The above chart is a historical and projected record of market trade cycles based on the first 100 years of trade data from 1810.
1 Indicates years in which panics have occurred, and will occur again.
2 Indicates years of good times, high prices, and the time to sell stock and values of all kinds.
3 Indicates years of hard times, low prices, and a good time to buy houses, stocks, goods etc., and hold until the boom reaches a year of good times, then unload.
As far back as the year 1872 in the international trade markets, there was a trade chart issued, reproduced above, remarkable in that, recording graphically the booms and depressions in the markets from the beginning of the 19th century up to 1872, it projected the graph forward to 1945 in such a way that the events of the intervening half century, had confirmed its correctness. It indicated that the years in which panics had occurred, and may be expected to occur again, run in regular repeating cycles of A: 18,20,16 years; and that years of good times, run in repeating cycles of B: 8,9,10 years; and years of hard times repeat at C: 7,11,9 yearly cycles.
Thus, it was shown, at the time the chart was originally prepared in 1872, that 1931 would be one of the worst years, and 1935 a good one. It almost looks as if nature had a hand in the proceedings, so regular are the cycles of events, but the observation of natural conditions indicates the fallacy of any such preposition.
A curve plotted to show the curve of development by man of the resources of nature would be a continuously rising one, having no resemblance to this up and down of boom and slump or depression in trade from which we conclude that boom and depression, like the so-called “economic blizzard” is entirely man-made and avoidable. Realizing this, we are saved from depression when we observe that the curve of the graphic predicts a steady decline in trade after this year, to a climax of panic in 1945.
In congratulating the enterprising firm of Frederick Braby & Co Ltd upon its diamond jubilee, we thank whoever had the inspiration to commemorate it by the issuing of this remarkable chart. – “The Railway Gazette”. August 23, 1935.
On the publishing of this document and recognising its importance, it was kept safely by an early settler, John Blakely of Ophir, Central Otago, New Zealand. It was passed down through the Blakely generations to his son Stewart, then to grandson Avery and finally to great grandson, Jerry Blakely of Christchurch. Jerry was intrigued by the accuracy of the trade forecasts for the preceding periods and using the same mathematical patterns, he projected out the market trends to the year 2066.
I recently had a meeting with Jerry Blakey in Christchurch who introduced me to this document that had been in the family for generations.
Again, intrigued by the uncanny accuracy of the forecasts for the preceding 200 years, I took the liberty of reproducing the trade data forecasts and cross correlating some historical financial market events in addition to some more recent market trends to help get a better picture of the current state of the markets to see where we are in relation to the currently projected trade cycles.
As you can see from the “Recorded events against predicted cycles (D-Y)” it is uncanny how these events have directly correlated to the forecasted trade cycles, to such a point whereby serious consideration should be given to the future forecasted trade data timelines.
Overlaying of some more recent financially pertinent events may in the future, mark the tipping point leading up to the next trade cycle correction
Some of these points include abandoning of the Gold Standard in 1914 by the UK, France and Germany followed by the United State of America in 1971 have given Countries the ability to implement quantitative easing or money printing. This is contributed to countries accumulating significant public debt with the USA owing more than 18 Trillion in debt and many other countries struggling to manage their debt position.
Over the last 30 years in New Zealand, we have not been immune from these trends. Whilst the Government has managed to keep our public debt relatively low relative to most developed countries, private debt has risen from $7 Billion to $400 Billion. This is over 150% of our GDP (Gross Domestic Product). The problem is, if the markets start correcting, which it will, interest rates will start rising, when this happens, New Zealanders with high private debt will be highly exposed. The OCR Rates, which impact Mortgage rates, are at an all time low at 1.75%. With the average price of a 3 bedroom home in Auckland exceeding NZ$900,000, it is not hard to see where Kiwis have chosen to invest. We are riding an immigration wave at the moment that is driving up property demand. Back in the 1980’s Mortgage rates peaked at more than 26%. I would guess many highly geared property investors would be challenged with a 20% increase in mortgage rates, not to mention a 500% increase.
Another indicator of uneasy times is the rise of alternate currencies such as Cryptocurrencies. Designed as a mechanism of financial transactions outside of the influence of governments and countries, crypto currencies such as Bitcoin have experienced significant growth, rising from a value of US$.10 through to over US$2,500 per bitcoin in less than 5 years. Countries implementing austerity measures such as Cyprus seizing bank deposits overnight and India demonetizing key denominations have driven the influx of funds into these perceived financial safe havens.
Based on the forecasting of historical trends, overlaid with more recent event data, it does appear we are in for a market correction in the not too distant future. Now is a good time to assess your current position and find ways in which you can generate multiple revenue streams for when times get tough.
Disclaimer: The information in this article should not be considered financial advice and is not intended to replace consultation with a qualified professional. It is merely an opinion based on historical data and market trends freely available.
