Wolf Money(Book recommendation)

 

“The Sale of a lifetime” by Harry S. Dent, Jr. discussed bubbles in the financial market are unavoidable due to human quest for more of the things we already had.  Remember the famous phrase by Gordon Gekko from the movie, Wallstreet, “ The point is, Ladies and Gentlemen, greed for a lack of a better word, is good”. Wallstreet is advocating greed is good. Greed and bubble always act in concert. Even the intellectually brilliant scientist, Issac Newton was a victim of South Sea bubble which nearly bankrupt him. If one is caught in a bubble, one is not alone.  It is also human-like to be greedy. Greed give rise to bubble. The author did give a good history lesson on some spectacular bubbles that went bust. The south sea company, The tulip mania and The great housing bubble in US that lead to the subprime crisis. Most bubbles if not all bubbles are created by government and its policy. The deregulation of the banking sector during the 70s lead to credit bubble. The removal of gold standard by Nixon lead to an unprecedented increase of US government debt which was previously under the shackles of Bretton Woods.

The author mention on the 7 guiding principles of bubbles.

1.) Bubbles are cyclical.

2.) Bubbles are human natural 

3.) Bubbles are exponential, not linear.

4.) Bubbles are financial orgasm. Price goes from exponential, climax, peak and deflated quickly.

5.) A burst of a bubble always resulted in price going back to where they start or sometime lower.

6.) There are no stopping of bubbles. It always happens one way or another in different form.

7.) A burst of a bubble always resulted in a reset that last for years to unwind. 

The key to identify bubbles is to follow a host of cycles. For e.g the demographic cycle from cradle to grave estimate the peak spending of baby boomer. On average, baby boomer of most countries have a peak spending around the age of 46-48. The 17-18 years geopolitical cycles is another key indicator. The down cycle started since 2001. For the last 20 years or so, we had many wars during the current period as compare to the relative calm from 1983 to 2000 in the geopolitical space. The book does give the reader a rough guide on how to predict the next boom and bust. I find the book an interesting read. It is not the last book which try to predict boom and bust but the concept does look sound. The book has a similar theme to the “Joseph cycle” 7 lean years and 7 bountiful years by Simon Sim. It goes onto Lone Wolf recommendation with its good explanation of boom and bust, cycles and periods.

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