The twisting of the points appears to have occurred on last Friday with oil prices rising, equities falling, and interest rates increasing. The major devaluation of the equities is immediately ahead of us. From 1998 the first monthly equity cycle was 22 months. 2.5 times this base is 55 months, which ends in December 2004. The second equity sub cycle is 16 months in length ending in September 2001. 2.5 times 16 are 40 months. 16 plus 40 minus 1 for doubling counting the last month of the first sub cycle and the first month of the second sub cycle is 55 months with a synchronized predicted low in December 2004. On a weekly basis the first cycle is 95 weeks and the second cycle is 68-68.5 weeks. The simple math for the predicted low in terms of weeks can be determined using this data. The revised base cycle length with an extra month and extra 3-3.5 weeks over my original cycle base length figures would allow both for this recent very appropriate equity blow off of 19 trading days and a total of an additional (15-18days) x 2.5 or 37-45 trading days over the terminal point of the original estimation. This would leave about 17-25 trading days left before the bottom of the primary devaluation. As I have stated in the original synchronization paper, I expect this devaluation to be similar to the 1929 devaluation with lower lows over the subsequent months. The fractal hypothesis of investment area valuations restated is specifically that the valuations of the debt, commodity, and equity markets follow rather precise fractals and trading patterns with growth saturation points and subsequent decay to lower decay valuation saturation points governed primarily by the available credit for those markets.
The overriding factor - the overriding factor- in a contracting credit system that makes the fractals so precise is the enormous debt that burdens the US and world credit system at this point in history- debt that must be serviced or attempted to be serviced. In the US there is an estimated 37-40 trillion dollars in financial, corporate, private and governmental debt. At an average of 5 percent interest this represents an annual debt service load of 1.8 trillion dollars in yearly interest payments in an economy growing only by .35-.4 trillion dollars annually. Importantly recent growth of the US economy has occurred primarily via additional debt expansion rather than by new US product manufacture for foreign consumption. Add to the 1.8 trillion in interest payments an annual of .35 trillion in federal government debt with the surplus of the social security trust funds paying down the .55 trillion in real debt. Add to this interest and federal debt related amounts, the overhanging behemoth burden of future unfunded pay-as-you-go social security entitlements and the perhaps equivalent or greater burden of unfunded massive generous pension plans for federal, state, and local employees encompassing over 30 percent of the total US work force. Add to this, the burden of generous pension plans of the large established US industries such as GM, Ford, US Steel, the airlines, et. al. All of these pension plans are dependent on either the equities maintaining their historically extremely high valuations or on funding via newly issued corporate bonds.
Money, i.e., US dollars, although seemingly created in vast quantities in the recent years, is, in fact, in relative short supply in relation to the ongoing amount needed to service the massive debt load. This mismatch between a finite number of dollars and the ongoing debt servicing requirements, is the ultimate cause for the 'twisting of points' recently described in previous pieces. Corporate bond markets; local, state, and federal bond markets, credit card markets; et.al., are all vying for a finite number of dollars. From where will these dollars come? Ultimately the US consumer must either increase his debt load or produce something of value for foreigners to purchase. Something both interesting and seemingly paradoxical is about to happen regarding the value of the dollar in respect to other foreign currencies. Because dollars are in relative short supply; the greatest amount of world debt is denominated in dollars; and debt must be repaid, the US dollar will transiently become a valued entity and the dollar's massive fall against major currencies WILL temporarily cease and the dollar Will rise for a 9-12 month period. With a higher valued dollar and less dollars/credit available for investing, commodities including precious metals will fall during this time period. The monthly commodity fractals are consistent with this scenario. This prediction is supported by an inspection of the out months in the commodity futures which shows very little to negative growth in the oil and precious metal commodities.
Finally to my mind a retrospective review of the equity markets reveals a perfect fractal pattern. The Yin and Yang of growth and contraction at the top of the major indices valuations since January 2004 are most remarkable with a 38/95/75 of 76 day (x,2.5x,2x) cycle. As well on a weekly basis last week was week 60(2x), with a 30-week base for nearly all of the major indices including the FTSE, DAX, and CAC. In the terminal portion of a contracting credit system a 2x length of a second cycle would be very appropriate.
News 
Market Data 
Discover 
AI
