The 120-Year Cycle

"To me, the "tape: is the final arbiter of any investment decision. I have a cardinal rule. Never fight the tape"-Martin Zweig

1990 was a very volatile year, with wide price swings. 1990 + a Fibonacci 21 years = 2011. This Fibonacci time count, as well as the peak of the 6-year cycle that is due soon, suggest that 2011 will be a volatile year. The political upheaval in the Middle East has been blamed as a fundamental reason for the volatility in oil, gold, and stocks. Is it oil or just Fibonacci time counts and natural cycles? Subscribers who remember my discussion of the 120-year cycle in past letters should not be too surprised at the events in both the Middle East and in state capitol buildings around the country. As you may recall, the 120-year cycle is both a revolution cycle and a depression and renewal cycle. When the cycle turned in the late 1700's, it created both an economic depression and the American and French Revolutions. Most people are unaware that the economic depression of the early 1780's almost destroyed the new American Republic. And what of France? It was an economic depression that resulted in the overthrow of King Louis XVI and Queen Marie Antoinette.

One hundred and twenty years later, an economic depression nearly bankrupted the United States Treasury in 1896. The stock market crash of 1893-94 resulted in a depression that caused riots in the major American cities. And both Cuba and the Philippines revolted against Spanish colonialism, culminating in the Spanish-American War of 1898. Today, we are seeing tremendous political upheaval in the Middle East. Amazingly, the American media is not telling people that the Middle East upheaval is primarily a result of poor economic conditions. Central bank easy-money policies have caused rampant food inflation in third-world countries. In addition, jobs are scarce and rents are exorbitant.

Now, in the early 21st century, we are not immune to the cycles of the universe. The 120-year cycle is alive and well -- and it is beginning to exert enormous pressure on political and economic conditions. What we are witnessing in the Middle East -- and around the United States -- is only the beginning of historic melodrama that will outlive us all in the pages of history.

"Whatever method you use to pick stocks...your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed. It isn't the head but the stomach that determines the fate of the stock picker"-Peter Lynch

The facts are unimportant. It’s what they are perceived to be that determines the course of events.

Most empirical facts cannot even be proven.

This is the Floydian Rule: A rock is not hard.

Higher Growth Could Mean Our Debt Worries are for Nothing by Stephen Gandel

http://www.time.com/time/magazine/article/0,9171,2055183,00.html

Gold and Silver:

1. We believe Gold is ready for a breakdown, short term, and remains near or at its high. We are completely out of Gold for the short term.

2. Silver hit our high of 34.50. If it closes below 33.50 we see silver also breaking down, for the short term

Our traders exited Gold at 1386 to 14.10, and should have exited Silver at 34.50. Our Silver long term leap was sold for up to 65% profits, two week hold

We will not, and have not gone short in the market. Any breakdown, and one could occur this week, we believe to be short term, and if the market hits 11,740 in downturn we would ADD to any existing long-term core position

Oil we believe could top at 107, perhaps this week.

Historically our recent upside has lasted over 205 days, one of the longest on record.