News and Publications

Tallal’s Tips

A Publication by Joseph (Jody) Tallal, Jr.
Volume XX, Number 2
May 1, 2006

The Fourth Turning � Degrees of Planning

In the last issue we discussed the method for establishing what percentage of your assets to hedge. Your first job is to determine just how likely you think a Fourth Turning is to occur. Before we begin this issue, I would like to share with you some personal thoughts in this regard, as well as an insightful e-mail exchange I had with one of the authors of The Fourth Turning.

A few weeks ago, I began pondering the question of exactly when does a Fourth Turning begin? Does it occur at the time of the catalyst, or does it occur as a result of the generational patterns assuming their Fourth Turning positions with everything simply waiting for the catalyst to ignite the process? As part of my research I decided to pose the following question to the authors of the book for their opinion. Below are the thoughts as I presented them.

“When in history did each past Fourth Turning actually begin? Did the last one begin the day of the stock market crash in 1929, and the previous one to that, the day the Civil War broke out?

Analyzing your theory, that would not appear to be the case. Wouldn’t a Fourth Turning have already occurred for the above described catalyst to be able to trigger its unfolding? Wouldn’t things in a society have to have already deteriorated to such a point that the catalyst was simple a flash point from which that Fourth Turning becomes most evident?

The events leading up to the stock market crash, and how people responded to it, are what allowed it to manifest into the Great Depression and subsequently WWII. The same is true of the Civil War, American Revolution, etc. Would not the system have to already be deeply skewed for a catalyst to be able to manifest the outward results of a Fourth Turning?

The reason for these questions is I am curious if our Fourth Turning has in fact already begun and simply waiting for the right catalyst to become overtly obvious. The most striking part of our problems today is the absolute corruption of our political system, which affects every part of our lives as Americans. Congress no longer represents the people. There is no level of common sense left in Washington and they uniformly see themselves as above the people, not subject to the same pension plans, rules, benefits, or for that matter, laws. For example, would the handling of the illegal aliens issue and the FBI seizure of Congressman Jefferson’s files (and subsequent responses from President Bush, the Attorney General, heads of the FBI and CIA, etc.) have been the same in the 1950’s, 60’s, 70s, or even 80’s?

It appears our nation is deeply divided over core beliefs and philosophies. Additionally, it seems safe to suggest that in our lifetimes we have never seen such polarity across the board on so many issues. The last couple of elections where split down the middle, with each side 180 degrees diametrically opposed to the thoughts and beliefs of the other. The depth of this cavern is so immense that neither side can even discuss the other’s point of view. Each demonizes the other’s thoughts and feelings with a rabid intensity that precludes logical discussion.

How can such intelligent people on both sides of an issue be so vehemently different on fundamental issues that they simply can not even communicate? This would appear to be the epitome of the very foundation needed to trigger a Fourth Turning.”

Mr. Neil Howe was kind enough to answer my inquiry with the following comments.

“On the specific question you asked, yes, it can always be said that each old era “contains” the new era within it (so to speak) otherwise how could the new era be born? George Will once famously observed that “the 1950s was pregnant with the 1960s.” And, I suppose, we all knows what he meant by that—culturally, socially, and generationally. Taken to its extreme, however, the incubatory perspective means that no new era ever really begins, going back to the beginning of time. This can’t be right, either. From our perspective, a new turning begins when the potential becomes actual, when what is earlier hidden (however obvious) becomes outwardly apparent, when society’s direction if not yet its position dramatically alters. It is in this sense that 1929 or 1860 or 1773 can indeed mark the beginning of new eras. Yes, gas filling a warehouse may be a necessary precondition for a conflagration, but that precondition is not yet the event. Someone has to touch it off with a match. That is the catalyst, which may in itself be a random event but which begins the unfolding of a new dynamic (“regeneracy”) unique to Fourth Turnings. But history is never predetermined. Until the match is struck, no one can tell how (or even if) the Fourth Turning will unfold.”

Mr. Howe’s grasp of this issue is obviously far superior to mine. What I take from his comments is that there is no Fourth Turning until a catalyst ignites the tender box. I also take from his analogy that striking a match in an empty warehouse will not trigger much more than the fire at the end of the match tip. However, if you have a warehouse filled with gas, it takes very little to set the whole thing off.

From my perspective, our first real job is to determine if there is any gas in the warehouse, and if so, just how much. As discussed in previous editions of Tallal’s Tips, I suspect that there is sufficient evidence to suggest the Fourth Turning theory continues to unfold yet again unabated.

There do not appear to be many signs that we have turned away from the path of each of the previous saeculums in Anglo-American history. This saeculum’s First, Second, and Third Turnings have proceeded as flawless examples of the book’s theory. In fact, it is not a far stretch to make the case that we have all the signs in place that the warehouse is overflowing with gas simply waiting for the match to strike. I believe the next Fourth Turning is imminent. It is not a question of if, but of when.
This Tallal’s Tips will focus on considering the possible catalysts we might face and beginning the preparation for dealing with each. Initially, it would appear that such a process might be next to impossible as the potential scenarios are almost endless. Fortunately, this is not the case. In fact it mirrors the same type of strategy required to do any long range planning where the issues are more abstract than concrete.

We each know how to attain concrete goals through simple planning. If we want to take a vacation, we know the steps to make that occur. However, if we want to retire, then that is a little more abstract. How much money each month would it take to provide the standard of living you want? How much money will that be in the future when you actually retire, after considering inflation? How large an estate would you need to have enough to continue to inflate through your retirement and not run out before your mortality? Now the issues are more abstract and not as easily visualized.

The goal in our case is to plan for all events that might happen if a Fourth Turning were to occur. What might this look like and what would you need to do? Where do you start?

Let me provide a simple example to make a point. Imagine before the time of air travel you received a telegram informing you that a rich uncle of yours has died in Hawaii and left you his entire estate. For our purposes let’s say that this estate already contains everything you will need to achieve this goal. The only requirement is that you must go to Hawaii in person and sign the transfer papers.

Looking at how some people would react to such a situation, you will find a few standing at the edge of the water in San Francisco Bay thinking Hawaii is to the southwest. They would then simply jump in the water and start swimming toward it. Obviously, because they did not think through the process, they would soon drown. A number of people might buy different types of boats, with some thinking ahead to buy navigational equipment. After setting the compass heading south by southwest for Hawaii, they would set sail, unaware that five miles off shore, they would no longer have any visual references. A compass heading of south by southwest would be useless as the ocean's currents and prevailing winds start pushing them around. The chances of reaching Hawaii would be next to impossible because if you miss Hawaii by 5 miles in the water, you will never see it and continue sailing on to Asia (see the illustration below). These two absurd illustrations might remind you of the methods undertaken by the vast majority who fail in their attempts to achieve their major financial goals. They either blindly move in the direction of their dreams expecting to receive, or inadequately plan their journey.

However, a ship’s captain almost always safely makes such a journey because he acts according to his experience and training. What is he doing differently than those in the above illustrations?

First, he knows that it is impossible to simply sail from San Francisco to Hawaii in a single step; it is beyond the capabilities of any known navigational procedures. Therefore, he charts a course that is a series of smaller, obtainable, coordinate points (sub-journeys) from San Francisco to Hawaii.

This step-by-step method is called the science of NAVIGATION. It is the same systematic method that a doctor uses to successfully complete an operation, or that an attorney uses to solve a complex legal problem. In fact, this same principle of navigation is employed by all the modern sciences. Likewise, it is the lack of this step-by-step procedure that causes failure in most peoples’ long range planning.

The same science is the process that we will use in developing our Fourth Turning strategy. It can provide you with a system to navigate through the multitude of events that might present themselves if a real Fourth Turning unfolds. It will allow for a true “end game” strategy that can allow you to stay focused and succeed no matter what occurs.

Our biggest challenge is going to be the natural attempt to keep this whole conversation in abstract form; not wanting to seriously consider what life might look like if a Fourth Turning really occurred. Our natural tendency towards self denial is going to be our biggest obstacle. This is why it is so difficult to write a will as one contemplates one's own death.

I know in my case this was definitely true for both situations. As soon as I read The Fourth Turning I tried to discount it because I simply did not want to seriously contemplate what my family’s future would look like if a Fourth Turning occurred. In fact, even after I decided that it warranted some serious attention, I fell asleep on this issue several times as self denial reared its ugly head. Only after I could no longer rationalize the prudence of not planning was I able to make a serious commitment to do so and followed through.

You have car insurance in case you wreck your car, even though you don’t plan or want to. The same is true for your house, health and life. Planning for a Fourth Turning is nothing more than acquiring the proper insurance to ensure your family will be OK if what you don’t want to happen actually does.

A sound strategy for this portion of the plan (borrowing from our navigational example) is to approach this like a captain of a ship does to properly provision his ship before setting sail on a long journey. He has to contemplate anything he feels might occur and be prepared for such with adequate supplies to handle them. He will have all kinds of spare machinery parts which may never be used, more food and water than he expects to need, and back ups for his back ups.

This is what I call staged planning. What happens if this occurs and then that, much like a good chess player plans his moves 10 - 15 moves ahead.

Like buying insurance on your home or car, if you don’t properly insure, a wrong event could cause a total loss. What if you had full comprehensive and collision on your car, but only 10/20/5 in liability coverage and you daughter accidentally runs over someone while talking on her cell phone? The premiums you paid provided no protection for this event which could spell financial doom.

Therefore, let’s break down the potential scenarios in an attempt to determine the various levels or stages for which to plan. The first is what we will call First Stage planning. This will focus on the events concerning financial issues that might occur during a Fourth Turning. Once they have been firmly identified, we can develop a step by step plan of action to address each potential. Our real job in this area is to attempt to think of all of the possibilities and not significantly miss the one that might destroy our planning.

One key element in this area is not to become a doomsday planner, shifting everything in preparation for the worst. This would be very expensive and could easily consume everything you have. Any good strategy, or hedge, has to consider the possibility of nothing happening. I have seen numerous wills and trusts so expertly crafted that when the person dies, their estate taxes will be nothing. However, God forbid that they should live “too long”. Any well rounded estate plan needs to consider the quality of life up to death as well as the tax consequences thereafter. The same must be true of your Fourth Turning economic planning.

The goal here is to attempt to diversify in such a way that if things go well you hopefully will not lose much money. If done properly, you would want to structure your diversification with a good risk/reward ratio, with an eye for real gain regardless of whether anything occurs or not. This way, the premium one might expect to pay for their Fourth Turning insurance could actually produce a real gain, even if things go very well in the future.

The next level is what we will refer to as Second Stage planning. This looks at potential breakdowns within the community in which you live. I can remember grocery shopping the day before Hurricane Rita was scheduled to come ashore. I wasn’t even thinking about it, but I was very confused when all the fruit was completely gone except for a very poor small selection. The next few aisles in the Tom Thumb store I walked down were also near empty, except for a few non popular items that were not very appealing. It took me almost two aisles to even realize that something was very wrong, even though I still had not focused on what it was. When I noticed the bottled water aisle was completely empty, I finally figured it out and was really quite shocked at my lack of forethought.

Think about how fast things deteriorated into near anarchy in New Orleans after Katrina hit. The police were right alongside the thieves in Wal-Mart stores taking whatever they wanted. Armed gangs roamed the streets raping and stealing at will. We need to carefully consider the prospects of what things might look like in different Fourth Turning’s unfolding. This is best accomplished by analyzing the potential catalysts that could be the ignition point and thinking through what might then unfold.

The next level is what we will term as Third Stage planning. This stage will look at potential governmental action, or lack of such in a crisis. Depending on the type of event, the government might move in with excessive strength and authoritarianism. Likewise, it might not be present at all like in what occurred in New Orleans for a number of days after Katrina.

We want to look at governmental controls utilized in the past and try to predict new approaches which might be considered to contain a crisis. The authors of the book discuss such a scenario in their prediction of a worldwide virus in which the government’s reaction would be to cordon off entire sections of the country. The potential strife resulting from such an action, and subsequent reactions, might eventually lead to calls for martial law. Again, the best way to address this stage of planning will be to carefully consider the potential catalysts and the government’s potential responses to each.

The final stage is what we will refer to as Stage Four, or disaster planning. This must consider numerous potentials among which would include not wanting to remain in this country. Hitler’s Germany would have required such actions if you found yourself unaligned with the powers to be. Those that survived best were those that got out first.
I will devote a whole newsletter discussing events over the last century around the world that have transformed safe, secure places to death traps in a relatively short period of time. While this seems too far fetched to discuss, failing to do so would not be prudent. A captain of a ship never expects to use lifeboats on a voyage, but failing to have them aboard would be a criminal act.

The only reason I am here today is my grandfather made a conscious choice when he was fifteen years old. He boarded a freighter by himself bound for New York with only a small suitcase of personal possessions. The village in which he lived was later ransacked and burned with most killed or dispersed. Those that chose other places to relocate ended up in areas that were even worse within a few years.

Such type of planning must be a part of any well thought out Fourth Turning strategy, especially when you consider the magnitude of what happened in each of the last five Fourth Turnings. In a Fourth Turning, life will not remain the same as we know it or return to normalcy shortly after the initial crisis. Instead, it will continue to spiral downward. The very concept of a Fourth Turning is best understood using the book’s author’s example of how winter is designed to clear away the old decayed growth and make way for the new in the following spring. Life in none of the previous Fourth Turnings returned to the past, but instead always moved into a new future.

When I originally started this series I planned for it to only have four parts. Based on continuing research, it now looks like it will take eight issues or more.

The goal of the next Tallal’s Tips will be to analyze Stage One potential catalyst in greater depth, and develop plans of action to address each. Following issues will take the same approach for each of the next stages in sequence. The final issue will be a summary issue with some final thoughts.

I appreciate your continued interest in this topic and am happy to speak with you concerning any questions or thoughts you may have.

www.tallal.us
(972) 726-9595

NOTHING CONTAINED HEREIN IS INTENDED TO GIVE ADVICE WITH REGARDS TO SECURITIES AND ANY SUCH ADVICE DESIRED SHOULD BE OBTAINED FROM A REGISTERED INVESTMENT ADVISOR