All posts by Gary Lammert

The March 2020 Interpolated Nikkei and SPX 38/95/76 Week :: x/2.5x/2x Growth Fractal Series

US March 2020 to March 2024 Unprecedented QE followed by Unprecedented QT

In early 2020 at the beginning and during the more lethal  covid variant phases, the Central Bank and governmental response of unprecedented QE/low interest rate/MBS/money creation and distribution   resulted in historical price inflation and misallocation of bank lending for speculative enterprises. The central bank then pivoted to an unprecedented acceleration of QT, shearing bond holders and causing Silicon Valley, Signature, First Republic and Heartland bank failures in 2023. These banks had the double whammy of both providing unperforming  ‘speculative loans’ combined with paper losses on federal securities. In 2023 the Federal Reserve initiated the BTF program which injected liquidity and propped up banks owning US debt instruments which suffered paper losses. The termination of this QE program on 12 March 2024, will have an additional QT effect on bank lending.

American consumers, which had acquired 2.5 trillion in savings during the paychecks from  the last part of the Trump administration and the first part of the Biden administration have depleted that savings in Jan 2024. 

China, the World’s Second Greatest Economy

For China, the second largest economy, citizen speculative malinvestment in real estate with an overproduction of 2 times the amount of units needed combined with a grossly  inadequate replacement younger population has placed a double whammy on citizen consumption and ongoing construction which had been about 7 percent of China’s GDP. Chinese construction giant Evergrande is undergoing bankruptcy proceedings and corporate giant Country Garden has lost 95% of its stock value over the last three years.

It is the hypothesis of this website that composite equity valuations, even under the most radical of central bank and governmental  manipulative conditions  of QE and Q,  grow and decay  in a deterministic  very simple time-based fractal-patterned manner following the most efficient mathematical  self- assembly process possible. 

The March 2020 NIKKEI 38/95/76 Week :: x/2.5x/2x Peak Valuation Fractal Growth Pattern(with an expected nadir in about 1.5x or 54-57 weeks)

The March 2020 Interpolated SPX 38/95/76 Week :: x/2.5x/2x Peak Valuation Fractal Growth Pattern(with an expected nadir in about 1.5x or 54-57 weeks)

SPX Maximum Self-Assembly Lammert Fractal Growth: X/2.5X/2.5X :: 35/86/88 Weeks – March 2020 to 12/13 February 2024

March 2020 Peak Lammert Fractal Growth and the Great 1982 13/31-32 Year Crash

From March 2020 the fractal math for the maximum time based self-assembly  fractal growth for equities is quite simple :  X/2.5X/2.5X , where X is the time length of  the First Fractal Base ending in a low valuation (30 October 2020), 2.5X is the time length of the Second Fractal ending in a low valuation (16/17 June 2022), and 2.5X is the time length of the Third Fractal ending in a peak valuation. (12/13 February 2024)

First Fractal: X: 35 weeks: 23 March 2020 to 30 October 2020

(3)/33 weeks {the first 3 weeks (3) represent preceding terminal decay}

 X is the time length of the First Fractal with all intervening daily/weekly valuations above the valuations of the first and last time unit (day or week) of the First Fractal Base grouping. Because growth begins in decay, the First Fractal Base X includes 3 weeks of a preceding decay series. This 3 week grouping serves as base subfractal for (3)/6/7/5 week subfractal growth series within the First Fractal Base. (see above figure)

Second Fractal: 2.5X: 86 weeks 30 October 2020 to 16/17 June 2022

The Second Fractal is the most characteristic Fractal unit and is defined by an observable nonlinear gap lower low valuation between 2X and 2.5X. See the 2005 opening page of The Economic Fractalist website. This occurs between week 85 and 86. (see above figure)

Third Fractal: 2.5X: 88 Weeks 16/17 June 2022 to 12/13 February 2024

The Third 88 week 2.5X Fractal was completed on 12/13 February 2024 and was concluded with a daily Lammert fractal growth series starting 27 October 2023. (below image)

The concluding 27 October 2023 self assembly growth fractal series is composed of a 16/33/26 day fractal series. In this case the Second Fractal of 33 days days determines the ideal length of the first base fractal as 13 days (33 divided by 2.5) The Third Fractal of 2X or 2 times 13 is 26 days occurring on 12 February 2024. The SPX made a new high on 12 February 2024 and ended near the low of the trading day.

A hard landing is coming for the global economy with an expected global equity low valuation in January/February 2025.

The Great 1982 13/31 of 31-32 Year Second Fractal 2024-25 US Wilshire Crash

As part of a 1807 US hegemony x/2.5x/2.5x/1.5x :: 36/90/90/54 year great fractal progression with nadirs in 1842/43 and 1932, and a peak valuation in November 2021, the valuation of the US progenitor and composite Wilshire has risen with post World War II US global money/credit expansion and with initially its enormous geopolitical and manufacturing dominance. Since the Volcker US peak interest rates in 1982, the Wilshire has been propelled by money and debt expansion from both the gradual 45 year lowering of US (and global) interest rates and later from direct central bank creation and ownership of debt and 2020 MBS’s and from historically low corporate and private debt interest rates tied to near zero fed funds rates whose combined QE effect fueled the post Covid equity boom.

While the US 3 month Treasury minus Ten Year Note has been inverted to a depth and monthly duration similar to the pre1929 equity crash, the SPX, ( but not the Wilshire which includes small cap equities), has peaked on 19 January 2024 to a new high. It is both the combination of end phase creation of service-based economy jobs associated with new debt creation and money dis-proportionally pouring into the SPX’s big 7 tech companies which have supported the SPX’s recent bubble peak valuation.

The 1807 36 year Wilshire progenitor First Fractal ended in 1842/43. The 90 year Second Fractal peaked in 1929 and nadir-ed in 1932. The 90 year 8 July 1932 Wilshire composite Third Fractal peaked on 8 November 2021 with a 54 year 4th Fractal expected to end in 2074.

The US 90 year Third Fractal and 54 year Third Fractal are composed of two interpolated sub-series: a 51 year fractal sub-series 1932 to 1982 of 10-11/22/21 years and a 1982 13/31-32/31-32/18-20 year fractal series ending in 2074.

The graphs below show the quarterly fractal progression from 1982 of 49/120 of 123-5 quarters.

The monthly progression from March 2020 is 8-9/21/20 of 20-21/12-13 months :: x/2.5x/2.5x/1.5-1.6x