Posts filed under “Cycles”
The 56 year cycle mentioned yesterday (“Periods When to Make Money” (© 1883) was picked up by FT Alphaville; we hear it caused some “consternation” in certain circles where the marinating of ice cubes takes place.
I find these approaches quite fascinating, if for no other reason than I consider myself a student of market history. (Whether it is an actionable thesis is an entirely different question). For those of you who are also interested in such things, let’s explore this periodicity, better known as the Benner Cycle.
Samuel Benner was a prosperous farmer who was wiped out financially by the 1873 panic. When he try to discern the causes of fluctuations in markets, he came across a large degree of cyclicality.
Benner eventually published his findings in a book in 1875 — BENNERS PROPHECIES: FUTURE UPS AND DOWNS IN PRICEs – making business and commodity price forecasts for 1876 -1904. Many (but not all) of these forecasts were fairly accurate.
The Benner Cycle includes:
-an 11 year cycle in corn and pig prices with peaks alternating every 5 and 6 years.
-cotton prices which moved in a cycle with peaks every 11 years.
-a 27 year cycle in pig iron prices with lows every 11, 9, 7 years and peaks in the order 8, 9, 10 years.
It makes some degree of intuitive sense that a farmer would recognize longer term cycles. Their entire year is based on the annual sowing/growing/reaping cycle; The 11 year solar cycle would certainly impact their crop yields, revenue, etc. So looking at how the variants of crop yield and prices impacts the overall economy and markets makes lots of sense.
There are two caveats to all of these cyclical variants — Gann, Elliot Wave, Fibonnacci, Benner. First, consider there is insufficient data — we really need 500 years of market history to have a better data set to draw conclusions. Second, the unfortunate tendency to form fit after the fact (I see people doing this with Fibs especially). Mnay of the peaks and valleys are off by a year or two, but it looks close. Some of it might be explained by randomness.
Regardless, I think it is worth thinking about as a general long term framework — and a reminder that the so-called 100 year floods comes along much more frequently than the name implies . . .
Via Google Books
For those who wish to explore this further, you should check out David McMinn’s THE BENNER CYCLE, FIBONACCI NUMBERS& THE NUMBER 56.
I am not a huge Prechter fan, but I found his book Prechter’s Perspectives very intriguing — it covers the long term political-socio-economic cycles of recession, war, recovery, expansion, bubble, etc. It is intellectually stimulating, but not exactly actionable . . .
Yesterday, we looked at Long Term Market Cycles dating back to 1927; Today, lets have a look at periodicity dating back to 1763. The cycle the (unknown) author posis is a repeating 16/18/20 year Across the top is the legend “Years in which panics have occurred and will occur again.” The past panic century of…Read More
You may recall that last month we picked up on a troubling signpost in the divergence between temporary hiring and private sector payrolls (less temps). In that post, I produced the following chart (below is from last month’s post, not updated with most current data): I wrote: But here’s the thing: Temp jobs are now…Read More
(Invictus here, friends. Please note that technical problems booted me out of this post before I was done with it, and it posted before I could get back in. Therefore I’m doing I’ve done some after-the-fact editing, which I would normally not do.) As readers may know, I have used some pixels here and elsewhere exploring what…Read More
Okay, so here’s today’s thought experiment. Instead of putting up some charts or tables and providing my own interpretation (not that I’m ever shy about doing so) , I’ve decided to post a Rorschach Chart. Below is a comparison of two data series that have a meaningful correlation (>0.70, with a lag in this case) over time. The two series are identified below the fold. For now, here’s the chart. So, what does it all mean (if anything)?
NOTE: Blue line goes to the right-hand scale, red line to the left-hand scale.
(Data Source: St. Louis Fed)
(Invictus here, boys and girls) As I have written previously here and elsewhere, I tend to look at everything through the lens of job creation. What is the correlation of a particular release to the job market, if indeed there is one. Does it lead? Lag? Is it coincident? If I can find a meaningful…Read More
The Case-Shiller Index printed this morning, so a bit of chart/table porn is in order. Below is a 20-in-1 look at the Composite 20 (both the chart and the table are NSA): 19 of the 20 metro areas showed sequential gains for the month, the only laggard being Las Vegas. Here’s a nostalgic city-by-city look…Read More
The Chicago Fed’s National Activity Index (CFNAI) printed this morning at 8:30 AM Eastern. As always, Calculated Risk covered the release, so I won’t rehash what’s covered over there. However, I will note — as I have before — that the Personal Consumption & Housing subcomponent remains mired in deeply negative territory. In fact, it has…Read More
I hate it when two people I know and like do battle. This week, it is Mike Shedlock of MISH’s global economic analysis squaring up against my friend and work neighbor, Lakshman Achuthan of the Economic Cycle Research Institute (ECRI). Mish ripped ECRI in an unsparing critique this morning: ECRI Weekly Leading Indicators at Negative…Read More
In his Washington Post column last week, Fareed Zakaria laid out the argument that Obama is anti-business (Obama’s CEO problem — and ours):
“The Federal Reserve recently reported that America’s 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets . . . And yet, most corporations are not spending this money on new plants, equipment, or workers . . . The key to a sustainable recovery and robust economic growth is to get companies to start investing in America. So why are they reluctant, despite having mounds of cash lying around?”
Answers to Zakaria’s questions apparently came from “business leaders” who “wanted to stay off the record, for fear of offending people in Washington.”
“Economic uncertainty was the primary cause of their caution . . . But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes . . . But all [the business leaders] think he is, at his core, anti-business.”
First, a look at the series in question:
For starters, I disagree with Mr. Zakaria’s notion of what the key is to a sustainable recovery. Since we know that Personal Consumption Expenditures comprise 70 percent of GDP, I’m not sure why “getting companies to start investing” would be considered the key. The demand problem we have on our hands is what is keeping companies’ spigots closed.