The Inevitable Market Cycle

Doc, why do you believe in the inevitability of cycle
times? You named two or three technology reasons for the long secular bull market we just had,
and we are now in a vast international economy that never existed before, with new technology altering our lives today: nanotech, gene design, medical breakthroughs without ceasing...

Dave H.



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The Inevitable Market Cycle

by Doctrader

What causes the inevitable market cycle?

Human nature does not change with technology neither does the harmonic market cycle. In my book, the Harmonic Stock Clock, every secular market can be defined within a specific time parameters. The creation of new technology causes destruction of old technology. The net effect of “creative destruction” causes old technology to be discarded and new technology to be implemented. At the beginning of the creative market cycle, new technology is introduced to replace old technology. This process grows slowly, but exponentially until manufacturing and distribution reaches a harmonic pivot point. The harmonic saturation pivot point is reached when lowering prices produces fewer net sales, and lower profits.

What are the signs of harmonic saturation pivot point?

The key signals when a saturation pivot point is reached is when there are multiple distribution points with multiple and redundant manufacturing outlets. When either multiple distribution points or multiple redundant manufacturing outlets have a monopoly, the U.S. Courts disrupt the natural order with Anti-Trust laws. A good example is AT&T, IBM, and Microsoft. In each of these cases, the companies had a monopoly and Anti-Trust litigation allowed their competitors to slowly gain market share on their respective monopolies. The Anti-Trust laws are debatable to their effectiveness on multiple distribution channels versus efficiencies of a monopoly; however they only prolong the inevitable market cycle of creative destruction by new technologies.

You are living in a time when I have predicted the end of all long distance telephone services. The invention and distribution of the internet began to erode the need for long distance telecommunications. The specialization of AT&T of long distance, using analog voice technology is being replaced by fiber optics data, which is being replaced by wireless internet, which will be replaced by….?


AT&T was restricted to voice telecommunications only, and was a late
arrival to data, internet, and fiber optics telecommunication. Meanwhile, their competitors were gaining market share using AT&T'S own equipment.

The natural creative destructive harmonic is an inevitable market cycle within human nature as mandated by the Creator. The first command to mankind from God in Genesis 1:28 “Be fruitful and multiply, and replenish the earth, and subdue it: and have dominion over the fish of the sea, and over the fowl of the air, and over every living thing that moves upon the earth.” The natural harmonic cycle effects all things according to the master Creator.

Everything in the universe is a logical building block to higher complex systems, from the atoms to the stars. A simple analogy is that of an oak tree. The oak tree grows from sapling to mighty oak, but the oak tree can never take over the whole forest. The mighty oak tree cannot continue to grow taller than the highest mountain, nor can the mighty oak tree do anything more than it was designed to do. The mighty oak tree may dominate all areas where it's shadow is cast, but slowly over time there are fewer leaves produced, creating more sunlight for the younger saplings drawing on the nutrient rich soil and water resources. The mighty oak tree slowly falls to the many competitors. As the mighty oak tree decays in death, the nutrients which nurtured it in life are given up to support new life. So harmonic cycle is repeated over an over in nature. The natural harmonic cycle occurs in the business world also.


Market watchers think that the answer lies in biotechnology, nanotechnology or some other technology, but people are slow to adopt new technology. Did you know the first television signal was sent in 1928? The first fax machine was invented in the1940’s, the internet was created in the 1960’s. The political resistance to anything "bio" will prevent adaptation by the public in large numbers for decades.

The baby boomers may create the need for better drugs, but it will be at the expense of post baby boomers. The political clout of the baby boomers is growing each year, and most baby boomers will have to rely on social security and medicare for support. The baby boomers do not just exist here in America, but all over the world.

While all these new bio-tech and drugs are invented, there is still the public acceptance and adaptation of these products before the high growth phase. Until the high growth phase is reached, any new technology will only have a modest impact on the market's performance.
The pioneers are first are not the ones who become rich, but who take all the arrows! When other companies follow the pioneers, these companies are able to plan successful growth and avoid the pitfalls that destroyed the pioneers. These second tier companies may not exist now, but the harmonic cycle of creative destruction will emerge from the next secular bear stock market.

So, there will be a secular bear market after the secular bull market and history will repeat itself once again!

God Bless

Doctrader

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