2008-07-21

US Stock market / Gold cycles and bank failures 1928 - 2024

US Stock market / Gold cycles and bank failures 1928 - 2024



I. About the article:

This article is continuation of my article US Stock market / Gold cycles 1850 - 2013, made APR.2008. In case you did not read it already, I encourage you to do so before continue.

II. Methodology:

Please refer to US Stock market / Gold cycles 1850 - 2013 for stock price methodology.

For bank failures, I use a chart from "Calculated Risk Finance and Economics" blog. The data is scraped manually and is estimated. Between 1945 and 1979 we assume no bank failures.

III. Dow / Gold ratio and bank failures:

As we see, in year 1934, when Dow/Gold ratio bottomed, there were almost no bank failures, but they began raise. "Some time" after (2-3 years) the bank failures began skyrocketing and peak year 1936 and 1937 to ~80.

In year 1980 when Dow/Gold ratio bottomed again, bank failures began raise again. As previous Dow/Gold peak (1965) was higher, the bank failures peak to new level (500+) in 1989. This time it was 9 years after the bottom.

IV. Possible predictions:

Currently in year 2008, we have just 2 or 4 bank failures (depends of how you count it). These are Bear Stearns, Indy Mac, Fannie and Freddie. Fannie and Freddie technically are still OK, since US government will pour unlimited amount of money to bail them out.


Now we need to expect Dow/Gold ratio to bottom to under 5, and "some time" after that we will see huge failures - chart suggest it must be much more than 800 - 1000 !!! This is huge number, but as we saw with mortgage crisis - everything is possible. This must be done before year 2035 when next peak of Dow/Gold is estimated. Assuming the Dow/Gold bottom will be in 2013 and 2035 when Dow/Gold peak will be, "best" possible year for bank failures peak is 2024.



© JUL.2008,
Nikolay Mihaylov, nmmm@nmmm.nu

4 коментара:

Doug Eberhardt каза...

Hi Nick, It's hard to figure out how to comment, but I think I figured it out, hehe.

I think the logic of the theory is relevant. I'm not sure about the timing as in this day and age, things can happen overnight right? This is also why I don't like Eliot Wave Theory as it can't predict economic catastrophe's or wars, declared or not.

But in general, the ratios seem to hold true with the number under 5 from what I've researched.

Keep up the good work!

Doug Eberhardt

Анонимен каза...

Hopefully this post works as I am guessing at what to press (language barrier), lol.

I think the logic and numbers make sense overall Nick. The only thing that I can't concur with in it, as well as my problem with Eliot Wave Theory, is there is no way to predict economic catastrophe's or wars.

These both have immediate impact that can't be predicted by any forecasts that I'm aware of.

Keep up the good work!

Doug Eberhardt

NMMM.NU каза...

See this small post:
US Bank failures - statistical information

NMMM.NU каза...

US Bank failures - statistical information
http://nmmmnu.blogspot.com/2009/04/us-bank-failures-statistical.html