THE DOT - if this turns orange or red be alert

Sunday, December 6, 2009

A very interesting cycle theory


© 2009 Stephen J. Puetz.
All rights reserved.

From the January 7, 2009 issue of the Unified Cycle Theory Newsletter...

A theoretical model of the Extra-Universal Wave Series (EUWS) cycles serves as a good starting point. See the chart below. The blue line represents a composite model of nine theoretical cycles covering a 334 year span from 1720 through 2045.

Among other things, the EUWS cycles modulate mass-behavior in humans. The chart also contains arrows -- marking historically important financial events that transpired along the way. By comparing theory with history, an excellent perspective emerges showing the tremendous influence that EUWS cycles exert on humans via markets.

The vertical grid-lines on the chart represent theoretical peaks of the 19.08-year EUWS cycle - associated with reoccurring financial panics. Every third grid-line (at 1720, 1778, 1835, 1892, 1949, and 2007) indicates theoretical peaks of the 57.24-year EUWS cycle - associated with economic depressions. Russian economist Nikolai Kondratieff discovered this cycle nearly one hundred years ago; however, its precise frequency has been subject to debate ever since. As part of a refinement process, the Unified Cycle Theory more accurately estimated the frequency at 57.24 years. Being located at the years 1835 and 2007, every ninth grid-line designates minor civilization cycle peaks - associated with the 171.72-year EUWS cycle. Downturns in the 171.72-year cycle usually become extreme enough to force major adjustments in living standards for unstable civilizations. Minor civilization cycle declines amount to super-depressions - equaling a magnitude greater than the Great Depression of the 1930s, but not large enough to cause a civilization collapse.

A comparison of the actual financial record versus the EUWS theoretical model follows:

Down Arrow 1 - South Sea Bubble and Mississippi Bubble.
In France, the Mississippi Bubble burst during the first half of 1720 - about a half-year ahead of the theoretical peak of the 57.24-year depression cycle. In England, the South Sea Bubble burst during the second half of 1720, coinciding almost exactly with the theoretical peak of the economic depression cycle. In Holland, numerous smaller stock market bubbles also disintegrated during 1720. The fallout from these financial bubbles was so severe that it took nearly a century before major stock market bubbles inflated again.

Down Arrow 2 - Revolutionary War Depression.
Started with the hardships at Valley Forge in 1778, the struggling American colonies slipped into a decade-long economic depression. This depression began exactly at the 57.24-year theoretical peak of February 1778. Even though the colonies prevailed in the Revolutionary War, following their victory the collapse of the Continental Currency extended the financial hardship for several more years. The depression ended shortly after Shays' Rebellion of 1786-87. Waves of repossessions enforced on unfortunate debtors - mostly involving taking land and homes from poor farmers - triggered the rebellion.

Up Arrow 3 - Prosperity for the New Republic.
By 1788, the United States began shaking off the negative effects of the debt incurred during the Revolutionary War. A slow, steady expansion began. George Washington became the first president of the United States in 1792 and prosperity continued; however, a fairly severe recession from 1797 to 1800 somewhat marred the final years of Washington's second term.

Down Arrow 4 - Climax of the Railroad and Canal Bubbles.
The first major stock market speculation in the United States came to an abrupt end during the same year and month as a theoretical peak of the 171.72-year EUWS cycle - during May 1835! The longest bear market in the history of the United States followed. The decline in stock prices finally came to an end seven years later, in 1842. The stock market crashed first, and the depression followed. The depression began immediately after the Panic of 1837 and it ended in 1843.

Down Arrow 5 - Panics of 1854 and 1857.
A second wave of financial turmoil broke out in 1854 triggered by difficulties at the Knickerbocker Bank in New York. This panic started in the same year as a theoretical peak of the 19.08-year cycle. The financial chaos intensified during the Panic of 1857, and conditions worsened with the outbreak of civil war during the 1860s.

Up Arrow 6 - End of the Civil War.
The depressionary cycle initiated by the stock market crash of 1835 finally came to an end with the conclusion of the Civil War. This recovery started very close to the theoretical trough of the 57.24-year EUWS cycle.

Down Arrow 7 - Panic of 1873.
The Panic of 1873 interrupted the post-war recovery. Business conditions remained relatively poor until 1878, and then moderate expansion resumed. The Panic of 1873 started in the same year as a theoretical peak of the 19.08-year cycle.

Down Arrow 8 - Panic of 1893.
A significant stock market downturn during 1892 came in the same year as the next theoretical peak of the 57.24-year depression cycle. On cue, the 1892 stock market decline eventually turned in the Panic of 1893, and economic depression followed. During the first half of the 1890s, unemployment reached record-high levels (later eclipsed during the Great Depression).

Down Arrow 9 - World War I Bear Market.
Exhibiting a moderate downward bias, a choppy 11-year period began in December 1909 an ended with the deflationary depression of 1920-21. This consolidation period began a little more than one year ahead of a theoretical panic cycle peak in 1911, and it continued throughout World War I.

Up Arrow 10 - Beginning of the Roaring '20s Bull Market.
The great bull market of the 1920s started at the time of a theoretical trough of 171.72-year EUWS cycle. While its industrial base had been laid during the previous hundred years, the United States advanced and applied these prior technologies across all areas of the country during the 1920s.

Down Arrow 11 - Stock Market Crash of 1929.
The stock market crash of 1929 arrived almost one year ahead of a theoretical peak of the 19.08-year cycle. The resulting Great Depression came in three waves. The first phase ended with a stock market bottom in 1932; during 1938, a secondary bottom in stocks ended the next down-phase; and the third phase ended in 1942 about six months after the bombing at Pearl Harbor.

Up Arrow 12 - Global Power Prosperity.
The post-WWII prosperity actually began before the war ended - during the last half of 1942. The ascent started slightly after a 19.08-year trough. During that time, the United States emerged as the world's dominant military power. In doing so, Great Britain fell to a secondary status. After the war ended, uninterrupted prosperity continued for another twenty years.

Down Arrow 13 - Go-Go Bull Market of the '60s Ends.
The speculative Go-Go Market of the 1960s climaxed within one week of a theoretical peak of a 19.08-year cycle. The first phase of the bear market spanned the time from December 1968 to May 1970. The second phase of the decline lasted from April 1971 to December 1974.

Up Arrow 14 - Great Bull Market of 1975-2007 Begins.
The great bull market of the last quarter of the 20th Century started within three years of a theoretical trough of the 57.24-year economic depression cycle. Only two significant events interfered with the non-stop prosperity - the bursting of the Internet Bubble in 2000 and the stock market crash of 1987.

Down Arrow 15 - 1987 Stock Market Crash.
The stock market crash during October 1987 struck just two months ahead of a theoretical peak of the 19.08-year cycle. The resulting financial fallout lasted until early 1991.

Up Arrow 16 - Final Phase of the Great Bull Market of 1975-2007.
The final phase of the greatest bull market in the history of the United States began in January 1991. As Iraq's invasion of Kuwait reached a critical juncture during January 1991, an awesome display of military might convinced investors that the United States could always count on its military to influence global conflicts in an economically positive way.

Down Arrow 17 - Subprime Bubble Bursts.
The subprime lending bubble burst during January 2007. That coincided exactly with a theoretical peak of the 171.72-year EUWS cycle. Downturns associated with the 171.72-year cycle normally produce super-depressions - of the civilization-shaking variety. Within nine months of the subprime crisis, all major global equity markets peaked, and then crashed. During 2008, virtually every major Western-based international bank technically failed. Only massive government interventions kept them afloat.

To summarize the past 300 years, major economic and financial events coincided closely with theoretical turning points of the 19.08-year, 57.24-year, and 171.72-year EUWS cycles. This correlation links financial events to the EUWS cycles so closely that it cannot possibly result from mere chance.

1 comment:

Metalda said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


About Me

I am a professional independent trader