The Economic Clock

[stockGURU]

Just wondering about people's views about The Economic Clock (see attachment).

Do you think it accurately represents the various stages of the boom/bust cycle of capitalism?

If so, where are we on the clock and can we expect things to be the same this time? Is it all really this predictable?

 

[investorpaul]

Looking at the graph we have seen falling interest rates, but we really having seen real estate fall that much yet. Still based on the graph you posted we would look to be in about the 6 o'clock position.

The question is how long will we stay there?

 

[Glen48]

3 to 6 should be at 2 in the olden days R E went down Stocks went up ...we are are joined at the hip like Siamese twins who have to go to USA once a year so the other twin can get a chance to drive we still need USA

 

[Wysiwyg]

Do you think it accurately represents the various stages of the boom/bust cycle of capitalism?

SG

Here is another representation of the cycles.Note the economic cycle "lags" the stock market cycle.Also Financials (4) at the late bear to early bull.

A post on another thread about the huge amount of cars in storage and Harvey Norman posting a 56% profit fall suggests Consumer Cyclicals (late bear 2) are still not active.

Take a look around you (neighbours, friends, shopping, sometimes newspapers, employment etc.) and quietly note any changes.Although the changes will be subtle to begin with, as the first of the herd venture out onto the plains to graze again.

 

[Bill M]

Just wondering about people's views about The Economic Clock (see attachment).

Do you think it accurately represents the various stages of the boom/bust cycle of capitalism?

If so, where are we on the clock and can we expect things to be the same this time? Is it all really this predictable?

I have often wondered about the accuracy of this clock. Some say that it could be irrelevant as now governments take more action than in the past, I don't know. We would definitely have to be at just before 7, I mean it is the lowest interest rates we've had in 45 years. But as someone else has said, real estate hasn't really taken much of a hit. I would say we are at 6.45 with another 1 or 2 small interest rate cuts to come but then again who really knows.

 

[sinner]

We are not a minute past 3:30.

Other countries are only an hour or two ahead.

Also I think 5 and 7 should be swapped around.

 

[Aussiejeff]

I think the clock is broken.

I was sure yesterday afternoon it was pointing to 6.30, but this morning it has gone backwards to 5.30?

Can someone please fix it?

 

[Sir Osisofliver]

Just wondering about people's views about The Economic Clock (see attachment).

Do you think it accurately represents the various stages of the boom/bust cycle of capitalism?

If so, where are we on the clock and can we expect things to be the same this time? Is it all really this predictable?

stockGURU,

Where did you get that picture? A couple of your clock points are off - there are better graphical representations of the concept out there. The concept is just to show that...

a) Cycles happen
b) Certain asset classes perform better at various points of the cycle

To answer your question of "can we expect things to be the same this time?" you are asking a question about history, so - how is this time different from any other time? Each negative period in the history of our market is unique in terms of severity and duration, but the cyclical nature of these events is remarkably similar.

When you look at your diagram of the economic clock (Also known as the Investment Clock - first espoused by the London Evening Standard newspaper in 1937) the basic theory behind it was that each economic condition that appears on the clock tends to be the result of the preceeding economic condition. They naturally flow from one to the next. The share market looks crappy and starts to fall? Money flows into Property. Interest rates are increased to combat this effect, both shares and property look rubbish, money flows into fixed interest. Everyone hoarding their money, spending decreases, less consumption, less production, more unemployment, creates vicious circle and we head towards recession. When everyone who is going to be fired has been, employed people relax a bit more and buy those things that they put off when they thought they were going to lose their jobs (eg cars - that's why a lot of people look for new car sales as an indicator). More consumption leads to greater production which leads to greater employment, which leads to greater consumption which leads to greater production to meet demand - and the cycle continues around and around we go.

Has something fundamental happened to change this?

Look at the date the concept was introduced, they said the clock was broken in '51, '60, '72, '80, '87 - yet around and around we go, following the same path.

The concept is robust - your diagram of it? Not a great example

Cheers

Sir O

 

[SuperGlue]

Just wondering about people's views about The Economic Clock (see attachment).

Do you think it accurately represents the various stages of the boom/bust cycle of capitalism?

If so, where are we on the clock and can we expect things to be the same this time? Is it all really this predictable?

Just dusting and winding the good old Economic Clock.
Looking at long term, time is at 6 to 8 o'clock .

We have got falling Real Estate values, Falling interests rates & now a big maybe Rising share prices.

Looks like the clock has mend itself, after all these years.

Refer to clock on orignal post #1

 

[So_Cynical]

Yes somewhere between 7 and 8 i would reckon.
~

 

[Bill M]

Yes somewhere between 7 and 8 i would reckon.
~

I go along with that too.

 

[burglar]

... (eg cars - that's why a lot of people look for new car sales as an indicator). ...
Sir O

I heard the news today! Oh boy!?

Car sales are up ... hooray!
Locally produced car sales are down ... booo!!

 

[Aussiejeff]

Yes somewhere between 7 and 8 i would reckon.
~

Oh no!

Only 6 hours to another slump!!!

 

[stockGURU]

Yes somewhere between 7 and 8 i would reckon.
~

Does this clock ever start running backwards?

It seems like this is a very cautious recovery and there doesn't seem to be a lot of optimism about the prospect of sustained economic growth.

Does anyone have a chart or table that documents how long each cycle has been in the last 100 years?

 

[FlyingFox]

Does anyone have a chart or table that documents how long each cycle has been in the last 100 years?

This would be interesting but I suspect ultimately flawed as we have had so many changes in the 100 years (and virtually every decade in those 100 years) to be incomparable to any other century in history and hopefully any other century to come.

In short I don't know how much you can extrapolate from it.

 

[SuperGlue]

Does this clock ever start running backwards?

We have taken one step back on the economic clock and it is out of whack.

1. Interest down
2. Falling stock market (foregin investors bailing out of Aust.)
3. Falling dollar
4. Low commodity prices

a. Interest rate & dollar down - good for the companies to invest and export, bad for retirees, good for properties
b. Falling stock market and commodity prices - belt tightening & unemployment

My thought are, we are heading into bad economic times, with belt tighteing, unemployment and retirees not spending, not good for property market and companies won't invest.

As for the low dollar, good for export, but bad economic times overseas so a little improvement here.

When and if 2nd rate cut happens, hopefully the stock market will rise because of dividend chasing.

Now if RBA were to leave rates as it was, the economic clock won't be out of whack and the next is rising commodity prices.

Only time will tell......................

 

[CanOz]

We have taken one step back on the economic clock and it is out of whack.

1. Interest down
2. Falling stock market (foregin investors bailing out of Aust.)
3. Falling dollar
4. Low commodity prices

a. Interest rate & dollar down - good for the companies to invest and export, bad for retirees, good for properties
b. Falling stock market and commodity prices - belt tightening & unemployment

My thought are, we are heading into bad economic times, with belt tighteing, unemployment and retirees not spending, not good for property market and companies won't invest.

As for the low dollar, good for export, but bad economic times overseas so a little improvement here.

When and if 2nd rate cut happens, hopefully the stock market will rise because of dividend chasing.

Now if RBA were to leave rates as it was, the economic clock won't be out of whack and the next is rising commodity prices.

Only time will tell......................

Everything seems a bit out of sync and I suspect that globalization throws a spanner in the clock too. Australia is so tied to china too. I guess there had to be a downturn sooner or later in Australia. The RBA at least has some room to maneuver...

CanOz

 

[MARKETWINNER]

I believe next market cycle can start from late 2014 or beginning of 2015.

Next year is very crucial for global markets.

We cannot expect strong Australian economy over the next 18 months to two years. Probably Australian market can slow down during next 18 months.

Both Australian dollar and New Zealand dollar could fall to a level not seen in about three years in the next few months.

In June 1998, Australia's economy was growing at 3.9 per cent and, yet the Aussie dollar could buy only US58.
In mid-June 2006, the Aussie dollar traded at US73 ¢. During this time government had surpluses, unemployment was low and we had an equities boom.

Australia didn't undergo a recession during the global financial crisis. Growth is now slowing sharply. GDP grew 0.5% in the first quarter and is expected to rise less than 1% over the next year.
The peaking of the mining cycle also will affect Australian economy. I believe at least three, and possibly four, more cuts are coming over the next six to eight months.

However there will be opportunities in some sectors in Australia and New Zealand even in the current challenging climate.

By end of next year we will be able to get some assessment on global economy trend including Chinese economy.

It is time to study market cycles, next most bullish stocks, commodities, sectors and markets and take positions accordingly.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.

 

[baby_swallow]

Where are we on the Economic Clock I'm confused
Real Estate prices are at the top of the boom.
Share prices are near all time high.
Yet the RBA has been cutting rates to an all-time low.

 

[Knobby22]

I think we are at 8 now.