17 October 2005
Nonlinearity as Part of Macroeconomic Fractal
The current best fractal solution for the primary decay sequence of
equity valuations is a decline over the next 50 or so trading days.
By current fractal analysis nonlinearity is expected as part of this
solution with a remarkable unanticipated devolution. As commented
before, nonlinearity is part of nature's recurrent theme and common
solution for aged structural conditions at critical stress points.
Supernovae, nuclear fission, earthquakes, and death are common
nonlinear events in an otherwise linearly operating universe. The
stress point of credit deceleration and contraction in a house of
cards financial system dependent on continuous credit expansion has
resulted in the tremors and shaking of the US composite equity
valuation since 3 August 2005. These rumblings have been the warning
quakes of the deluge soon to come.
In several months, the probable valuation decline will,
retrospectively, be seen to fit perfectly well with the emanating
economic data that is now occurring and is so very apparent to those
with eyes wide open: the bankruptcy of venerable smokestack and
airline industries; the inflationary energy cost pressure placed on
America's new bell weather distribution industry, Walmart; the
outsourcing pressure on America's higher paying manufacturing and
technological jobs; the saturation and overvaluation and higher
property taxes associated with the Real Estate South Sea Tulip
industry; the narrowing of long and short term interest rate spreads
decreasing lenders' profitability; the recent bolus of bankruptcy
fillings; the massive current account deficits whose continuation is
wholly dependent on the cash strapped American consumer and his now
cresting housing valuation debit card; the sharply falling consumer
sentiment and general confidence in the future; the empty sales rooms
of American automobile distributors; the mass of hopelessly insolvent
corporate and city pension plans; the overly generous entitlement
programs whose sustainability are squarely based on continued consumer
borrowing and spending and a lower paying service economy to maintain
future GDP growth; the recent ongoing derivative dealer debacle which
is but the tip of the iceberg, and the historically low cash reserves
in mutual funds. How could anyone miss the ongoing macroeconomic data
occurring in our ENRON nation?
The primary equity value devolution can be viewed in two fractal
manners: one, a declining growth fractal sequence with an ideal
pattern of x/2.5x/2.5x and two, an inverse growing or growth of decay
fractal sequence of x/2-2.5x/x-2x.
As of Sunday 16 October 2005:
The current best estimation of the former declining fractal growth
sequence is 19/43 of 47-48/47-48 days. The first 19 days includes the
3 August Wilshire high.
The current best estimation of the latter inverse growth of decay
sequence is 10 of 10-12/25-30/16-22 days.