| Solar Bear Market? |
There are recurring patterns of behavior in commodity markets and, on much longer time scales, stock markets, that have striking regularity. The speculative traders who provide liquidity in these markets make much of their money by being students of these patterns.
One classic sort of cycle includes up-and-down phases upon which are imposed three or four well-defined smaller cycles. This sort of behavior has been evident in, for example, the silver market for more than 20 years. It still provides very profitable trading opportunities.
While some traders (including very good ones) contend that these cycles are facts of nature that can be derived from mathematical principles alone, most professionals think that they are the manifestations of self-fulfilling coordinated actions by the tens of thousands of people who trade in these markets and anticipate (thus create) these cycles. The truth may well lie somewhere in between. Certain sorts of experimental results do arise automatically from inanimate systems and impress themselves on biological ones. For example, it can be rigorously proved mathematically that a variable that is determined by a large number of similarly sized independent effects will be distributed as a Gaussian distribution. Hence, we see Gaussian distributions in measurements of phenomena throughout the biological world.
Similarly, there are patterns of behavior among inanimate objects that seem to arise by magic, but are actually the result of the cyclical nature of some physical systems. When these arise in complex systems that are still beyond detailed human understanding, they can be measured but not easily explained.
In an interesting interplay between these two worlds - human action in the investment markets and empirical cyclic behavior in inanimate systems - Bob Bronson of Bronson Capital Market Research, 6191 S. Creftbrook Drive, Morrison, CO 80465-2223, telephoned me to point out the strong similarity of the 3,000-year temperature record in the Sargasso Sea (figure 2 of our paper "Environmental Effects of Increased Atmospheric Carbon Dioxide'') and the market cycles with which he makes his living. Figure 1 shows the Sargasso Sea data to which has been added the trend lines and cycles that Bob Bronson pointed out. Note the remarkably regular behavior of this graph - in slope and timing of intermediate cycles - during the two down cycles. Note also that both of the first half-cycles - one up and one down -have four intermediate cycles (assuming the first is complete).
This curve is primarily a reflection of cycles in solar activity, which are not now well understood. It is in our paper to illustrate two points. First, the temperature of the Earth has fluctuated over a wide range during the past 3,000 years without ill effects on global climate. Second, global temperatures today are about average and not unusual.
Still, if this were a stock or commodity market chart - as studied by those who make their livings betting on the world as it is and as it is reflected in charts of its activities - we would be expecting two more down cycles in temperature before the cooling trend that began in the Middle Ages runs its course.
As to more exact timing, note that there are only two intermediate uptrends lasting more than 200 years in the chart, including the one that we have been experiencing since the Little Ice Age. The previous one terminated after about the same duration as our current cycle. The entire record includes ten previous cycles of rising temperature. Only the one that corresponds to our present time in the earlier downtrend (peaks numbered 3) was as long as the one we are experiencing today.
Enviro pseudoscientist Stephen Schneider of Stanford would probably rush this into print as proof that there is a 90% chance that man is warming up the planet with carbon dioxide. [He has published a similar paper on century-long trends.] It then would be necessary to point out to unlistening politicos that most of the current warming occurred before humans released much carbon dioxide into the atmosphere, and that a similar cycle occurred 2,000 years ago.
The correct interpretation is that, based on this record, there is a greater than 90% probability that the current warming trend will end sometime within 100 years. If one takes into account the long cycle similarities in this graph, that chance is much higher than 90%. The satellite and balloon measurements showing that atmospheric temperature has not increased for the past 20 years may be an indication that this next down cycle in temperatures is beginning to take place.
The professional trader reading this graph would not, however, be worried about deflation - a harmfully cold period of Earth temperatures. The first large trend indicates that, by the end of the second down cycle, most of the cooling has taken place. He would trade the temperature from the short side until temperatures were a little lower than those of 300 years ago - and then go long.
The obvious criticism of this analysis would be that our data set is limited to only 3,000 years and about 10 short cycles within two partial long ones. In the investment markets, there is often much less data than this - and there are some very wealthy people who have read that data and made fortunes as a result. In any case, this sure beats the tax-guzzling global warmers, who ignore even the data that are available.