15 November 2005
Fractal Decay Solutions Near the End of a 147 Year Macroeconomic Cycle.
The repetitive growth and decay fractal evolutions of equity and debt
instrument valuations have an internal recurrent patterned nature that
occurs with a predictive probability that approaches if not equals that of a
hard science. These fractals are the result of a completely deterministic
saturation process which most efficiently and optimally distributes the
ongoing convertible money available for investment. The application of that
convertible investment money efficiently flows into the most optimal of
investment pathways resulting in directly analogous optimal and efficient
growth and decay integrative saturation patterns or fractals.
There are maximum limits to equity growth based on the real ongoing
macroeconomic dynamics of debt accumulation and consumption saturation,
which are in turn further balanced by the countervailing limitations of wage
growth, savings growth, and asset overvaluation. The timing for the maximal
growth limits and subsequent decay cycles can be predetermined based on the
inductive knowledge and non complex pattern recognition acquired by
empirical observational analysis and the repetitive and seemingly constant
evolutions of  three fractal growth cycles and one decay cycle  patterns
in an idealized order of x/2.5x/2x and 1.5x at smaller, intermediate, and
larger time units with the 1.5x decay pattern further fractalized into an
idealized y/2.5y/2.5y decay sequence.
The global macroeconomy is nearing the end of one of those colossal maximal
growth limits, a 147 year sequence composed of approximately two 74 years
sub fractals. These two chained sub fractals followed a 70 year fractal
ending in 1858. The valuation top of the second 74 year sub fractal occurred
in March of 2000. While equity markets of lesser economic nations have
exceeded their 2000 summit  the top European, top Asian, and American
composite equity indices remain substantially below their previous 2000
peak, despite historically unprecedented massive credit expansion and
unfathomable new debt obligation in the ensuing five years. The obligations
for servicing this massive new debt which has supported the growing and
unsustainable 6 percent US GDP 'unbalance of trade' disequilibrium and has
been created primarily by the US and other leading nations' real estate
markets  whose valuations have been artificially skyscrapered by both the
stimulatory posttechbubblecollapse, historically low, fed fund rates and
irrationally imprudent lending practices, ultimately rests on the shoulders
of American consumer, whose real wages are not keeping pace with inflation.
Just like the historically low cash reserves of US mutual funds, the null US
consumer's savings rate is telltale of the near end time limit of the
current 74 year sub cycle. Excess money available for US equity investment
is contracting and otherwise drying up consumed by debt servicing; essential
consumer inflationary spending for fuel, real estate taxes, secondary
education, food, health care, et. al.; and the very large alternative and
safer investment area: US debt instruments.
A look at the longer monthly fractals originating in October 1998 which
includes the March 2000 peak as part of both alternatively a first monthly
decay  and a first monthly declining maximal growth  fractal sequences,
provides possible predictive information regarding the final maximum
terminal growth and decay patterns ending the 148 year cycle.
A maximum decay pattern of 15/38/33 of 38 months is apparent with a sub
fractal decay sequence after the first 15 declining month base
fractal(as defined by
the underlying slope of the second fractal) of 11/28/22/12 of 17 for ideal
x/2.5x/2x/1.5x completed sequence.
A maximum growth pattern also starting in October 1998 can be identified as
having a 15/37/37 monthly pattern.
There are two high probability solutions to the final daily fractal
devolution that involve the terminal third fractal portion composing an
expected 38 months of a 15/38/33 of 38 decay sequence:
1. The first solution involves a continuation and the normal expected time
frame completion of an ideal fractal pattern x/2.5x/2x/1.5x dating from
August 2004. The daily sequence for this ideal fractal evolution is:
52/130/104/78 days
In this ideal fractal pattern, the Wilshire, as of the end of the 15
November trading day, has 41 more days to complete the ideal 78 day
time frame decay fractal progression. The last two fractals of 104 and 78
days have been integrated into an optimal terminal growth and decay
composite fractal pattern, which represents a series of lower high
daily saturation trading areas which ideally and ultimately will culminate
in a nonlinear ideal terminal decay pattern of y/2.5y/2.5y.
2. The second solution involves a gradual and progressive shortening of the
above ideal sequence, 52/130/104/78 which has been transformed into the
following truncated version of
approximately:
52/123/100101/7073 days
The reasons for this slight shortened and shortening version at the end of
the great 147 year second fractal could be attributed to an evaporating
money supply that is exiting the macroeconomic investment complex system
secondary to multiple developing conditions: looming pension defaults,
competing and more attractive long term debt instruments, cresting real
estate valuations, diversions of investment money into the low interest rate
associated inflationary cost of living essentials such as food, housing,
transportation, energy cost, real estate taxes, health care cost, secondary
education cost, et. al. Over the last ideal 52/130/104/78 day fractal time frame
investment money for equities has been contracting and otherwise 'drying up' as
evidenced by the historically low cash reserves in the mutual equity
fund industry.
In the second contracting and shortened solution, the Wilshire at the close
of trading on 15 November will have 23 to 24 more days to complete a 7073
day shortened decay time sequence. In this last 7073 day pattern, just as
for the first above ideal solution, there are saturation growth
periods with sequentially
lower highs before a final and terminal nonlinear daily decay sequence occurs,
which can be expected to be in a daily pattern of y/2.5y/2.5y.
Within the umbrella fractal time frames of both of above two solutions, two
fractal decay patterns have emerged, one whose base sequence of 19 days
contains the 3 August Wilshire high and the second whose 26 day base
includes both day 104 of the longer 52/130/104/78 day sequence and
additionally the lower high day 100 of the 52/123/100/7175 shortened
sequence.
The two fractal decay patterns respectively are 19/4748/24 of 4748 with 24
more days to a primary low and 26/24 of 65/65 with a primary low expected
day 65 of the second fractal with 41 more trading day to a primary low.
Notice that these two daily solutions match the expected lows of the shorter
52/123/100/7175 and the longer ideal 52/130/104/78 day fractal sequences
respectively. The 26/24 of 65/65 day decay sequence is particularly
appealing because it matches the expected monthly low of the greater
umbrella decay fractal of 15/38/33 of 38 months. Likewise a possible
11/28/28 day sequence composing this second 65 day fractal is possible.
Gary Lammert
