Nonstochastic Saturation Macroeconomics A New Science July 2005

Blog of gary.lammert -A recap of debt dependent quantitative saturation nonstochastic macroeconomics

The Economic Fractalist - An introduction Posted at 2005-07-01 13:54:52 by gary.lammert Welcome to the small alcove for the advancement of cause and effect saturation macroeconomics. This site pursues the hypothesis that the nature of market valuations and economic cycles is both causal and quantitatively decipherable. Valuations conform to fractal cyclical patterns that can be recognized, interpreted in conjunction with data emanating from the macroeconomic system, and used with short term and long-term predicative power. Information from this site is not intended to be construed as investment advice or as an investment tool. This site has been constructed because of the expected inevitability of a major sudden phase transition to occur at the conclusion of a grand 140 plus-year second fractal cycle starting in 1858. For the masses this phase transition will occur both very unexpectedly and very suddenly. Approaching the global macro economy from such a causal and fractal Weltanschauung may help those considering further debt obligation and those in position of formulating future interest rate and monetary policy. The cyclical nature of the macroeconomic system operates by causality rather than chance. Valuations of assets are controlled chiefly by interest rates - the cost of money. Lowering nominal interest rates, below asset inflation controlling rates, leads to macro economical disequilibria with excessive money expansion through increased borrowing. This expansion engenders unbalanced forward consumption, consumer saturation, overproduction, and inflation of assets and consumer items. With the addition of ongoing wages of the consumer masses, these oppositional elements are countervailing, and periodic macroeconomic imbalances will self correct. Market overvaluation saturation and decay corrections to new lower saturation points occur in a fractal manner. Cyclical patterns can readily be identified on valuation charts denominated in minutely, hourly, daily, weekly, monthly, and yearly units. The transitional asymptote of overvaluation saturation curves are followed by decay curves which bring market valuations to lowered decay saturation levels where intelligent buyers reenter the market. Valuation fractal cycles of yearly and multi-yearly lengths are based on saturation at the consumer level. Human psychology is a decidedly lagging indicator and follows as an end effect of the mechanistic saturation and decay evolutions in the market. Market contrarians understand these turning points and anticipate the directional changes of the markets based both on market asymptotic overvaluation saturation areas or decay end-point saturation characteristics and counter intuitively by recognizing the lagging psychological parameters of extreme optimism or pessimism in reaction to the mechanistic respective high and low points. Both the degree of valuation and the cyclical time course of valuation evolutions appear to conform to range bound near quantum-like units and quantum related Fibonacci numbers. While the absolute degree of valuation is influenced by the absolute interest rate, the percentage or proportionality changes of valuations from highs to lows and lengths of time to decay and intra-cycle nodal points appear to conform to these range bound near quantum units. The ideal growth fractal time sequence is X, 2.5X, 2X followed by a decay sequence of 1.5-1.6X. 'X' represents the fractal unit of time denominated in minutes, hours, days, weeks, months, and years. The first two cycles include a saturation transitional point and decay process in the terminal portion of the cycles. The second cycle may be composed of two roughly equal time units or one confluent time unit. A sudden nonlinear drop in the last 0.5x time period of the 2.5X is the hallmark of a second cycle and characterizes this most recognizable cycle. After the nonlinear gap drop, the third cycle begins. This means that the second cycle can last anywhere in length from 2x to 2.5x, which has import for the current 140 year grand fractal cycle, now in its 147th year. . The third cycle 2X is primarily a growth cycle with a lower saturation point and decay process followed by a higher saturation point. The last 1.5-1.6X cycle is primarily a decay cycle interrupted with a mid area growth period. Near ideal fractal cycles can be seen in the trading valuations of many commodities and individual stocks. Most of the cycles are caricatures of the ideal and conform to Gompertz mathematical type saturation and decay curves. Feel free to visit The Economic Fractalist Website. G. Lammert

## Saturday, May 9, 2009

## Saturday, July 5, 2008

The Wilshire closed at 12815.47 on 3 July 2008, near its 22 month lows. Composite equity valuation decay will follow a quantum fractal decay pattern. What is that fractal pattern? Will the current fractal decay pattern time frame and final low be mathmatically consistent with the larger growth and decay pattern starting in October 2002? Will the US 150 year composite equity second fractal's terminal nonlinear area be incorporated within a larger nearly perfect quantum fractal pattern whose evolution and valuation saturation limits intuitively is casually determined by systemic unpayable massive debt? This historical debt evolved by unregulated credit expansion, financial engineering, and uncompetitive interest rates and taxed savings acoounts and misrepresented by the term 'investing' vice the real term 'speculating' has resulted in oversupply, over ownership, over valuation, and gross dysequilibrium between the jobs and wages needed in the real economy and the the ongoing capacity to service the artificially created excessive amount of debt. The macroeconomy composite equity valuation is now evolving under such conditions and is within the terminal devaluation area were debt and entitlements wlll undergo synchronized default. The October 2002 x/2.5x/2x/1.5x quantum fractal is a 11/27/22/13 of 17-18 month evolution and a 46/115/92/ 51 of 69 week evolution. The 92nd week of the third fractal contained the 19 July 2007 high and a reflexive 20/50/40 day fractal yielded the predicted 11 October 2007 interday nominal all time Wilshire high. Is first decay base 13 weeks vice 23 weeks? This fractal decay base would generate a decay sequence of 13/32-33/32-33 weeks vice the 23/48/48-50 week sequence...In this mathematical construct the second decay fractal could be composed of a 24 and a 9 week fractal with a low at the end of the 9 week fractal substantially higher than expected because of massive and historical federal reserve intervention with total rate cuts of over 2 percent for the January -March 08 time period with contemporary financial guarantees involving the collapse of the fifth largest US investment agency. This short 9 week fractal stills serves as a potential base for a final 9/17-18/17-18 week fractal with the week of 7-11 July 08 having a nonlinear movement with the Wilshire on 4 July 08 at 38-39/77 of 78 days with 39 days starting on 22-23 January 08 and ending on 17 March 08 composing the short 9 week base . The 2x end of second fractal at day 77 of 78 is near the low valuation level of the first fractal with decay nonlinearity expected between 2x and 2.5x or between day 78 and day 95. With the deteriorating second fractal valuation level, nonlinearity is expected in the ealy range of the 78 to 95 day 2x to 2.5x timw window..

17-18 additional weeks of a third decay fractal 9/17-18/17-18 weeks would take the decay pattern to a low consistent with the terminal portion of the larger 46/115/92/51 of 69 week fractal;progression starting in October 2002 and provide strong support of an operative self limiting mathematical quantum formula defining the limits and governing the complex macroeconomic system. The valuation devolution within the final third fractal of 17-18 weeks would reflect a necessary massive repudiation of debt and entitlement payments in the global debt expansion system which has fostered asset oversupply and overvaluation and has caused a facade of GDP growth. GM is likely to go the way of New Century during this next 18 week time period, with a final fractal pattern of 34/69/34 weeks, a fractal pattern elegantly similar to the pattern composing its first 34 week fractal a 9/18/9 wek pattern. Fractally interestingly, gold as a marker for commodity speculation has a potential 11/28/10 pf 28 week decay fractal which would match the expected composite equity low. On a daily basis as of 4 July gold and gold stocks are following a final 9/23/16 of potentially 18 day growth fractal. How low denominated in US dollars will the old yellow relic fall in the next 18 weeks supported by a plummeting number of surviving dollars?

## Saturday, February 2, 2008

## Saturday, January 26, 2008

### Decay model E Modified :: x/2.5x/2x/1.6x and y/2y/2y

Another 0.25 to 0.75 interbank interest rate cut is expected on Wednesday January 30. This will accompany cuts of 0.5, 0.25, 0.25, and the emergency cut of 0.75 on 18 September, 31 October, 11 December 07, and 22 January 08 respectively. The yield for the ten year note dropped from 4.3 percent on 25 December to 3.3 percent on 23 January. For the same dates treasuries dropped from 3.3 to 1.9 percent. For the Wilshire starting from its 16 August lows, a Lammert four phase 17-18/44/34-35/28 :: x/2.5x/2x/1.6x day growth and decay fractal appears operative. From 27 December a 6/12-13/12-13 day :: y/2y/2y decay fractal is discernible not only for the Wilshire, but additionally for the FTSE, for the DAX, for the CAC, and for the NIKKEI composite indices with 28 January day 4-5 of a 6/12-13/4-5 of 12-13 day potential y/2y/2y decay fractal sequence. Fourth fractal Day 28 of the 4 phase Lammert fractal series and third fractal day12 of the three phase decay fractal series occur on the same day: 6 February 2008. If this quantum fractal model is correct and there are no trading halts, 6 February 2008 would represent an ideal low with expected nonlinear collapse within the next 8 trading days. The world composite equities are sharing the umbrella influence of a contracting world money supply - contracting under the triple saturation of US consumer asset acquisition, US consumer debt, and global asset overvaluation - all three caused primarily by lending parameters and as well by inadequately-high, non inflation controlling interest rates. From its twenty seven year lows gold is following a 17/34/33 of 33-34 x/2x/2x month growth fractal. From its 16 August 2007 low, gold has made a near perfect Lammert 4 phase fractal sequence of 11/28/22/18 days with the characteristic nonlinear drop in the terminal position of the second growth fractal. In the final 18 days of the final decay fractal, a terminal 9 day base formed serving as a new base with a 9/21-25/14 - 18 of 14 - 21 day growth fractal sequence with a blow off commencing in the early phases of the second fractal. This could be as simple as a 9/21/18 of 18 -21 x/2.5x/2.5x day sequence with day 18 of the third fractal having an opening gap rising to a new US nominal high at 925 US dollars and ending on the low of the day. What are the effects of a 1-1.5 per cent interest rate cut within a two week period? Can the Fed and Congress alter the controlling invisible forces governing the macroeconomy and hence the ideal quantum fractal patterns through historical radical interest rate cuts, 800 US dollar tax rebates, and subprime repayment moratoriums and modifications? The next 8 trading days will provide the answer.

## Sunday, January 20, 2008

### 'Decay Model E' : Oct 1987 and ? Jan 2008: the Terminal 23 July 1987 and 16 August 2007 x/2.5x/2x/1.5-1.6x Lammert Nonstochastic Fractal Sequences

In 1987 the US macroeconomy during and after the rapid Wilshire October equity devolution was in a healthy state. Underpinned by massive percentage GDP deficit cold war military expenditures, by its position as a world creditor nation with high savings, by its NAFTA-less WTO-less role as a net exporting and manufacturing nation, by its role as the foremost innovative technology R and D developer and manufacturer of microcircuits and computer chips - very equivalent to the 1950's transistor revolution- and by the related ongoing explosive marketing of the PC, the 1987 US macroeconomy was a global economic steamroller. The tranisent nonlinear October 1987 equity collapse was quite simply secondary to transient overvaluation and investor saturation; a nonstochastic saturation event that occurred in an otherwise remarkable economic growth period. Over twenty years later, the US macroeconomy suffers from a most severe dysequilibrium, the necessary consequences of 'globalization' of its formerly more nationalistic US corporations. Maximal profit motive drove US corporate CEO's and boards of directors to make business decisions and influence American politicians in the passage of globalization agreements that would maximize corporate profits. Ultimately corporate profit motive has relegated the American consumer to a significantly indebted borrower - with corporations gaining large profits from the financial debt business and the business of importing and distribution of cheap labor produced items to the US consumer market. During this same time low interest rates - politically and economically necessitated by the 32 month or so collapse of the high tech bubble, lending parameters of the financial industry, and artificial transient wealth created from the resulting inflation of the housing bubble synergistically provided the dynamics for the unsustainable debt driven economic growth. Globalized corporations had record profits - reaping benefits from both lending to American consumers and selling cheap-labor imported manufactured goods. First, the saturated and overvalued housing bubble crested and remaining investment money was focused on the equity and commodity markets. As the available investment money further contracted by ongoing debt default and associated restricted lending, the residual was lastly focused on the commodity markets. At the end there will be inadequate amounts of investment money available to support commodities. Without any particular Federal Reserve monetary action, residual investment money, as many times past predicted, has optimally flowed into the US federal debt market driving the ten year note to a four year low. The 2008 US macroeconomy is triply saturated: saturated with a large supply of overvalued assets, saturated with asset over-ownership, and saturated with debt - all three supported by a contracting number of disproportionally service-related US jobs. 2.6 trillion dollars has undergone devolution from the Wilshire's 11 October 2007predicted high. January 2008 is not October 1987. It likely represents the nonlinear devolution area of a major generational consumer saturation time phase predicted in The Economic Fractlist. Near ideal Lammert x/2.5x/2x/1.5x fractal progression may soon occur. For the 1987 Wilshire it was 9-10/24-25/20/15 days and for the 2008 Wilshire it may likely be 17-18/44/34/25-27 days.

## Saturday, January 12, 2008

The American economy - and hence with its weighted value, the global macroeconomy - is contracting. The American economy that has been so heavily dependent on massive debt growth with primary gains over the last 5 years in the real estate and financial debt industry sectors came to a net worth climax likely on July 19, 2007 when the combined commodity, real estate, bond, and equity markets' worth reached a zenith composite valuation level. Perhaps aided with the lowered interbank interest rates by the Federal Reserve and perhaps of its own 20/50/40 day intrinsic maximum growth process, the 15 trillion dollar Wilshire made a final predicted high on 11 October 2007. Equity asset values unsupported by further debt expansion at the consumer level are undergoing devolution. Job numbers related to real estate, durable good production, disposable income driven entertainment, financial transactions, sales, et. al. - are all contracting in a macroeconomy defined by limited wage growth, consumer saturation, debt saturation, asset overvaluation,and bad loans undergoing default. How does this asset overvaluation - consumer saturation macroeconomy compare to 1929 and 2000? The country and the world are about to find out. How severe will the devolution be and how effective will a sub one percent Fed Fund rate and less than 1 per cent treasury rate be in propping up the equity markets? By the US 1930's experience with T-bills approaching 0 per cent and the more recent Japanese experience, it is not likely the Federal Reserve will have a determining influence. The value of surviving US dollars will increase relative to assets undergoing devolution. Gold which has undergone a recent blow-off has completed a 7/17/14 year fractal starting about 1970. The mid portion of the 14 year third fractal has shown this collectible's substantial weakness and is harbinger of future valuation.

For the Wilshire December 2007 concluded a 11/27/27 month maximum saturation growth fractal x/2.5x/2.5x starting in October 2002. The Wilshire's weekly count 'borrowed' 2 weeks from the concluding portion of a three phase decay fractal starting in 1999 for a 46/115/92 week fractal with week 92 of the third fractal within a few days of the 19 July 2007 averaged daily high. Week 115 (2.5x) of the maximum saturation area of the third fractal rests between the two final weekly highs at weeks 114 and 116 correlating to the final daily lower highs on 12 and 26 December 2007, respectively. So what is the necessary quantitative fractal decay pattern? Model D from this site is still viable at 16-17/42 of 43/43 days as of 11 January with Monday 14 January (vice 12 January,a nontrading day) as the possible nonlinear break point day. At the close of 11 January 2008 and on a 15 minute fractal basis the Wilshire has recently followed a perfect 12/30/25 :: x/2.5x/2x 15 minute unit pattern - the base borrowing (3) 15 minute units from the preceding decay fractal. The 24th 15 minute unit of the third fractal was higher than the 25th unit. Will Monday 14 January day 43 of a potential 16-17/43 of 43/43 day decay fractal represent a nonlinear break point day - or is it the beginning of a few day growth area and consistent with Model E?

Model E for the Wilshire: From the 16 August low a 17-18/44/34/25-26 x/2.5x/2x/1.5x completed fractal with day 25-26 of the 4th (decay) fractal representing an interim low, prior to yet another deteriorating growth and much lower low decay sequence of perhaps 41 weeks in length. Interestingly the 17-18/44/34/26 model matches the duration of an averaged 20/50/50 day decay sequence starting on 16 August with a second fractal low on 21 November(still slight higher than the 26 November low)

## Tuesday, January 8, 2008

### Decay Fractal Model D 16/40/40 or 16-17/40-43/40-43 days?

Because 22 October 2007 the first day of first decay fractal was upgoing, the window for the conclusion of the second fractal for model D is extended to 11-12 January 2008.

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