Hamilton's E-Wave Analysis

BRK.A, Berkshire Hathaway

For some unknown reason we chose .A this time instead of the B. Both look pretty much the same so it should not matter. The above charts are identical except that the first is arithmetic and the second semi-log.  The semi-log has the added advantage that a certain pace of growth is represented by a straight line or, in this case, a fairly narrow channel. So for the first twenty years growth (in the value of this stock ) is almost constant. Then from the tech bubble to the “great recession” growth slows down only to start up again after 2009. But growth remains slower than previously, that is the first twenty years.

    If we were to tentatively put an EW count on these charts, the 2009 drop would most likely be a wave 4. Alternatively it could even be a wave 2, implying the end of one bull market and the start of an entirely new one. The one year duration strongly argues against this alternative and therefore we will work with the wave 4 idea. That makes everything from the great recession low in early 2009 a wave 5 that already has 5 clear subdivisions and has exceeded every possible channel or simple line. The 5th wave of wave 5 may not yet be complete, but it is getting there.

      The great recession of course gave rise to the even greater bailout and and an even more forceful embrace of the Keynesian philosophy of very low interest rates.  With it we got perhaps the most concentrated and single minded academic theories ever on the impact of monetary policy. Apparently this ill-advised approach contaminated economic thinking all around like a gospel. One of the many unintended consequences, income inequality, quickly became a lot worse. In the context of the Davos summit, Oxfam, just a few days ago, reported that now, today, the 8 richest people have as much wealth as one half of the world’s humanity or about 3.6 billion people! This is down from 43 in 2010. By the way, they are, Gates, Ortega, Buffett, Slim, Bezos, Zuckerberg, Ellison and Bloomberg. Warren Buffett having invested his income from his proverbial paper route at the tender age of 11, is perhaps the most deserving in this lot.

     The form of capitalism that is embraced today, primarily  but no longer exclusively in the US, where wealth is the single most important variable in the perception of one’s status in life, cannot continue as soon we will end up with one or two people as wealthy as all the rest. The nominees for the new cabinet in the US are for the most part very rich and they as a group will naturally want to continue this idiotic interpretation of capitalism. Already the assertion is that this cabinet has the highest IQ ever. A perfect misrepresentation.

     We would lighten up on Berkshire, just remember that Gates once tried to sell his part in Microsoft for all of $50,000. Intelligence and luck are not the same thing.