‘I once was what you are, and what I am, you also will be.’

— Memento mori epitaph from The Holy Trinity, a fresco by Masaccio

We came back to France to celebrate the Toussaint with friends and family.

All Saints’ Day is still an important holiday in France. People go to church in the morning, clean the graves of their relatives in the afternoon, and put pots of chrysanthemums on the sepulchres.

We will do the same.

One of our aunts is buried in the local churchyard. She came with us when we moved to France 25 years ago. She greatly admired the French and always wanted to live in France.

Alas, time didn’t wait. She was already in her eighties when we arrived and had previously had a stroke. We doubt that she fully enjoyed it here…She died a few years later.

 

Unusually grim

Passing through Paris yesterday, we found the city unusually grim.

It was raining. Maybe the weather affected our mood. But the bars and cafes looked worn and sad. And the sidewalks were littered with slippery leaves.

A blind man made his way, walking in front of us. He had his route well-mapped-out in his mind and swung his white stick from side to side, getting his bearings…and warning others to watch out for him.

But the whole area around Montparnasse is under construction. The familiar landmarks are boarded up. After a few seconds of watching him, we realised he was lost.

‘No…you’re not at the crosswalk yet.’

He was about to step off the curb into the traffic. We took his arm and guided him across.

‘I’m okay now,’ he said, and turned towards the train station.

But he wasn’t okay. There were too many obstacles — cables running across the sidewalk…plywood sealing off side streets and entryways…and makeshift steps leading into the station.

‘It’s all changed around here,’ we said as we took his arm again, guiding him around a temporary enclosure.

‘Yes. I hate it. I never know where I am. I’m always afraid I’m going to be hit by a taxi. They don’t care. They’ll run right over you.’

‘Well, there are no taxis in here. You’re in the train station. Right at the entrance to the grandes lignes…’

‘Well, then, no problem. I know where I’m going.’

With that, he detached himself, thanked us, and headed toward a turnstile, where a young woman in uniform seemed to take charge of him.

 

Tout passe, tout casse…

This morning, down in the countryside, it is cold and overcast. The warm summer that once was is no more.

We will use this occasion to give a memento mori of our own.

‘What’s changed?’ we asked our part-time caretaker, Damien. He threw it back at us, giving himself time to compose an answer.

‘Well…nothing. Our little town is just the same. Nothing ever changes. Except that people are getting older. Jean-Pierre now can’t walk at all. He was able to get around on crutches until a few weeks ago. Now, he’s in a wheelchair all the time. His legs have swollen up.

‘And Claude is still fighting his cancer. I think he’s losing the battle, though. He looked terrible the last time I saw him.’

We were getting an update on our old friends. The news was not good.

‘I guess that is the way we’re all going,’ said Damien gloomily.

We had the same thought. ‘Tout passe, tout casse…’ as the French say. Everything breaks down and goes away. Mountains, men, and markets. But not all at the same rate.

Mountains take millions of years to flatten. Man has a shelf life, too — as it says in the Bible, of ‘three score and ten’ (we are hoping to do a bit better)…And as for markets, it depends.

Looking at the long sweep of the stock market, as measured in real money — gold — we see only four major tops and three major bottoms over the last 100 years.

Maths whizzes will quickly realise what is missing — another bottom. Every ‘I am’ must be followed by ‘I was,’ and every major top must be followed by a major bottom. Or else, the whole balance of life will be out of kilter.

 

Desperately ill

The first major top in stocks, as measured by the Dow compared to gold, came in August 1929. Thereafter, the stock market died…losing 90% of its value, in gold terms, over the next four years.

The next top came a full generation later, in January 1966. And then, just when the stock market seemed at the peak of good health, it fell desperately ill…and drooped and dropped over the following 14 years, wiping out 95% of its previous value — again, in terms of gold.

It took another 19 years for the stock market to fully recover and post a new high — in October 1999. This was the third — and greatest — high of the 20th century, when it took 40 ounces of gold to buy all the Dow stocks.

As usual, commentators proclaimed a ‘new era.’ Thanks to the Information Revolution, they said, this was a stock market that might live forever.

But it was not early in the stock market’s lifecycle. It was late. It had already become what it was…Now, it was ready to fulfil its destiny…by dying.

By the end of 1999, stocks had already begun to sink. Over the next 11 years, they fell, hitting a bottom in September 2011 — with an 85% loss.

From there, well…now, we are in recent history…

Stocks soared and are now at another major top — not as high as in 1999, when compared to gold, but higher than in 1929 and close to the 1966 top.

Could stocks go higher? Yes, of course…Every nursing home has a few old codgers who have surprised the doctors and dismayed the heirs.

Trends tend to go on longer than you expect…and then fall harder and faster than you thought possible.

Who imagined in 1929 — at the peak of the Roaring Twenties — that a Great Depression was coming?

Who foresaw — at the height of the 1960s prosperity — that we would soon be waiting 33 years for stocks to recover?

What sage forecaster knew that the fabulous ‘Information Age’ technology would be a bust?

And today…just in case…we leave you with a warning: What those crashes and depressions were, so will this bubble become.

Buy gold. Sell stocks.

Memento mori…

 

Regards,
Bill Bonner