The Cycle that Begot the Panic

Last October was the 90th anniversary of the Wall Street Crash of 1929 … which was roughly 90 years after the Panic of 1837 … which was …

OK, here I go again. Yeah, there’s a well-known cycle that predicts … you guessed it … financial panics.

This cycle was noticed by William Delbert (W.D.) Gann, who was known for using math and geometry to predict events in history and the financial markets … and who reportedly made $50 million trading in the early part of the last century.

Gann’s education mainly came from the Bible (from which he learned to read) and in cotton warehouses (where he learned to trade commodities).

He saw that markets have predictable turning points by claiming “Every movement in the market is the result of a natural law and of a Cause which exists long before the effect takes place and can be determined years in advance. The future is but a repetition of the past, as the Bible plainly states …”

He was especially keen on his 90-year cycle, which foresaw the financial crisis of 1929.

Long-term cycles like this coincide roughly with the lifespan of a generation. The reason is simple …

Each generation forgets and ends up repeating the mistakes of its forebears.

Or the “experts” say, “This time is different.”

In fact, the establishment claims to have avoided a worse economic disaster following the 2008 financial crisis. Uh, yeah … by lowering interest rates to levels never before seen in history …

… and by pumping trillions of dollars into the markets through bond purchases via a mechanism known as quantitative easing (QE).

But that’s a topic for another time. Back to Gann’s cycles …

The half-cycle of 45 years brings us back to a significant stock market low in 1974. (If you remember, we also had an OIL CRISIS then, like we did in 2020 … although prices went in opposite directions.)

Forty-five years before that it was 1929.

The “Gilded Age” market top occurred in 1881, 48 years before 1929 and certainly within range. (Stocks bottomed in 1896.)

Going back 45 years further is 1836. (The stock market topped in 1835.)

Finally, 45 years before that was 1790. (We find a significant stock market low in 1789.)

History may not repeat itself exactly, but it often “rhymes” (as Mark Twain said).

With that in mind, let’s take a look at the stock market at the beginning of the Great Depression …

Source: GoldSeek.com, Gold Seek LLC

 

Notice how stocks rallied for about five months following the crash of ’29 before heading south again?

So, let’s see … stocks bottomed in March and now it’s August. Hmmmm. I guess we’ll see if 2020 “rhymes” …

All the best,

Sean

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Comments 2

  1. Wayne Silzel August 15, 2020

    66 years ago I began studies in macroeconomics in college. I witnessed the “Credit Crunches” in 1965 and 1969, the oil crisis and inflation in the 1970’s, the 1990’s housing crisis, the 2000 dot com bust and the 2008 housing recession. The effect of each on my real estate finance company was a humbling experience. An upward interest rate cycle that began after WWII peaked in 1982 and has now bottomed in 2020 having completed its own 70 year cycle. As W.D. Gann acknowledges, the Bible supports these cyclical findings. The Bible also foretells of a debt “Jubilee” every seventy years. Given the massive accumulation of unrepayable debt shouldn’t we be preparing for that too?

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  2. Johnny Lego August 13, 2020

    Late September 2019 (therefore call it October) was the beginning of all of the current problems thanks to the blow-up in the repo market and the Fed swooping in to run up the balance sheet. That problem has yet to end and was obviously exacerbated by Covid. As such Gann may have been literally spot on with his timing and I personally don’t think we’ve seen anywhere near the bottom of this same cycle which is still actively in play.

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