2008: America’s Ragnarok
On January 2006 Autozone stock was worth roughly $95 dollar per share. Less than 10 years later the stock was hovering right around $800 per share. That is an incredible 700% increase in value. Meanwhile, General Motors, one of America’s largest car manufactures, stock price had dropped below $1. GM was forced to declare bankruptcy.
The main reason for General Motor’s bankruptcy was the devastating famine known as the Great Recession, where household’s average lost 1/3 of it’s of their economic buying power. As a result, more and more Americans turned on fixing their cars, rather than buy new ones. According to Cars.com the average age of a car on the road was 11 years. This lead to an explosion of value for Autozone, as more and more Americans turned to the auto parts supplier to help get them through the recession.
The Viking Cycle of Life and Death
This situation is a perfect example of the “Viking Cycle.” It is fraught with warfare, death, Ragnarok, and new life, only for the cycle to begin again. But it is important to note that the recession didn’t actually change the economy itself, it simply changed what direction the money was going. The only reason Autozone increased in value is because the average household income declined. With declined buying power, people simply changed their spending habits to affect their new reality.
Let’s just say X represents the total amount of money in the United States spends on cars every year. Before the recession the majority of X was going to General Motors, and a much smaller amount was going to Autozone. Then when the Recession hits, now AutoZone is getting the majority of X, while General Motors is getting less of X. So as a result the amount of X didn’t really decrease, it just changed hands. This is a very fundamental rule of Economics. And it is a rule that has governed, and will always govern the financial world.
The Viking Shaman
While Vikings were notorious raiders, they were led by incredibly wise leaders. These leaders would look at what was happening in the world around them, pay attention to what “cycle” they were in, and plan their conquests accordingly. For example, a Viking shaman would start paying attention to the winter weather they were receiving. The shaman would notice it was an incredibly colder winter than normal. This would lead the Shaman to believe that England was also experienced a harder than normal winter.
The Viking Shaman would then summarize that the coastal cities of England would be hit hardest. So they would have had to exhaust their stores of food and supplies over the harsh winter. The Shaman then thinks about the cities surrounding the coastal cities. He would summarize that the more inland villages would have to start producing more resources to share with the coastal cities. The Shaman then knew the best target to attack this spring would be the inland areas, as they would have double the normal amount of supplies. So the Shaman would meet with the raiding party leaders and explain his logic. The raiding captains would agree with the shaman and really their men, and as soon an as the ice thawed, the raiders were on their way inland.
The Shaman over at Autozone also behaved in the exact same way. They saw the recession coming, then began to change and adapt their business model for a new “season.” They were rewarded for it many times over. Whereas the General Motors Shamans did NOT pay attention to the economy, and suffered a humiliating defeat in one of the largest bankruptcies in American History.
Timing Today’s Market: Reading the Runes
While today the Great Recession is over for many, the fact is that cycles still are in play today. With the election of Donald Trump as the 44th president of the United States, has entered into a new cycle. The stock market is soaring to new highs, unemployment is shrinking, and wage growth is finally beginning to be seen.
However one must remember that the economy isn’t growing, money is just simply moving in a different direction. Social programs are being cut, government worker wages are being frozen, and many of parts of the United States government are being privatized. And regardless of the 2020 election, it’s clear that the United States is in a new type of cycle.
As a Viking Investor you will need to learn how to read the runes. To learn to see the world not in terms of asset classes and opportunities, but rather in cycles. Luckily for us we live in internet age where anyone can become their own Financial Shaman. I personally would recommend first reading books about market theory and economic conditions, before reaching for information online. Websites will often be too steeped in current events and not focus enough of the fundamental economic information.
So as the Viking investor you will need to learn to study this cycle. Much like the Shaman, you will need to try to think where is the economy going? Where is the opportunity? How can I the best profit of this current cycle? Or how can I the best survive it? Every cycle presents both opportunity and destruction. So learn to read the runes, learn to listen to the wiser gods of finance, and above all else. Do not let your personal feelings affect your judgment. You may absolutely despise President Trump, but your 401k might not mind him at all.