November 1, 2021

From Cash to Crash - Insights With Andrew Pancholi Part 1

Can the market be predicted? In this 2-part series, discover the power of market cycles in crypto, commodities, and cash.

From Cash to Crash - Insights With Andrew Pancholi Part 1

Doug

I'm Doug Lehman, with our resident educator, Sonia Dumas. We got a special Alt Monie show today. What's going on today, Sonia?

Sonia

It is my pleasure to introduce our viewers to Andy Pancholi. Now, if you don't know who Andy Pancholi is, he is the author of the highly acclaimed Market Timing Report, which I'm an avid reader of. He's a board member of the Foundation of the Study of Cycles. He's a consultant to institutional investors and multimillion dollar hedge funds. His work has been published in Trade World magazine, FX Street, Real Vision. And here's something that a lot of people don't know. He is the co-author of The Lost Coffee Course of W. D. Gann.


Sonia

Now, if you don't know, W. D. Gann is a legendary trader that spent his life developing a whole unique set of trading methods. And Andy was entrusted with cataloging the entire works of W. D. Gann. So with that, this incredible guest is going to help us bring historical and seasonal context to the evolution of geopolitical shifts, finance and economics. So with that, Andy, welcome to the show.

Andy

Thank you very much, Sonia. Thank you, Doug. It's great to be here.

Doug

Well, we've got everybody represented. We've got London, we've got Colorado and Atlanta, Georgia. So we talk about the global reach here. So let's kick it off, Sonia.

Sonia

You know what, Doug? The thing about Andy's work is that it is so rich in proprietary analytics. So, Andy, we would love for you to share in this conversation in Introduction to market Cycles. And then later on, we'll shift into exploring how seasonality patterns play out with gold with digital gold now Bitcoin. So help us understand where are cycles going? Where is this market moving? How do patterns play a role in the economy that we're living in today?

Andy

Well, those are a great series of questions. And what we'll do then, Sonia, is we'll start off with the big picture and I'll show you some super long term patterns and pictures. Most people don't believe it exists. So I want to show you them so you can make your own mind up. But then we're going to drill this all the way down to see how we can take advantage of this in our day to day trading and investing. Awesome.

Sonia

Well, take it away. Show us what you have.

Andy

Okay, Sonia, what I'd like to do is show everybody the super long term cycles, and there's a whole bunch of them. But let's concentrate on the main ones. I'm going to show you the 90 year cycle. So it's a little bit of a history lesson, but it's going to be a lot of fun, and it could make you a lot of money if you understand this, to stay with it. And I'm not going to give you too much history. But let's take a quick dive. Now, I'm going to introduce the 90 year cycle and what you'll find is commodity markets have major turns every 90 years.

Andy

And this cycle also works in the stock market. So most of you, many of you will be aware that there was a significant market crash all the way back in 1929. But also if we went back another 90 years from there, we saw a significant crash in 1839, so we can see these 90 year patterns repeated. And this is the sort of stuff we're going to look at when we work with cycles. But first of all, for those of you that are not familiar on the 3rd of September 1929, the Dow Jones industrial average traded at a price 386.

Andy

And it has been going up for about eight years. And of course, those who've never seen market crashes before just seen this market race all the way up. And then suddenly it popped. And boy, it went down, creating the 1929 crash. And it went from a price of 386 all the way down to a low in July 1932 of around about 46. So you can see the market was down 90%. And history shows that markets can correct in such ways and do and will do, let's go a little bit further back.

Andy

Let's go back another 90 years. And what we saw was that America was booming. What we see here is that credit was cheap. The market was heading up into 1837. We saw a significant top. What was going on, what credit was available? Andrew Jackson had changed the laws. There were several banks growing and just opening and lending far more than they had available. And what was fueling this was those huge demands for property and land around the Great Lakes, those canal building and the idea of the canals was to get all the agricultural production from the Midwest, out into the Great Lakes and up the St.

Lawrence Seawind and around the world. So this is this great boom that was developing. But suddenly credit dried up and boom. The market went pop and it came crashing down all the way to 1942. But in 1939, there was a sharp acceleration and a further crash. So this is the 90 year cycle going back one more from there. And of course, we can split this 90 year cycle into 45 years. And what we can see here is that if we took 1839, which is the midpoint of that.

Andy

And at 45 years, we get to 1884, American already been in a bit of a depression. But we saw the sharp selloff in 1884. And this is because there was a lot of gold leaving America for Europe. So again, just a small crash. But we can add another 45, 45 from 1884 takes us to 1929. And we already looked at that. And we can add another 45 to that situation. And that takes us to there's the 1929 crash. If we had 45 years to that, we get to 1974 most of you will probably not remember.

Andy

I know what you're thinking. He doesn't look old enough, but I do actually remember this. I was a kid at the time. Let me just hasten to add that I'm in England and yeah, we had what was called the three day week. So the utilities, we had power cuts. I think you call them power outages in America for three or four days a week. People were only going to work for three days a week, and the trash as we call it rubbish, the trash in America and Britain was only collected every month.

Andy

There were rats everywhere. I know it's crazy, right? The oil crisis and what happened was, well, there's been several differences between OPEC, the Arab Nations controlling the oil production, especially Iran and also America. So they decided to hike the price of oil. It went up eight fold, and it brought the Western world, which was an oil guzzling world down on its knees. And there's a huge crisis. I think that's when the first 50 miles an hour speed limits were introduced into America before that, it was great to have the gas Guzzling Super Corvettes and whatever else you have out there.

Andy

We had some fast cars here. But you see, history repeats. And I think, Sonia, you saw how we were forecasting this further turn down in 2019 based on the 90 year cycle from the 1929 crash, in the 45 year cycle from 1974. And what we see, we actually ran just six weeks. Well, when you're looking at big yearly cycles, six weeks is nothing. And ran about the 15 February. We saw a high and we saw a sharp correction all the way into the 23rd March 2020 where we got that crash.

Andy

But we had an oil crisis in 1974. What do we have in April 2020, we had a day where the front month oil futures went into negative territory. They just couldn't give it away. So there was a mini or micro oil crisis. This is how some of these long term cycles repeat.

Sonia

Incredible. And what's interesting also to recognize is that the memory that cycles go through, we don't really remember, right? Like even those who went through it, they don't necessarily remember that this is a part of a long term pattern whether it's up or down. Do you find that to be true?

Andy

Yeah. I think that people don't actually recall or remember the cycles. They remember the events and they'll have an emotional connection with it. But very few people stop to think about it and see how it impacts them in their personal lives. And I can assure you, because as part of my other work, I look at personal cycles as well. And you'll quite often find there's a ten year cycle in the stock market. Years ending in five are very bullish. Years ending in seven pretty much have corrections.

Andy

But you might want to look back when you get a few more ten year patterns in your own life. I know you're very young, Sonia. You probably only had a couple of these so far. Doug might have had three, and I probably had a few more than that. But you can go back ten years and you can see similar flavors and you can see, well, there's some relationship stuff, job stuff coming in and out every ten years, 20 years. And that sort of thing.

Sonia

This is true. So for me, the most memorable pop or bubble was the tech bubble that happened in 2000. I was living in Silicon Valley, but I was a teenager about to go into college. Little did I know that Amazon and Google were trading around $4. Wish I had bought it. Now it's over two grand. My focus was a little different at the time, but I matured.

Doug

You wish you would have had a Market Timing Report for that.

Sonia

I wish I would have had a Market Timing Report, but it was either that or the latest fashionable jacket.

Andy

It's all about choices, guys.

Sonia

This is true. So tell us more, Andy. Tell us what's going on with these cycles.

Andy

Well, there's a whole series of things we can look at. And what we can say is that we can use these super long term cycles to predict what's coming up next. And there are a series of 100 year cycles which have been really relevant to what's been going on last year and this year and what's coming up later this year as well in the big scheme of things. And I think we were looking at bubbles and how can we predict them so we can take a look at those.

Andy

Is that something you'd like to look at? And then we can hone it right down into.

Sonia

Give us a high level view. And then let's zone in at the six foot or at least five foot six view.

Andy

Okay, let's do that.

Sonia

Okay.

Andy

So, Sonia, Doug, let's just take another look at another set of big long term cycles. But these are really apparent, like why it pays, how you can make very big money with very little risk when you understand how these super long term cycles work. So let's start off with the 100 year cycle. Why the 100 year cycle? Several of you will remember the 2007 global financial crisis. And basically, let me tell you a little story here. I was very fortunate to be invited by a gentleman called Tony Robbins to a gathering in South Beach in Miami.

Andy

And they're about 40 of us in the room, including the multi billionaire commodity trader Jim Rogers and also Robert Prechter from Elliott Wave and also Harry Dent. I'm just a very quiet little cycles guy. And somebody said nobody could have seen this global financial crisis coming. And a little later on, I spoke to that gentleman who's a very well known guy, and I just asked can I show you something? And I sketched on a napkin. If you go back 100 years from 2007, we had the 1097 Rich Man's Panic.

Andy

This is known as the Knickerbocker Crisis. And there was a huge financial meltdown and the half cycles of these. And there's a further one back in 1807. I'll show you them right now. And what these all point out is really they have in common is that all these cycles runs on banks. So in 2007, we did see several American banks impacted. But in Britain, we have the Northern Rock Building Society of bank run and people literally queuing outside trying to get their money out.

Andy

There was a really true run on the bank there. And for those of you that are not familiar, 2007 saw the market down 54%. So it's just bigger than a greater than 54% retracement there. And again, if you're familiar with this and if you've seen the big short and things like this is all about the CDOs. The CDOs is very cheap, very cheap money, a lot of credit. There's this big housing boom, and you can borrow millions and millions of dollars for next to nothing. This is what happens in these prices.

Andy

If you watch credit, you can understand it. But if you go back we saw something very similar. So again, it was the withdrawal of credit, as I mentioned before, it's just known as the Knickerbocker Crisis. And the funny thing is, here's the thing the American government Congress, asked JP Morgan to come and help resolve the situation of course, he was a very wealthy financier. Then what happened in 2007? Of course, Mr. Morgan himself was long gone. But JP Morgan was called upon to come and help with the bailout.

Andy

So history repeats in several ways. And by the way, there the market was down 80% or something like that, 70% to 80% in 1907. But the story doesn't stop there. The European world was in the Napoleonic Wars. Britain and France were at war, okay? And America was staying neutral, as America tends to do. But America obviously had issues with Britain just coming out of independence. But Britain had been trying to impress sailors that was basically taking US citizens and making them sailors in the British Royal Navy.

Andy

And America wasn't happy about this. And America wanted to get some leverage over France as well. So they said, we're going to pass the Embargo Act. We're going to stop all trade with the rest of the world and the rest of the world's going to suffer. But what happened? The blockade in Europe just actually badly impacted the American economy because American goods were not being sold there anymore. And the market was down 80%. So you can see how these cycles are very clear.

Andy

And let's look at the 50 year midpoint cycles. Well, if we go back from 2007, go back 50 years. We saw this sell off and the market came down about 20%, and there was a recession in the United States. Well, what happened here? There was no great crisis per se. But what did happen was that everybody that could afford an automobile now had one, everybody that could afford a refrigerator now had one, everybody that could afford a television now had one. And so there was a drop in decline of customer purchasing power.

Andy

The markets were saturated. In other words, they're waiting for the next innovations to come along.  So just looking at the 1957 chart, the market came down 20%, and this was basically the end of the manufacturing boom and a gentle pullback. 1857 was a tremendous crash. This was the biggest modern day crash in panic in modern day history. Right. So what happened here? I call it a dual centric economic collapse, because what we saw was that this was the end of a phase of railroad expansion.

Andy

And there have been a lot of bonds issued to raise capital for railroad building in 1857. This phase of the railroad boom popped. And in Cincinnati in the fall, the Ohio Life and Insurance Trust failed, and it brought the American markets down. But at the same time, Britain was experiencing similar things in the Industrial Revolution, and it's railroad industry as well. So we got a massive global panic. You can see how these 50 year patterns are playing out. But if you don't believe me, and if you're still skeptical about cycles, I always like to show this chart now, the 1987 crash on top.

Andy

I do remember this. I'm sorry to say this, but we got a high here, but go back 50 years before that. And you'll see, there was a high the same week. And then look at that. The low actually came in on the same day. There were significant sell offs and look at the pattern afterward afterwards. It's similar. It's not the same, but it's very similar. And it kind of matches from here. And this is what you find. If you look at cycles, they go into phase and they mirror.

Andy

If you can find the right mirroring for whatever is your trading, be it gold, the stock indices, commodities, then you're on to a winner as long as you can maintain that and manage your risk. So that's the 50 year cycle. So when we look back in 2018 and 2019, we were looking at what might come up. And as we said earlier, I think you probably were party to this information when you joined us. But we were on alert in 2019 because remember September, the back end of September 1929.

Andy

We saw this top. So we thought the back end of 2019, we should be on alert for the big crash. We were 45 years on from the OPEC oil crisis. But when we got to 2020, we got an acceleration in the 1929 crash. And we were 90 years on from that 1930 collapse. Now, there's some other 100 year cycles that I just want to introduce to you very briefly. Go back to the year 1720, and we saw two big booms and busts, right. Bubbles. Right. And the first one of these was the South Sea bubble.

Andy

This really primarily affected British traders and investors. They were being sold stock in basically fraudulent companies in the South Sea Islands, basically way over in the Southern Pacific. And it's just grossly inflated. And people got sucked into this bubble. Perhaps the more interesting one is the 1720 Mississippi Land Crisis. And there's a Scottish economist called John Law, went over to France, and he spoke to the French aristocracy, the ruling king there. And he said, look, your people don't like you. You're unpopular. You're seen as being very much a ruling class, taking advantage of the working masses.

Andy

And he said, I can help you out there's this land that's growing and we can offer people shares. And they said he did two things. First of all, we’re depressing the currency. This is really important. The currency was unbacked. He pegged the currency and he was selling them shares and stock in basically what was swampland in Mississippi. Right. This is around the New Orleans area. The stock went up and up and up, and then it just kept crashing down.

Andy

So we got these two panics in 1720. This is important. Pay attention to that. And just very briefly, there were a couple of land panics as well in 1820 and 1920. So what happened? Basically, we had a pandemic that brought everything crashing down. The stock market crashed. That was the 90 year cycle, six weeks off from the exact high, but really tied in with the 90 year cycle from 1930. I mentioned the land panics. What happened to real estate in New York last year? I see it's coming back quite quickly, but it really took a hit, right?

Sonia

Yes, it did.

Andy

Yeah. And then we had our bubble last year on the 300 year cycle, which was the cryptocurrency bubble. And also the grains took off. Now let me show you a little bit more about this. So most of you will be familiar with this cryptocurrency boom. I know, Sonia, you're way ahead of the game in the crypto market. And you can see how this really started. Then it really exploded. Into 2021 and of course, we've got the boom. And we've also got the bust because that's what happened to these things.

Andy

Now there's more to come on. That's good news. So stay tuned. But unless you're a commodity trader, the 50 year cycle here, we got this. This was the Nixon shock. Basically, there was a Russian famine together with a dollar devaluation and commodities went out of this trading range with a trading range one dollars, $22. And they went all the way up to nearly $4, like they went up three fold. Okay, so 50 years on and we haven't had a chance to talk about this timing system that we have of cycles.

Andy

But we were expecting this. There was a big spike suggesting a change in trend. These spikes are predictive, right? We know them in advance. These are future spikes. So this is the 50 year cycle playing out. But actually, let me just show you something else. That's quite interesting. We're talking about 100 year cycles. And back in 2018, for followers of my work, they all have been made partly to some of this information. And we saw this pandemic in 2019.

Andy

But 100 years earlier, we had the Spanish flu, pandemic, and millions were killed there between 1880 and 1920, as we came out of the First World War, or it was just known as the Great War. Then the Second World War hadn't happened. And it was known as I say, the Spanish flu. The reason it was known as the Spanish flu. Just a little bit of insight was because the world was at war. The Allies didn't want people to know about this pandemic, which actually really did have quite a strong foothold in America, and Spain was neutral, and it was the only country to report it.

Andy

So that's why it became known as the Spanish flu. But you can go back to 100 years before that. And between 1827 and 1824, we had what was known as the first cholera pandemic. It started in Asia and India, and it spread all the way into Europe as well. Millions, tens of millions died there. And you can go back another 100 years into and we see the measles pandemic in America. And again, smallpox before that. And there's actually a smallpox pandemic in 1717 as well. And these earlier pandemics really impacted the first people, the nation's first people.

Andy

So these pandemics are regular as clockwork. And I don't want to bore you too much. But you can put 50 year cycles in there. And I just want to tell you is that if you add 50 years to the 1618, that takes you to 1668, and that was the plague in London, the Black death, 1665. So these things are really measurable. But there's a little bit more to the coveted pandemic because there was an 18 year cycle that came in 18.6 year cycle. And you go back 18 and a half years.

Andy

And we had SARS and I was on a plane going from London to Australia, and we did a fuel stop there in Singapore, and everybody was walking around with masks. I've never seen that before. Everybody is used to masks right now, but going on and I was lucky enough to have a nice, comfortable seat towards the front end of the plane. And there was nobody else in that cabin. Go back another 18 years and we had AIDS, HIV, and you can go back another 18 years.

Andy

It's a little bit faster. It's been about 20 years or so, a little bit less than 18 years. We had the Hong Kong flu. So you can see these things that follow exact mathematical patterns. So that's really, really interesting with the virus cycles.

Sonia

One interesting thing with the virus cycle is approximately 18 to 20 years. So with our lifespan expanding into 80s and 90s, you can expect what, four to six virus cycles in your lifetime if you do the math.

Andy

Absolutely. I can certainly remember I was a student when the AIDS HIV thing was breaking news, and then I was on my way on a business deal to Australia when SARS was out. And so I guess this is the third one. So you're right. I can certainly expect another one. Let's make it clear that's going to be around about 2038 to 2040, isn't it?

Andy

So write down in your diaries.

Doug

You see the trends with the research that you're doing with the pitchforks, the histograms everything that you put with your data on your reports. History repeats itself in so many different cycles, and this is a wealth of information. You continue to profit from what's going on next.

Andy

Yeah. It's a lot of fun. And. Well, Iit's actually a very serious business. The people we consult to because we can predict geopolitical situations as well as these health situations. The real thing is that there are some very smart people. There are certainly three billionaires that I speak to who do look at this information. But 99.9% of the population thinks it's all rubbish and it used to really annoy me. But now I just know, I'll talk to anybody that wants to listen, but there's not many people who want to listen.

Andy

Most people think this work is crazy, but we've been doing it a long time and we know it works. And just even taking the 2007 panic, there's going to be another panic in 2057, right. Okay. You write it down for your kids, maybe your grandkids, but bear that in mind. And you can look at the half of that 25 years. So that's not so far away. That's going to be a 2032. Right. Right.

Sonia

Andy, clearly, there's nothing new under the sun when you're looking at these long term cycles. So how can we apply this strategically, like maybe let's take this down to practical levels when we look at gold. And now Bitcoin, which is called digital gold. What do you think as far as how we should look at these long term cycles from an investment trading, just financial market standpoint.

Andy

Okay. Well, let's drill down into that and let me just bring in one other thing. I'll just talk to you about it. There's no particular picture I want to show you, but it will really impact what's going on. Right. I mentioned the big boom in the grain markets in 1971, and what happened in 1971 was we got the Nixon Shock, actually, in May 1971, the Nixon Shock took place. Now let me explain what that was all about. This is really important if you understand this, because what happened was towards the end of the Second World War.

Andy

The Western world all got together and they wanted to create a monetary system that was fair, balanced and it wouldn't create competitive revaluations and evaluations. And so it became the Bretton Woods agreement. It took a long time to get into place and operate properly. But what everybody did was they pegged their currency to the US dollar. And in return, America held so much gold to back that at $35 an ounce. So it's a pretty cool system. But what happens post war? We see that some countries grew faster.

Andy

So Japan and Germany recovered really quickly. But America didn't. And then America also had burgeoning debt. And then it got into Vietnam. It had to pay for the war effort. So by the time we get into the 60s, everything is out of kilter. And countries like France wanted to redeem their currency for gold. America just did not have enough gold. It only had $13 billion worth of gold holdings, of which only 2 billion was available for international reserves. What happened was that every nation was having to revalue their currency.

Andy

This is going to be really relevant to what's coming up next. I know some of you FX traders as well, but what happened there was that Germany. It was on the 5 May 1971. Germany left the Bretton Woods agreement, as did several other countries. But at the same time, that was the 50 year cycle. If you take the 90 year cycle back from this year. All right. You'll see that the Credit and Style Bank collapsed, and there was an Austrian Bank that was funding. It wasn't just a bank.

Andy

It was funding a lot of growth and development in Europe. We got these two crashes. So this May, we got the 90 year cycle. We got the 50 year cycle from the Nixon Shock, right. What happened on the 5th May? That was the day the cryptos tanked, right. I told people to look out. Not only that, that was the day the grains tanked as well. So these cycles are really clear. So if I set that as a background. What this is really saying is that and also, if you look back 90 years later on this year, I think it's going to be the 21 September will be the 90 year cycle from Britain, leaving the gold standard.

Andy

Right. So this is suggesting currency volatility. And in December, I think it was the 13 December 1931. Japan left the gold standard. Right. So this tells us there's going to be a bit more volatility coming up. Now, there's another cycle that I'm just going to bring in. It goes all the way back to 1781. It's a bunch of 30 year cycles, 240 years or 360 year cycles. I'm not going to bore you with any more mathematics, but America was at war with England with Britain, and they were paying for mercenary soldiers.

Andy

And they created the Continental dollar. And it was not backed. So by 1781, which is the year of York Town, this became worthless. Right. So it was worth about a 10th of its value. And it phased out in 1781. So we're seeing the dollar melted down in 1781, this big set of six year cycles. The dollar came under a lot of stress in 1971 and the 50 year cycles, that to me, the spotlight is going to be on the dollar.

Andy

Now, a lot of people are saying the dollar is going to strengthen which it might do. All I'm saying is we're going to get some big moves. But to give you a warning, then we'll drill down to what's going on. When we look at next year, I think we'll find America ceased private holdings of gold above. So that suggests some degree of intervention. I think that's going to be intervention on cryptocurrencies, probably coming up next year. Right.

Sonia

There's something you mentioned with currency volatility. What does that mean to just everyday people? What should they think of when they think of currency volatility and why that's important or what the impact can be.

Andy

Okay. So this can manifest in several ways. It can either be slightly inflationary. You're going to pay more for certain things because a nation has to import goods from other countries as well as export goods. You're going to pay more for stuff, right? Obviously. Which way it moves. Now, if you're kind of not too interested in international trade, it's not a big deal, right? Really. But where it is a big deal is I'm in England and you're in America. And basically, things are either going to get cheaper for me or if I'm holding dollars, my dollars are going to be worth less.

Andy

All right. So it's good if things get cheaper for me, because more trade comes into America. And the previous incumbent of the White House wanted to encourage this sort of trade, but equally, if the dollar goes up, it gets stronger, then things get more expensive. So I'm going to be less inclined to buy something from America. If I can get a parallel product from another nation where it's going to be cheaper, that's the simple way. It's far more complicated than that because there are interest rate implications as well.

Sonia

Andy, thank you for this incredible conversation and sharing with us your proprietary research about cycles and for our viewers. If you're interested in being a part of this smart money community and you want to capture opportunities during this global reset, then click the link below to get access to Andy's realtime research and information. It's an impressive report that'll help you to think strategically about the future and as always, get educated and stay intellectually curious. Cheers!

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