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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: FrozenZ who wrote (377)	2/21/2004 12:48:45 AM
From: mishedlo	Respond to of 116555

A Brief Look at Cycles by Steve Saville safehaven.com Market prices tend to move in cycles; from very long-term cycles lasting 50 years or more to short-term cycles lasting a few weeks or months. These cycles are often very clear in hindsight -- particularly the longer-term ones lasting a few years or more -- but putting a lot of emphasis on cycles in One's market analyses can create problems because in real time things regularly don't play out the way that a purely cycle-based view of the world would suggest they should. A good current example of cycle-based analysis leading to a monumental error is provided by those followers of the Long Wave, or Kondratyev Wave, who have anticipated falling US$-denominated commodity prices over the past few years based on their belief that we are in the "Kondratyev Winter", a period in which commodity prices are supposed to fall. Clearly, commodity prices have risen sharply, not fallen, so either the K-Wave winter ended in 2001, or hasn't yet begun, or is never going to occur because there is no such thing. Or, perhaps we are currently immersed in a K-Wave winter but it is demonstrating different characteristics to previous K-Wave winters because this is the first time in the recorded history of the world that this part of the Long Wave is occurring while none of the national currencies are officially tied to gold. In other words, even if we assume that the K-Wave winter is presently upon us does it make sense to conclude that the fiat currencies of the world are going to increase in value relative to useful and scare resources given that central banks now have the power to create currency in unlimited quantities? We don't think so. There is, however, some logic in the argument that commodity prices will fall relative to hard money (gold). In fact, although we are long-term bullish on commodity prices we expect that the CRB Index will be substantially lower, relative to gold, at the end of this decade than it was at the start of the decade.