The 1970's was an extremely volatile period for stocks. The OPEC embargo
early in the decade was a harsh signal of what the 1970's was going to be like.
Again, political stupidity was the underlying cause. This time it was not
entirely the American politicians causing economic chaos. It was kings on the
other side of the Earth. Their greed and hatred took its toll on the stock
market. Oil prices rose from $3 per barrel to $36 in the 1970's. This ignited
inflation that had not been seen in over fifty years. Interest rates were at
record highs. The stupidity of politicians again showed itself with a
"freeze" on prices. And more government and regulatory solutions were
established that only added to the problems in the 1970's.
Of course, government enforced price controls were set by American
politicians and it does not take a genius to recognize the magnitude of that
stupidity. It is amazing that the same institutional body of politicians who
impose price controls on society can impose a minimum wage rate and forced
insurance coverage on employers. If politicians want to have a minimum wage
rate, why don't they go through the gut-wrenching details of starting a
business, hire the folks they feel sorry for, and pay them a lot of money? All
this nonsense put a lid on the stock market in the 1970's and continues to do so
today.
As we move forward into the 21st century there will be more movements to
remove power from the political arena. Societies are recognizing the ineptness
of politicians. Consequently, political influence is waning around the globe.
The world is increasingly being dominated by business-minded people. As this
movement continues to accelerate profits are going to increase at a rapid rate.
The economic prosperity for all will accelerate at amazing speed and the stock
market will increase at extraordinary rates. However, from time to time, the
politicians will exert their few remaining vestiges of authority and screw
things up. The Indicant can foresee that and get you out of the market in time
to preserve your capital.
The LT Indicant recognizes this part of the upside down world and gets you
out of the market when political decisions begin to creep into the free market
system. The LT Indicant also monitors general economic activity, inflation,
deflation, interest rates, etc.
The LT Indicant signaled "buy" in December 1971 with the Dow at
890, but quickly signaled sell in April 1973 with the Dow at 921. This was the
smallest long term indicant gain of 3.5% since 1920. Oil prices, political
stupidity, rapid inflation, and high interest rates were too much for the
market. The LT Indicant did not signal "buy" for the remainder of the
1970's.
