The four seasons of investing

The book of Genesis made Joseph a superstar amongst forecasters.  His seven years of plenty and seven years of famine predictions led the pharaoh of Egypt to collect a tax in order to save/store crops for the bad times. This effectively enabled the kingdom of Egypt to become the superpower of its times.  Seven years cycles exist in the commodity space, FX, and stock market.  Bear markets were recorded in 1973, 1980, 1987, 1994, 2001, 2008, 2015 (yes it did happen). Worth putting 2021 on your calendar.  In FX markets, seven years cycles worked like a clockwork too. So in essence, we can see that there are 7-8 years  money flow cycles influencing all asset classes, but the economy too, from industrial production to unemployment.

Michael Armstrong is an intriguing character, so intriguing in fact that he might as well been the inspiration of the movie Pi or the unfortunate hero of a fictional spy novel character.  Myth or reality, the 8.6 years cycles described by his papers have gathered enough publicity over the years to take notice, especially if his global business cycle is once again calling for caution, at least until the beginning of next year. 

Even if the length and the drivers of Kondratieff cycles are stillmatter of debates, the fact of the matter is that such cycles can be split into two or four blocks or what we call Generational cycles.  26-30 years plus cycles are typically the length of commodity "super cycles"  14 to 18 years are what also referred to as Benner and Kuznets cycles, which are typically the length of secular bull or bear markets.  The duration here are less about time than about the prevailing conditions of that time period.  It's the same as the weather. Snow falls don't have to wait for the official start of winter. Intriguingly enough, the French use the same word "temps" for both weather and time. As the grand daddy of all asset classes, commodities  classic supply demand cycles have been studied over centuries. They do span 28-30 years, with twelve years of booms and eighteen years of excess capacity within longer 54-60 year cycles. Amongst commod

Divide a generational cycle into two and you get what is often referred as a Juglar cycle, a 9.2 year or almost decade-long cycle, one that corresponds to the time that often separates recessions and major sun spot waves. 

Ray Dalio is the founder a Bridgewater Associates, the world's largest hedge fund management by assets under management.  He is also a greater teacher.  I recommend every student to watch his wonderful video of "How the Economic Machine Works".  The model illustrates how the economy works based a simple, elegant and yet powerful model describing how K waves may actually be explained by the interaction of real productivity growth (GDP/capita) and the debt cycle.  Productivity growth trends would echo the work of Schumpeter, who sought in the study of major technological innovations the root causes of each Kondratieff cycles, in what he famously dubbed a process of creative destruction.  The use of credit as the main funding mechanism of the economic/capital growth cycle is then added to mix, thereby illustrating how long term debt cycles are punctuated by shorter ones and contribute to the accumulation and then misallocation of capital that ultimately complete the

We owe to Schumpeter the rediscovery of Kondratieff’s work. Kondratieff had died twenty years earlier in 1938 in a goulag prisonier camp in Siberia. He died for his simple but powerful economic findings. Little did young Nicolai Kondratieff know that his discovery would seal his fate. Hired by Lenin to find the scientific proof that the a major crisis would eventually destroy capitalism , Nicolai Kondratieff was a man on a mission.  His study of more than a century long of a twenty plus economic data series covering the wholesale and retail prices of goods, wages, interest rates, industrial data across six of the largest economic powers of the time   (France, UK, US and Germany) over more than a century was the achievement of a titan, considering the lack of computerised centralised recipient of such data at the time. Nikolai Kondratieff thought of his work as a scientific endeavour. He did not try to explain. He first tried to gather data and observe them. Once assemb