Brenner's Cycles: A Farmer's Insight into When to Make Money in the Market
Samuel Brenner was an American farmer and entrepreneur who lived in the 19th century. Throughout his career, he dabbled in various businesses, including iron production, pig farming, and more, experiencing both successes and failures. At some point, Brenner became deeply curious about the workings of market cycles and decided to approach this question systematically. He began meticulously documenting and analyzing his observations.
In 1875, Brenner published a book titled "Economic Prophecies of Future Price Fluctuations." In this book, he divided the market into three periods:
- Panic Years: These are times when the market panics, leading to irrational buying or selling of stocks. As a result, prices can either skyrocket or plummet contrary to expectations.
- Prosperous Times: This represents the golden era for selling stocks and other assets as their prices reach their peak.
- Hard Times: During this phase, stocks, commodities, and assets are traded at their lowest prices, making them appealing for purchase and holding until the next prosperous times, which are bound to come.
At the time Brenner wrote his book, he was primarily engaged in farming. He was aware of how seasonal cycles and weather conditions influenced crop yields, which, in turn, dictated supply and demand, ultimately shaping prices. Brenner delved deeper into these cycles, calculating their durations.
For instance, he found that the prices of corn and pork followed an 11-year cycle, with peaks occurring every 5 to 6 years. He drew parallels with the 11-year solar cycle, as it also logically influenced crop yields and, consequently, supply, demand, prices, and overall income.
As for iron, Brenner's cycle theory proposed a 27-year price cycle, with lows recurring every 11, 9, and 7 years, and highs every 8, 9, and 10 years.
Brenner's Cycles in Modern Times
Studying historical price data can help investors identify market cycles, understand their impact on prices, and even predict future events. As of 2021, according to Brenner's cycle theory, the market had just exited a panic period.
The graph does not indicate any significant changes until 2023. This suggests that the market will continue to rise until the current cycle ends, followed by another period of crisis and "hard times" in the market.
Forecasting is an inherently uncertain science, especially when made by a pig farmer who lived 150 years ago. Nonetheless, the world is cyclical, life is cyclical, and so is the market. It's worth paying attention to these patterns.
Even considering that Brenner made his forecast in 1875, it's remarkable how accurate his chart was for the 2000s. Brenner's cycle theory indicates that 2007 was a year of high prices and a time to sell stocks. Compare this with the S&P chart; in 2007, the market was at its peak before the global crash of 2008.
Brenner's cycle theory can be used in combination with other indicators and metrics to inform trading decisions. This tool can serve as a valuable long-term warning of potential market reversals. Traders can still incorporate it into their trading plans. Here is the original chart that Brenner drew in his book, "Economic Prophecies of Future Price Fluctuations."