Market Cycles for Baby Boomers

I keep running into people who are unaware of the long term US bond cycle. It is the cycle that Nikolai Kondratieff and others wrote about nearly a century ago. It lasts about sixty years peak to peak or trough to trough, and it is currently very deep into its interest rate trough phase which began with 15-20% Baa bond yield rates in 1980. Baby boomer engineers and economists do not believe in cycles. The reasons for their disbelief are many but largely come down to the dogma that all things are random except when they are acted upon by wise managers. If cycles really existed, they believe,  it would make their ceaseless efforts to regulate everything not only more difficult but possibly unnecessary. As they find it impossible to believe in a world without economists and politicians to fine tune and deep tune all things, the case for cycles is dismissed with scorn and probably a bit of secret fear.

Despite all this, cycles do in fact exist in the real (market) world and are well known and established from very long term serial price data. For bonds the data go back to 1768 via respected Moodies, Cleveland Trust Company, and Foundation for the Study of Cycles data bases.

Kondratieff showed a graphic chart of bond yields for the 19th and early 20th centuries which you can see in the classic Kondratieff article at this site (go to left hand column under Long Wave Sources to the bottom item for a PDF of Kondratieff's paper), and I and others have shown charts of the more modern cycles. I had expected the current long term decline in rates to end at about the same time that gold bottomed, from 1999 to 2003 or so. And for several years it looked like the Treasury bond futures had topped, and yield bottomed, in 2003. It is, after all,  normal for inflation-sensitive assets to make their long term bottoms as interest rates bottom. But we have learned much the past few years about how distorted interest rates have become since 2003 due to persistent Keynesian interventions throughout the world which continue and threaten now to escalate again like the temper tantrum of a one-trick economist.

Read more about the bond cycle and about baby boomers in this excellent presentation by Tom McClellan: http://www.mcoscillator.com/learning_center/weekly_chart/60-year_cycle_in_interest_rates/