24 September 2005

The Exquisite Daily Fractal Evolution since March 12, 2003
.... and Recomputation of the Primary Decay Sequence.

The macroeconomic world appears to operate and, operate
exquisitely, according to three saturation fractal growth phases,
followed by a saturation fractal decay phase. The idealized time units
that compose the three growth phases and decay phase, as delineated in
the main page of the Economic Fractalist are x/2.5x/2x and 1.5x
respectively.

Because equity valuation fractals exactly represent the complex
money-debt-asset system, the larger the equity index, the more
perfectly representative the index is of the underlying global
macroeconomy. This is why the Wilshire 5000 , TMWX,  which represents
the near summation US equity position is useful  in fractal analysis.
Even though other Euro-Asian equity markets have had better
performance, it is the American economy represented by TMWX that has
driven recent global economic growth.

Each day new valuation information is added and the consistent fractal
patterns and overall fractal puzzle gains greater clarity.
Periodically review of the entire fractal evolution provides possible
new insights. In this context a most remarkable balanced fractal
picture has come into focus. It is a fine extension of the prior
estimate of future fractal evolution rather than a departure. The echo
housing bubble created by the lured debtor of last resort, the
American consumer, has crested. This plateauing has been confirmed by
such proxies as IYR and HGX and the greater TMWX index.  US
overconsumption, overvaluation, asset inflation,and servicing of debt
have become predominant factors over ongoing new debt and money
creation in the complex money system.

Since 12 March 2003, the beginning of the current major  three phase
fractal growth period, the idealized fractal evolution has been simply
exquisite. In general, major growth fractal units of significant
length, e.g., weeks and months, are determined by low valuation points
and the connecting underlying slope line which contain all interval
points. The below data for TMWX  can be easily confirmed by using Big
Charts.

First growth fractal (x):  103 days  (12 Mar 2003 -6 August 2003)

Second  growth fractal (2.5x)  258 days  (6 August 2003 - 13 August
2004)(note nonlinear drop
on August 6, 2004 denoting the hallmark of a second fractal)

(The exact idealized  time frame is 103 x 2.5 = 257.5 days. Notice
that the closing low is actually lower on 12 August 2004 with an
intraday lower low on 13 August for exactly 257.5 days-exactly
matching the idealized low).

The idealized expected third growth phase and  the idealized decay
cycle would be:

Third growth cycle idealized (2x)         206 days
Decay cycle           idealized (1.5x)      154.5 days

Notice that the sum of the first and second growth cycle equals the
sum of the third growth cycle and decay cycle:  103 + 257.5 = 206 +
154.5 =  359.5 (The first and last day are double counted requiring a
subtraction of 1)

Now look what has happened in the real fractal evolution of the third
growth cycle starting 12 August or 13 August 2004. It has been
composed of three subfractals:

First subfractal:  (y) 51-52 days 12/13 August - 25 October 2005

Second subfractal  (2.5y) 129-130 days 25 October 2005 - 29 April 2005
(note nonlinear drop on  April  15,2005 denoting hallmark nonlinear
devaluation of the second fractal)

Third subfractal  (2y)  103-104 days was ideally completed on Friday
23 September 2005.

Remembering that the sum of the first two growth fractals equal the
the sum of the third growth  fractal and the decay fractal, the decay
fractal should be equal to:

Expected Decay Fractal:  51.5 +129.5 minus 103.5 (-1 for double
counting) = 77.5 days.

Notice the sum 51.5 + 129.5 + 103.5 + 77.5 (-3 days for double
counting) = 359 days.

This most remarkably agrees with the above idealized expected third
growth cycle and idealized decay cycle within half a day.
Macroeconomically this might be explained by continued (excess)
growth capacity to be had from ongoing debt creation and credit from
existing asset valuation. The idealized third fractal incorporated
this excess growth et, al. and  rearranged itself into a new
integrated sequence -  with exactly the same number of days to the end
of the idealized cycle.

This total cycle equivalent day fractal rearrangement potentially
provides a much better solution for the final decay fractal sequence.
Retrospectively, using this solution, the recent fractal valuation
behavior of the last 2-3 months becomes understandable and perfect in
its evolution.

The base containing the 3 August 2005 Wilshire high starts on 18 July
2005 and is 16 days in length - vice 14 days. The evolution is 4/8/6
days. Rather than being the actual primary decay base, it appears to
be a bridging  intermediate base whose second fractal sequence
contains the actual base for the primary devolution.The expected low
of a second fractal with  base of 16 days is on day 40(2.5x).  This
last Friday,  September 23, was day 34 of this 40 day sequence. Using
a 16 day base,  there should be 6 more days to a low.

Likewise including the TMWX secondary peak(in reference to March
2000), 3 August 2005, is a potential  interlocking confirmatory base
sequence starting on 29 July 2005. This base sequence is following the
classical x/2.5x/2x/1.5x and is 7/17/14/and 5(as of 23 September 2005)
of 10-11 days. Noticed that the expected low occurs on the same 40th
day(or one day earlier) of the 16/40  x/2.5x sequence as delineated
In the preceding paragraph.

The potential real first decay fractal base is contained within these
two above interlocking fractal patterns and appears to be 3/7/2 (as of
September 23) of 7-8. The primary decay base would consist of  15-16
days starting on the lower high of 12 September 2005.

The idealized decay pattern would be either( for a total of 78 days
from the 103-104 day
third fractal third subfractal lower high):

15/37.5/37.5 x/2.5x/2.5x or
16/40/32-33  y/2.5y/2y.

By this fractal reckoning the first decay base low will be reached in
5-6 more days and the entire three phase fractal decay cycle will be
reached in 77 more trading days. Considering the enormity of
imbalances, entitlements, and outstanding debt, this devolution could
potentially represent  the 147 year nonlinear fall into the abyss. The
collapsing financial picture will tax the American banking system
with its inadequate fractional cash reserves in its ability to redeem
deposits of concerned savers.

This is not investment advice. It is a rather specific prospectively
identified potential pattern that can be tested.  Again as the daily
fractal valuations evolve, further prognostic refinements may be
indicated.

However, the odds that the preceding identified  daily Wilshire's
fractals since March 2003, characterized by easily identifiable
valuation lows, are occurring by chance and randomness alone -
resulting in exquisitely perfect quantum fractal patterns must, from a
statistical point of view,  approach zero.  Based on this significant
statistical improbability, the macroecomony may very well operate via
its own predictable scientific fractal law.  Time will tell.

Gary Lammert