muses of the moment

April 14, 2009

Kondratieff Wave…the winter of our discontent

“Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened.” Winston Churchill

April 2009-If you think that we are in a recovery period right now or that this economic crisis is not morphing into a Depression, you have stumbled and hurried on.

For the rest of you, who have tripped upon the truth, be aware and prepared:

The Kondratieff Wave Theory is similar to Martin Armstrong’s Economics long cycle theories. It is a very long term investment tool, but it is very important right now. We, as a global economy, are moving into the Winter phase of this cycle. The complete cycle is about 100 years long (with each phase ranging from 20-30 years). Your investment strategies will need to change immediately.

Characteristics of the Kondratieff Winter phase:

  • Debt implosion (check)
  • Falling credit availability (check), then high interest rates on credit and/or very little credit available
  • Interest rates fall (check), then go high, then fall again.
  • Gold and cash are king, then after credit crunch (when rates rise again), bonds are a place for your money.
  • High volatility and losses in the currency markets (check).
  • High private and commerical bankrupty rate (check).

Right now we are in the deflation and credit crunch phase. Investors selling everything to cover high losses in the financial paper (debt) markets, therefore no capital investment.

Some economists think this “winter” will last until 2018. Some say the lowest point will be 2018, but we will not recover to the 2006-2007 highs until 2030. In other words, prepare for things to go along as they have been in the last 18 months until at least 2018. There will be market ups and down, but the overall global economy will be depressed in one form or another until then.

Adjust your long term portfolio accordingly. Especially your 401Ks and IRAs, retirement money you would like to keep for the next 15-20 years. You will lose what little you have left,  if you are not paying attention to this shift.

How to prepare now:

  1. Reduce debt before interest rates start climbing in a couple of years (could be sooner).
  2. After debt is reduced, start saving cash.
  3. Have cash ready for bargain hunting in real estate and tangible assets (not paper) in 2012-2018. Update Dec. 8, 2009: John Williams from Shadowstats.com has come out with his revised Hyperinflationary Depression Report. Make sure cash is in a form to fight hyperinflation by 2014 (or sooner). John is currently expecting a USDollar currency collapse in 2015. He thinks a new dollar or new reserve currency will replace the dollar default at that time.

Store some of your savings away from the banking system and currency markets in precious metals, commodities, and other like tangibles. Get in now before the credit crunch is over in order to secure the most return on the upside.

Secure all these positions before 2010-2011. Expect another leg down in the deflation spiral (as everyone continues to liquidate everything) and more of the same in 2009-2010. We are seeing a bear market rally in the markets right now. Use this opportunity to get out and move into the new tangible portfolio and cash listed above.

Side note: real estate can be a tangible asset, but wait until the residential and commercial real estate markets have bottomed. Look for that bottom, 2012-2015. We have a whole other crop of option arm mortgages resetting in 2010-2011. Update Dec. 2009: upon further research with Martin Armstrong, real estate is in a 26-year decline. We will have a low in 2012 and a small recovery in 2015, but real estate will be at 1950’s prices (adjusted for inflation) by 2032.

The next 10 years: capital (savings) to buy tangibles of all kinds at bargain prices.

Your focus is to preserve your capital during the credit crunch and deflation, and buy tangibles low, to sell high, as we inch closer to the next wave….Spring in 2030’s.

There is no reason to be fearful during this winter phase. You can preserve your capital AND make money during each phase. However, the focus of your investments needs to change with the “season”. What worked in Spring or Autumn, will not work in Winter.

One last note, if you prepare for winter, thinking spring is coming in a few weeks, it will be a LONG, COLD winter for you and your family. Prepare for the 20-year Kondratieff Winter Cycle now.

More detail on K-Waves. Pay special attention to the circle graph in the middle of this linked post. Very important information there.

3 Comments »

  1. […] We are in the winter cycle of the K-wave. In the autumn cycle (approx. 1970-2000), 401Ks were a good option and everyone made money (or at least kept money). This is NOT the best investment option for the winter cycle. Please investigate this on your own and adjust accordingly. […]

    Pingback by Why I don’t like 401ks « muses of the moment — September 9, 2009 @ 8:30 am

  2. In this article “the rich will move to more stable countries.”
    If this is world wide, what countries will be more stable? Canada? and what other?
    Thank you

    Comment by nj moran — February 27, 2011 @ 12:10 pm

  3. NJ,

    If I knew that answer I would move there. I don’t know. We will have to keep an eye on it. Laws change in a heartbeat, so what is a good country now, could be dangerous tomorrow. You can google retire aboard or PT or five flags to get more info and current/changing info.

    gg

    Comment by totallygroovygirlfriday — February 27, 2011 @ 7:36 pm


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