What Charles Dow Would Say About the US Today

Charles Dow founded the Wall Street Journal and invented the Dow Jones Industrial Average. He would have something to say about the US economy right now except for one thing. He’s dead.

Luckily, he left behind principles for analysing the market that became known as Dow theory. And they have something to tell us about the US today and in the future.

Part of Dow Theory is the idea that strong stock market growth needs to be reflected (and preceded by) strong growth in the earnings of the transport companies. That’s trucks, railroads and the like for shipping goods and people.

Well, this week the Wall Street Journal reports that the amount of freight hauled across US highways hit an all-time high earlier this year.

According to the paper, improved retails sales and factory output is fuelling this trend. The American Trucking Association says industry revenue has grown on average 6.5% a year since 2009.

Now a lot of people think the US stock market is nothing but a bubble the Fed created from easy money. But old Charles, if he was still with us, would suggest the following.

He’d say the American economy and stock market is chugging along OK. People are spending. Goods are moving. You can stop worrying so much.

But there’s something old Charles would never have imagined. And that’s the idea that trucks might one day be driving themselves.

It’s incredible that this tech doesn’t seem to register on people’s radar a bit more.

We’re getting closer by the day. That’s why there’s actually more to trucking right now than just testing which way the economic winds are blowing. The industry is going to prove part of the testing ground for the arrival of autonomous vehicles.

There are many angles to this. For one, I’m not sure where all this leaves talk about the Rock’s remake of the 1980s’ classic Big Trouble in Little China.

It’s one thing to imagine Jack Burton talking into an iPhone in the Pork Chop Express instead of his CB radio. But not even having his hand on the wheel?

But how close are we to this new reality? I mean autonomous trucks. That’s where it gets tricky. Martin Ford says in his book The Rise of the Robots that trucking is one of the more difficult areas to make completely autonomous.

He sees someone staying in the driver’s cabin for the foreseeable future. The trucks will drive themselves. But companies will be forced to have a human around to supervise.

That’s mainly down to the huge destructive potential of the vehicles. Not too mention the liability that comes with them. Also, there are old crumbling roads and bridges, and different terrain on long hauls. Humans can cope better with these obstacles.

Finally, he says automating trucks that deliver food and crucial supplies opens them up to hacking and cyber attack. That’s an ever-present danger now. Sam Volkering can show you how to profit from that here, by the way.

What’s true for trucks is not the same for taxis, buses and couriers that operate in the urban environment. Ford puts it like this:

Once the technology has a solid track record and the data demonstrates a clear safety and reliability advantage, there will be a powerful incentive to automate these vehicles.’

We can already see that trend in play with Google, Uber and the car manufacturers investing in driverless technology.

What Ford’s book makes clear is this trend of automation and robots is coming for a lot more than cars. Not just low paying, retail jobs either.

According to Ford, white collar workers aren’t safe. Not even lawyers and pharmacists. This is going to break open entire industries across the world. And it’s just starting.

We’re talking robots that are curious and self-learning. They can outwit humans in the game Jeopardy. They can even cook. US start up Momentum Machines says it’s building a machine that can make gourmet hamburgers.

Hamburgers? It can toast the bun, slice the fillings and add sauces to order. It can make 360 burgers per hour. The bookquotes the co-founder as saying, ‘Our device isn’t meant to make employees more efficient. It’s meant to completely obviate them.’

Ford see more and more jobs wiped out and automated, with profits increasing to business owners. In his eyes, labour will be irretrievably subjugated. Of course, like everyone else, he missed the effect all this will have on land prices.

For example, the current tech revolution is heavily centred in California. So it’s no surprise to me to hear the Wall Street Journal say this week that the tech sector ‘gold rush’ is why San Francisco has the most expensive homes in the US.

It’s rippling out all over California and LA. The paper quotes a Beverly Hills real estate man as saying…

”Demand is high at every level and every price point,” he says. For homes priced at $2 million and under—even up to $3 million—the market is “insane” right now.

Insane. His words, not mine. It’s the land question everyone misses. That’s because to see that, the only place you can go is here.


Callum Newman

Associate Editor, Cycles, Trends and Forecasts

Join Markets and Money on Google+

Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect.

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