of imagined individual success.
So why I am telling you this? Well this is eerily what it feels like now and we all have a crystal ball into the future through the past. We just need to pay attention. A couple of years ago, nearly 7, someone asked me, how did you know Oil will trade to $10 a barrel? The answer was simply cycles of History. What was happening in the 1980's in Crude? See the Oil Glut. This was the last time Oil was at these lows. Suddenly you can see a picture of things to come. All traders should be connoisseurs of history, yeah, that's your crystal ball right there. The 1929 stock market crash was due to over abundance of credit in brokerage accounts, it was a big fucking margin call. In 2008 and it was the abundance of mortgage debt in the housing sector, it was a big fucking margin call. Oh yes...And this is the good bit...By the next year the stock market had fully recovered. So why on earth was no one buying stocks in 2008? Let me tell you why. It's because we believe history is linear, one thing leads to the next, bad shit only happens to bad people, prevention is better than a cure and we will keep making carefully crafted progress.
Well, I have got news for you. Progress is accidental, a small spark in the blazing cycle of birth and death, as life cycles repeat themselves. That's the reason why the automobile can't fly, why we are still riding the express train to work and pedicabs are still in service. So there it is...If you want a better P&L curve look at how traders of the past achieved their P&L curve, Like Wyckoff and Jesse Livermore. You want to know what the Pound will do next? Then read this. As a trader I always bare in mind, I don't have a time machine but I sure have the cycles of history on my side and I will keep making smart investing decisions because I know history is not linear and one thing does not lead to the next. Adios Amigos!