Keying on October 15, 2017.
Key Words: what you believe in, Trickle Down, Consumption Economy, Growth Engine, Long Cycle, Timing Apex
For all of the investors who believe like Janet Yellen, that cash is not important, that the new money is paper assets like stocks and bonds, we will just say this, tell us what you believe in when October 15, 2017 arrives.
That is the date when the 17.6 Year Long Cycle that started on March 24, 2000 will be completed. This cycle has spanned a unique period of economic history. It has been a period when major Global structural changes have occurred. Pointedly, over the first 15 years of this cycle, the leaders of the World were not willing to address those structural issues. In the US, for example, Congress has sunk to new lows in their public ratings. During this time our two Presidents have flailed at the issues, one even starting a War that we are now only seeing all the repercussions as Iran and Saudi Arabia duel it out.
Into this vacuum of leadership we have had two Presidents who believed that if the economy was strong everything else would be ok. And how did they use their leadership? Basically by allowing the Federal Reserve and its three Chairman for the time, Alan Greenspan, Ben Bernanke, and Janet Yellen convince the world that they had the smarts and the magic wand through low interest rates to make the world better. Implicit in that belief was the theory of Trickle Down, that worked by creating cheap money to provide the top 10 % the cushion to push up the new money, stocks and bonds, and those people would create jobs. And they eventually did create jobs but at a lower pay scale than the employees old jobs. But most importantly the money stayed at the top which constricted the availability of consumer funds to support the Consumption Economy.
So what happens now, nothing has been built with the money that has flowed to the top. It is now just money, not a Growth Engine for the Global Economy. The only way the holders can capture the money is to sell, and they cannot do that, because no one else will buy.
None of the major structural issues have been addressed as the western economies became obsessed with paper assets. These issues are primarily based on the rest of the Globe wanting a bigger share of the Global pie and the speed with which that issue is evolving through Technology.
Now the treacherous details can be addressed. Here we are at end of first quarter 2015 with just 2.6 years left in the Long Cycle. We see the start of QE III on September 13, 2012 as the triggering point for the final 5.2 years. We believe we are now at the Timing Apex, halfway to cycle end on October 15, 2017. It should be noted that the Long Cycle through history has not always been 17.6 years, it is an average.