it may be winter but spring is just around the corner
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IT MAY BE WINTER BUT SPRING IS JUST AROUND THE CORNER. David Chapman MGI Securities Inc. IT MAYBE WINTER BUT ……. “ Those who cannot remember the past are condemned to repeating it” -- George Santayana (1863-1952) - PowerPoint PPT PresentationTRANSCRIPT
David ChapmanDavid ChapmanMGI Securities Inc.MGI Securities Inc.
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IT MAYBE WINTER BUT ……IT MAYBE WINTER BUT ……
“Those who cannot remember the past are condemned to repeating it”
-- George Santayana (1863-1952)George Santayana (1863-1952)
“The people are turbulent and changing, they seldom judge or determine right.”
-- Alexander Hamilton (1755-1804Alexander Hamilton (1755-1804)
“We hope that the weight of evidence in this book will give future policy makers and investors a bit more pause before next they
declare “This time is different.” It almost never is.-- This Time is Different: Eight Centuries of Financial Folly
Carmen M. Reinhart, Kenneth S. Rogoff, 2009 Carmen M. Reinhart, Kenneth S. Rogoff, 2009
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CYCLESCYCLES
Cycles occur – In Nature- In Climate and Weather
-In Geology-In Agriculture
-In Physics-In Sound
-In Mathematics-In Music
-In Business and Economics
And many more
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Long Term CyclesLong Term Cycles
Dewey & Dakin (54 Year Commodity Cycle)
Kondratieff Kwave (54-60 Year Supercycle)
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Edward Dewey And Edward DakinEdward Dewey And Edward Dakin
● 54 Year Cycle
● Their book charted prices from 1790 for wholesale prices that coincided with peaks and valleys for commodity prices
● Cycle measured peak to trough with roughly 27 years to peak and 27 years to trough
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IT MAY BE WINTER BUT ….IT MAY BE WINTER BUT ….DEWEY & DAKIN PREDICTIONSDEWEY & DAKIN PREDICTIONS
Year of Peak Prediction – Year of Peak Prediction – Dewey & DakinDewey & Dakin
Actual Peak Actual Peak Peak WarPeak War
1755 * Seven Years War aka French Indian Wars (Britain/France)
1817 1817 (1810) War of 1812
1871 1868 (1864) Civil War
1925 1920 WW1
1979 1980/81 (1974/75) Vietnam
2033 War on Terror? WW3?
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IT MAY BE WINTER BUT ….IT MAY BE WINTER BUT ….DEWEY & DAKIN PREDICTIONSDEWEY & DAKIN PREDICTIONS
Year of Trough Prediction – Year of Trough Prediction – Dewy & DakinDewy & Dakin
Actual TroughActual Trough Trough WarTrough War
1729/1730 * French Colonies and Great Britain
1790 1790 (1783) American Revolution
1844 1842 (1837) Mexican American War
1952 1949 (1932 and 1947) WW2
2006 2001 (1998 and 2002) Gulf War II, War on Terror
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Kondratieff Cycle or KwaveKondratieff Cycle or Kwave
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The K-Wave Cycles 1789-Present U.S.A.The K-Wave Cycles 1789-Present U.S.A.SPRING (EXPANSION) SUMMER (RECESSION) AUTUMN (PLATEAU) WINTER (DEPRESSION)
1784-1802 (American Revolution 1775-83)
1803-1816 (War of 1812)
1817-1834 (Era of Good Feelings)
1835-1844 (Mexican American War 1846-48)
1845-1858 (Mexican American War 1846-48)
1859-1864 (Civil War 1860-65)
1864-1874 (Reconstruction)
1875-1896 (Spanish American War 1898)
1896-1907 (Spanish American War 1898)
1908-1920 (WW1 1914-18)
1921-1929 (Roaring 20’s)
1930-1949 (WW2)
1949-1966 (Korean War 1950-53)
1966-1981 (Vietnam War 1962-73)
1982-2000 (The Information Age)
2000-? (War on Terror? WW3? 2001-?)
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IT MAY BE WINTER BUT ….IT MAY BE WINTER BUT ….Kondratieff Phase Best Investments Worst Investments Characteristics
Spring (Expansion)Inflationary Growth
Stocks, Real Estate and Commodities
slowly rising
Bonds Low inflation, healthy banking system, growing savings
Summer (Recession)Stagflation
Commodities, Gold and Real Estate
Stocks and Bonds Inflation, debt growing (corporate),
stagnate growth
Autumn (Plateau)Deflationary Growth
Stocks, Bonds and Real Estate
Commodities and Gold
Debt levels soar (consumer), wealth
disparity, stock market euphoria, low
inflation
Winter (Depression)Deflation
Gold, Cash and Commodities in late
cycle
Stocks, Real Estate, Bonds (until end of credit crunch then
they fall again)
Deflation, debt collapse, trade conflicts, social
upheaval
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THE K WAVE – SPRING
● Best Investments – Stocks, Real Estate● Fear of a return to depression lingers
● Banking system has been cleansed - Credit begins to slowly flow again● Economy grows more solidly
● Recessions are short but fear lingers● Consumer confidence improves along with employment and improving
business conditions● Interest rates are low but rise near the end of the cycle
● Real estate prices rise slowly● New technologies and innovations create new industries
● Inflation is low but gradually rises● Gold and precious metals rise slowly
● Stocks prices rise but suffer short but sharp corrections – peak at the end of the cycle
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THE K WAVE – SUMMER
● Best Investments – Real Estate, Commodities, Precious Metals● Confidence in the economy grows despite problems – rising expectations
● Credit begins to flow more easily especially to corporations● Inflation begins to rise then increases rapidly to peak at the end of
summer● Increase in money supply leads to inflation
● Debt levels increase● Industry tends to overproduction
● Raw materials and commodity prices spike at end of summer● Farm land prices peak
● Interest rates peak● Gold and precious metals rise and peak at end of summer
● Recessions Steeper and longer● Stock market stagnant but falls sharply in real terms● Primary recession at the end of the K Wave summer
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THE K WAVE – SUMMER
● Emotional wars of the K Wave Summer
1st cycle – War of 1812-18152nd cycle – US Civil War 1860-18653rd cycle – World War 1 1914-19184th cycle – Vietnam War 1962-1973
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THE K WAVE – AUTUMN
● Best Investments – Stocks, Bonds, Real Estate● Increasing confidence leading to extreme confidence even euphoria
● Credit begins to flow easily especially to consumers● Interest rates fall
● Growth is primarily through debt as debt levels soar● Inflation falls into disinflation or at least low inflation
● Commodities, gold and gold equities in long bear market that ends at the end of the autumn
● Real estate prices driven up by speculation● Debt reaches high levels even unsustainable levels
● Expansion by acquisitions and takeovers● Financial scandals become more prevalent ● Worldwide overproduction and overcapacity
● Financial speculation grows● Stock market booms
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IT MAY BE WINTER BUT …. IT MAY BE WINTER BUT …. THE K WAVE – AUTUMN
● Society is optimistic but wages stagnate● New technologies and innovations create new industries
● Record stock offerings and IPO’s● Unemployment remains high despite economic growth
● Inequality in wealth and income widens● Speculative blow off in stocks
● Trade conflicts grow
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THE K WAVE – WINTER
● Best Investments – Gold, Cash● Confidence is shattered – There is concern, fear, panic and depression
● Global stock markets enter an extended bear market punctuated by periods of sharply rising markets that causes swings in optimism
● Interest rates fall then rise with a credit crunch followed by another fall● Inflation falls and could move to outright deflation
● Economic growth slows, stagnates and turns negative● Real estate prices peak then collapse
● Trade conflicts grow● Money becomes scarce, credit is constrained● Bankruptcies soar – personal and corporate
● Banking crisis and collapse● Sovereign debt collapses
● Overcapacity and overproduction is purged by obsolescence and failure
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THE K WAVE – WINTER
● Recessions are long, recoveries weak● Numerous corporate and banking scandals
● There is social upheaval – society becomes more polarized● Polarized society leads to rise of extreme political parties of both the left
and the right● Debt levels fall after bankruptcies and defaults
● Gold bullion and gold equities rise in face of huge financial and economic crisis
● Commodity prices also rise but then fall as crisis widens● The risk of war increases
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IT MAY BE WINTER BUT ….IT MAY BE WINTER BUT ….THE K WAVE – WINTER
● Economic Wars of the K Wave Winter
1st cycle – Mexican American War 1845-18482nd Cycle – Spanish American War 1898
3rd cycle – World War Two 1939-19454th cycle – War on Terror? WW3? 2001-?
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THE 72 YEAR CYCLE
● Panic of 1819 + 72 Years = 1891 Panic of 1893
● Panic of 1837 + 72 Years = 1909Panic of 1907
● Panic of 1857 + 72 Years = 1929Panic of 1929
● Panic of 1873 + 72 Years = 1945Panic of 1942/Panic of 1946
● Panic of 1893 + 72 Years = 1965Panic of 1962
● Panic of 1907 + 72 Years = 1979Gold/Silver Panic of 1979/1980
● Panic of 1929 + 72 Years = 2001Panic of 2001/2002
● Panic of 1937 + 72 Years = 2009Panic of 2008
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SOME INTERESTING CHARTS SHOWING THE IMPACT OF
THE KONDRATIEFF WINTER
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43www.shadowstats.com
44www.shadowstats.com
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The information contained in this presentation is for informational purposes only and is from sources that MGI Securities Inc. (‘MGI’) believes to be reliable and is not guaranteed as to its accuracy or completeness by MGI nor does MGI assume and responsibility or liability for the information. The opinions expressed at the presentation are those of the author and not necessarily reflect the views and opinions of MGI. This information is not intended to provide specific financial, investment, tax, legal, accounting or other advice for you, and should not be relied upon in that regard. You should not act or rely on the information without seeking the advice of a professional. Your investment professional can help ensure that your own circumstances have been properly considered and that action is taken on the latest available information.
MGI IS A MEMBER OF THE CIPF
Thank YouDavid Chapman
www.davidchapman.com