April 25th, 2013
See you on Saturday?
The 17.6 year Balenthiran stock market cycle
The last few days we have been busy preparing for the exhibition at the Design Centre in London, this Saturday. I hope you can make it as there is an interesting line up of speakers as well as dozens of listed companies exhibiting.
In an earlier Dividend Alerts – released April 11th, I mentioned that I was going to prepare an article about whether a major downturn is just around the corner based on a rather compelling stock market cycle theory developed by Kerry Balenthiran.
The 17.6 year Balenthiran stock market cycle
By way of introduction - Kerry studied mathematics at the University of Warwick and then worked as a Spacecraft Operations Engineer in the UK and at the European Space Agency. He qualified as a chartered accountant with Arthur Andersen and now works as a consultant within financial services. His mathematical background led to a fascination with the cyclical nature of stock market booms and busts.
Balenthiran’s research has identified that 17.6 year stock market cycles exist within the markets consisting of downtrends lasting 2.2 years and uptrends lasting 4.4 years (2 x 2.2 years), with a combined cycle length of 17.6 years.
Click Here to read an extensive explanation of the Balenthiran stock market cycle in an article released in our Dividend Income Blog.
The Balenthiran Cycle theory shows convincingly the intermediate turning points that match stock market behavior going back to the early 1900s and he has extrapolated the cycle forwards to provide a market roadmap of the next secular bull market to 2035 and subsequent secular bear market to 2053.
Balenthiran confirms that we are in a secular bear market that will last from 2000 to 2018, while the current uptrend will end in 2013. Interestingly, he predicts that the FTSE100 will have a low by the end of October of 2013 (but, not lower than the 2009 low).
Following this low Balenthiran forecasts (using historic cycles) that we are likely to see a bounce in the markets with higher lows in 2015 and 2018 before the new secular bull market begins in 2018.
If this scenario were to play out this time round the coming low should not be a new lower bear market low but rather we should see a correction of between 20 to 30 percent in the FTSE100 from its 2013 high (current 2013 high: 12 March 2013 at 6534) with the FTSE100 returning to levels between 5227 and 4574.
You may ask: what will such a market drop cause? I can think of some reasons, but your guess is as good as any.
Click Here to read this article in our Dividend Income Blog.
Do you have a plan to benefit from a temporary major "dip"?
If and when the market crash happens do you know what to do and what and when to buy and sell?
At Dividend Income Investor.com, we are great believers in ‘mean reversion’. That means what is expensive will eventually get cheap; cheap shares will eventually get expensive, and vice versa. So if you buy now when a dividend paying shares is becoming increasingly expensive, you are more than likely to have disappointing results in the long run.
The big threat here is that investors are increasingly willing to pay a premium for dividend paying shares. Of course that will change one day, when shares will crash. That is why I am currently rather cash rich in my Dividend Income Portfolio.
If you are looking for a good source of information on when a high quality dividend paying share is historically undervalued or overvalued, you should take a look at Dividend Income Investor.com
We focus on high-yielding, reliable dividend payers, and purchase them when they are historically undervalued. Once we believe their dividends have become unsustainable, or when they have become historically overvalued, we sell.
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