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P. 1
8 Point 6

8 Point 6

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Published by: thirdwheels on Apr 16, 2009
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1Wednesday, June 14, 2006
8.6-Year Review
By Martin Armstrong / Princeton Economics
_______________________________________________As a brief introduction to the 8.6-year frequency within the Princeton Economic-ConfidenceModel, let us follow its course beginning with the last major panic that took place in October1929 from the US perspective. Factoring in the month of October as .75 to represent a decimalportion of the calendar year, the calculations embark on their journey with 1929.75 to see howwell the cycle will hold up in forecasting the past 52 years. The next step was to add 4.3, half thecycle duration, to come up with the next bottom. It projected 1934.05 which would have beenJanuary. This year marked the Gold Reserve Act and the beginning of the New Deal. As a result,it also marked the beginning of the turning point in that human emotion known as hope. Thestock market had actually bottomed in 1932 and in the later part of 1934 it had begun a rally thatwould double the Dow Industrials by March of 1937. Continuing on, we apply the next half cycleof 4.3 years which brings us to the next peak projection of 1938.35. This was extremely close tothe real events. The stocks had peaked early, a s they always do in a recovery. The long-termtrend in the business cycle had rallied from a -38% to -10% in growth according to the ClevelandTrust Co. Index of US business activity. Despite the fact that the growth was still negative, it wasa strong improvement within the economy that began to fall off reaching a -18% during 1939.The next bottom, projected out by adding another half cycle of 4.3 years to arrive at 1942.65,which corresponded to the beginning of World War II and another beginning of an economicboom. The Dow Jones Industrials had been declining since March of 1937 when it peaked at194.40. the Dow eventually bottomed out on April 28th, 1942 at 92.92. From there the Dowwould begin another 4 year rally.The 8.6-year cycle was holding up very nicely. From 1942’s bottom, the cycle peaked again in1946.95. This corresponded with the end of the World War II period and the beginning of thepost war recession. The stock market had peaked during 1946 at the 220 level on the Dow and forthe next three years the Dow traded sideways between 160 and 200.Moving ahead, the next bottom was projected to arrive at 1951.25. The 1949 recession was adeep one in which the US did not begin to pull out until 1951. Although the business cycle beganto rise due to the Korean War during mid 1950, it actually peaked during mid 1954 at a +18% onthe Cleveland Trust Co. Index followed by a sharp drop to a -2% in 1954. The Dow had started torise during 1950 and remained in a bull market rising from 195 to reach 525 by 1956.The next cyclical peak projected out to be 1955.55. The Dow had pulled off a 250% rallybetween 1950 and 1956 and then fell sharply by 100 points going into 1957. The business cyclepeaked during October of 1955 rising from a -2% in 1954 to a +8% growth factor during 1955.The cycle at this point appeared to hold up very nicely, being off no more than 1 year at anypoint.From the 1955 projected peak, the next cyclical low was due in 1959.85. The Dow had actuallybottomed during 1957. During 1958 and 1959 a bull market once again returned to the Dow
Industrials. The business cycle fell from the 1955 high of a +5% to a bottom during 1958 of a -7%. Early during 1959 the business cycle growth bounced back to a +6%, but in the last quarterof 1959 fell again reaching a -1%.The next peak on the 8.6-year cycle projected out to be 1964.15. During this year, silver coinsbecame extinct and inflation, as measured by the CPI index, had reached 92.9 which was nearlydouble that of 1929. Industrial production rose in its index that year for the first time to exceedthe 80 level after bottoming out during 1932 at 11.6. The Dow was still strong, reaching a highduring 1964 near the 890 level only to continue to eventually reach 1001.11 during 1966.The cyclical projection then called for a bottom on 1968.45. The Dow had peaked on February9th, 1966 and a sharp 260 point decline had begun. Inflation had continued to mount in much of the world. The United States and six West European nations agreed on March 18th, 1968 todiscontinue the sale of gold to private buyers.The next cyclical projection pointed to a peak in 1972.75. The Dow Industrials had rallied from asharp decline which saw the Dow bottom at 627.46 on Tuesday, May 26, 1970. From that low,the rally in the Dow peaked at 1,051.70 on January 11, 1973. That high would remain a majorrecord high going into the 1980s. This projection was accurate because the 1973 recession was aserious one, marked by the failure of the Franklin National Bank. It would serve as the worstrecession since the 1929 panic.The next projection came up with a bottom during January 1977.05. The early peak on the Dowduring 1973 was followed by a severe panic decline that dropped even below the previous cyclelow in the Dow. The bottom came on December 6th, 1974 after nearly a 50% decline. Despite thefact that gold began its rally during August of 1976, the economy didn’t begin its inflationaryupswing until 1977.The next projected high on this 8.6-year cycle called for that peak to come in at 1981.35. Thiswas the precise month when the bond market reached a bottom and interest rates began to turndownward. But, from that 1981.35 peak, the next projection called for a decline into 1985.65which marked the end of deflation as the stage was set for a new global economic trend.Thereafter, the next two major turning points are 1989.95 and 1994.25.December 1989, (1989.95), was the major turning point for the Japanese share market and realestate prices worldwide. In addition, it also forecast that the first stage of recession would unfoldmoving into a bottom in January 1991. Now that same cycle is pointing upward moving intoFebruary 1992 and, indeed, the economic numbers are just now showing that the worst of therecession is over. While the majority did not speak of recession until December 1990, our modelwas forecasting that the decline would unfold years in advance.________________________________________________________________________

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