History Rhymes: Learning from the 1970s
BowtiedBull formerly known as Wall Street Playboys has been a regular source of alpha and insight for me. I’ve written about how history is super helpful to understand what is happening in the present day. Technology and elements of society change but people do not. It feels like we continually live these cycles in civilization. This is why it’s helpful to have an understanding of history: the pattern recognition. Bowtied Bull, like Calvin Froedge have shown that the times we are going through right now have many parallels to the 1970s. You can read the full write up here: https://bowtiedbull.io/p/1970s-vs-today-another-chaos-opportunity
While history rhymes, it doesn’t always repeat. Some key differences of the 2020’s versus the 1970s.
“Income inequality is massive. The top 1% wealth in the USA is around $14,000,000. Even if they dumped everything into 5% bonds, they would never care about gas prices with a $700,000/year to spend. More realistically they can track the market which means a cool $1,000,000+ to spend assuming they don’t even work! (Hint vast majority still work for fun)
We unlikely get a wage/price spiral. Back in the 1970s, wages went up because inflation was high which caused companies to raise prices. Rinse and repeat. Today? Big difference is Tech. You don’t need as many workers to retain the same profit margins so instead of raising the wages, you replace the workers with more technology
Finally, the oil industry is nowhere near as big as it was in the 1970s as a percent of the economy. We have a lot more domestic production, electric vehicles are around and we have alternative energy sources for power beyond oil
Yet there are some lessons to draw on from the 70s, I found these to be interesting ideas on areas and assets of growth.
"While the most important part is positioning yourself to launch a niche business based on youth trends, if you look at investing you could group up the items that will likely repeat vs. struggle:
We wouldn’t assume that oil/utilities end up being complete home runs like the 1970s. Domestic production is much higher, alternatives exist and it’s the easy scapegoat for the masses to say “go after the utilities/oil companies” to reduce the cost
Luxury Real Estate is probably the safest. Back in the late 1970s farmland did well but that is not something you can do without significant active effort
Stocks, unlike the late 1970s, we’d expect tech to actually do better and in a worst case buying something like the S&P would simply keep pace. A lot of companies would get crushed in another wave of inflation but you’ll be offset by the winners (a general wash)
Bonds are un-investable once again.
Wages will unlikely keep pace with inflation. Tons of deflationary pressure from technology will make it hard to recreate the 1970s wage/price spiral. Once again more like the “modest stagflation” set up
Printing money is where the incentive is. Trump would prefer an asset boom vs. bust."
The point is to learn from history. These are some really good ideas to inform your investing strategy and help you build some assets to position for the future.