The Benner cycle

(chart geotritch)
Ritholtz/ FT Alphaville
http://ftalphaville.ft.com/blog/2010/08/18/319336/steampunk-chartism/
http://www.ritholtz.com/blog/2010/08/the-56-year-benner-cycle/
The 56 Year Benner Cycle

“Periods When to Make Money” (© 1883)
Yesterday, we looked at Long Term Market Cycles dating back to 1927;

Today, lets have a look at periodicity dating back to 1763. The cycle the (unknown) author posis is a repeating 16/18/20 year

Across the top is the legend “Years in which panics have occurred and will occur again.” The past panic century of dates are 1911, 1927, 1945, 1965, 1981, 1999, 2019. Except for 1981, these were all pretty good years to sell (or short) stocks.

Fun stuff . . .


The 56 year cycle mentioned yesterday (“Periods When to Make Money” (© 1883) was picked up by FT Alphaville; we hear it caused some “consternation” in certain circles where the marinating of ice cubes takes place.

I find these approaches quite fascinating, if for no other reason than I consider myself a student of market history. (Whether it is an actionable thesis is an entirely different question). For those of you who are also interested in such things, let’s explore this periodicity, better known as the Benner Cycle.

Samuel Benner was a prosperous farmer who was wiped out financially by the 1873 panic. When he try to discern the causes of fluctuations in markets, he came across a large degree of cyclicality.

Benner eventually published his findings in a book in 1875 — BENNERS PROPHECIES: FUTURE UPS AND DOWNS IN PRICEs – making business and commodity price forecasts for 1876 -1904. Many (but not all) of these forecasts were fairly accurate.

The Benner Cycle includes:

-an 11 year cycle in corn and pig prices with peaks alternating every 5 and 6 years.
-cotton prices which moved in a cycle with peaks every 11 years.
-a 27 year cycle in pig iron prices with lows every 11, 9, 7 years and peaks in the order 8, 9, 10 years.

It makes some degree of intuitive sense that a farmer would recognize longer term cycles. Their entire year is based on the annual sowing/growing/reaping cycle; The 11 year solar cycle would certainly impact their crop yields, revenue, etc. So looking at how the variants of crop yield and prices impacts the overall economy and markets makes lots of sense.

There are two caveats to all of these cyclical variants — Gann, Elliot Wave, Fibonnacci, Benner. First, consider there is insufficient data — we really need 500 years of market history to have a better data set to draw conclusions. Second, the unfortunate tendency to form fit after the fact (I see people doing this with Fibs especially). Mnay of the peaks and valleys are off by a year or two, but it looks close. Some of it might be explained by randomness.

Regardless, I think it is worth thinking about as a general long term framework — and a reminder that the so-called 100 year floods comes along much more frequently than the name implies . . .
For those who wish to explore this further, you should check out David McMinn’s THE BENNER CYCLE, FIBONACCI NUMBERS& THE NUMBER 56.

I am not a huge Prechter fan, but I found his book Prechter’s Perspectives very intriguing — it covers the long term political-socio-economic cycles of recession, war, recovery, expansion, bubble, etc. It is intellectually stimulating, but not exactly actionable . . .

FT Alphaville
EmailDiggRedditLinkedInFacebookdeliciousMixxPropellerYahoo! BuzzstumbleupontwitterSharePrintSteampunk chartism
Posted by Joseph Cotterill on Aug 18 15:53.

Hindenburg Omens are for kids. Here’s a tip of the top hat to Barry Ritholtz for unearthing this nineteenth-century great-grand-daddy among technical cycles:



(Click to enlarge)

That’s by one George Tritch. Who, for what it’s worth, appears to have been a big cheese in Denver’s German emigrant community at the time.

It’s indeed an interesting chart to point out, as Mr Tritch’s choice of years for ‘panics’ actually establishes a key point about chartism. It’s really rather backward-looking.

Note how this chart picks 1819, 1837, 1857 and 1873 as panic years, for example — indeed they all were, and as Mr Tritch no doubt remembered, either from his own lifetime or from folk memory. Hindsight bias, basically.

Of course, if you survived the Great Crash of ‘99, lived through the Early Noughties Depression and sold off in 2007, you’ll probably have known all about and done well out of Mr Tritch’s tips, so go ahead and ignore our churlishness. (Wait — what?)

Tritch did kind of get it right about the actual Great Depression, though…

Related links:
Robert Sloss predicted the iPhone in 1910 – Marginal Revolution
Long Depression – Wikipedia
Drowning? No, just Elliott Waving – FT Alphaville

This entry was posted by Joseph Cotterill on Wednesday, August 18th, 2010 at 15:53 and is filed under Capital markets. Tagged with chartism, Historical finance, History, stock markets, stocks, technical analysis. Edit this entry.