The Great Cycle: Predicting and Profiting from Crowd Behavior, the Kondratieff Wave, and Long-Term Cycles

by Dick Stocken and Dick Stoken

Informative grade on long-term economic cycles and how they impact our financial lives. We must understand the past in order to forecast the future, and no other book explains where we've been and... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 1557384878
• ISBN13: 9781557384874
• Release Date: January 1993
• Publisher: Probus Publishing Co.
• Length: 225 Pages
• Weight: 1.26 lbs.
• Dimensions: 0.8" x 6.3" x 9.3"

Customer Reviews

Dow 40,000, Dow 1,700

Anytime the DOW average falls 16 2/3 percent or more and reaches the lowest level for the year, we can consider it a bear trend. When determining when to buy, watch for the following pattern: during a Kondratieff upswing, the low of the bear trend prior to the last bull market high is the important prior low because, when it is broken, it tells us that we are near the low of a major bear market. The generally weak financial conditions make it unlikely the DOW will rally back and make a new high following a bear trend. At the beginning of the depression phase it appears that for a bear trend to be an important prior low, it must be a five year low or more. A buy opportunity occurs shortly after the break of the important prior low. It takes courage to buy at this moment and the investor will need to break the prevailing pessimism and buy. In this case the investor could wait three months before buying. The following pattern signals its time to sell. During Kondratieff up waves, a psychology of increasing optimism leads people to extend their economic commitments. The result is a three stage bull market, these secular bull markets generally last eight years and sometimes longer. The first stage is recovery and lasts until the DOW has hit an all time high. The second phase induces major changes in perception and represents a shift in investor sentiment where the investor suddenly turns his economic outlook to a favorable economic prospective. Suddenly there is a significant number of new risk takers, who are attract to buying stocks and this creates a vast reservoir of buying power and a new bull market emerges for a minimum of four years too 49 months, a 16 2/3 percent or more break occurs downward price pressure, but too many people believe the stock market is a good place to be and are willing to buy back the break. The DOW returns to a new all time high following the setback and investors think they are on the brink of perpetual prosperity, 49 months pass in the third stage and its time to think about selling. If the past is any guide to the future, we can expect to see a series of bear markets, during which there is a chance the DOW will shrink to at least 1,700. We are in the last up third wave, as the DOW has surged past 11,000 mark and third wave, peaking around 40,000. If the third wave started in 2002 and it will run between 4 year too 49 months and should peak around 2009. 2009 would complete the four year - 49 month cycle and should signal its is time to sell. By selling the investor acts prudently waiting waiting for a new long wave buy pattern too emerge.

Innovation is the root of confidence in capitalism

Technology innovation restores faith, the root of economic confidence in capitalism. Long wave cycle merely reflects the emergence of a breakthrough technology. Depression reflects the abandonment or pessimistic outlook towards capitalism and during depression investors seeks safety, security, and stability. Savings increase during depression and investment reduces. In order to make predictions, real interest rates must make known the inflation rate of the prior year and the current year (i= [CPI(this year) - CPI(last year)] / CPI(last year)). Over speculation occurs when long-term interest rates exceed real interest rates. When a new breakthrough technology emerges on the market (10% market adoption), the new technology is rapidly applied to a wide number of sectors; the rapid deployment of technology creates a strong surge in demand, for capital too build the technology infrastructure; the new technology works, increasing production capacity and excess inventories; the overvaluation of demand and large inventories represents liability or inefficiency. The increased demand for capital is realized as long-term interest rates increase. Over capacity is realized and liquidation necessitated. During correction replacement technologies, such as, electrical for steam are not immediately adopted because of ROI apprehension and failure to adopt the breakthrough technology reduces efficiency that it could produce and therefore decreases profits. Growth and productive have not peak but the market begin pulling back sounding the possibility of recessive behavior. Speculation must be atoned for by changes in human behavior. Investors repent from their "non conservative" viewpoints, returning too the comfort and safety of conservative investment thought. The behavior adjustment also applies economically, as one would socially (feminism to patriarchy, promiscuous sexual behavior to fidelity, immodest clothing styles to increases in length, and divorce to monogamy) and the similar economical analogy of repentance applies, as conservative values flow over into financial belief systems establishing a risk taking for safety paradigm, save in banks, now verses profit taking from rapid stock price, plan of the present verses competing for the future, and acceptance of large institution income sources verses capitalizing on small company profit growth. The market takes a very positive economic outlook prior too entry into the depression and is characterized by 1. Reasonable low interest rate 2. and rising inflation 3. and high productivity 4. and high corporate earnings 5. and belief that political intervention will affect market behavior 6. and imperialistic manipulation of less developed countries siphoning currency in an attempt to save their failing currency. As the market realizes they have over speculated, when long term interest rates excess real interest rates; the group begins to repent of their excessive optimism; liquidation