The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

A “ROGUE WAVE” Coming in the Financial Markets?

A rogue wave occurs seldom, although more frequently than had been thought. It can be 85 ft, high. It will shatter ships like little toys. The same can be said about the financial “rogue waves,” which are becoming more frequent.

  1. There was the 1973-1974 devastating bear market when the Value Line index plunged 80%.
  2. That was followed by the 1980—1982 rogue wave, when inflation went to double digits and the prime rate topped out at 21.5%. A destructive bear market followed.
  3. Then came the “Crash of 1987.” The DJI fell over 22% in one terrible day.
  4. This was followed by the Thai crisis in 1997, and the Russian debt default in 1998, both of which caused global market plunges, which neiter country could endure.
  5. Then came the internet bubble which imploded in 2000. A number of Stocks without earnings, or even income, went from $2 per share to over $100. One went to $996. I was lucky to own that stock, selling much of it over $980.
  6. It was followed by the global financial crisis of 2007-2008. Although many stock indices have recovered well from that, the economies have not. It has been the worsts post-recession recovery since the Great Depression.

Imagine, the creation of the Federal Reserve in 1913 was supposed to prevent such crashes. But now we are seeing such “rogue waves” in the stock market with increasing frequency and heightened amplitude. The next one could be the rogue wave that damages the global economies for decades.

I saw the following article about the “rogue waves” and wanted to share some excerpts.

An excerpt of an article, by “Cognitive Dissonance” (   

“Since the impact force of a wave is an exponential function of its height, you can clearly understand why no modern ship is designed to survive a direct hit from a wave of this magnitude. 15 meter/49 foot waves from trough to crest is the current design standard, while the Draupner was nearly 25m/82ft tall, thus the reason for rarity of eye witnesses to these events.

The only reason the measuring device, an on-board laser, survived to tell the tale was because it was secured to a gas pipeline platform anchored to the sea bottom and suspended above this monster wave.

Interestingly the 2001 European Space Agency’s MaxWave project illustrated that rogue waves, in this case defined as waves at least 25 meters/82 feet in height, are not as rare as previously assumed. Using satellite data from a three week period of time, they identified ten rogue waves in total.

I readily acknowledge a universe of reasons why the coming catastrophe can, and will, be denied or downplayed by those who are certain this could never happen (‘they’ will never let that happen) will assume we are all doomed anyway (what’s the sense, we’re all gonna die) or are simply comfortably numb (don’t Bogart that SSRI my friend). In reality there are always a million reasons not to act and barely one or two to do so.

As long as the herd is grazing (relatively) peacefully, from a psychological point of view it is much safer to burrow deeper into the perceived safety of the herd than to strike off on a contrarian path. Within the mind of the denier, the apathetic and the depressed, what is coveted above all else is affirmation from the herd we are doing what is best. First we lie to ourselves and then we seek affirmation from external ‘authorities’ that our lie is in fact truth. And the ultimate authority is the mindless herd.

Few have the stomach to walk the lonely path of the contrarian; fewer still have the stomach to lie to themselves and not seek external affirmation of their lie. Truth is self evident and needs neither confirmation nor affirmation. But the lie is voracious in its desperate need to be constantly confirmed and the liar affirmed.

Nor will I pontificate about expected arrival times of the rogue wave, for that is a fool’s errand pure and simple. It could arrive in a few months, a few years or even a few decades. The powers that be are quite adept at keeping the balls in the air.

On the other hand, ultimately the arrival depends not so much upon the machinations of the money masters as the degree of faith and belief the population wishes to invest in the crumbling regime. Those who control and promote the economic madness are not the only desperate men out there. As the rogue continues its approach, the herd will sense encroaching danger and plead with those who ultimately created the wave to save them from the wave.

Thus self destructive collective bargains will be struck and the day of reckoning will be moved back a short distance. While the can will not be kicked down the road forever, it can be kicked further than you and I think possible. All it requires is an ever increasing price to be paid in the form of the citizen’s consent to greater burdens and deprivations. And by ‘consent’ I don’t necessarily mean ‘willing’.

One thing appears clear to me. You and I have more time than we think, but less time than we need to properly prepare. To paraphrase Ernest Hemingway, the rogue wave will approach gradually, then suddenly. The question is not if you will prepare, but do you have the inner courage to prepare now for a nearly certain event of potentially catastrophic power arriving at an unknown time.”

My view: as the ever accelerating growth in global debt, eventually we will reach the point where just one dollar more of debt will cause the pyramid to crumble. You may have seen the physics experiments where a small pyramid is built with sand as one grain after another is added. Eventually, just adding one grain of sand to the pyramid causes the entire pyramid to crumble.

The big puzzle: there is still no way to know when another added grain is the final one. Nor is there a way to predict the timing of the next global crash. We know it is inevitable. The best we can do is to try to recognize it when it starts…using advanced technical analysis.

For those who love math, check this link out, which explains market crashes in fractals: