Looking Through A Glass Darkly: The Future of The Market and Your Investments A Presentation by John Mauldin, Author of Bull’s Eye Investing And the Editor.

Looking Through A Glass Darkly:The Future of The Market and

Your Investments

A Presentation byJohn Mauldin,

Author of Bull’s Eye Investing And the Editor of Thoughts from the Frontline

The More Things Change…

Three Things That Will Three Things That Will Not ChangeNot Change

A. The Innovation Cycle

B. Secular Bull and Bear Markets

C. Human Psychology

The The

InnovationInnovation

CycleCycle

The Innovation S-Curve

Mar

ket

Pen

etra

tio

n

Time

Diagram of Dent’s Innovation Cycle

Mar

ket

Pen

etra

tio

n

Time

Some Ruminations on the Character of a Secular Bear Market

““The race is not to the swift, The race is not to the swift, nor the battle to the strong.”nor the battle to the strong.”

But that is the way to the Bet.

They all start with period’s of high price to earnings

(P/E) ratio’s

Markets are Volatile and Tricky Little DEVILS

The negative impact of compounding:

Giving back the good times

Taxpayer Nominal

Taxpayer Real

Human Psychology

- Just a few examples of our behavior patterns which drive the markets

- And Drive Us Crazy

A. The Home Field Advantage

B. Confirmation Bias

C. Hindsight Bias

D. Extrapolation - Projection vs. Interference

What Will Change?What Will Change?A. The Pace of Innovation

B. The Pace of Globalization

C. The Shift From A US-Centric World to a More Balanced World

The Pace of Innovation

The Shakeout from the Information Age

Economy Innovation Growth Boom Shakeout Maturity Boom

Agricultural / Commerce -- -- -- -1809

Cotton / Textile 1762-1794 1794-1834 1834-1843 1843-1861

Railroad / Industrial 1831-1847 1847-1888 1888-1895 1895-1917

Mass Production 1882-1908 1908-1937 1937-1944 1944-1973

Information 1961-1981 1981-2007? 2007-2014? --

Railroad/Industrial Economy Industries

IndustryInnovation

DateGrowth

BoomMaturity Boom

Coal -- 1844-1883 1883-1917

Education (Elementary) -- -1851 1851-1930

Iron -- 1846-1889 1889-1916

Railroad 1830 1857-1887 1887-1917

Steel 1855 1878-1898 1898-1918

Telegraph 1844 1860-1893 1906-1929

Composite 1839 1847-1889 1895-1917

Mass-Market Economy Industries

IndustryInnovation

DateGrowth Boom Maturity Boom

Airline 1909 1951-1967 1967-1987

Broadcasting 1917 1925-1940 1946-1970

Education (Secondary) -- 1910-1940 1940-1970

Electric Power 1882 1905-1941 1945-1976

Electric Appliances 1901 1909-1937 1943-1960

Motor Vehicles 1893 1907-1929 1949-1973

Petroleum 1859 1889-1937 1943-1956

Synthetic Fibers 1884 1921-1936 1943-1978

Telephone 1876 1907-1929 1945-1980

Composite 1895 1908-1937 1944-1973

Demography is Demography is DestinyDestiny

The Pace and Shift The Pace and Shift of Globalizationof Globalization

Fundamental Fundamental RestructuringRestructuring

The Shift to the East is an The Shift to the East is an Economic, Political and Economic, Political and

DemographicDemographic

Governments are the Governments are the Problem, Problem,

not the Solutionnot the Solution

The Change is the Demise The Change is the Demise of Centralized Governments of Centralized Governments

and the Rise of the and the Rise of the

Sovereign IndividualSovereign Individual