Urban Survival: Annual Forecast for 2001: 12/15/2000

Replaying 1929!

Updated December 15, 2000

The Urban Survival Annual Forecast: Publication Date: December 15, 2000

Bush 2 as Hoover 2 in Depression Two

First, the bad news: Depression Two started the week ending March 22, 2000. Now, the good news: Wait, there doesn't seem to be any "good news"...just "news". (Unless, of course, like us, you are loading up on gold and short LEAPS and about to go long very short-term calls for the Jan or Feb cycle...)

Thanks to the Aggregate index approach, making the predictions about the market this year is very simple. Just follow the lines, and estimate where the markets will be. I'm eyeballing a decline of 27% over nine months of 2001 basis the 27 percent decline from the 8250 Aggregate top to sub-6000 in the short term 1930's equivalent to the comng period. Look for the low sometime next fall.

What will be more important is who is in the White House and how they will lead us through the pending depths of Depression Two. In this regard, it is instructive to review the biography of George W. Bush to compare it with Herbert Clark Hoover.

The first significant thing to note is that both men were/are about 55 at the time they took office. They are on the young side. Hoover, who was born in 1874, was elected in 1928 - 55 years. Bush, born in 1946, was elected in 2000, 54 years.

Both men come from essentially political backgrounds. Hoover served as Secretary of Commerce under two presidents, while George W. grew up under the shadow of the White House and served as Texas Governor.

As the White House biography says, "Hoover became the Republican Presidential nominee in 1928. He said then: "We in America today are nearer to the final triumph over poverty than ever before in the history of any land." His election seemed to ensure prosperity. Yet within months the stock market crashed, and the Nation spiraled downward into depression.

Doesn't this sound a lot like what's going on with the mood of the markets today?

Elsewhere, we read of Hoover: "After the crash Hoover announced that while he would keep the Federal budget balanced, he would cut taxes and expand public works spending."

What can we expect from Bush? According to the official Bush web site: "He has proposed plans for... reducing taxes on all taxpayers, especially those on the outskirts of poverty; strengthening the military with better pay, better planning, and better equipment; saving and strengthening Social Security and Medicare by providing seniors with more options; and ushering in the responsibility era in America.

I submit to you that public works spending of the 1930's is analogous to spending in the medical and retirement arenas today.

During his administration, Hoover expressed the feeling that Congress was subverting his proposals for political reasons. With things badly split as George W. takes office, is it possible that Bush will face the same problem? Hoover was painted as a coarse and callous president, and given the way things look a year or two from now, that would likely be the paint a liberal press would wish to apply to Bush.

By 1932, the country was in the depths of the Depression and Hoover was badly defeated. Is it possible that Bush will be badly defeated in 2004 with the country at the depths of the "not-yet-fully-evident" depression developing around us?

It's not all bad. Hoover made major contributions to the government by helping in post-war reorganization in 1947. This means Bush might have a roll in rebuilding the post-war economy around 2019. Bush should also live until age 90, which means 2036.

Both men are Ivy Leaguer's. Bush completed his BA (Yale) at age 22, although he later went on to grad school (Harvard). Hoover graduated from college at age 21 (Stanford).

Both men were involved in extracting "wealth from the earth". Hoover was a mining engineer and although he's an MBA, George W. background is primarily in the oil and energy business. According to the George W. Bush web site: "He started out as a land man, researching who owned mineral rights to property, then began trading mineral and royalty interests and investing in drilling prospects, and ultimately started his own oil and gas company. circa 1978.

In 1888, Hoover was a land man, too; he worked in the land settlement office of his uncle, Dr. Henry John Minthorn.

Both men had entrepreneurial drive. Hoover organized an engineering firm in the mining field at age 34. George W. Bush began his own oil & gas business in 1978, at age 32.

Hoover was the father of two boys (Herbert Clark Hoover and Allan Henry Hoover) while Bush is the father of two girls (Barbara and Jenna). There's a certain statistical Yin and Yang about this.

Both men did what must be viewed as similar great "public works" that brought them great fame. For Hoover, it was his American Relief work in 1918-1919 to bring Americans home from Europe. Hoover was 44 at the time. What was George W. doing at age 44? Like Hoover, he was doing something immensely popular with the public. He assembled the group of people that bought the Texas rangers in 1989. Bush was 43.

In 1931 Hoover's deepening economic crisis became more severe as repercussions from Europe continued to shake the financial world. Will Bush face a similar problem from Asia's continuing decline a few years into his Presidency? The re-emergence of Asia has been good for stock hypers, but not much else.

So, what should we see from Bush Two as Depression Two unfolds? Perhaps this snippet about how Hoover handled it, from Grolier's online encyclopedia will be helpful:

"Hoover believed that aid to the hungry and the deserving unemployed should come from local governments in the states and counties, not from the federal government. Yet he recommended and Congress appropriated funds for huge public works. On Hoover's recommendation, Congress established the Reconstruction Finance Corporation, approved Jan. 22, 1932, with an initial working capital of $500 million. " <http://gi.grolier.com/presidents/ea/bios/31phoov.html>

I can only observe that Bush 's record suggests his approach - and possibly results - will be similar. What I see coming will likely be an "Energy Independence Corporation" to push the country forward toward renewable resources, given Bush's excellent handle on the real-life facts of energy depletion.

The world "economic trough" war, forecast by long wave student and adherents, is likely to be waged by a second term Democratic president, who we will elect to a first term after defeating Bush in 2004.

Although some of his mining lectures were later to become part of a book, Hoover didn't write his first big political work until he wrote "The Challenge of Liberty". This means we should see George W.'s book out shortly after he looses to the strong Democrat in 2004.

No, this is not an exact match up. However, as Mark Twain observed, history does rhyme.

The annual forecast for 2001 is a slight up into either the January or February option close, and then a resumption of the long grinding bear market. Down 20 percent, 25%, or even more, is in the cards if the forecast is right.

As I wrote for the Thursday update last week:

1930: If you asked people in 1930 if they thought the country was in a Depression, the more honest would have said "No sir, but we have had a little trouble with Radio (trust) lately. I think the market will recover.".

2000: If you ask people in today's market, the more honest will say, "No, dude, but geez, the tech stocks have had a little trouble lately. Still, I think the market will recover."

Notice any similarities?

I sent a copy of this report to one reader, with whom I correspond now and again. His comments I think are of interest to the case that Bush will replay Hoover. Read on, and make your own judgement, remembering this site offers no financial advice!

I can see that you have done your research.

Curiously enough, a good friend of mine is heavily invested in tech stocks with her pension.

I warned her a few years ago about the impending market crash but when the Naz goes to 5,000 from 1,000 you look like a fool. [Been there, did that & got a major tax loss carry forward left over for this year, too - Ure]

I had told her a year ago that I expected the next president would be "Herbert Hoover round two". (honestly)

She said " Who is Herbert Hoover ?".

Anyway, she was euphoric this past winter when her portfolio was up to $ 500,000, basically the attitude was "you have been calling for the crash for years".

I don't know what the value of her portfolio is now , but she feels " I am so optimistic that a low will be put in soon " !!!!

Well now I recommended she get defensive but what is the use ?

They have been brainwashed George, and my credibility is in question because I was too early.

But my friend here in Maine finally relented, I was adamant, his wife said "he won't sell his Motorola". I was persistent this time, because the timing was right and I knew the blowoff top was in.

I am in complete 100 percent agreement with your Hoover / Bush analogy due to the parallel fundamentals:

1. The excessive stock valuations

2. The excessive corporate and private sector debt

3. The extreme public bullish sentiment for the economy and stocks, which peaked earlier this year, and now we are in the denial phase ( denial, capitulation and then acceptance )

4. The excessive levels of government debt (that's a new fundamental)

5. The "Death by Dotcoms" lemonade stand analogy

6. The fiat currency wars (another new fundamental ?) [Oh yeah, darn near forgot about that point; It's about time for the "Currency Wars paper to become timely based on my 6 month lead of markets - Ure]

George, I trade the S&P e-mini and analyze the market technically with Elliott wave , moving averages, oscillators, commitments of trader reports and everything but the kitchen sink.

The bottom line for trading ? buy strength and sell weakness. (fundamental analysis has been fruitless in recent years as you well know )

Where do we find a bottom here and rally ? I don't know , but will we know when we finds a bottom ?

Yes, when the public becomes bearish, higher highs and higher lows, (the "Santa Claus Rally" is toast as of today), the market doesn't have to do anything: cycles, bradley dates,elliott wave, seasonal tendencies, "cot's", etc.

I am just rambling on but as of now Microsoft guided lower after the market closed, the S&P's are now down to 1351 so tomorrow we will dump again and take out 1340 cash.

In all honesty I became a skeptical bear from incessant bludgeoning by the bull (and suffered the financial losses but did make money on the short side) but the fundamentals are taking control now, the market has to be monitored with an open mind.

I am a trader, and analysis on a daily basis is required for survival.

Do you know the mantra " buy low and sell high ? " WRONG Buy strength and sell weakness, buy high and buy higher, sell low and sell lower.

Things are playing out now as they should, if I have a strong technical analysis opinion I will share it with you.

Your fortitude, swimming upstream against the "BULL" has been commendable but your analysis was based on fact.

Reality rules in the face of insanity, with the facts in hand I think we know how things will play out in the next few years.

I recall on "longwaves" back in March you said " Howard Hill come back, the problem is there are no more bears left", the ultimate top indicator.

A friend of mine that has worked for BASF for twenty years at a plant that manufactures Styrofoam beads in NJ, recently went through a major restructuring, they brought in efficiency experts that evaluated all the employees and presented a new work schedule for the 24 hour plant.

Guess what ? they eliminated one third of the employees and implemented a new work schedule , and by the way they are competing with the plant they built recently in Mexico.

He hates his job now and would love to move up here, he has rented a beach house in Maine for vacation the last ten years.

Anyway , his pension was always in a bond fund, guaranteed return, last December he told me he was going to put his pension in the stock market. ( another ultimate top indicator )

I told him "NO" , if you respect my intelligence don't do it, you will lose, he listened. (I told him he owes me a beer)

This is just a real life example of the insanity, of course his bullish brother and in-laws told him to "get in to the market, you can't lose".

George, I had a union shop Architectural woodworking business that I started from scratch ( after working for a big company in Edison, NJ for five years after college ) for twelve years that primarily did work for pharmaceutical companies, all their corporate headquarters are located there (Merck,J&J,Hoffmann-Laroche,Bristol-Myers-Squibb,Schering-Plough,Hoechst), that is where our work came from, we did work for all of them.

When Clinton declared war on them upon election in 1992 with his proposed socialized health care / drug price controls there was no more work , I went out of business.

Stay the course and let reason and fact guide your thoughts, we know where the ship is heading, on the rocks.

Fortunately you have prepared yourself financially and physically to deal with whatever the future delivers to us.

I live in a very secluded area in southern Maine with friendly wholesome neighbors, they are truly a throw back to the old days, we don't lock our doors, we all have firearms, my three nearby neighbors homes were built in the 1790's , post and beam.

I have an orange cap I wear so they don't mistake me for a deer when they are hunting.

The best (or worst) should play out in due time as we watch the plunge protection team and all the other government apparatus play their games and try to keep their shell game going with their fiat currencies to protect the wealth of the "Fed" shareholders, those bastions of wealth that make Bill Gates look like a pauper.

Let's sit back and watch your latest prognosis unfold unfold into the future.

Hillary in 2004 ? We'll see.

That friends is the simple point of this year's Annual Forecast. Bush 2 is Hoover 2 in Depression 2. If the rest of the planet figures it out this year before the next Annual Forecast, I'll be surprised. But then I tend to run way ahead of events. For example, I developed wireless data to the home computer market when it was still in the videotex realm*. Like I tell everyone who asks, I'm usually very right, but I tend to way ahead of the pack. To put numbers to 2001: 8100 in 2001 by the Dow, and similar declines in the other indices.

Write when you get rich.

George Ure (Seasonal note: if you feel like sending one, drop us an email and we'll send you our Christmas wish list! Urban Survival is free, but a bottle of wine or something would be really nice of you...)

*Now remember: I used the radio name George Garrett at the time, as Ure was totally incomprehensible (see resume). With this in mind look at the front of the second section of the Friday March 4 1983- good picture of me, too: "Seattle radio station KMPS will broadcast what sounds like high-pitched gibberish. The noise will be a test of what George Garrett, KMPS news director, says will be the first broadcast in the nation of computer data over a commercial radio staton's main channel...The noise, when taped and fed into a home computer through a telephone modem, will translate into a simple message on the home computer screen...Garrett said KMPS could over the next six months try broadcasting 15 to 30 minutes of computer data on a fairly regular basis....Copyright laws would have to be explored further befpore transmission of of computer information by commercial radio stations is broadened, Garrett said" {Damn, double damn...I even got the IP/copyright issue right!} I'd also give anything to go back and make a few investments to back the vision! That project got me into Microsoft's heating plant (the home of the big compilers) , in the old 520 building's fourth floor. But again, vision is easy. making a buck is a lot harder!

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