| 
Let’s turn our attention to a cycle which we’ve rarely discussed
over the years. The Kress 24-year cycle is one of the components of the
120-year cycle series which is scheduled to bottom in 2014. The 24-year
cycle tends to get eclipsed by the longer-term cycles like the 40-year
and 60-year cycles (both of which have a major impact on equity prices
and the economy). But the 24-year cycle takes on a special significance
all on its own: it’s the cycle of war.
The final “hard down” phase of any cycle is defined as the final
8% to 12% of the cycle (averaging 10%). Therefore the final “hard
down” phase of the previous 24-year cycle encompassed most of the year
1990. Not surprisingly, the year was a bearish one for stocks. The
banking sector was particularly hard hit by this particular 24-year
cycle as 1990 was the worst part of the infamous S&L crisis and saw the
failure of more than 100 small banks.
The 24-year cycle might be described as the first of the major
longer-term cycles and tends to bottom with a strong impact. Not only
does this cycle typically bring about a major decline in equity prices,
its bottom also historically coincides with the initiation of military
hostilities.
Since 1894 when the previous 120-year Grand Super Cycle bottomed and a
new one began, there have been four military conflagrations at each
subsequent bottom of the 24-year cycle. Most of these wars have been
major in scope. The first such instance of war occurred in the years
leading up to 1918, which saw the first 24-year cycle bottom of the
current 120-year cycle. The 24-year cycle that bottomed that year saw
the ending to the First World War. Remembering that the final “hard
down” phase of the 24-year cycle approximates to almost two-and-a-half
years, this represented roughly the second half of that major war, a war
that involved the United States.
The next 24-year cycle bottom occurred in 1942. This year represented
the United States’ entry into the Second World War against Japan and
the Axis Powers. Both the 1918 and the 1942 cycle bottom years proved
vicious in terms of military conflicts on the global scale.
Following the 1942 bottom, the next 24-year cycle bottom occurred in
1966. This was a particularly harsh year in the Vietnam War in terms of
the United States’ involvement. Following the 1965 National Liberation
Front attack on two American military installations, President Lyndon
Johnson ordered the continuous bombing of North Vietnam.
The year 1990 saw the most recent 24-year cycle bottom in the current
120-year Grand Super Cycle. This year saw the start of the first Persian
Gulf War involving the United States and its allies against Iraq. This
period also saw a rather conspicuous jump in the price of crude oil as
it related to the war and its anticipated supply disruptions.
The final “hard down” phase of the current 24-year cycle begins
this year. It shouldn’t be surprising in light of this fact that
we’re already hearing a steady increase in war drums pounding for a
preemptive strike against Iran. As I wrote in my book, _The Stock Market
Cycles_, “If history repeats the period between 2012-2014 can be
expected to usher in another major war involving the U.S., possibly on
the global scale.” I’ve since amended my expectation for war to
occur no sooner than the actual 24-year cycle bottom in later 2014.
One example of the psychological preparation for war in the mainstream
media is in the February 13 issue of _Newsweek_ magazine. The front
cover of this edition of _Newsweek_ features a wall art portrait of
Christ bespattered with what appears to be blood and accompanied with
the headline: “The War on Christians.”
The article by Ayaan Hirsi Ali begins with these ominous words: “From
one end of the Muslim world to the other, Christians are being murdered
for their faith.” The article goes on to chronicle the increase in
terrorist attacks on Christians in Africa, the Middle East and Asia (up
309% from 2003 to 2010, according to _Newsweek)_. It further states,
“In Iran dozens of Christians have been arrested and jailed for daring
to worship outside the officially sanctioned church system.”
One can’t help but wonder by a mainstream publication which has in
the past been less than sympathetic to Christianity in America is
suddenly concerned with the plight of Christians in the Third World. The
answer can be found elsewhere within the same issue. In his latest
column, _Newsweek_ columnist Niall Ferguson argues in favor of a
preemptive Israeli attack on Iran and why the U.S. should theoretically
support it. He gives five reasons in support of this aggressive military
stance. He concludes with these words: “War is an evil. But sometimes
a preventive war can be a lesser evil than a policy of appeasement….It
feels like the eve of some creative destruction.”
Mr. Ferguson isn’t alone in his feeling. The belligerence on both
sides is “getting frightening” said _The New York Times_ in an
editorial. Rumors of an Israeli attack this spring are spreading. Leslie
Gelb, writing in _TheDailyBeast.com_, opined that an attack against
Tehran would unleash a major reprisal against targets both foreign and
domestic. Oil and gas prices would soar and the economic recovery would
be imperiled, says Gelb, adding that if diplomacy fails “we’re stuck
on today’s collision course with Iran.”
For all the saber rattling, a war against Iran is unlikely this year.
War sentiment is high mainly because the economy has recovered enough in
the last couple of years to allow officials to finally turn their
attention from economic concerns at home to military matters. The
current U.S. presidential election should detract attention from the
Iran problem in the coming months, however. And if the Kress cycles are
correct, the current recovery phase is a temporary phenomenon, and by
the end of this year deflationary pressures will return once the 4-year
cycle has peaked.
Gold is an excellent barometer of, among other things, military
aggression. The gold price will typically spike significantly higher for
at least two months prior to the outbreak of war. As you can see here,
gold has been in a comatose state for the last several months and has
made a series of lower highs since peaking last summer. Gold doesn’t
smell war as yet. If a major war is coming this year then we should see
gold overcoming its nearest high from November followed by a strong and
sustained rally in which gold goes on to make a series of higher highs
and higher lows.
Another concern being voiced in the media is the potential for a
war-induced spike in the oil and gas price the real problem. As it turns
out, oil doesn’t need a war to move higher. The media haven’t given
it much coverage lately but energy prices have been steadily approaching
their highest levels in three years and could even approach pre-credit
crisis levels by summer. (See the weekly gasoline futures chart below.)
If the gasoline futures price pushes decisively higher above the 3.06
level (last year’s high), expect to see an explosion of fuel-related
fulminations in the mainstream media. This in turn would add to equity
market volatility going forward and would give investors something new
to worry about besides Greece and Iran.
Another point worth considering is that the U.S. has never entered a
major theater of war during a presidential election year. This is an
important point to remember whenever we hear the rumormongers in the
media warning of an “imminent” war with Iran. Consider the following
statistics:
* Wilson re-elected in 1916 on campaign slogan of “He kept us out
of war.” U.S. enters WWI on April 6, 1917, the year _after_ Wilson’s
election.
* Roosevelt re-elected 1940. U.S. enters WWII Dec. 11, 1941, the year
after Roosevelt’s election.
* Truman elected 1948. Korean War starts in 1950.
* Kennedy elected 1960. U.S. entry in Vietnam begins in 1961.
* Bush Sr. elected in 1988. Operation Desert Storm Jan. 17, 1991 –
Feb. 28, 1991, almost two years before the 1992 election.
* Bush Jr. elected in 2000. The War in Afghanistan starts on Oct. 7,
2001. Second Iraq War invasion started in 2003. Bush re-elected in 2004.
Based on this historical pattern, it’s unlikely that 2012 will
witness the opening of a new theater of war for the U.S., particularly
since the U.S. has just exited Iraq. Also worth mentioning is that major
wars are rarely commenced during deflationary winter. Major wars
involving the U.S. tend to begin after a major long-term cycle bottom
(e.g. the 12-year cycle bottom year of late 2012 saw the start of the
second war with Iraq).
The 12-year cycle is exactly one half of the 24-year cycle of war, both
of which are scheduled to bottom in 2014 with the 120-year cycle.
Accordingly, any major war involving the U.S., which could potentially
involve Iran or another Middle East country, is likely to begin at some
point after the 2014 long-term cycle bottom.
With the long-term bull market in gold and mining stocks in full swing,
there exist several fantastic opportunities for capturing profits and
maximizing gains in the precious metals arena. Yet a common complaint is
that small-to-medium sized traders have a hard time knowing when to buy
and when to take profits. It doesn’t matter when so many pundits
dispense conflicting advice in the financial media. This amounts to
“analysis into paralysis” and results in the typical investor being
unable to “pull the trigger” on a trade when the right time comes to
buy.
Not surprisingly, many traders and investors are looking for a reliable
and easy-to-follow system for participating in the precious metals bull
market. They want a system that allows them to enter without guesswork
and one that gets them out at the appropriate time and without any undue
risks. They also want a system that automatically takes profits at
precise points along the way while adjusting the stop loss continuously
so as to lock in gains and minimize potential losses from whipsaws.
In my latest book, “Gold & Gold Stock Trading Simplified,” I remove
the mystique behind gold and gold stock trading and reveal a completely
simple and reliable system that allows the small-to-mid-size trader to
profit from both up and down moves in the mining stock market. It’s
the same system that I use each day in the Gold & Silver Stock Report
– the same system which has consistently generated profits for my
subscribers and has kept them on the correct side of the gold and mining
stock market for years. You won’t find a more straight forward and
easy-to-follow system that actually works than the one explained in
“Gold & Gold Stock Trading Simplified.”
The technical trading system revealed in “Gold & Gold Stock Trading
Simplified” by itself is worth its weight in gold. Additionally, the
book reveals several useful indicators that will increase your chances
of scoring big profits in the mining stock sector. You’ll learn when
to use reliable leading indicators for predicting when the mining stocks
are about o break out. After all, nothing beats being on the right side
of a market move before the move gets underway.
The methods revealed in “Gold & Gold Stock Trading Simplified” are
the product of several year’s worth of writing, research and real time
market trading/testing. It also contains the benefit of my 14 years
worth of experience as a professional in the precious metals and PM
mining share sector. The trading techniques discussed in the book have
been carefully calibrated to match today’s fast moving and volatile
market environment. You won’t find a more timely and useful book than
this for capturing profits in today’s gold and gold stock market.
The book is now available for sale at:
Order today to receive your autographed copy and a FREE 1-month trial
subscription to the Gold & Silver Stock Report newsletter. Published
twice each week, the newsletter uses the method described in this book
for making profitable trades among the actively traded gold mining
shares.
Clif Droke is the editor of Gold & Silver Stock Report, published each
Tuesday and Thursday. He is also the author of numerous books, including
most recently, “Gold & Gold Stock Trading Simplified.” For more
information visit