Sunday, December 9, 2007

Saturation Macroeconomics and the ubiquitous quantum x/2.5x/2x and x/2.5x/2.5x Lammert growth fractals:

Saturation Macroeconomics and the ubiquitous quantum x/2.5x/2x and x/2.5x/2.5x Lammert growth fractals.

Subtitle: What the Wilshire's deteriorating 16 August three phase growth fractal pattern reveals about the true Macroeconomy and its money growth velocity: the Wilshire's third fractal's collapsing performance.

There are counterbalancing countervailing limits to aggregate money growth. 19 July 2007 and 11 October 2007 predicted by quantum fractal analysis represent those limits.

The banking and associated corporate financial system runs on liquidity and positive cash flow. At macroeconomic saturation areas, saturation areas defined by limiting non payable debt, asset overvaluation, and wages incapable of supporting low interest rate associated and lending variable associated inflationary cost of essential daily need ed to live items, there is an acute inflection - where the underlying real over valued debt liabilities abruptly emerge and cash flow abruptly halts. The complex interdependent series of the financial industries' short term debt obligations can not be repaid and the whole system comes to an abrupt halt. The recent injections of 500 billion equivalent US dollars by the world central banks have kept the fragile system afloat - for a while. Those short term loans delayed a disastrous system lock-up, now add in a small way to the total debt with requirements for interest repayments- and have provided breathing room time for the financial industries to assess the dire state of affair and possibly renegotiate and reorganize as possible their short term debt relationships. As well the Federal Reserve has lowered the discount rate three times: 17 August, 18 September, and 31 October and the Fed Funds rate on the latter two dates - and will likely do so again on 11 December.

In spite of the massive short term central bank loans and reduction of interbank bank lending rates, the Wilshire's 16 August fractal progression is clearly deteriorating. Since 16 August, the Wilshire has followed a 17+/44 day first and second fractal growth pattern. The third fractal pattern begins with a deteriorating lower low pattern and thereafter is curvilinear positive for a possible final curvilinear fractal pattern of 4/10/10 days with the final 10 day third subfractal pattern having positive valuation and December 7 as the final lower high.

There are other final short term growth possibilities. One alternative is a final fractal pattern with the terminal 3 days of the 10 day second subfractal forming the base of this final fractal growth pattern: 3/7/4 of 4-6 days. This would put the final Wilshire lower high also on 7 December - or possibly on 10/11 December.

The European Equity indices third subfractal growth patterns have recently somewhat diverged from the Wilshire. The Nikkei 's fractal growth pattern - whose 17 day first fractal pattern was identical to the Wilshire, CAC, DAX, and FTSE shows what happens in an environment where interest rates can no longer be significantly lowered. A portion of the Nikkei's deteriorating third fractal lies below the 16 August low.

GE, the largest of the Wilshire units has followed the Nikkei with a portion of the third fractal below the 16 August low. GE's 17+/44 day first and second series display the characteristic nonlinearity decline of the second fractal. Its third fractal is composed of two fractal growth series: - a 2/5/5 day deteriorating growth or simply decay fractal followed by a 3/7/4 day positive growth fractal series with the intraday low of day 7 of the second fractal below the 16 August intraday low. From its March 2007 low GE currently rests in an apparent completed fashion at 7/17/17 weeks. GE is likely under performing the Wilshire because of its substantial corporate component participation in the debt industry.

Google appears near completion currently on week 72 of a 29/72-73/72 of 72-73 week pattern.

On 7 December New Century now at 2 and 4/10 pennies completed day 28 of a 14/35/28 of 28 day fractal which might extend to a 28 of 28-35 day fractal.

The CRB from its 16 August low has followed a 9/21/21 pattern and thereafter a 5-6/14-15/14 of 14-15 day pattern near its all time high valuation and- with a timing consistent the above Wilshire final fractal growth models.

Since the end of 2000 gold and the gold equity indices XAU/HUI have been interesting within the context of gold's 7/17/14 year fractal series.From the 16 August low gold has conformed to a perfect Lammert progression x/2.5x/2x/1.5x or 11/28/22/18 days. Since making a low on day 18 it has traversed laterally in valuation. Gold equities (NEM eg) have followed a fractal pattern curiously similar to the CRB: a 9/22/18 pattern followed by a 7/15/14 of 14-15 day pattern. Gold's under performance from 1996 to 2000 relative to equities and other commodities likely underscores its true value in the 21 century.
The fractal pattern from 2000 for the combined/ gold/gold equities is approximately 27-30/56-59 months. The second fractal's completion at 2x is due with devaluation nonlinearity of 11-15 months ahead. Note that this decay would time well with a Wilshire's expected 11/27/22/18 month fractal completion.

With the lowering of interest rates and supportive central bank money injection, there is both new speculative interest - and malinvestment competitive interest - as treasuries and mutual funds are generating lower yields for savers - in a currently high inflationary environment. The Federal Reserve may well understand that inflation will recede in the next several months as the real consumer economy undergoes retrenchment. For the pensioner and saver, who see daily living prices real time, the lowered yields may incentivize them to errantly redistribute and malinvest their assets in the speculative equity markets, which historically have generally done well in a declining interest rate environment.

For the Wilshire 2 of the prior 4 primary fractal decay models remain viable: 1.the 9/23/23 day primary decay sequence with day 40 or 11 October 2007 of a 20/50/40 day finial high growth fractal contained within the 9 day first fractal base and 2. the 16/40/40 day decay model with day 50 of a 20/50/50 similar final growth fractal contained in the 16 day first fractal base.

The 9/23/23 Wilshire decay fractal model would suggest a primary decay sequence with two longer secondary and tertiary fractals to follow. A 16/40/40 decay sequence would suggest that zero Fed interest rates might allow a third fractal in a possible weekly series of 75/187-188/ 121.5-150 weeks. In this scenario, inflation of the CRB: gold, oil, and grains might be substantially supported both by foreign holdings of US dollars and further devaluation of the dollar (after its current 15 or so week rally. This scenario might take physical gold from its current 7/17/14 year growth fractal starting in 1970 to a 7/17/17 year final growth fractal ending in approximately 2010. Fractal growth for gold equities are offset from the actual metal and appear to be following a 7/17/11year growth fractal.starting in 1978.

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