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16 September 06
Terminal Investment Rotations at the 148 year Generational Saturation
Asymptote
As the housing market reached the buyer saturation area with oversupply
ever increasing, the building industry no longer plowed profits back into
further real estate development. Those terminal profits of developers from
the selling of houses courtesy of easy lending term low interest- no interest
rate mortgages rotated away from the peak-area housing market and
found their way into commodities, bonds, and equities driving valuations of
commodities and equities higher and long term interest rates generally
lower.
As retrenching consumers dependent on house wealth gradually curtail their
consumption of goods and perhaps as oil is added to the market
via strategic reserves, commodity prices have recently peaked with
insufficient money supply support to maintain valuation. Recently the CRB
has experienced a substantial devaluation.
Terminal recent profits by the smartest commodity sellers may no longer be
rotationally invested in sister commodity elements but rather be rotated and
invested in bonds and equities, which unlike commodities represent interest
bearing investment instruments.
Saturation of equities may soon occur when the functional money supply's
time first and/or derivative is no longer positive. Equity valuations, dependent
on company sales and profits, are directly curtailed by the
declining and
saturated consumer market. Compare the domestic sales and exports of
US vehicle's in the late summer of 1929 to GM and Fords' recent monthly
figures.
Finally terminal profits of the smartest sellers in the equity market
money may rotate into the safest vehicle, debt instruments, driving interest
rates lower.
Poignantly money can be borrowed to invest in the housing, commodity
and equity markets - all of which borrowing increases the money supply. With
long term and short term interest rate spreads so very narrow and
recently in negative territory, taking on short term debt to invest in the
longer term debt market is not profitable for the private sector. When
inversion occurs the money supply cannot be amplified by gaming the spread.
In summary as this generational macroeconomic saturation area has evolved,
investment money has progressively rotated from real estate
development and proxy stocks such as TOL into 1. non interest bearing
commodities and interest bearing bonds and equities and thereafter into
2. equities ultimately based on consumer activity and non consumer
dependent bonds, and 3. finally into interest bearing bonds... driving interest
rates lower.
Where is the US economy in this terminal rotational process?
The TMWX is a composite index of all the element equities. In the
short term, fractal examination of individual stocks can occasionally
be more revealing than the composite.
For instance, Ford (F) abruptly reversed itself with a downside lower
gap on 15 September 2006 after completing a three phase 8/16/16
x/2x/2x terminal growth pattern. Ford and GM may represent American
companies that are too big to allow to fail from the perspective of
default federal government pension obligations and bond default
liabilities.
Likewise by fractal examination GE. MSFT, XOM, PFE, C. WMT, AIG, IBM
and INTC can all be interpreted as in terminal fractal positions of
their respective second and third short term growth fractals.
The Gold stocks proxy for the noninterest bearing metal appear to be
breaking down in a terminal 8/13 0f 20/20 decay fractal pattern which
potentially matches XOM 8/12 of 20/20.
In context of the previous 30/75/75 week fractal with a high in
January 2006, a 28-30 day apical base x contains the Wilshire's May 5-10
saturation area at day 58-60 (2-2.5x).
If this May 5-10 2006 area represents the Wilshire's secondary
saturation area secondary to its March 2000's peak, a cuvilinear x/2.5x/2.5x
fractal with a base of 17 days containing the saturation area may be
opeative.
This fractal sequence has been previously described as
17/43/34 becomes at its maximum curvilinear growth - 17/43/43
x/2.5x/2.5x
with 15 September 2006 as the secondary high to the May 5-10 2006
saturation area.
Using the weekly nodal lows there is yet another possibility using the
same quantum construct of x/2.5x/2.5 fractal growth with extensions -
and this one is completely consistent with all the aforementioned fractal
quantum rules.
From its nodal low on 12 March 2003 a clear 22 week pattern is defined.
A nonlinear drop on 6 August 2004 defines the end of the second weekly
fractal with nodal weekly low at week 55 on 13 August 2004 exactly
2.5x of the 22 week base.
The third weekly fractal is composed of an 11/28/24 week progression or
52/130/117 days. The second subfractal of 130 days is exactly 2.5x of
the 52 day base with a characteristic nonlinear drop in the terminal
portion on day 120 or 15 April 2005.
The 55 week 2.5x extension of the third fractal ie 22/55/55 is
contained in the 5-6 apical week cup of the third fractal saturation
area from 3 August to 12 September 2005.
The completed weekly fractal is 22/55/61 of which the third fractal is
composed of a 11/28/24 subfractal series.
In this series using absolute daily and weekly nodal lows the third of
the third fractal becomes the base for the final fractal extension.
The terminal 24 weeks or 117 days of the 11/28/24 three phase weekly
growth progression and of the correlative 52/130/117 daily fractal
progression becomes the base x of the final 2x second fractal
extension. Again at breakdown at the 2x level of this second fractal
extension series would parallel the second fractal breakdown at the
148 year US Second Grand Fractal whose first base of approximately 70
years ended in 1858.
While the weekly count of this extension series is 24/49 weeks, the
daily count is 117/333 of 333-334 days or one day lacking of an ideal
2x 334 day top. A breakdown from this area would be ideal both in the
concept of quantum saturation extension and in the use of absolute
nodal lows for determination of those quantum daily and weekly counts.
In this scenario, a nonlinear lower gap would hallmark the
characteristic breakdown between the 2x and 2.5x area of the terminal
portion of the second fractal with an ideal low on day 393 or 2.5x of
the 117 day first extension base beginning on 29 April 2005 and ending
on 13 October 2005.
The third fractal of this extension series would ideally be between
1.5x and 2.5x of the base or between 278 and 393 days with a low lower
than the terminal low of the second fractal on day 393 or 60 trading days
from Friday 15 September, 2006
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