Power of Four

Realism / Archibald Thorburn/ Cock Grouse

Just felt like taking a couple days off.  I really didn’t do a damn thing.  Did some reading, beer is in the fermentor, slept too much.  

Just decided not to make a decision for a while on just about anything.  I can coast for a bit to see how things play out.  

Right now I think that things are in the blow-off mode.  I just have a hunch that something is gonna give.  Now, as a long-term and studious semi-doomer, semi-prepper, I have favorites in my readings in the past.  One such little bit of heartwarming negativity is Dmitry Orlov’s “The Five Stages of Collapse”.  Fun stuff.  But the map that he has outlined appears to have some legs to it and I think the mental model that he uses where collapses can occur in discrete sections of the political/economic sphere to be quite useful.  The problem with this is the use of the specific word “collapse”.  Quite the word that.  It is freighted with angst and fear which sorta makes it less than useful.  I tend to think of Dmitry’s model as roughly comparable to being knocked down in a fight.  You aren’t knocked out, but getting up ain’t that fun.  

I guess that my view of “collapse” is at the transitions.  This is what I want to work on tomorrow.

Look, does anybody outside of the filthy-rich getting filthy-richer really have a dog in this fight?  The market is nuts.  There is nothing supporting the climb in share prices other than the printing presses at the fed.  Sooner or later the printing presses are going to have to stop spinning.  What I am betting is that the printing presses are going to stop spinning about the same time the capital gains tax goes back to an appropriate level.  When these two things happen, the price of stocks will probably not go up.  

Now, unlike a great deal of the “good” ‘Murca, I have been out of the stock market since 2008.  Since I was beat up in both 2000 and 2008, I had decided that three strikes just wasn’t acceptable (my losses during these two years were in no way trivial).  But the market looks to me to be up to one of the “no, this time it is bad” chunks that I have lived through too many times. 

Now, I currently assign the varying levels of Dmitri’s model’s probability on a semi-logarithmic scale with successive powers of four:

Stage 1: Financial collapse.  1 chance in four

Stage 2: Commercial collapse  1 chance in sixteen

Stage 3: Political collapse  1 chance in sixty-four

Stage 4: Social collapse 1 chance in two hundred and fifty six

Stage 5: Cultural collapse  1 chance in one thousand twenty-four

So what I need to prepare for is another big shake out in the stock market.  Done.  The collapse of the stock market will probably be an inconvenience, but it will mostly affect folks who are in the stock market and who rely on the stock market for their income (boomer day traders:  this means you).

But I think that commercial collapse is a significant enough risk now that I need to address it.  More on this tomorrow.