Review of ‘The 17.6 Year Stock Market Cycle’ by Kerry Balenthiran

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Some months back I met up for lunch with Kerry Balenthiran (@17_6YrStockCyc on Tweets) because by a strange quirk he happens to work in Windsor where I live. Over Pie and Chips and Ale we got to discuss his book about a regular 17.6 year Cycle in Stocks which he has shown repeats itself over and over. Part of me has some scepticism with regards to this kind of VooDoo stuff (maybe it should be called the Balenthiran Black Magic Cycle) but over the years and having learnt more and more about stuff like Technical Analysis, Economics and Psychology, I am actually quite ready to explore such claims and see how it all stacks up.

I have been poised to read Kerry’s book for many months but with all the usual demands of life on me (like Sleeping in the morning, elongated Coffee Breaks, trips to the PUB, watching Countdown - you know the sort of hectic schedule a Retired Bloke has…..oh, and writing stuff for the WD Website…) I had not got around to reading it until just a few days ago and I have finally got on with it. When I first picked up the Book I thought “oooh, this is a bit slim” but as I have got into it I realise that it is not the Quantity of pages etc. that counts but the Quality and the messages held within this Book are potentially of very high value - as I will no doubt explain as we go along.

At a high level, the basic concept is that Stockmarkets have moved over time through Cycles of Bear Phases and then Bull Phases which both last about 17.6 years - and within these ‘Phases’ (my words, not Kerry’s) there are Bull and Bear mini-Phases (my words !!) that also have a multiple of years in their duration (this is based on 2.2 Years but you need to read the book).

Kerry first of all establishes these Cycles and then he goes on to look at how they have fitted with Stockmarkets leading up to the Great Crash in 1929 and all the events since - and the fit is remarkably close. Also in the early pages Kerry points out how this fits with other Cycles like the famous Kondratieff ones and other Cycles like that extolled by Jim Rogers for Commodities - if I understood this right, the Commodity and Stockmarket Cycles are very closely related with one feeding the other (which from an Economic standpoint actually makes a lot of sense).

Of course the bit we all want to get to is towards the end when Kerry goes on to look at what is most likely to happen in the near future - this is particularly relevant because his Timeframe goes up to about 2035 and hopefully Readers will still be around to see if he is right or not !! The really exciting bit here is that Kerry establishes that we have been in a Bear Cycle of 17.6 years since 2000 and in 2018 we will be starting a new Bull Cycle of 17.6 years - so most of my Retired Life could well be a golden time for Stocks - it sounds nuts but I have a sneaking suspicion that Kerry is absolutely right here - this is borne out by the simple fact that nobody outside of my Investing/Trading Circles even knows that Stocks have been going up. When a Bull Market ends, even my Paper Boy will be giving me Rocket Hot Stock Tips……

Probably the biggest message to take away from this Book, even if you don’t necessarily buy into the full 17.6 Year Cycle, is that ‘Buy & Hold’ has proven to be a masterful (and extremely lazy/easy) Investment Approach and if Kerry is right about the period after 2018, then Buy & Hold will serve us very well. There will of course be Bear Phases within the 17.6 Bull Cycle but these will most likely be opportunities to buy Stocks cheaply before the next push up.

I really enjoyed reading this and it was something quite different to much of what I read about Stocks, and Kerry has some worthwhile thoughts on how to best ‘play’ the coming years in line with his Cycle - there is even a great bit where he admits to bottling out and selling his Portfolio far too early but that was before he had fully completed his work on the Cycles and realised the significance. I read this in a few afternoons with just a few hours in total - it’s an easy read but very worthwhile and even if it just makes me a bit more reluctant to Sell something it will have more than paid for itself in terms of the Cover Price and the time taken to read it. There are loads of pretty pictures and without doubt these ‘illustrate’ the concepts Kerry is extolling very well.

Of course many Readers will now be thinking “Strewth, Wheelie, you and your mate Kerry B are bonkers - there are no such Cycles and it is proper Fantasy Island stuff” - and of course such a reaction is understandable. However, if we are to accept that Kerry’s predictions for an upcoming 17.6 Year Bull Cycle are correct, then what could be the drivers of such a run? There are 3 simple and identifiable factors that are not hard to envisage today which would be consistent with Kerry’s Cycle as follows:

• Stockmarkets are forward-looking mechanisms and in themselves contain an amount of predictive power - ‘The Wisdom of Crowds’, and recently almost all Major Indexes (and certainly the most important ones that are in the US - The DOW, S&P500 etc.) have broken-out to new All Time Highs and this has baffled many people who just don’t understand why it has occurred. It could simply be that the Markets are predicting the Bull Run that is contained within Kerry’s Cycle.
• There is a double-headed Economic Argument that is supportive of Kerry’s Bull Cycle.  The easy bit is that Donald J Trump is expected to pursue a Policy of Lower Taxes and Deregulation in the US in order to stimulate the US Economy and get the GDP Growth Rate of the US up over 3%. After many years of relatively high taxation and without doubt considerable over-regulation in most Western Economies, this could be a significant change that is the fuel for a Bull Market. 
• The second argument is that in a normal Recession where Governments stand back and let things play out in their own way, there is a natural force of ‘Creative Disruption’ (Schumpeter and all that) which destroys Bad Business Models and in effect cleans out the System so that Quality Business Models can survive and thrive. This in turn then means that the Economy bounces back fast and these more efficient businesses are not dragged back by the Competition from the poor business models which are merely stumbling along. What has arguably happened since the 2008 Recession is that Governments have tried to buck the Markets and to lessen the impact of the Slowdown by Stimulus Measures like extremely low Interest Rates and Quantitative Easing (QE). This might seem like a clever idea but in reality it has meant that Poor Businesses have been able to limp along like Killer Zombies and this has meant inefficient allocation of Capital across Western Economies and this has resulted in slower Economic Growth and arguably the rise of Extreme Politics like Trumpy, Le Pen, Jezza Corbes, Five Star Movement, etc. etc. This Zombie Economy has limped along for nearly a Decade but finally perhaps the Bad Business Models are being removed from the System by Takeovers and Bankruptcies and suchlike - just like could have happened in a very short space of time if the Powers that Be had not tried to be clever (and of course it very much suited the Wall Street/Davos Elites to pursue these Policies). So we are maybe now at the Point where we should have been back in 2011 or something and Major Economies are now poised to resume their Long Term Average Growth Rates…….

I cannot stress this point enough. Time and again it has been shown how ‘Buy and Hold’ has been a remarkably effective (and easy !!) approach to Investing in the Stockmarket for pretty much all of the time Stocks have existed - even if you think such things as Cycles are total mumbo-jumbo, at least if this book persuades you to stay invested in the Markets and not to keep leaping in and out, then it will have been worth it (although your Broker might stop sending you bottles of Champers at Xmas because you are no longer generating them all that Commission….). 

Personally I think there is something in these Cycles and it makes a lot of sense to me because it is clear there are many Cycles in Human Lives and Human Societies such as how we age and how we have new Generations coming along all the time which gradually push out the previous bunch. Such Cycles as the Credit Cycle in economics and the Cycles of Commodities caused by Supply and Demand fluctuations and various Investment Cycles are clearly in evidence. It is not too far a stretch to extrapolate such Cycles into a Cycle in the Stockmarket and Kerry’s Book evolves these ideas into a clearly recognisable time span.

Of course, you can find a copy of Kerry’s book in Wheelie’s Bookshop - feel free to Splash your Cash….

Cheers, WD.