Forecast 2014: “Mark Twain!”

By John Mauldin

January 18, 2014

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Piloting on the Mississippi River was not work to me; it was play — delightful play, vigorous play, adventurous play – and I loved it…

– Mark Twain

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In the 1850s, flat-bottom paddlewheel steamboats coursed up and down the mighty Mississippi, opening up the Midwest to trade and travel. But it was treacherous travel. The current was constantly shifting the sandbars underneath the placid, smoothly rolling surface of the river. What was sufficient depth one week on a stretch of the river might become a treacherous sandbar the next, upon which a steamboat could run aground, perhaps even breaching the hull and sinking the ship. To prevent such a catastrophe, a crewman would throw a long rope with a lead weight at the end as far in front of the boat as possible (and thus the crewman was called the leadman). The rope was usually twenty-five fathoms long and was marked at increments of two, three, five, seven, ten, fifteen, seventeen and twenty fathoms. A fathom was originally the distance between a man's outstretched hands, but since this could be quite imprecise, it evolved to be six feet.

The leadsman would usually stand on a platform, called "the chains," which projected from the ship over the water, and "sound" from there. A typical sound would be expressed as "By the mark 7," or whatever the depth was. In modern English language, it is interesting to note that the expression "deep six," refers to this old method of measuring water. On the Mississippi River in the 1850s, the leadsmen also used old-fashioned words for some of the numbers; for example instead of "two" they would say "twain". Thus when the depth was two fathoms, they would call "by the mark twain!" (bymarktwain.com)

And thus a young Samuel Clemens, apprentice Mississippi riverboat pilot, would take the "soundings" and from time to time would sing out the depth of two fathoms as "By the mark twain!" We think that is how he found his pen name. In Life on the Mississippi, Mark Twain describes sounding: "Often there is a deal of fun and excitement about sounding, especially if it is a glorious summer day, or a blustering night. But in winter the cold and the peril take most of the fun out of it."

The pilot would much prefer to hear the sweet sing-song call of "no bottom," as that meant there was no danger of running aground. "Mark twain," or 12 feet, was getting rather shallow for some of the larger vessels and so sounded a note of caution.

On their surface today the markets seem as smooth and flowing as Old Man River, but are there sandbars lurking in the depths? Will the journey this year be as fast and easy as in the last five? Can we plunge on into the night, relishing the call of "No bottom" that we are hearing from the bulls? Or is that a cry of "Mark twain!" telling us to be cautious?

Perhaps we should take our own soundings from the data to see what might lie up ahead. This week, in the third part of my 2014 forecast, we'll look in particular at the US markets as a proxy for markets in general. (This letter will print a little longer as there are lots of charts.)

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