Monday, February 23, 2015

Fundamentals & Fractals

COMMENT: Mr. Armstrong; Your piece on fundamental analysis is fascinating. The more I thought about it the more I saw the light. This is why the gold promoters hate you so much. They lure people in with total bullshit from manipulations, paper gold, missing gold Fort Knox, and how Shanghai would end paper gold in New York. Then some ask for donation to investigate manipulators that only sell the market. They are the ultimate manipulators. They are either sublimely stupid or crafty con-artists selling to unsuspecting people a land of fiat and dreams. The saying that the trend is your friend makes sense. People will interpret whatever news based upon the trend in motion. Supply and Demand depend entirely upon the trend. Am I correct in that conclusion?
Thank you for being the lone voice of reason
ANSWER: Yes, you are correct. Just because you increase the supply of anything does not mean that prices will decline be it a commodity, stock, bond, or money. If demand rises more rapidly, as it typically does compared to supply, prices will rise and that becomes the trend. Because prices then rise, this stimulates ultimately the expansion in supply.The two are offset and do not peak or bottom together. They are like pistons in a combustion engine working together but not simultaneously in the same direction.
Illustrated above, the rally in stocks going into 1929 unfolded (1) because of capital inflows, and (2) the supply of stock was insufficient to meet demand. You can see that only toward the end of the cycle the supply of new offerings increased rapidly and exceeded demand.
You saw gold miners expand only when price rose. This accounts for then over-supply at the top. As the price collapses, mines shut down becoming that contraction in supply that then sets the stage for the next rally.
There is so much hidden order within the system it is mind numbing. If we take the 8.6 frequency and look at the fractal structure, 43.0769 years from 1932 low brings us nearly to the 1966 high and 86.1538 years added to 1929 brings us to this target in 2015. There is an order to everything as well as a time and place. There is nothing which is purely random. No matter what, a pattern and cycle will always surface. The layer of order are incredibly deep like an union – we just keep peeling each layer back to discover another remarkable hidden order.

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