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Our Extreme Long-Term Model Forecasting Tools

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QUESTION: Mr. Armstrong, Your reputation precedes you. They call you the legend because you have been the only analyst who forecasts events years in advance. Throughout the rise and fall the stock market, you called for only 2 year correction from 2000 and 2008 and the market would remain in a bullish trend. I read that Barrows piece on you where it seemed they laughed at your forecast I think in 2010 when you said the market would rally and make new highs. You did the same in 1987. My question is, do you have a particular indicator that allows you to see the long-term like that in the stock market?


PEI Bond Report 6 4 1991

ANSWER: This is why I stress that to be a successful trader, you have to conquer your emotions. I was always institutional. Our reports were too expensive for the retail world for they use to go out over telex, which would cost $75 alone per transmission back then. That is why we opened offices around the world to reduce delivery costs. We would send one transmission to that office and they would redistribute it to the clients in that region. We are gathering all our old forecasts that were in storage and will try to assemble them on annual basis for reference.

When FAX became common, we moved to that delivery system and that brought the costs down dramatically. Today, it is email and that is all free. So that is why we became the largest institutional adviser. However, because our clients were institutional, we had to specialize in reliable long-term forecasting. Day traders were not our focus.

Extreme Long Term Trend Indicator

We developed our Extreme Long-term trend indicator. This has successfully calculated that these corrections where everyone calls will be the next Depression were only short-term corrections. The calculations are extensive, but this indicator has been used by our Institutional Clients to provide underlying confidence in what is REALLY unfolding in the markets on a broader basis.

Dow Jones Earnings Book Value 1937 1982

These are the charts I was showing at our institutional sessions around the world going into 1985. This indicator was starting to take off on the Quarterly level in 1982. It was fully outright bullish in 1984 on the Yearly Level one year before the ECM turned in 1985. This is why I ended up advising a few of the takeover players back then who they ended up making the movie Wall Street about with Michael Douglas and his famous speech on greed.  What the movie did not explain was that the book value declined so much that we could buy companies, sell their assets, and double or even triple our money. I was warned that we were entering a takeover boom.

1985EconomistAdd Full R

1985 Economist

ECM Eonomic Confidence Model Public Private MAWe took out the back cover of the Economist in July 1985 for three weeks to forecast that the deflation was ending and a new Private Wave on our Economic Confidence Model was beginning that would eventually peak in 2032.

The ECM even picked the high in the interest rates at the Fed in 1981. Our long-term forecasts have been amazing. They even impressed me. As I said at the last WEC, nobody has tried to defeat these models more than me. True, I do not like their projections into 2032. But that is my personal opinion which is not something clients rely on. We all know that the forecasts can only come from Socrates. These indicators have been reliable and you cannot forecast the future from a personal gut feeling.

You have people who will try to claim it’s all nonsense mainly because they want to think, like Marx, that the government is in control. They respond to events. At the precise bottom of the ECM in 1985, they formed the G5 at the Plaza Accord responding to the high in the dollar which produced the high in deflation. The government does not want to learn how to manage the economy. They want to fool the voting masses just to retain power.