The Economic Cycles
The Study of Cycles and Economic Business cycles may seem to raise an eyebrows to many when hearing it the first time. Yes, you heard it right ;CYCLES almost every human activity through out in history almost and most often revolve in an intelligent discernible patterns which we called cyles; this idea is often far fetched and most likely to be misunderstood and anyone who are known knowledgeable in the study of cycles , such as yours truly; are often criticized and often ridiculed. But ancient civilizations such as the Mayans, and Egyptians and Babylonians are very much aware of this knowledge where they (Mayans) where able to device the mayan calendar for timing the precession of the equinox to dates and seasons of time when it is time to plant and harvest crops. Same is true with the Egyptians where they follow the Egyptian calendar of cycles to know when is the time to harvest and plant crops as well as to know when is Nile river flooding might next to occur.
History of Cycles
Modern contributors in the study of cycles that was first noted in 1800's till present.:
Sir Willam Herschel , 1802-(Scientist/Astronomer)-. He also said that that there is a correlation between the price of wheat and the sunspot cycle.Also discovered that mars and Jupiter rotated on their axis and that they have double stars so their gravity extends outside the solar system
Clement Jaglar ,1860 -discovered that there is a cycle of 9 -11 years of interest rates and stock prices and that cycle was named after him.
William Stanley Jevons,1870 - discovered that there is an economic cycle clearly correlated with the 11-year sunspot cyle.
Rothschild Family, 1890- is believed to have discovered the 40-months cycle of consort prices and the commodity cyles for metals which helped them to amass tremendous amount of wealth that made them the richest family in europe.
Rockerfeller family 1900,- is beleived to have done the same as the Rotschild's but they in turn discovered the 18 year property cycle.
W.D Gann (1900-1930)- Legendary Trader- discovered that there are a lot of economic cycles; and that this cycles are harmonically related to each other.
Joseph Kitchen ( 1920)- publicly published the 40 mos cycle of interest rates and consort prices, this cycle was named after him.
Nikolai Kondreif (1925) -Russian Economist -devised and clearly define the major economic cycles of History in his writings. Later named this wave cycle as the Kondreif wave theory.
Alexander Chihevsky (1918-1942) - Russian Biophysicist ,cosmobiologist, and father of heliobilogy, Nobel piece price winner. Quotes that :" Life is a phenomenon, its production is due to the inner firms of the dynamics of the cosmos and their subjects which is due to the dynamics of each oscillation of organic pulsation which is coordinated with the cosmic heart and the grandiose hold of nebulous hold of the stars and the planets." Hence , that the Cosmos is the cause innacting to the Sun that results in the changes in the affairs of men and those things around him".
R.N Elliotte,1930 ( Accountant/Annalyst)- studied the behaviors of Markets, That markets behaves in waves nested in another waves(fractals), this is the a 5 wave patterns in cycles and named that pattern after him.
Joseph Schumpeter, 1940 - as an Australian-American Economist- discovered that the prior studies on cycles presented by Kondreif's (54 yrs),Kuznets's 18 years ,Juglar's 9 years and Kitchen's 4 yrs are all Hamonically related to each other and can form a composite wave form .
http://en.wikipedia.org/wiki/Joseph_Schumpeter
Simon Kuznets,1940 -published the18 year property cycle in the US. this Cycle was later named after him.He later received thenobel price on economics in 1971.
Edward R. Dewey, 1942(Columnist)- Founding Father of modern cycles research and founded the Institutte of Cycle research FSI which holds other sub institutional research.
Rockerfeller family 1900,- is beleived to have done the same as the Rotschild's but they in turn discovered the 18 year property cycle.
W.D Gann (1900-1930)- Legendary Trader- discovered that there are a lot of economic cycles; and that this cycles are harmonically related to each other.
Joseph Kitchen ( 1920)- publicly published the 40 mos cycle of interest rates and consort prices, this cycle was named after him.
Nikolai Kondreif (1925) -Russian Economist -devised and clearly define the major economic cycles of History in his writings. Later named this wave cycle as the Kondreif wave theory.
Alexander Chihevsky (1918-1942) - Russian Biophysicist ,cosmobiologist, and father of heliobilogy, Nobel piece price winner. Quotes that :" Life is a phenomenon, its production is due to the inner firms of the dynamics of the cosmos and their subjects which is due to the dynamics of each oscillation of organic pulsation which is coordinated with the cosmic heart and the grandiose hold of nebulous hold of the stars and the planets." Hence , that the Cosmos is the cause innacting to the Sun that results in the changes in the affairs of men and those things around him".
R.N Elliotte,1930 ( Accountant/Annalyst)- studied the behaviors of Markets, That markets behaves in waves nested in another waves(fractals), this is the a 5 wave patterns in cycles and named that pattern after him.
Joseph Schumpeter, 1940 - as an Australian-American Economist- discovered that the prior studies on cycles presented by Kondreif's (54 yrs),Kuznets's 18 years ,Juglar's 9 years and Kitchen's 4 yrs are all Hamonically related to each other and can form a composite wave form .
http://en.wikipedia.org/wiki/Joseph_Schumpeter
Simon Kuznets,1940 -published the18 year property cycle in the US. this Cycle was later named after him.He later received thenobel price on economics in 1971.
Edward R. Dewey, 1942(Columnist)- Founding Father of modern cycles research and founded the Institutte of Cycle research FSI which holds other sub institutional research.
The Foundation for the Study of Cycles (FSC) is an international non-profit research organization for the study of cycles of events. It was incorporated in the state of Conneticut by Edward R Dewey in 1941. It has published "Cycles" magazine and recorded the work of Dewey and many other cycles researchers through the years. The FSC also holds conferences and publishes its proceedings. It publishes two journals aimed at investors, Business and Investment Cycles and Cycles Projections.
The Foundation consists of four interrelated groups:
- Interdisciplinary Cycles Research Institute (CRI)
- Market Research Institute (MRI)
- Institute for the Study of the Business Cycle (ISBC)
- Edward R. Dewey Institute for Cycle Research (ERDI)
J.M Hurst ( 1970 ) , - introducedthe computers analysis in the study of cycles and formulated the HURST cycle.
From the Author:
There's a lot of cycle discoveries in the past and many of them coming from different fields had gained prestigious recognitions , but yet even though many of this studies done from the past which many finds today as irrelevant and some say unfashionable or unscientiific; yet we cannot deny it exist and happens in our everyday lives , Only then by learning to appreciate this natural cycles in our lives by carefully studying the past and look for patterns in the stock market and other charts; that we can benefit enormously along the path to wealth creation and not walking blindly against it.
Stock and Commodity Cycles
Looking at the DOW jones historical data since the stock market began : Stocks and commodities have historically moved in opposite directions. Each asset class typically has a 16-18 year bull market followed by an equally long bear market.
Being aware of these cycle patterns and understanding where in the cycle you are will give you great insight. Long term investors attempt to buy into these long bull market cycles early and ride them out until the end.
You don’t have to be a genius to make money in a bull market. Simply buying an index can give you great return in bull market cycle. The bull and bear stock market, commodity cycle shows remarkable consistency with a bull market in stocks and commodities taking turns every 16-18 years on average.
Each cycle during the 20th century has displayed similar characteristics.
1906 – 1923.
The commodity bull market began just before the stock market crash of 1907. This Crash was known as the “Bankers Crash” or the “Panic of 1907” and the New York Stcok Exchange fell 50%. The commodity bull market lasted until after WWI. Characteristics to note are a stock market crash followed by a commodity bull market.
1929 – 1949.
In 1929 the stock market crashed. The Great Crash as it is known sent the Dow Jones Industrial Average from 380 in 1929 to 40 in 1932. Between 1929 and 1932 the Dow fell 90%. During this time commodities were in a bull market and stocks were in a bear market. The bull market in commodities intensified during World War II.
In 1929 the stock market crashed. The Great Crash as it is known sent the Dow Jones Industrial Average from 380 in 1929 to 40 in 1932. Between 1929 and 1932 the Dow fell 90%. During this time commodities were in a bull market and stocks were in a bear market. The bull market in commodities intensified during World War II.
1950 – 1965.
In 1950 the 2nd world war was over and the Great Depression had ended. A bull market in stocks lasted for the next 15 years. Commodities were plentiful as production was still at very high levels.
In 1950 the 2nd world war was over and the Great Depression had ended. A bull market in stocks lasted for the next 15 years. Commodities were plentiful as production was still at very high levels.
1966 – 1982.
This bear market was notable for the market trading sideways for 16 years. The market fell 22% during this period and in comparison to past bear markets it doesn’t seem much but the real problem was inflation. The CPI in the U.S. increased by over 200% and interest rates reached double digits. Commodities boomed. There were a few stock market bear market rallies over this time but by 1982 no-one wanted to touch stocks, yet they were historically cheap.
This bear market was notable for the market trading sideways for 16 years. The market fell 22% during this period and in comparison to past bear markets it doesn’t seem much but the real problem was inflation. The CPI in the U.S. increased by over 200% and interest rates reached double digits. Commodities boomed. There were a few stock market bear market rallies over this time but by 1982 no-one wanted to touch stocks, yet they were historically cheap.
1982 – 2000.
The cycle repeated again with an attack on inflation as central banks around the world raised interest rates. The 1980’s recessions in the U.S. and Japan were short but deep and both countries exited the recession early, although Japan experienced a deep recession in the early 1990’s. The U.S. had to deal with the Savings and Loan crisis during the early 80’s as well. In 1982 growth in stock prices and the economy took off for the next 18 years. This bull market ended with a .com mania, the “Tech Wreck’ and a crash in 2000. A bull market in commodities followed.
The cycle repeated again with an attack on inflation as central banks around the world raised interest rates. The 1980’s recessions in the U.S. and Japan were short but deep and both countries exited the recession early, although Japan experienced a deep recession in the early 1990’s. The U.S. had to deal with the Savings and Loan crisis during the early 80’s as well. In 1982 growth in stock prices and the economy took off for the next 18 years. This bull market ended with a .com mania, the “Tech Wreck’ and a crash in 2000. A bull market in commodities followed.
2000 – present.
The new commodity bull market started in 2000 with a sharp rebound in demand from emerging markets and particularly China. We don’t know when this commodities bull market will end but we estimate around 2016-2018. By the end of the commodity bull market commodities will no longer be in shortage as higher prices stimulate production of both prime commodities and alternatives.
The new commodity bull market started in 2000 with a sharp rebound in demand from emerging markets and particularly China. We don’t know when this commodities bull market will end but we estimate around 2016-2018. By the end of the commodity bull market commodities will no longer be in shortage as higher prices stimulate production of both prime commodities and alternatives.
Bull markets in stocks generally end with a crash followed by a commodities boom. The cycle is loosely around 18 years from boom to bust.
The current commodity super-cycle can be dated back to 1999. The major commodity indexes all hit their 20 year lows that year or in late 1998. Without doubt China and emerging market demand have been the drivers of the great commodity boom. Very low interest rates, thanks to the world’s central banks have made it attractive to own commodities in anticipation of inflation down the track.
Riding the commodity dragon with cheap money has been the name of the game.
China’s latest number are sobering, there has been a mark down in growth and trade partly caused by domestic policy changes but also because of weakness in Europe. Recent comments from BHP and Rio Tinto confirm a slowing of forward orders.
If China is slowing, and we expect it is, the question is one of term, or how long for? We don’t know, and neither does anyone else, we have to watch the numbers as they are released.
If commodity demand is softening what about the other factor, that of interest rates.
Federal Reserve Chairman Ben Bernanke is famous for having said that the Fed expects that abnormally low interest rates should start rising in late 2014. But fed funds futures indicate rates will rise sooner than that, perhaps as early as first quarter or till to mid 2013.
As we have listed above, there have been three periods in the past 80 years where periods of ultra-loose US monetary policy have coincided with upswings in the commodity-price cycle. These were the 1930s to the 1940s, the late 1960s to the 1970s, and the current period beginning in 1999.
As we noted earlier commodity cycles, tend to coincide with equity bear markets and last between 15 and 25 years. The current commodity cycle could run out of steam as early as 2014, bearing in mind that cycles are not an exact science, the future always changes; and these cycles compete with each other (e.a multidimensional reality) and its up to us : cycles analyst to identify which active cycles we are currently in.
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And one thing we have seen in recent months is that commodity prices will have turned down well before official recognition of changes in underlying supply and demand for raw materials.
Other Notable Cycles :
25 year Generational:
The 25-28 year Generational cycle is probably a sub-set (harmonic) of the longer 75-84 year cycle. The four most recent manifestations of this cycle were in 1907, 1929-37, 1956-57, 1980-1982, and 2007 , 2016?. somc postulates that the longer astronomic cycles are related to this 25-28 year cycle, and will do further research to consider those probabilites statistically. Every third cycle seems to carry increased importance: after the 1789 inauguration of US President Washington, the 1860's civil war, the 1930's Depression, and Now, probable depression.
This cycle, at its best, tends to produce long and grinding Bear markets (falling stock prices). At its worst, it correlates with financial calamities.
The 25-28 year Generational cycle is probably a sub-set (harmonic) of the longer 75-84 year cycle. The four most recent manifestations of this cycle were in 1907, 1929-37, 1956-57, 1980-1982, and 2007 , 2016?. somc postulates that the longer astronomic cycles are related to this 25-28 year cycle, and will do further research to consider those probabilites statistically. Every third cycle seems to carry increased importance: after the 1789 inauguration of US President Washington, the 1860's civil war, the 1930's Depression, and Now, probable depression.
This cycle, at its best, tends to produce long and grinding Bear markets (falling stock prices). At its worst, it correlates with financial calamities.
10 year Numeric:Or the 10 year cycle for stocks:
This 10-year negative economic cycle usually appears during the 6th and/or 7th year of every decade. It just happens frequently--no one knows "why". But i beleive that it is linked to the 20 year Jupiter/Saturn cycle, that, in a Financial Astrologers perspective, has a variable negative intensity every 10 years. It is correlated with significant, and sometimes rapid, drops in stock prices and other assets. High to low, the periods had declines in assets/stocks averaging 20% (substantial corrections being more likely). The most recent noted 10 year cycles occurred in 1906-7, 1916, 1926, 1937, 1946, 1956-7, 1966, 1976, 1987, 1996, and 2006.
8-year cycles
Also, the "8" years tend to be among the most profitable, with 2008 being a notable exception. I think the profitability of the "8" years is a rebound effect of the preceding "6" and "7" years. This time, 2006-7 had some sharp drops, but on the whole had rising stock prices, and thus the rebound effect in the "8" year, this time, was negative.
This 10-year negative economic cycle usually appears during the 6th and/or 7th year of every decade. It just happens frequently--no one knows "why". But i beleive that it is linked to the 20 year Jupiter/Saturn cycle, that, in a Financial Astrologers perspective, has a variable negative intensity every 10 years. It is correlated with significant, and sometimes rapid, drops in stock prices and other assets. High to low, the periods had declines in assets/stocks averaging 20% (substantial corrections being more likely). The most recent noted 10 year cycles occurred in 1906-7, 1916, 1926, 1937, 1946, 1956-7, 1966, 1976, 1987, 1996, and 2006.
8-year cycles
Also, the "8" years tend to be among the most profitable, with 2008 being a notable exception. I think the profitability of the "8" years is a rebound effect of the preceding "6" and "7" years. This time, 2006-7 had some sharp drops, but on the whole had rising stock prices, and thus the rebound effect in the "8" year, this time, was negative.
8 year US Presidential Cycle:
8-year US Presidential cycle:
Starting with 1907, the 8-year US Presidential cycle has been one of the most reliable indicators of market variability. The negative periods tend to occur around the 6th year of two term Presidents, followed by significant rallies into the next election. The declines averaged, high to low, about 20%; and the subsequent rallies similar in magnitude. The years include 1907, 1917 (premature related to WWI), 1926, 1937-8, 1946 (would have been Roosevelt's second #2 term), 1957, 1966, 1974, 1987, 1998, and 2006. 2006 was a failure of this cycle. 2006-07 had several short, sharp (about 5-10%) declines, followed rapidly by higher highs. 2008 was The Failure, with the beginning of a Depressionary decline.
From the Author :
But for second half of 2012 will be part of a culmination of this US Presidential cycle; which in my forecast will have another leg up starting on the 3rd week of Sept until Middle of October in the US economy.And may start to pick up again by November. In a fundamental note : this is due to the FED's move to give another Quantitative Easing (QE with a different name) to prop up the economy. Because they all know, that a weak economy in an election year will not be good to his re election.Caveat! on the second week of January 2013, as many US treasury long term bonds may be maturing next year as well as the US fiscal deficit problem , expiring tax holiday, pension funds of baby boomer , obamacare's implementation and the current debt ceiling will all be rolling out next year and may all be again in focus .by PinoyGrader
CaveaT
Reposted the PSE
PSEi current 2012 model compared to its historic data. The top 3 positive correlation are 2004,2005 and 2007.For the month of July: It is an historical important month of the year where the market decides which trend it might want to go. ( important pivotal point of the year); but before it has to change its course ; historicaly it is a has a behavior to dip down first before a new trend to commence. one of the three years (shown below) will be the conclusion of the next trend.
The Black lines are current data
The Red are historic data
PSEi index comparison 2012 VS 2004
Timelag : 8.48 yrs
model correlation - 81 %
PSEi index comparison 2012 VS 2005
Timelag : 7.44 yrs
model correlation - 73.9 %
Timelag : 7.44 yrs
model correlation - 73.9 %
PSEi index comparison 2012 VS 2007
Timelag : 5.19 yrs
model correlation - 78 %
