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« The Great Wave Debate - Neely vs. Prechter | Main | The Zoran View - "Dow 100K" is attention seeking and useless »

Sunday, May 29, 2005


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Rich Melmon

I have a dear college friend from almost 50 years ago I saw most recently last week. We’ve stayed close. He’s one of these fellows who likes to take the position that the US is not as great as some of us think it is. He did it 50 years ago, and he does it today. And he always argues his point with great eloquence. Over the 50 years, he has with great facility shaped the particular events of the day to make his case. I love this guy, and so it is easy for me not to get involved in the debate so much as to see the Platonic form at work within him, and watch with fascination as he shapes the material of the day to it. Facts don’t bother him. He has his own. They serve him well. For out of his inner makeup, a particular Platonic form that says the US is not so good must be served. He needs that to savor his life.
I think it safe to say most of us have our own versions of Plato’s forms in us. And it is damn hard, if not impossible, to go very far from them when forming our views on any subject that has any amount of complexity to it—that is, any subject even worth forming a view on.
Predicting stock market closes for tomorrow is impossible. Predicting stock market closes 50 years from now truly absurd. Nonetheless, people far more clever than I can somehow find ways to be paid to do it. And paid well. So they do it. And they, like the diet pill peddlers, use fascinating bits of logic to make their money seemed earned. Or their views seem sociality important. The form their particular versions of this logic take are of course shaped to the particular Platonic structures that inhabit their unique brains. Facts about actual market performance will not in any way dent those Platonic structures. The facts will always be easily shaped to conform to the form.
This is not to say the logic used to support these predictions is completely without merit. There are varying degrees of interesting speculations that come out of the Dow 100000 or Dow 400 debates. Population explosions. Population crashes. Exploiting the natural resources of the planet. Running out of the resources. There are drivers in the world’s economy, like these, that will determine our fate. Some of them can be discussed with insight. But how these drivers will interact with each other, and with the cultures and political structures of the world is not knowable. The discussion reveals only Platonic forms. And there are only two—optimistic and pessimistic. Optimists see man as ascendant. Pessimists don’t. I’m more inclined than ever to think any one strongly in either camp is an idiot.
There are really good people who work very hard on real things that can have a big impact on our future. For example, people who have perfected the hybrid car. Or the next generation of nuclear generation technology. Or sincere efforts to build health care schemes that admit we can’t afford to save everyone every time forever. Apologists for technology, thinking it capable of solving all our problems, are silly. Our market economy is not at all effective in sending us the complex signals we need to do this right. While no better economy has yet been devised, I’m inclined to think we will survive in spite of our belief in markets, not because of this belief.
Market signals notwithstanding, some people still try to spend their energies making good judgments about things that could really impact our grandchildren’s futures. Some people don’t.

Nate Kendrick

A simple criticism, maybe, but looking at the Dow Jones charts on the Dow Jones website, I can't see much that resembles a bubble from 1915 to 1919, and nothing that looks like a 72% drop... Am I missing something?


The scale of charts can mislead. The data show that the Dow had a nice run until 1919, then fell 72% over the next 3 years. The run up was driven by Ford and the promise of mass production. Surrounding it a lot of auto infrastructure got built - paved roads, gas stations, tires, parts stores, and so forth. No where near the bubble of 1929 or 1999, but for the time it was a nice little bubblet, and the auot promise caused a lot of surrounding investments to be made, not all of which were showcased by the Dow index. The Dow had been in an extended trading range, something like now, bouncing against 100, and the Ford phenomenon drove it up, then it collapsed post WW1 amidst double digit inflation, high interest rates, and similar.

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