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Strategies & Market Trends : Signs of a Market Top Thread

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To: Sir Auric Goldfinger who started this subject	11/5/2000 5:40:00 PM
From: Stcgg	of 39

The Kondratieff Economic Wave Cycle.. A Kondratieff Cycle or Long Wave is a continuous repetitive pattern, also observed in 1913 by dutchman Van Gelderen. The cycle shows repeated periods of ever increasing economic expansion and contraction. Kondratieff correctly observed that from the despair of depression capitalism gave birth to another cycle of expansion mostly founded on a new technology. This new technology was only partially developed in the late stages of the previous cycle. This demonstrates the historic inherent ability of free people in a market environment (capitalism) to survive. According to Simon Kuznets' article "Schumpeter's Busines Cycles" published in The American Economic Review (1940) a Kondratieff cycle consists of four distinct phases, or distinguishable, dramatic mood changes. These mood changes reflect and determine the actions of individuals involved in an economy. The mood of the up phase is one of accumulation, expansion and the desire for new product manufacture. The mood of the down phase is one of saturation and contraction. Current Kondratieff Cycle - Revival (1949-1966) Out of the ruins of World War II 1949 gave birth to a new inflation/deflation cycle. The western economy was rebuild and by doing so people (re)gained confidence. This optimistic mood resulted in increased business activity and rising stock prices. Suddenly everybody realised that capitalism didn't fail. Governments and Central Bank didn't want the economy to grow too fast so they tried to control inflation and wages. The first part of the up phase peaked around 1966. Recession (1966-1981) A long hot summer followed. Prices skyrocketed - helped by two OPEC shocks - and so did inflation. This changed the mood dramatically which was reflected by an invisible stock market crash (we have made the crash visible by measuring it in real terms or constant dollars). Too much money, debt and capacity had been created. Inflation (the up phase) peaked around 1981. Prosperity (1981-1999) Inflation had caused lower demand so businesses turned their attention to efficiency: doing more with less resulting in lower prices. Global price competition increased and in order to survive businesses had to cut costs. This changed the mood to optimism once again. The stock market took off like a space shuttle. Everlasting prosperity ahead. And by creating even more debt we can now say we are experiencing a credit card economy. Depression (2000-2009) Winters are hard but very healthy. During such a period too much debt, money and capacity will be eliminated. Debt liquidation will change the mood and pave the way for a depression. This will be reflected in a massive drop in stock prices (90% will be lost). morphocycles.com >><<

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