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Sunday, August 5, 2012

Jupiter, Saturn and the Kondratieff cycle of India


Nikolai Kondratieff, a Russian Economist, after years of study, in 1931, released his findings in Russia which stated that capitalistic economies across the world were about to enter an age of prosperity and growth. Communist Russia, promptly jailed him, sent him to Siberia, where he eventually died.
What in essence did Kondratieff postulate?
·         Economic cycles repeated themselves with an approximate time periodicity of 54 years. 54 years between the peaks and 54 years between the troughs of the cycle. In essence the cycles could oscillate between 45-63 years (54 plus one sixth or nine years). 
·         The cycle is made up of 4 stages or phases- Spring, Summer, Autumn and Winter. Spring and Summer represented growth phases and Autumn and Winter represented contraction phases. Phases of the cycle were not even. During periods of growth, prosperity years were more than contraction years and vice versa.
·         During Contraction years, Agricultural output suffers the most, as compared to other economic activity. Drought and famine are common.
·         Many new inventions and technologies are invented or discovered during the contraction phase.
·         These new technology or products will only be applied in a mass scale once the contraction phase ends and a new cycle begins.
·         At the beginning of the growth phase, gold production increases. Markets for goods and services will expand. Credit expansion begins in a small way and later gathers momentum.
·         Closer to the end of growth phase of the cycle, emotive wars break out. Closer to the end of the contraction phase, economic wars break out.
Two critical observations need to be recorded.
1.    This cycle must not be confused with Stock Market Cycles. Stock market cycles are a reflection of the perception regarding the future of the Economy and hence will always lead the Economic cycles, sometimes by as much as one year. Typically between 6 to 12 months.
2.    Economic cycles are no more Agriculture oriented. First Industrialization and then Technology advances have changed the nature of the ingredients which affect the Economic cycle. The extent and the timing of these two changes vary from Nation to Nation.

Based on these postulates, we shall attempt to see the Kondratieff cycles which affect us, in India, shall we? Let us also look at some long term planetary cycles and their correlation to Kondratieff cycles.

We begin with the 1971 Indo-Pak war. It began on December 03, 1971 at about 17.40 hrs and ended on December 16, 1971, at 16.31 hrs. In the same year on October 17, 1971, Saturn from Gemini opposed Jupiter in Sagittarius. Thereafter Jupiter was moving towards forming a conjunction with Saturn. This conjunction eventually took place on January 01, 1981, in Libra.
So from 1971 to 1981, Jupiter was moving through what is called as a waning or declining phase. Saturn is the slower planet and Jupiter faster. When Jupiter pulls away from Saturn after a conjunction, we say, Jupiter is in a waxing formation with Saturn.  When Jupiter moves towards Saturn, from behind, we say, Jupiter is in a waning formation to Saturn.

Now 1971 war was a war of economic considerations.
Why so? According to Wikipedia,
“Approximately 10 million people fled East Pakistan and took refuge in the neighbouring Indian states. The East Pakistan-India border was opened to allow refugees safe shelter in India. The governments of West Bengal, Bihar, Assam, Meghalaya and Tripura established refugee camps along the border. The resulting flood of impoverished East Pakistani refugees placed an intolerable strain on India's already overburdened economy.” The war was a successful bid by India to stem the flow of refugees and prevent economic bleeding.
This brings us back to the topic under discussion-so 1971 to 1981 represents the last years of contraction of a previous Kondratieff cycle which had its origins sometime in the 1920s. Maybe in sync with the Great Depression years in the US. Who knows? We have precious little records from those times.
 1971 to 1980 represented slow growth under the burden of a flourishing license raj and it was the external environment changes and India`s response to them, which might have brought about the  closure of the contraction phase of the previous Kondratieff cycle.

 The external environment  changed dramatically in the course of 1979 with the second oil price shock, the full impact of which was evident in 1980-1981, the current account went into deficit and net foreign capital inflows increased to 1.7 per cent of GDP. 
If we assume the Economic cycle bottomed out in the later half of 1980, then this ties up with the Bombay Sensex touching its all time low in December 1979. 
Jupiter was conjunct Saturn on January 01, 1981 in Libra.One cycle of Jupiter and Saturn, from conjunction to conjunction is 19.85 years and it takes approximately 59.55 years for Jupiter and Saturn to come back into conjunction in the same sign.  This seems to tie up with the length of the Kondratieff cycle- varying between 45-63 years.So the next Jupiter -Saturn conjunction, in the same sign, of Libra, after January 01, 1981,is on 31 October, 2040.



 Waning trine in 2014, may be a   big top , followed by a side ways market in 2015 and then an explosive upmove close to 2016.

Here is the weekly chart:

 Conjunctions of Jupiter and Saturn are  called as Royal Conjunctions.For several centuries now, people have been interpreting them to know the prevailing  economic cycles of various kinds.
Of course the Economy is subject to various other cycles, some of them very long term.What is amazing is that periodically these cycles seem to come together in times of great import.The trick of course is to decipher them clearly.
Iam not anticipating any particular price targets here. That is best done with application of Elliott wave Principles closer to the events.   
These are postulations. I request visitors to this blog to please value add with your comments. Let me be corrected wherever Iam  wrong in my assumptions or projections.
Of course, these topics are for academic interest. Please use such information  for trading or investing only after you consult your Financial Advisors.











7 comments:

  1. Dear Sureshji,
    Thanks for the very informative post. It is said "from conjunction to conjunction is 19.85 years and it takes approximately 59.55 years for Jupiter and Saturn to come back into conjunction in the same sign". In Malayalam panchang a cycle of 60 years are given starting from "Prabhava" (last was Christ year 1986) and your observations are very near to it - congratulations. "During Contraction years, Agricultural output suffers the most, as compared to other economic activity. Drought and famine are common." In countries like India where agriculture is predominant, rain is an important factor and deficiency of Monsoon will definitely affect economic activity also. So, we may be in a contraction period.

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    Replies
    1. Thanks for your observations Bala Sir. Iam very interested to know about Prabhava cycles. Maybe we could learn something there.
      Agricultural output suffering, because of deficient monsoon as we see now is yet to be confirmed. In other words this phenomena has to be consistently repeated. We need to witness a few continuous years of crop failures and drought before we think of cyclical contractions. For example the Maharashtra droughts of 1970-1973 were so severe that people left their villages enmasse and migrated to Mumbai.The entire Five Year drought relief funds were used up in one year and still there was so much suffering.Interestingly the years 1970 -1973 fall within the contraction period suggested for the previous Kondratieff cycle.
      On the other hand, this constant exploitation of Agricultural Land by people wanting to develop townships and apartment projects followed by a few intermittent years of changed weather patterns could precipitate a Kondratieff Autumn leading to a Winter post 2016...

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  2. Ihave discovered an important cycle of 55 months working in stock markets.
    8-1-2008 was a top made.55 months prior to it was 30-5-2003.
    now we are again coming to 55 month cycle on 9-9-2012.
    could this make a market correction to an end and start a NEW CYCLE??.
    If NO then what??
    next fionacci month that kicks in after 55 is 89.
    So if the market does not stop the corrective phase now and does not begin a new cycle the PROBABLY we could see correction till 30-5-2015.the next 89 month ending.
    So lets wait and see the turn of the event by 9-9-2012,plus minus 15 days.

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    Replies
    1. Dear rkwadher,
      Your 55 month cycle is very interesting because it has a powerful astrological correlation.
      Mars revolves around the sun in 1.91 years.Jupiter takes 11.8 years to complete the same revolution.So the time taken by Mars and Jupiter to move from one conjunction ( 0") to another conjunction is 2.23 years.All other conjunction cycles of Mars and Jupiter ( for example, a waxing trine of Mars and Jupiter to the same waxing trine ) is 4-1/3 years or 223 weeks. This is a Fibonacci number. This fits in with your 55 month cycle isn`t it? Mars and Jupiter were trine on July 18 and will be in opposition on October 29, 2012.18th July is 37 trading days early and 29 October is 35 trading days late, to the date indicated by you..Cycles are never precise- they get distorted by other larger cycles. As you said, let us wait and see.Any how this observation of yours is definitely worth researching further.

      Thanks a lot for your post.

      Warm Regards,



      Suresh

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  3. your so called economic cycles vary from country to country.. and variants are stage of development of that country, demographics ..etc etc.. I for one believe that applying Kondra cycle to India is quite premature. In any case, Kondra cycle has been discussed for quite some years now.. and i havent heard anybody making money out of it.

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  4. Dear Ashish,
    Thanks for your comments. Economic cycles do not vary.. They are the same everywhere. It is the effect of the cycle, ability to respond and the responses themselves which vary from country to country. The responses to a Tsunami in Japan or a 9/11 in the US are going to be vastly different when such events hit other countries.
    India also is subject to the same Kondratieff cycles. We had never bothered about it much, in the past. Now with sophistication coming into investing in India as well, we are looking into it. The main interest in these large time cycles is not their largeness or curiosity as to what would happen at the end of the cycle, but the sub cycles of these large cycles and how to decipher them profitably for a time period nearby. For example in the charts above, I had indicated a date of May 2014 with bells, as a probable market top. Iam aware of the 8 year cycles in our markets. Will larger cycles will push this Kondratieff cycle to create a market top in 2014? What would happen to the periods 2014 to 2016? How would the long term Elliott waves look like, in such a scenario? If we sub divide them and look at waves of lower degrees will they match with what the market is drawing out now? How are the real estate cycles of India relating to the stock cycle and to the Economic cycle? Real estate cycles seem to follow a 12 year pattern- top formations in 1984-5, 1996, 2008 and probably 2020.Will they also contract? Will the real estate and stock markets top out together in 2016? ( Real Estate cycles are considered because that is the single major market whose collapse has affected economies everywhere else.)
    There are several questions which crop up which a cycle analysis could reveal. And analyses of cycles are never complete without looking at larger time cycles. Most often the short term cycles are nothing but phases of long term cycles.
    Incidentally the Kondratieff cycle is not the largest cycle. We have much larger ones- the largest one to date, is the 510 year cycle. Of course, there is no stock market cycle of such duration. But noted cycles climatologist, Raymond H.Wheeler in his research papers published between 1930 -50 had written about climatic cycles and their relationship to business cycles. To quote,
    “ 500 –year period beginning in 1475 is drawing to a close.” He had expected extremes in temperatures throughout the world, as the last sub cycle of the 510 year cycle ends in the first part of this 21st century. He had also mentioned that this period would coincide with extremes in business cycles.
    I fully agree with you, that they are not for day to day trading. But they sure have economic and investment significance.
    Warm Regards,
    Suresh

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