23 September 06
Synchronization of Superimposed Long Term Second Fractals and the Nonlinear Decay Portion of Generationally Saturated Markets
Looking from afar at the qualitative decay valuation curve of the great British South Sea Bubble's two year 96 plus percent collapse which fooled even the great mind of a subsequently poorer Sir Issac Newton, valuation decay with a 70 percent loss of value is apparent over less than a month or so of its primary non linearity devolution phase. Newton, who ironically had a unique understanding and perception of the small-to-great-mass-coupled -with-short distance apple-to-earth non linearity produced within a greater field of lulling linear (curvilinear) relationships of circling heavily bodies, failed to anticipate a comparable nonlinear force occurring in economic systems.
The mathematically well described - but still as of yet only empirically known - force of the earth's gravity causing the accelerated nonlinear drop of the apple is similar to the immutable and empirical macroeconomic saturation forces producing periodic nonlinear drops in market systems -operating by simple quantum mathematical fractal patterns composed of serially smaller fractal time units. A ten day chart of any tradable asset will reveal these recurring fractal patterns and the nonlinearities of devaluation. All of these nonlinear drops at smaller order time units, are occurring within a system that appears from a human longevity time frame and adult market interest time frame to be reassuringly linear.
At generational macroeconomic saturation points where the population of speculators, consumers, and borrowers have been exhausted limited by the constraints of ongoing wages, the accumulative cost of borrowing, over production of assets, and the over valuation or inflationary costs of those assets- at these points- the nonlinear drops are proportionally greater with greater follow-on consequences. A slowing forward velocity of Mercury at some critical point in its long term future may 'rapidly' and 'non linearly' spiral this sky lab - earth equivalent heavenly body into the sun. Perhaps this has already occurred for ancient unnamed planets a,b, and c which were a billion, 2 billion, and 4 billion years or so ago very proximate to the sun.
While the generational economic saturation and maturation of the complex debt-wage-asset system occurs with regular periodicity, the follow-on nonlinear phase of value devolutions of leading asset classes may represent a consistent marker for macro economic, macrosocial, and macropolitical dislocations and turmoil that thereafter ensue. The magnitude of severity of these follow-on disruptions may be in proportion to the degree of leading asset nonlinear absolute devolution or fractal decline which is in turn proportional to the degree of credit expansion via the preceding debt creation cycle.
The US cold war economy, transitioning to the 1990's new paradigm IT economy (and collapse), and thereafter the coexistent new global dollar debt for low cost Asian goods economy and the new housing bubble economy via low interest and ARM housing credit expansion have occurred in rapid order over the last 55 years with never a declining year of GDP growth. This continuous US GDP growth is unparalleled in its 230 year history. The US accumulative and accelerating yearly international debt imbalances in trading IOU's for foreign products are likewise unparalleled. The economic growth of IOU receiver and producing countries has never before been so dependent on a foreign consumer willing to take on so much debt. The 10 percent 1929 margin equivalent leveraged debt expansion has been eclipsed by the current unregulated and predatory US lending industry targeting a much larger population in their pursuit of the 'traditional American Dream'. Like all 70 or so year economic cycles the current generational nonlinear devolution will end with a new cycle of growth, but not before a terrible price is likely extracted in terms of follow-on macro social political dislocations.
Just as with growth, assets decay appears to occur in discrete fractal patterns, as the liquidation phase of overproduced and /or overvalued assets 'grows' or accelerates in discrete quantitative units. While the nonlinear phase of 1720 was quite efficient, computerized trading as shown in 1987 has the potential for unparalleled liquidation efficiency. The computer's efficiency in 87 brought about regulations with trading breaker rules dependent on hourly and daily percentage decays within the market. Even without the efficiency of the computer, because this generational macroeconomic saturation point lies at the end of a 148 year second fractal sequence, non linearity will be limited only by these paradoxically 'computer enforced' artificial 'time-outs'.
Current Fractal Analysis
Day 334 of the Wilshire's 117/334 extension fractal - whose base of 24 weeks or 117 days contained the 55th week of a maximum 22/55/55 weekly growth fractal starting in March 2003 - was contained in 4 day apical cup from Friday 15 September to Wednesday 20 September 06. With the terminal rotation of investment funds into bonds, there was simply not enough investment money for the SPX to break 1330 on Thursday 21 September, although the Thursday NASDAQ did make an intra day high, higher than its Wednesday's high. Likewise contained within the 4 day apical cup is the 24th terminal day of completed 16/40/32/24 day inverse growth fractal. In actually there is perfect symmetry with day 334: day 2 and day 24:day 3 of the 4 day apical cup.
The equities and all asset classes are headed for a singular and historical lower non linearity and precipitous decay marking the end of a synchronization of several 2-2.5x fractal time frames: 70/148 years, 8/16 years, and finally 117/334 days. The 16 year second fractal is an extension fractal of the 8 year third major growth fractal starting in 1982 and ending in 1990. Using absolute nodal low points for major fractal determination, the concept of synchronization of superimposed second fractal terminations is again offered. The cresting point or saturation areas of superimposed second fractals of various time frames are matched, 148 years, 16 years, and 334 days and so their follow-on periods of expected non linear decay. The second fractal 2-2.5x time frame's appropriate suddenness and the probable magnitude of the simultaneous second fractals' super impositions and synchronized nonlinear decays will very likely take the breathe of the collective global macroeconomy completely away.
Should the Wilshire fall below 12400, the trend line selling trading programs prewired into the financial business supercomputers will take over and efficiently complete the non linearity with 19 years of advanced and faster microprocessors than the 1987 286 models.
The saturated quantum fractal picture well matches the crumbling position of the US economy: with its zero rate MI money supply growth, its falling industrial production, its oversupply of US housing matching the oversupply of 1929 automobiles, its zero saving consumer, its record mortgage defaults, its record leverage of multiple house mortgage-owner-speculators, its record citizen credit card debt, its inversion of short term and long term treasuries, its paucity of credit able mortgage applicants, its over consumption, its bad bet commodity hedge fund billion dollar losses, its downsizing of the ranks of its fortune 500 employees, its precarious and underfunded pension obligations, its massive corporate debt, national federal debt, state and local government debt, and its record low job expansion and wages during the 2003-2006 'recovery' period.
The fractal generational saturation curve for hard assets, commodities and equities has been completed. Superimposition and synchronization of 234 day, 16 year,and 148 year second fractal saturation points are alligned and positioned for nonlinear unravelling. Expect suddenness, nonlinearity, and perhaps in the context of the above paragraph describing the current tenuous picture of the US economy and its collective balance sheet, the very very expected.