I was watching two interviews the other day - one of Tim Morge (http://www.medianline.com/) and one of Jim Rogers (http://www.jimrogers.com/). Both were making the same point: the actions of the FED and the US Government led us step by step to the abyss that faced us a few days ago. Each step was taken in the name of saving the economy - firstly of the US and then the World. And each step has made matters worse.

I agree.

I would not be surprised if at some point soon, Paulson will tell us in Paul Keating’s famous line when Treasurer of Australia: “This is a recession we had to have”. As I thought at the time when I heard it: “True, but you (the Australian Government) created the conditions that made it inevitable!”.

Given the bubbles of the 90’s (created by excesses in M3), we were always going to face a secular bear-market in stocks and at least a recession of the economy. Historically there have been 6 secular bull markets:

• 1816 to 1835
• 1864 to 1873
• 1898 to 1902
• 1921 to 1929
• 1932 to 1966
• 1982 to 1999/2000

Each bull leg has been followed by at least a sideways to bear phase that has lasted an average of 17 years and showing a standard deviation +/- 2 years. The sample size is too small to rely on as a map; but the consistency of the data does provide a guide. So, all things being equal, the bear in stocks should bottom out 2015 to 2017.

But, and this is a big ‘but’, the Government has the ability to prolong the pain.

I am hoping they won’t do that  too much. We have just had the first leg of a bull market in an epoch marking change (from the Information to the Internet Age); the second bull market following such a change has been stronger than the first. The 1966 to 1999/2000 was the first and in Aussie terms, it was a beauty! Imagine what the second leg will be like if history continues its pattern.

If history does repeat, I’d love to take part in that!

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