Economic Cycles

eagle SG · 2009-01-10T16:26:37+00:00

Economy do go in cycles. I will need to dig out the german uni notes I have to scan I guess.... that's if I can find...There's a reason for it to go in cycle...

eagle SG

Supposedly written by a trader, found on CNA forums

This is for a certain moron here who tried to tell me before that cycles are not accurate ways to predict the trend of the economy when I questioned on why GST increased in 07 although the we had a major recession in 97/98.... It is this power of cycles which led me to look for a job (with a bond) in 2005 because I graduate in 2008.... Everyone just appears to forget about cycles when the economy is booming...

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Cycles have been repeating from the beginning of time. The use of our clock is a cycle. There are sixty seconds in a minute, sixty minutes in an hour, two twelve hour cycles or twenty four hours in a day. The ancients used the moon cycle which is a twenty nine day cycle. The four seasons are a cycle of roughly ninety days for each cycle or season. Cycles are endless and the ancients seem to have been most fascinated with time and cycles of time. This was their clock. The ancient Egyptians, Mayans, Greeks and countless other civilizations based everything that they did on cycles to keep track of time. They used the cycles for the planting of food, harvesting, and even reproduction. Since we know cycles repeat, do they effect the markets, or even sports? Perhaps they do.

Lets first examine the 17 year cycle (cicada cycle). In 1991, the United States of America was in a recession. The recession occurred after a long bull market run that started in 1982 and lasted 7 years until 1989. The president at the time was George H.W. Bush. The United States had just entered a Gulf War which was against Iraq. The NFL New York Giants football team won the Super bowl against the Buffalo Bills that were located in the north east part of the United States. 17 years later in 2008 the President is George W. Bush, the United States is fighting another war in the Gulf against Iraq. The NFL New York Giants win the Super Bowl against the New England Patriots(NE Patriots are located in the north east of the United States). Perhaps this is just a coincidence or maybe there is something more to the cycles.

In 1907 the stock market had a one year crash that was very similar to what we are seeing today. Please note that this is 100 years. The stock market peaked in October of 2007. We have now approached the one year anniversary from that 2007 high. In 1907 and 1908 the Chicago Cubs baseball team made the playoffs in consecutive years. The Chicago Cubs repeated that feat in 2007 and 2008 by making the playoffs in consecutive years, exactly 100 years later. The irony of the story is that a cub is is a baby bear. This market is a bear market. In 1907 it was JP Morgan who came to the rescue and in 2008, exactly 100 years later it is JP Morgan Chase who is again coming to the rescue.

The Mayan civilization used a very advanced calender and cycle system. As most of us now know the 2012 cycle is when all the Mayan cycles converge. This event signals the end of an age and a beginning of the next age. However, there is one cycle that stands out to me. It is called the 'Mayan long count'. This is a 52 year cycle that ends naturally in December 2012 with the rest of the Mayan cycles. If we subtract 52 years from 2012 we get 1960. This was a pivotal time in the U.S. If we subtract 104 (2*52) from 2012 we get 1908. As we all know this bear market is very similar to the 1907 stock market crash which ended in 1908. You can draw your own conclusions.

The last cycle that I will examine is the 10 year cycle. Ten is known as a perfect number, hence perfect 10. Therefore, I personally watch the 10 year cycle and multiples of ten. In the year 2000, major stock indexes began a new bear market. 2010 will be the 10 year anniversary from the 2000 bear market. The market also sold off in 1910 . This is also 100 years from 2010. Many times market tops are formed in the ninth, and zero, years of decades. For example 1929, 1910, 1920, 1980, 1990, and 2000 just to name a few. Realizing how important the 10 year cycle is I decided to multiply it to the Mayan 52 year cycle(10*52=520) and we get 520 years. The next Mayan 52 year cycle is completed in 2012. Therefore, if we subtract 520 from 2012(2012-520=1492) we get the year 1492. This is certainly a pivotal time in history as this was when Columbus discovered America.

Whats the conclusion? This is a severe bear market without question. Short term traders appear to be the only people benefiting from the volatile market. This type of environment should last for several years to come. If you are going to invest or trade it is imperative to know and understand the mechanics of the market and not the Wall Street Hype. Cycles are apparently one of the more important ways to understand when the major trends are about to change. Perhaps cycles can even predict who is going to win the next Super Bowl.

Stevenson101 SG

What he's trying to say is that everything in the world is happening in predictable cycles or what?

charlize SG

NFL football teams (and most other north american professional sports) tend to behave in cycles because of the "equalizing" nature of their annual draft picks.

angel7030 SG

he is saying eg. sometime only stevenson got business, sometime only beijing 101 got business, sometime both also got business, and sometime both also got no business. It all depend on supply and demand, if bald headed men decided to hv hair implant or growth on their patched bald head, both would hv business, etc etc...

16/f/lonely SG

That's a rather unadvisable way to see market forces.

Undoubtedly, the world economy has its ups and downs, and it is also more or less cyclical and predictable. Downturns and booms dont just occur overnight.

The danger of seeing the world economy as cycles is it will lead to apathy.

It's a double-edged sword. Being able to see the cycles will lead either to: Apathy, or preventive measures for downturns.

The danger of the latter is well-documented....and many believe that downturns are necessary pains that will somehow lead to future growth.

That view leads to unnecessary distress, eg. refusing to restructure a troubled company in the belief that market forces indicates that the company should go thus freeing up resources for more productive works. The ensuing unemployment and chaos that follows usually have far-reaching repercussions.

We should not go into that.

soul_rage SG

what he's saying is actually just one thing

History repeats itself.

Most times the idiom, Once Bitten, Twice Shy, doesn't seem to apply to reality.

Most of today's mistakes are yesterday's lessons that we have learnt, but which we forget the moment life is good. Greed is above sanity and logic

Today's problems have very close similarities to the 1930's depression. And the 1930 depression resulted in WW2. Let's hope this current crisis does not result in the same thing.

hisoka SG

what he's saying is that if you try hard enough you can always find a way to link anythign to certain patterns

angel7030 SG

what he's saying is actually just one thing

History repeats itself.

Most times the idiom, Once Bitten, Twice Shy, doesn't seem to apply to reality.

Most of today's mistakes are yesterday's lessons that we have learnt, but which we forget the moment life is good. Greed is above sanity and logic

Today's problems have very close similarities to the 1930's depression. And the 1930 depression resulted in WW2. Let's hope this current crisis does not result in the same thing.

that is why it is called a cycle. What come around, goes around, come around and back again.

soul_rage SG

Yes, it's a cycle.

But most people think that cycles are stupid theories, that there's no basis to it.

The basis is that of human nature. I remember someone in psychology saying that our natural mechanism is of forgetting and moving on - to protect us from too much emotional load.

However, I believe its that same nature that is causing the cycle. People forget about the lessons they learnt after some time, and then we are back to the same old issue again.

Coming back to 16/f/lonely (I hope you are not as lonely as what your nick is telling us) pt on

"It's a double-edged sword. Being able to see the cycles will lead either to: Apathy, or preventive measures for downturns.

The danger of the latter is well-documented....and many believe that downturns are necessary pains that will somehow lead to future growth.

I feel that downturns are necessary pains to weed out those that are fundamentally weak. Companies that survive grow stronger and better able to cope, resulting in a company built to last. It's like our body. We get struck by flu, but yet getting struck by flu helps to ensure that our bodies get stronger as time goes by.

That said, I am on the agreement with her that refusing to restructure is not acceptable as well. However, we should not be throwing $$$ without the proper justification (Look at AIG, they are still spending lavishly even though taxpayers' money have helped to avert their collapse)

My thought is to ensure that the trouble makers get punished (CEOs lose their jobs without package, board of directors get replaced, etc), and the company name is replaced (removing the company's brand, culture and reputation that is a direct blow to any long-standing company), so that they get punished adequately. And at the same time, jobs get preserved.

angel7030 SG

let put it this way, it is the same game of monpoly, but a set of different players, as long as men continue to be greedy, craving for materialism, self interest and sabotage each other, etc etc... nothing will change, the environment may get altered, but the characteristics remain. You may change/add soup, but the base ingredients still the same.

melee_sg SG

i think he means human beings need patterns because we need answers. so everything is explained by a universal phenomenon at work, from the recession to a pot of swilling peas.

then when we look too hard and find nothing, we decide random coincidence can also be cyclical and there we go again.

angel7030 SG

Yes, it's a cycle.

But most people think that cycles are stupid theories, that there's no basis to it.

The basis is that of human nature. I remember someone in psychology saying that our natural mechanism is of forgetting and moving on - to protect us from too much emotional load.

However, I believe its that same nature that is causing the cycle. People forget about the lessons they learnt after some time, and then we are back to the same old issue again.

Coming back to 16/f/lonely (I hope you are not as lonely as what your nick is telling us) pt on

"It's a double-edged sword. Being able to see the cycles will lead either to: Apathy, or preventive measures for downturns.

The danger of the latter is well-documented....and many believe that downturns are necessary pains that will somehow lead to future growth.

The laws governing capitalism protected the businessmen/employers much much more than the employees. That is a fact and part of a capital system we are living in...therefore, unless you change the system, CEO or directors can go scotchfree, because capitalism defined business or company as a different entity of another living thing.

eagle SG

i think he means human beings need patterns because we need answers. so everything is explained by a universal phenomenon at work, from the recession to a pot of swilling peas.

then when we look too hard and find nothing, we decide random coincidence can also be cyclical and there we go again.

it could also mean that there's indeed relations, but we don't want to believe that there is, so call it random coincidence

angel7030 SG

i think he means human beings need patterns because we need answers. so everything is explained by a universal phenomenon at work, from the recession to a pot of swilling peas.

then when we look too hard and find nothing, we decide random coincidence can also be cyclical and there we go again.

born and be reborn..

melee_sg SG

it could also mean that there's indeed relations, but we don't want to believe that there is, so call it random coincidence

it could also imply that our ability to 'find' cycles is forcing us to see everything as one. and a century of combing for cycles later, history is still coming back at us.

human potential is so limited.

Miracles&Prophecies SG

Everything in life has a cycle. It's so obvious.

If the economy can pick up and go booming so can it slow down and enter recession.

Life is dynamic that's all. everything that goes up have the potential to go down. And eveything that goes down has the potential to go back up. Nothing is going to remain unchanged. Even the face of the earth is still changing and will change dramatically from it is now eventually.

But of course you can't predict when what is going to unfold.

eagle SG

it could also imply that our ability to 'find' cycles is forcing us to see everything as one. and a century of combing for cycles later, history is still coming back at us.

human potential is so limited.

Yes, you have already implied that. No need to repeat.

16/f/lonely SG

You see?

Many have already fallen into the trap of seeing cycles.

The goal is simple. To sustain booms (if any), and make shallow any downturns.

Easier said than done. Downturns tend to be caused by bubbles, and bubbles when detected are typically too late to deflate without any form of pain.

This is what's causing the periodical bear/bullish markets.

If somehow we can bridge the gap of imperfect knowledge which is the major cause, then we will be able to control the "cycles" better.

Bubbles are difficult to detect early-on because few would know if the increasing prices (prices can be seen as an indicator of consumption) is caused by increasing aggregate demand due to optimism, or over-optimism. Both are separated by a thin-line and the latter leads to unsustainable bubbles. If we are able to better find out which is occuring at any given time, we would be able to take steps eg. regulating the problem-making market (something usually unpopular).

Unfortunately, even when the information points to bubbles forming, countries are typically reluctant to burst them early because it is understandably unpopular. Worst of all, many politicians simply choose to pass it on to their successors so that they would leave with a "unblemished" record.

Why should we choose to see booms and busts as cycles? Why not choose to see them as man-made and avoidable or at least, minimised with the correct damage control?

melee_sg SG

Everything in life has a cycle. It's so obvious.

If the economy can pick up and go booming so can it slow down and enter recession.

But of course you can't predict when what is going to unfold.

I think everything in life has a process. Whether or not this process is cyclical remains subjective. Besides, time cycles and economic cycles are two distinct ideas, correct me if I'm wrong.

Ice Dive SG

The theory of cycle has been around for ages. What I think is that the cycles will become shorter . Probably from 10 years cycle to 8 years cycle or even shorter. It may also be a series of small cycles before a big 1.

Why do I think so ? From a big picture point of view , I think that now that world are more interconnected with each other. This visibility allows the people to jump onboard any new innovations / business practise without considering its real worth. Its much like when information flows , the good part is exagerated a few times when its passed from 1 party to another. Eg , Company A have a certain success because it has come out a technology that suits a certain demand . Company B replicates the idea and achieve success too . Companies C , D , E , F pops out . Then a lot more pops out. A lot investors jumps into the bandwagon and over rated the actual worth of the services.

The problem comes in when the "preceived worth" of innovations / business practice becomes much bigger than the real output that a dip finally come in to open the blinds to wake the people up.

Why do I think so again ? I think that there a lots of "successes" in the making throughout the world that these different "successes" explodes in their own time frame. So actually its a graph with multiple waves instead of only 1 sin wave. Any of the wave can cause a dip. If their dips coincide , then we have a bigger recession.