Social media I say will create a revolution in how we govern ourselves and eventually will start the next bull market, but not for at least three to five years. I define social media as the ability for everybody on this planet to be in instant communication with everyone else.
Several of you have commented that social media is as big a breakthrough as was the personal computer in 1982. In my opinion social media is, but not until the current representative govt format, actually falls apart and unfortunately that unlikely to happen over the next few years.
Before explaining how social media will not only transform government but lay the basis for a long term bull market, I think a pre amble into the history of tech breakthroughs that caused quarter century bull markets in the past would be useful.
On my March 13 Daily Edge I said the Dow was destined to drop to around 6000 before bottoming. To arrive at that conclusion I looked at the three most recent long term bull markets.
The first quarter century bull run that started in 1904, was due to breakthroughs utilizing the ability in moving energy along a wire, called electricity; and also cheaply producing gasoline powered automobiles.
Market participants remember 1929 better than 1904 because 1929 was when the then Dow Jones Industrial Average topped out 12 times higher than the 1904 low. What happened, every economic boom throughout history sooner or later creates the excesses that requires a bear market to eliminate those excesses.
Some say it took a war to end the 13 year bear market in 1942. I say it was breakthroughs in being being able to transmit energy through airwaves, called television. Second was the breakthrough in small motors that created the modern kitchen and household appliances.
The bull run that started in 1942 was a 12 bagger that lasted through 1966 when the Dow first hit 1000. That bull market created excesses over a quarter century that it took the next 16 years to work through.
Then in 1982 storing data on a silicon chip at a price affordable by all became possible; and that led to the IBM PC and Apple II computer. Then came the internet and after that broadband. 25 years later, by October 2007 which was just four and a half years ago, the Dow at 14,000 was 18 times higher than the prior low. The excesses created during that 25 year run are still being worked off.
Here is where I pick up the thread from when I said it will take another five to eight years before Social Media starts the next long term bull market.
Representative government is the real headwind we are facing today. Representative government was created back in 1790 to solve the problem of how we could govern ourselves even before railroads, let alone telephones or the internet.. The United States was geographically so large that there was no way everybody could communicate with everybody else.
But now, social media puts all of us in real time communication with everyone else; therefore why do we need representative government to represent us. We will eventually become in charge of ourselves. To me already existing inside of social media is how we will govern ourselves as a global community.
To summarize, in 1904 we mastered electricity and big engines which allowed for urban living. The mastery of the airwaves and small motors allowed for suburbanization where you could live and work the suburbs just as effectively as in a city. Microchips and broadband allows for exurbanization, which means anyone can work from anywhere on the planet. And then social media will allow for everyone to become a responsible member of the global community.
Unfortunately, all of that will take several more years before it happens. It took 13 and 17 years to work of the excesses of the past two 25 year bull markets. That could mean it will be sometime in the next decade before the next bull run starts.
Charles Biderman
President & CEO TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)
