Cycles, from Jim Sogi

April 30, 2012 |

 On a recent ski mountaineering trip to the Alaska Range, the guide said to me that the recent AMGA guide's association newsletter had an article about the Chinese Year of the Dragon and how that way of thinking might affect mountaineering decisions. He scoffed at this. I explained that the study of cycles is important to get a larger perspective on detailed studies. The Chinese system has a repeating twelve year cycle. Whether or not it is significant is not the point, rather what is important to understand is that life and the earth go through long term cycles over a period of years. Weather and snow have long term cycles. An entire season such as this drought season for snow in the Rocky Mountain and Wasatch ranges may have a weak snow pack leading to dangerous avalanche conditions the entire year. That is a cycle which if ignored could lead to dangerous short term decisions to go skiing on a snowy day, when in fact the whole year is bad. The entire year was a record snow season for Alaska. The entire spring in Alaska was a anomalous cycle of clear steady weather and perfect snow where risk was low.

It is important to recognize longer term cycles in markets. This entire spring was a bull cycle with no pull backs and low volatility. We are in a range or consolidation cycle now. Last fall was a bear high volatility cycle, for lack of a better term. In hindsight cycles are easier to see. The trick is to recognize them in progress. This can only be accomplished with the idea of longer term cycles in mind to recognize the conditions that exist during the various cycles.

The weather reports have a number of model they use to have the computers predict the weather. They use as inputs some of the larger global weather conditions. In finance, there are some long term large scale models like the FED model using interest rates, rate direction, TED spreads, to predict and model the market and economy. The weather forecasters have global satellites to use. Finance people look to Europe and Asia to see if bad finance is working its way through the global markets around the globe.

Phil McDonnell comments: 

There is a well known Pacific Decadal oscillation. Basically there is always a cold spot and a warm spot in the North Pacific. Sometimes it is near Japan and sometimes in the Gulf of Alaska. Currently it is cold in the Gulf of A and Seattle weather is responding. There is no warming going on here.

Here is an intro to these cycles


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