With the Dow Jones Industrial Average now falling back from its first test of the 10,000 level, we are reminded of the many years in which it repeatedly stalled at the 1,000 level before going through. Investment markets are quite interesting from a scientific perspective because they consist of tens of millions of people who pay to send in quantitative data about themselves. Superimposed upon fundamental prices are the greed, fears, hopes, and reason of statistically large numbers of human beings. To students of numbers, this data is as fascinating as it is complex - with numbers linked to rational thoughts intermingled with numbers arising from irrational numerologies - all mixed together, just as they are in the human population.

In evaluating these numbers, it is important to realize that they represent human beings as they are - not as some might opine that they "ought to be." The Dow after all is a small, statistically insignificant list of common stocks for which there exists no rational basis for particular numerical price levels. It has, however, a long historical record (although the list of stocks has been revised many times) and, most importantly, an almost universal following in the press. This makes it the market "number" that most people know.

Superimposed upon fundamental prices are the greed, fears, hopes, and reason of statistically large numbers of human beings....

"Magic" numbers which arise and are impressed on investment markets by human decisions are ubiquitous in commodity markets where traders must deal with them on a daily basis. Stock markets move much more slowly than commodity markets, so these numbers express themselves less frequently. Still, they are there. On a numerical basis, it seemed reasonable that the Dow might bounce downward from 5,000. When, however, it passed through 5,000, it was logical to expect the mania to extend itself to 10,000. Past 10,000 is 20,000 - unlikely, but, if 10,000 is penetrated, a good possibility.

The legendary commodity trader, W. D. Gann, made a fortune by means of understanding the "magic" numbers and ratios with which human action determines market turning points. While sophisticated and rational schemes that correct for changes in dollar purchasing power and incorporate superior systems for determining real values seem more prudent to follow, the mass actions of human beings with one eye on the numbers on newspaper front pages more often determine market turning points. Even among the most sophisticated investors, such as the professional commodity chartists who drove the markets in which Gann participated, certain charting techniques and calculation methods gain popularity and become, therefore, self-fulfilling.

...the mass actions of human beings with one eye on the numbers on newspaper front pages more often determine market turning points.

It is truly remarkable that even when a great fundamental market force moves many individual markets in one direction, numerous individual markets arrange themselves in the preceding weeks and months so that "magic" numbers will express themselves when the overall move takes place. In the current sharp deflationary action, we see that corn penetrated $2.00 per bushel; gold fell below $300 per ounce [a little earlier, since it tends to lead]; silver broke $5 per ounce; and the Commodity Research Bureau Index, a broad average that would seemingly have no rational link to any special numbers, dutifully broke below 200 at just the most critical moment of collapse.

Human action, a partially irrational force, determines prices. So, it is not surprising that the coming calendar change to the year 2000 is giving rise to many predictions of turning points. The market for books predicting the date of Armageddon has been expected to sharply expand and, perhaps, the general level of morals will show some improvement as people hedge their actions against a perceived increase in the probability of death and judgment. There is, however, little evidence that this has altered the behavior of our "President." [Probably the best book ever written on this subject is Observations upon the Prophecies of Daniel and the Apocalypse of St. John. []r Isaac Newton, first published in 1733 and republished by the Oregon Institute of Science and Medicine in 1991 - $19.95 postage paid from OISM, P.O. Box 1279, Cave Junction, OR 97523. Isaac Newton was opposed to the use of Scripture in attempts to predict the future, but he works his numbers out so carefully that his book actually contains an implicit prediction (not, it turns out, the year 2000).]

Eclipsing all other year 2000 fears, however, is the remarkable growing belief that Western civilization will collapse as a result of a single computer bug that inhabits obsolete software systems and older computer chips. The "Y2K" mania has now become so wide-spread that realtors in Southern Oregon have been noticeably busier serving customers fleeing the cities; survival food companies are seriously backordered (while grain farmers are being devastated by over-supply and low grain prices); and sales of Nuclear War Survival Skills, also available from OISM for $12.50, have sharply increased.

...a hundred million inventive and productive people who are not simply going to lie down and die...

 

Yet, what is the reality? First, nearly all of our heavy industry is manually operable without computers and is currently managed by men in their 50s and 60s who grew up computing with slide rules. Considering our technological society as a whole and omitting the newer computers that do not have the bug (virtually all PCs); the computer systems that will be fixed before 2000 (most well-managed enterprises); the computer applications that are not unusually date sensitive and are therefore easily correctable by simple date roll-back (see, for example, www.sitewave.net/y2ksb); applications that can continue to operate at reduced but adequate efficiency without computers, such as grocery stores that might lose their inventory control systems; and the wide range of American enterprises staffed by a hundred million inventive and productive people who are not simply going to lie down and die - but instead will innovate their ways around problems in numerous different ways - there is just too small a remaining part of our civilization that can be seriously damaged by Y2K for it alone to cause the widely predicted collapse.

While it is possible to make a "straw that breaks the camel's back argument" that the Y2K glitch will set off a crisis already waiting to happen such as overvalued markets or the massive debt pyramid, there are many such straws available now and our government seems committed to keeping us plentifully supplied in the future.

Still, human nature makes the year 2000 definitely a "magic number." Who knows how many forms of craziness will converge upon this date? Emergency preparedness for Y2K alone is silly, but general preparedness, physically and economically, is sensible. The current bull market in year 2000 fears is an important indicator.