Share this Post on Twitter

Thursday, August 19, 2010


The Big Picture has an old postcard posted that shows a pattern of 'Periods When to Make Money' based on a simply 16/18/20 year pattern:

Today, lets have a look at periodicity dating back to 1763. The cycle the (unknown) author poses is a repeating 16/18/20 year

Across the top is the legend “Years in which panics have occurred and will occur again.” The past panic century of dates are 1911, 1927, 1945, 1965, 1981, 1999, 2019. Except for 1981, these were all pretty good years to sell (or short) stocks.
The "antique" postcard...

One of TBP's readers (dasht) found some additional background:
“The diagram which we give above was published on a business card by George Tritch, in Denver, Col., in 1872. We reproduce it from the card, with the explanations given with it. The diagram is not altogether accurate; for example, the panic Tritch predicted for 1891 actually occurred in 1893; still, the year 1891 witnessed the beginnings of the depression and the shrinkage in values which culminated in the crisis of 1893. It will be noted that the diagram gives the year 1897 as the time when an upward movement is to begin, and when it will be wise to buy stocks and real estate.

Here Tritch has predicted like an inspired prophet. Everything in the grain, stock, and real estate markets are booming skyward, while the gold discoveries in various quarters, the financial legislation in foreign countries, and the opening up of factories and mills throughout this country indicate that good times have come again, to stay, let us hope, many years beyond the period Tritch sets down for another relapse, viz., 1899-1904.”
So... how well has Mr. Trich predicted? Using available data from Irrational Exuberance (since 1873) and judging performance of when to avoid the market via the real (i.e. inflation adjusted) change in the equity index over a five year period... quite well.

Since 1873, in "down years" the index has decreased 4.7% over five years in real terms, while the index has increased 18.9% on average over a five year period over that same time.

And now? We are still in the middle of a down period... but make sure you're ready for the next bull market in 2012.

Source: Irrational Exuberance