In 1970, the Communist party was entrenched in China. Over 35 million people had been slaughtered, culminating in the Cultural Revolution in which Chinese youths helped exterminate people just because they were smart, successful or capitalist. Would anyone have imagined that China, in just over a single generation, would be out-producing the United States, which was then the world’s premier industrial giant?
In 1963, medical care was cheap and accessible. Doctors made house calls for $20. Hospitals were so accommodating that new mothers typically stayed for a week or more before being sent home, and it was affordable. Would anyone have guessed that forty years later, pills would sell for $2 apiece, a surgical procedure and a week in the hospital could cost one-third of the average annual wage, and people would have to take out expensive insurance policies just in case they got sick?
In the space of just 30 years, rockets had gone from the experimental stage to such sophistication that one of them brought men to the moon and back. In 1969, many people projected the U.S. space program over the next 30 years to include colonies on the moon and trips to Mars. After all, it was only sensible, wasn’t it? By the laws of physics, it was. But in the 35 years since 1969, the space program has relentlessly regressed.
In 100 A.D., would you have predicted that the most powerful culture in the world would be reduced to rubble in a bit over three centuries? If Rome had had a stock market, it would have gone essentially to zero.
Futurists nearly always extrapolate past trends, and they are nearly always wrong. You cannot use extrapolation under the physics paradigm to predict social trends, including macroeconomic, political and financial trends. The most certain aspect of social history is dramatic change. More interesting, social change is a self-induced change. Rocks cannot change trajectory on their own, but societies can and do change direction, all the time.
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This article was syndicated by Elliott Wave International and was originally published under the headline The Stock Market Is Not Physics: Part I. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
