This Time it Really is Different

How often have we heard this in the markets? In my tenure in stock research I recall it during the Internet run-up in 1997-2000. Then I heard it during the housing bubble from some real estate chums.

Now, I am hearing it again… this time from Mohamed El-Erian. One individual that serves on my own personal ‘council of thought leaders’, (which is simply a small group of analysts and thinkers that I listen to very carefully.)

What sets El-Erian’s call apart from the others is that he is not delivering a message of unconstrained growth and a new era of unprecedented prosperity. No. He is in fact quite the opposite and serious in calling this time a pivot point in history that will be noted by forthcoming generations. In fact the words he uses are, ‘… a massive cyclical dislocation in the context of a massive secular realignment.’ (see the video here- his prepared remarks are quite sobering)

Let me see if I can translate his words from ‘econo-ligua.’ Secular changes are large, usually permanent changes that occur while cyclical changes are temporary fluctuations due to the business cycle of expansion, stagnation and contraction. So I am understanding El-Erian to say that we are undergoing a global, permanent re-balancing. So what are we ‘realigning’ or re-balancing? If I understand him correctly, we are realigning the fact that since World War 2, the USA has been the de facto leader of the world economy. Driven by an unstoppable consumer, the USA has been an economic powerhouse and the engine of world economic growth. Apparently this is changing permanently.

If that wasn’t rosy enough, his initial phrase is suggesting that this global shift in economic power is simultaneous with a global economic downturn that he calls a ‘dislocation.’ What is dislocated? Lotsa people, jobs, industries and standards of living. Well, there you have it, listen to the vid yourself and draw your own conclusions.

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