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An obvious, secret cycle

The education of Martin Armstrong, according to Martin Armstrong, commenced in 1964, when he was fourteen. He got a weekend job working for a bullion dealer, in Pennsauken, New Jersey, who initiated him into the idiosyncrasies of the trade in coins and gold. The next year, he bought several bags of rare Canadian pennies, which turned out to be even rarer than he thought. Within a year, they shot up in value: a roll of fifty was worth a thousand American dollars. Since he had roughly a thousand rolls, he became, for a brief spell, a teen-age millionaire. Expecting, as people do, that the pennies’ price would keep rising, he held on to them, but the high price precipitated the discovery of a greater supply, their value plunged, and he was once again a regular South Jersey kid working weekends in a coin shop.

Armstrong’s father, a lawyer and polymath whose grandfather had lost a fortune in the 1929 crash, disapproved of speculation, and he persuaded his son to put his diminished fortune in a fashionable but conservative investment vehicle called a mutual fund. Not long afterward, mutual funds, along with the broader stock market, abruptly crashed.

martin armstrong by jonathan rosen
Image by Jonathan Rosen

Armstrong began to observe that many things worked like this—that occasionally a contagion, of indeterminate origin, passed through the system, hitting one asset class after another. One summer, his father took him to Europe, and the web of foreign currencies gave him a tactile sense of interconnectivity and the oscillations that might come of it.

The following year, Armstrong’s high-school history teacher showed his class the 1937 film “The Toast of New York,” about the Black Friday panic of 1869 and the gold speculator and con man Jim Fisk, with a young Cary Grant as Fisk’s accomplice.

At one point in the film, Fisk quotes gold at a hundred and sixty-two dollars and fifty cents an ounce. Armstrong, aware that the price, in 1966, was just thirty-five dollars, assumed that the line was Hollywood nonsense. Prices could not possibly have fallen so far over the span of a century.

He went to the library, however, and found, on microfilm, a contemporaneous reference in the Times to a gold price of a hundred and sixty-two dollars. It further demolished his youthful assumption that assets gradually appreciated over time—that markets were linear. Could it be a secret cycle?

The secret cycle of forecasting

One day, in a newspaper, he came across a list of financial panics that occurred between 1683 and 1907. On a lark, he divided the span (two hundred and twenty-four years) by the number of panics (twenty-six) and found that, on average, there had been a panic every 8.6 years. As he read more, he began to suspect that 8.6 was a highly significant number in this secret cycle. He discerned a recurrence of major turning points in the economy and in world affairs that followed a distinct and unwavering 8.6-year rhythm. Six cycles of 8.6 years added up to a long-wave cycle of 51.6 years, which separated such phenomena as Black Friday and the commodity panic of 1920, and the Second and Third Punic Wars.

Armstrong was, for the most part, self-taught. His father had him reading Aristotle at the age of nine, which, along with movies like “Cleopatra,” inspired him to delve deeply into ancient history: the arcana of Mesopotamian commodities, the decline of the Roman denarius. After high school, Armstrong attended the RCA Institutes, now called the Technical Career Institutes, and he audited a few courses at Princeton, but he never earned a college degree. School bored him.

Still, he adopted the habit of a learned man. In the early seventies, he became a trader and dealer in gold, and began compiling forecasts about commodities and currencies, which he sent out, via Telex, to clients around the world. Over time, the secret cycle of forecasting became his business. Much of it was rooted in cycles research. He travelled to London to the British Museum Newspaper Library and put together historical data on prices and exchange rates, down to the day. He constructed what he called an Economic Confidence Model, which he relied on to predict an upturn in the price of commodities in the early days of 1977. It worked, and he was amazed.

Read the rest…
@The New Yorker

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