As my corporate tagline says, “The Template of Time, Inc. explores a fractal conception of time and applies it to both history and markets.” If you read the first chapter of my book, The Template of Time: Our Destiny Decoded, you will begin to understand how these two practices (studying markets and history) came together. (Chapter one is posted on this website.)

For this reason these blog postings may cover what I think will be happening in the markets or what the Template of Time is revealing about history as it unfolds in our lifetime. Regarding market postings. These are not investment ideas that are guaranteed without fail to be right. They can’t be. I have made too many mistakes for that to be the case. So if you elect to act on an idea in a blog post, then understand I am in no way responsible for the outcome of your decision, good or bad. You are the one deciding and you are the one responsible for the decision and I hope all of your market decisions are profitable, but they won’t be. They never are for anyone.

I use a proprietary system to make my decisions on the market, so I won’t be sharing why I think this or think that since that would reveal the system, but it may help you in your decision making to know how I view the market.

The market is irrational. If you are going to understand the market I believe it is best to dispense with the idea that it acts in any way approaching rationality. It is driven by the emotions of greed and fear and when have we ever characterized emotions as rational?

I love to hear the market commentators give their reasons for market behavior after the fact. It sounds so reasonable until you string all of their pronouncements together. One time I heard someone say, “The markets are down because the price of oil went up and this was viewed as bad for the consumer who drives the US economy.” That sounds imminently reasonable. I doubt few people disagreed with this reasoning. The next day the price of oil jumped again and a commentator said, “The market is up, because the higher oil price benefited the oil companies and they led the market higher.” Now wait a minute. What happened to the US consumer who drives the economy? Either higher oil prices hurt the market or help it. When they are able to do both within 24 hours time then we have entered the domain of the irrational.

For example, if I say, “White is white,” on one day and then, “White is black,” on the other, then I have said nothing. I have contradicted myself and contradiction opens the door to an endless stream of meaningless drivel. So how can the market commentators get away with this? They have “reasons” readily available.

The classic reason they give—after the fact, always after the fact—is the market had already priced in some news. So when an earnings report beats all expectations and the stock goes into a nosedive we are given the reason the market had already priced in this level and it needed even better earnings to sustain or grow the share price. Just curious, is there any way these commentators can let us know in advance when the market has priced in these numbers? The choreography of their dancing gets even more involved when a stock issues lousy earnings and rises. All of this belies the notion that the market follows earnings. If that were true, then higher earnings would lead to higher stock prices, and vice versa, but such is not the case. So what are we to do?

Chaos theory. First, we need to start thinking of the market as a turbulent system.  To scientists the word turbulence describes a world that is unpredictable. An example of a turbulent system is the non-linear world of the weather. If our climate was a linear system, then we could predict what the temperature would be at a specific moment 100 years from now, but making a weather prediction a mere 7 days out is guesswork. This is because the weather is riddled with billions of conflicting variables, currents and cross-currents—turbulence.

Furthermore, some of the greatest scientists have given up on understanding even small-scale turbulent systems.

“It [turbulence] seemed almost unknowable. There was a story about the quantum theorist Werner Heisenberg, on his death-bed, declaring that he will have two questions for God: why relativity, and why turbulence. Heisenberg says, ‘I really think He may have an answer to the first question.’

“…What is turbulence then? It is a mess of disorder at all scales, small eddies within large ones. It is unstable. …It is motion turned random.” (James Gleick, Chaos: Making of a New Science (New York: Penguin Books, 1987), 121, 122.)

But there are some scientists who believe turbulence is understandable. It is studied by a new scientific discipline that operates under the name of chaos. This in-your-face name to their discipline is slightly disturbing. After all, no sane person wants chaos; it is the modernist nightmare, the existential tar-baby, an inextricable tangle of meaninglessness. Yet their embrace of chaos, their peering into the abyss of non-linear behavior, produced this stunning, counter-intuitive conclusion: “Chaos is ubiquitous; it is stable; it is structured.”(Op. cit. p 76.)

The market is a chaotic system and so we need to try and find structures within it that are related to the two key investment criteria: price direction and time. If I believe a stock is going to reach a pricing level that is 20% higher than its current level in two months, then I have the truly critical information I need to make an investment. Therefore, structures related to price movements in time are what I base my decisions on and not on news, or valuation, or anything else. That is what technical trading tries to do when it relies on stock price charts to make trading decisions. There are a number of excellent books on technical trading, but I have to tell you it is not easy. As chapter one of my book relates, I lost a lot of money using these techniques until I refined them based on my understanding of the Template of Time. This understanding enabled me to call the market bottom both as to its timing (the trading week ending on March 6th) and its depth (I said the Dow would drop to around 6500 and it stopped falling at 6470).

Market prognostications. In some of the blog postings that follow I will offer my opinion of where individual stocks and the market are headed. This will not be done every day. For the moment I will include this prognostication. Though the economy is headed for some very rough times (inflation and higher oil prices among them), I do not believe the S&P 500 low of 666—how beastly!—will ever be breached. But that does not mean the market will continue to soar higher. It is more likely that we will have gyrations up and down within a range for several years. Timing when to be invested in stocks or move to cash, could dramatically impact one’s performance in the world of investing.

Historical prognostications. Some of these will be found in my book. The Template of Time has some mind blowing suggestions as to where we are headed as a nation and as a family of nations. But occasionally I will point out things that are based on what are called sequences, or thirty-six year cycles that show where a particular movement is headed and when it will arrive at its destination. If these seem confusing then chapter one of the book should clear the confusion up.

Perhaps the most important thing to understand in the near term is this: the present time, around the year 2010, will change the direction of history for whatever time this world has left. The Template of Time: Our Destiny Decoded has an entire chapter on it. We should soon witness Israel attempt to take out the Iranian’s nuclear facilities. This is one of the clearest suggestions of the Template since they have previously done so to Iraq (the Osirak facility in 1980) and Syria (an alleged nuclear facility in the desert in 2007). Once this happens we will see massive changes in the Middle East. There should be a change in leadership in Iran and Egypt and possibly a change of government in Iraq. There will be changes in the US relationship with China and much more. I am posting this now so that when my book is published it will be clear that this forecast was made before the events took place.

Finally, replies to emails. Volume will dictate whether or not I am able to respond. If I do not, please forgive my apparent rudeness. I mean no offense.

Sorry for the length of this first posting. The other ones will be nowhere near this extensive.

God’s grace to you,

Tom Payne

 

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