Foreshadowing—what we learn from the past and what to make of it

Posted: 01.14.08

Figure 1: Maslow's Hierarchy of Needs.

Trends, styles, customs, and governments come and go. Few things remain constant. Eating, drinking, housing, Maslow-type things remain constant. But the next two levels up are the ones that interest me, and projecting a bit, I think you do too. It is in the status and belonging levels that we find the association of self esteem and consumer goods—automobiles, clothes, and yes, TVs and gadgets. Here is where the iPod and the HDTV show up as important needs. And in the industrialized countries where the basic needs are met for most of the populations, these esteem and aspirational needs become more important as we apply our discretionary income and extend our borrowing.

With that thought in mind, it occurred to me that CES, the granddad of all conferences—the longest running electronics show in the world, was a harbinger of things to come.

Back in 2000, in a former publication we owned called Multimedia Device Report, we wrote this about CES in the year 2000. “This year’s CES, held in Las Vegas (1/5/2000), was interesting for a number of reasons. First, it was smaller than past years—estimates had attendance at about 100,000. The declining attendance figures for CES and other shows in the past year or two make me wonder if we aren’t coming to the close of the expo/conference/show era after twenty years of continued growth. The second thing that struck me, as I wandered past dozens of booths filled with radios, MP3 players, remote controls, souped-up DVD players, watches, laser pointers, calculators, HDTV LCD panels, and every kind of electronic gadget and gizmo known to man, was that China has decided to take over world-wide production of any and all of these devices. Based on the number of Chinese companies exhibiting products and prototypes at the show it won’t be long before we start calling it the Chinese Electronics Show.”

In addition to being a window into the future of the development of devices and global economics, I think CES may also be a predicator, a leading indicator of how the stock market is going to behave. Consider the following chart.

You notice how CES attendance rose and then so did the Dow-Jones stock market index. And notice how when CES attendance fell off, the market index followed.

Now, notice what CES attendance has done in the last two years. If CES attendance is a foreteller of the future, then we’re heading into some rough times in the stock market. I’d like to call this Peddie’s Law (number three, I have others you know), because it’s a prediction based on an observation just as Moore’s Law is (there’s no real LAWs of physics involved here or in Moore’s Law.)

Figure 2: Trends and developments of DJIA and CES attendance.

Now we have the choice of half-full or half-empty philosophies. If you think the glass is half empty and that the market is going to crash, then you’d sell. If you’re a half-full kind person, then if the market is going to crash that means there’s going to be some great companies’ stock for sale at discount prices so you’d buy.

Predicting the future from the past has only worked (so far) for Dr. Moore. You can’t drive a car looking in the rearview mirror, and the past has not been a reliable predictor of the future, especially in electronics. So, the best advice I can give you for the future is PROCEED WITH CAUTION—there is going to be rough water ahead.