I have been involved in a long series of discussions on Seeking Alpha as to 1) whether or not there is such a thing as a Business Cycle; and 2) what is the true definition of a Bull Market and a Bear Market.
I have a simple graphic explanation of the answer to both these questions. 1) Yes, there is a business cycle; 2) the business cycle is the definition of the Bull Market/Bear Market Dilemma. The Bull Market is the Business Cycle.
As nature would have it, Bull Markets last 18 years and Bear Markets last 18 years. The Business Cycle (Growth Period) lasts 18 years; the (empty or end of the) Business Cycle, the Bear Market, also lasts 18 years.
Here is a simplified version of this for the recent century:
1911-1929: Bull Market Business Cycle
1929-1947: Bear Market, End of the Business Cycle
1947-1965: Bull Market Business Cycle
1965-1983: Bear Market, End of the Business Cycle
1983-2001: Bull Market Business Cycle
2001-2019: Bear Market, End of the Business Cycle
2019-2037: Bull Market Business Cycle
2037-2055: Bear Market, End of the Business Cycle....
What sane person could believe that Bull Markets and Business Cycle's would be scheduled so precisely in history? Good question. In fact, astronomers long ago understood that they could predict many things in nature. They could predict when Spring would begin each year, many centuries in advance. They could predict all the seasons, exactly. They could predict solar and lunar eclipses. In fact a specific series solar eclipse returns to the earth every 18 years (there is that number again).
In fact, this system of predicting Bear Markets and Bull Markets (or in understanding them) is much preferable to man's definition: Is a 20% decline in stocks a bear market; is an 18% decline almost a Bear Market. Is a 20% advance in stocks a Bull Market. Is anything more than a 20% advance in stocks something more than a Bull Market? Why is a 20% decline in stocks the definition of a Bear Market but a 20% advance in stocks not a Bull Market? It's not very precise, is it? Man's definition.
My definition is very precise. Like the solar eclipse, the Bull Market returns every 18 years. As a matter of fact, speaking metaphorically, a Bull Market is very much like an eclipse of the Moon by the Sun; a Bear Market is very much like an eclipse of the Sun by the Moon -- this is why I call the Bull Market (the Business Cycle) a Day-Cycle, and why I call the Bear Market (the end of the Business Cycle) a Night-Cycle.
I promised you the perfect picture of the Business Cycle-Bull Market and Anti-Business Cycle - Bear Market. This picture is of the price of the S&P 500 Index divided by the price of gold (the Stock/Gold Ratio, it is called). Note how the tops in this chart correspond to the end of the Business Cycle-Bull Market I have designated above: 1929; 1965; 2001...
Business Cycles and Bull Markets run from 1911-1929, from 1947-1965, from 1983-2001. How could anything so complex as the Business Cycle and the Bull Market be so simple? Good question. It just is. There is no need to rationalize it. Our modern scientific prejudice is that everything needs to be rationalized, explained rationally, broken down into rational parts, thus, convincing us that we have power over it, making us thereby larger than it is, a god ruling over Nature. But that is just our modern fetish; this says nothing about Nature or Reality. Mind over matter apparently is not just a mystical notion, but is a very practical scientific application as well.
Plato wrote: "God geometrizes." He also wrote: "The Laws of Nature are the thoughts of God."
Kepler wrote: "Geometry is one and eternal shining in the mind of God. That share in it accorded to humans is one of the reasons that humanity is the image of God."
Simplicity within complexity. Complexity within simplicity.
Some humans will reject simplicity because it is not complex enough, not intellectual enough.
Einstein admired simplicity. He wrote: "Simplicity boils down to two steps: identify the essential; eliminate the rest." He also wrote: "Simplicity is the ultimate sophistication." And again: "If you can't explain it to a six-year-old, then you don't understand it yourself."
I know there will be scoffers who will reject this apparent proof because it is not sophisticated enough, not complex enough, too mystical, too exact. "The Business Cycle is defined exactly like an alarm clock going off," they will mock. Yes. Time is the form that Space takes in manifestation.
I do have more involved arguments as to why 36 years. But I grow weary of explaining it to those who feel it their duty to de-bunk rather than their privilege to receive such revelations. So I will write these more elaborate notes at some other time.
Suffice it to say: 18 years for the Bull Market; 18 years for the Bear Market. A 36-year cycle.
So, according to this reasoning, 1911-1929 was a Bull Market and a Business Cycle Spending Season. 1929-1947 was a Bear Market and a Business Cycle Saving Cycle (a 'rest' cycle -- during which time no growth is or was possible).
Ok, so we should test this premise. Let's look at stock gains during the proposed Bull Markets and stock losses during the proposed Bear Markets:
1911-1929 Bull Market
1929-1947 Bear Market
1947-1965 Bull Market
1965-1983 Bear Market
1983-2001 Bull Market
2001-2019 Bear Market ...
1911-1929 Bull Market = DOW JONES INDUSTRIAL AVERAGE RETURN: 424% Bull Market total gain • positive 24% annual gain.
1929-1947 Bear Market = DJIA return: negative 47% total gain • negative 3% annual return
1947-1965 Bull Market = DJIA return: 386% total gain • positive 22% annual return.
1965-1983 Bear Market = DJIA return: 22% total gain • positive 1% annual return.
1983-2001 Bull Market = DJIA return: 915% total gain • positive 51% annual return.
2001-2019 Bear Market = DJIA return:still to be determined. (I have written much about central bank attempts to distort the Business Cycle by stealing money from the future to spend today -- which I believe will result in a prolonged disaster -- and a horrible crash of the financial system. I am predicting a crash in the DJIA to around 8787 by 2019, a loss of more than 50% from where we are today. Time will tell if this occurs.)
Clearly, Bull Markets are about unlimited gain (much more than 20%); and Bear Markets are periods of rest. We should think of these more as Day-Cycles, periods of productive activity and expansion, evolution of the material world; and Night-Cycles, periods of rest, recovery, regeneration of energy, and dreaming the imagery of what we will become during the next Day-Cycle, when we 'wake up' from our rest.
When we sleep, the material world is destroyed to us; our identity is totally lost. When we awaken, the anti-material world of our dreams is destroyed to us also. It is not really clear which world is the real world, as both are real in their own context. The spiritual world of our dreams feeds us imagery that we construction in matter when we awaken and carry those dreams into the waking world, the Bull Market. We should learn to treat the Bear Market sleeping world with as much respect and honor as we treat the Bull Market world of activity. Without the Bear Market Night-Cycle of rest and recovery there would be no Bull Market of evolutionary change. The Bear Market rest and recovery period is about refocusing and the conservation of energy we have spent during the Bull Market Day-Cycle. (Note: Day-Cycles are about expending energy, so the Bull Market Business Cycle can also be called the SPENDING CYCLE. Night-Cycles are about the conservation of energy, the saving of energy, the storing of energy for emergencies: Night-Cycles can also be called the SAVING CYCLE. Interest rates should be lowered in support of the Spending Cycle and raised in support of the Saving Cycle. Simple, again; but true.)
Tricks to extend the Business Cycle, and the Bull Market, the Day, are, in fact, stealing energy from ourselves and from our own future. The Business Cycle and the Bull Market cannot be extended beyond the 18 year limit without stealing resources and recovery energy from ourselves. This is a wisdom that Greed battles and tries to destroy. Such Greed also destroys empires, as they steal energy from their own futures, and become weaker during each cycle, eventually collapsing from within because of their desire for MORE NOW, always for MORE NOW.
Please think about this before rejecting it. Scientific thinking (and debunking) is part of the day language of the Bull Market Day-Cycle -- but there is also a Night-language, symbols, dreams, metaphor, which will give one extended life during the Night-Cycle. That is why we must develop both sides of the brain, not just the practical, causal, empirical reasoning (and rationalizing) left-brain of the Bull Market Day-Cycle. If we are not balanced, we do not get eternal life.
Nature is precise. Time is the precise side of Nature. Science does not reject the precision of Nature once it learns how to measure (and then perceive) such precision.
Hard to believe an 80% correction is possible. But the Nikkei 225 Index corrected over 80% after the Housing Bubble top in 1989 -- and is still in a bear market definined by lower lows and lower highs, even will all those trillions invested through QE through the last several decades.