Archive for the ‘Interviews’ category

Bill Meridian's Interview

This is the 8 April Interview conducted on the Orpheus Thomson Reuters Technical Analysis Forum

Mukul Pal Welcome Bill
Domnita Pascut Welcome Bill
Bill Meridian Hi
Cosmin Grozea hello
Mukul Pal Hello Everybody
Mukul Pal Thank you for all for your presence today
Mukul Pal Bill Meridian from CYCLES RESEARCH is here with us today
Bill Meridian Hello
Mukul Pal We at the Technical Analysis forum welcome you Bill. Thanks for being here today.
Mukul Pal I will give your brief introduction for all the members here
Mukul Pal and then we can start the interaction
Mukul Pal Bill Sarubbi obtained his MBA in 1972 and began to study cycles in the same year. A 7-year psychotherapeutic training apprenticeship followed.
Mukul Pal Since the 70’s, he has been on Wall Street applying cyclical theory to markets, developing his own software in the process. Most recently, he spent 14 years as a fund manager in the Middle East, and has been operating his own money management and consulting service since 2004.
Mukul Pal He has been applying the cyclical methodologies learned in the market to historical events and to industry analysis. Having been influenced by cycle theorists such as Ed Dewey, Charles Jayne, George Lindsay, and R.N. Elliott, he believes that fundamental developments, as well as prices, can be projected with a certain degree of accuracy.
Mukul Pal He is a member of the Vienna-based Kenos Circle and a director of the Foundation for the Study of Cycles.
Mukul Pal Cycles Research LLC advises institutions and manages funds utilizing unique combinations of cycles, fundamental analysis, and market analysis. His website and e-mail address are: and [email protected]
Mukul Pal We can start the interaction
Mukul Pal please feel free to ask bill about markets and assets and cycles
Cosmin Grozea Could you tell us the few reasons why you think US equity market is going top in April - May 2010?
Bill Meridian April to May is usually weak.
Bill Meridian There are several time cycles that expire in April.
Bill Meridian The 24 and 40 month cycles have already topped.
Bill Meridian Years ending in zero are down 65% of the time.
Bill Meridian Q2 in the 2nd year past a Pres. election is usually weak.
Bill Meridian I am awaiting technical confirmation of a top.
Mukul Pal What kind of technical confirmation are you waiting for Bill? Some break in key supports?
Mukul Pal any levels you have in mind on DOW below which we get the negative confirmation?
Bill Meridian Typically, new highs less new lows, breadth and the Lowrys indices top months before the markets do.
Orpheus Research You do follow sentiment indicators. What is the current status of Reuter’s poll for US fund managers?
Bill Meridian They held 66% of assets in Feb., highest level in 14 mos.
Mukul Pal any ideas on historical extremes for such readings bill?
Mukul Pal do the readings go up above 70%
Bill Meridian No.
Mukul Pal k
Mukul Pal so 66% is already extreme complacency
Bill Meridian I think that it is when you look at the very low VIX reading.
Mukul Pal so 66% gives us the idea that a large section of the market is already invested
Bill Meridian The impression that I get is that PMs do not know what to do, so they are simply sitting on what they have.
Mukul Pal I understand
Bill Meridian They are trying to figure out what will happen next in the economy. The admin. is heaping more and more taxes and regulations on business.
Bill Meridian So, this is not a normal recovery.
Mukul Pal correct
Mukul Pal what kind of retracements are you looking at on DOW?
Mukul Pal back to 9000
Mukul Pal or are you looking at a low below MAR low?
Mukul Pal on DOW
Bill Meridian I think that a 10-15% correction is due. The last time we were in this position was in 2000.
Bill Meridian It was a year ending in 0 and we were entering Q2, which we know from Art Merrill’s work, is traditionally weak 2 years past an election.
Mukul Pal so you are looking at a general slowdown and negative year
Mukul Pal not necessarily fast and harsh down
Mukul Pal with the kind of low volatilities one would expect fast and sharp moves
Bill Meridian I think the economy is still contracting but at a lesser rate. Stocks are likely to fall and then to recover late in the year.
Bill Meridian The period from the US mid-term elections (Nov is typically an important low for stocks.
Mukul Pal i understand
Bill Meridian The period between now and then is statistically/historically weak.
Mukul Pal I am sure members here would be keen to know how you see DOW till 2012
Mukul Pal there is some opinion that DOW may get into a new high
Mukul Pal what’s your opinion beyond 2010 negativity
Bill Meridian Years ending in 2 are usually lows according to the decennial pattern.
Bill Meridian Economically, we are in a period like 1966-1982.
Mukul Pal that is long sideways action
Bill Meridian the admin. Keeps hampering the economy.
Bill Meridian This is like the 1930s where the economy was held back by the New Deal.
Bill Meridian WW2 ended the New Deal and that allowed the economy to recover.
Bill Meridian That is why the market is so choppy.
Mukul Pal even after 1930′s market was sideways for 21 years
Bill Meridian Yes.
Domnita Pascut You are bearish on bonds. What’s your outlook on US notes for the next quarter of the year?
Bill Meridian Bonds are seasonally weak in the first half of any year since 1980.
Bill Meridian June is the worst month.
Bill Meridian I do not see a low until June.
Bill Meridian But, the 54-year rate cycle bottomed in 2005. This cycle is developed from corp. rates, which did bottom in 2005.
Bill Meridian US notes can carry on a bit longer, stretching the cycle to 60 years.
Bill Meridian I think that that top is now in, too.
Bill Meridian Thus, notes should be especially weak in the 1st half, as the bear market sets in.
Cosmin Grozea When is the long term view (54 year long cycle) view on interest rates?
Bill Meridian Sydney Homer tells us that rate cycles can last 21-36 years.
Bill Meridian This looks like the beginning of a big bear-the fundamentals are obvious.
Bill Meridian The 54-year cycle has already topped.
Mukul Pal just to clarify here
Bill Meridian OK
Mukul Pal Bill has written extensively on interest rates and inflation
Mukul Pal in his books he has mentioned about 50 year cycles of interest rates
Mukul Pal the 54 year cycle being discussed here is the K - Kondratieff Cycle
Mukul Pal please correct me if I am anywhere wrong Bill
Bill Meridian I think that that is correct. There are many natural cycles of 54-60 years.
Mukul Pal So bill if the 54 year cycle has topped
Mukul Pal are we not if for a long period of interest rates low
Bill Meridian I did not get the question.
Mukul Pal the 54 year interest rate cycles has already topped
Mukul Pal when was this?
Bill Meridian Yes..
Mukul Pal top
Bill Meridian In 2005, based upon the study of corp. rates done by the FSC.
Mukul Pal so what should happen now
Mukul Pal the interest rates should fall for how many years
Mukul Pal ?
Mukul Pal more
Bill Meridian Bonds re in a weak position-rallies should be sold.
Mukul Pal k
Mukul Pal From an Intermarket perspective BONDS are known to lead, is this true?
Mukul Pal do you find such conventional relations working in markets
Bill Meridian You mean leading on the way down?
Mukul Pal both on way up and down
Mukul Pal bonds reverse first
Mukul Pal in an economic cycle
Mukul Pal do u see such relationships?
Bill Meridian I think that is correct in the current climate.
Bill Meridian Yes.
Orpheus Research What’s happening to Oil? It is moving sideways from October. When do you think it will trend? What is the next quarter outlook for Oil?
Bill Meridian Overall, I think that the trend for commodities is up.
Bill Meridian I do not think that China will slow, so the D for oil will stay high.
Bill Meridian Much of the price appreciation is simply $ weakness.
Mukul Pal do you think we are going back to 100 in 2010?
Mukul Pal or next year?
Bill Meridian Yes,
Bill Meridian This year and next year. i think that conflict late in the year or in Q1 will spike oil up.
Mukul Pal what kind of conflict are you referring to bill?
Bill Meridian Iran-Israel over the missiles and nukes.
Bill Meridian Israel
Mukul Pal k
Mukul Pal Majority of us here are interested in Gold
Mukul Pal please enlighten us regarding Gold
Mukul Pal What’s the next quarter outlook on Gold? Any price targets?
Bill Meridian Gold is in a bigger bull market due to the expansion of paper currencies.
Bill Meridian Years ago, I said that the response to a crisis will be more credit-this has historically been the solution…
Bill Meridian …but there is one catch. All constraints have been removed. The Monetary Control Act of 1980 allows banks to lower their reserve requirements to 0, which means they can loan an infinite amount of money.
Bill Meridian This has been the trend for many years.
Bill Meridian Many years.
Bill Meridian Q2 is typically weak.
Bill Meridian But, the price may simply move sideways here.
Bill Meridian June is usually a low in a bull market.
Bill Meridian The lowest, I expect here is 1000-1050.
Mukul Pal so 500 - 700 dollars is unexpected?
Mukul Pal wishful thinking
Bill Meridian Yes.
Bill Meridian I recall $38 in the sixties.
Mukul Pal
Bill Meridian We thought it might go as high as 200.
Mukul Pal I was not born
Mukul Pal what is your long term target on Gold
Mukul Pal do you think it will go above $ 3000?
Bill Meridian At an interview at ValueLine in NYC, one market vet said that the top fund managers used to wear $600 suits in the 60s, but that would never happen again.
Bill Meridian I think that 2000-3000 is a minimum. But the governments will take action.
Bill Meridian That is why A, Sutton titled his book, The War on Gold.
Mukul Pal what etfs would you suggest to buy Gold? What % allocation would you suggest in a portfolio?
Bill Meridian I like the UGL, which is the double long fund. The GLD is the one times fund.
Bill Meridian I would avoid gold stocks because I think that the commodity will exceed the equity.
Mukul Pal This should be a first time? Or did this happen in 80′s?
Mukul Pal commodity exceeding gold stocks?
Bill Meridian Commodity-based stocks outperform the commodity for short periods…
Cosmin Grozea Where do you see the start of the bearish rally as a time interval - more detailed if possible like dates?
Bill Meridian but then the commodity exceeds the stocks in the long run. This has been demonstrated by studies in the Financial Analysts Journal.
Cosmin Grozea For equities
Mukul Pal interesting
Mukul Pal we all know you are good with dates
Bill Meridian The question is where do I see the low points in 2010?
Mukul Pal let us a date to SHORT
Mukul Pal tell us
Domnita Pascut
Mukul Pal i understand
Bill Meridian I think that it might be now and again in June.
Mukul Pal
Domnita Pascut How can the forum member’s subscribe to your newsletter?
Bill Meridian They can do so at the website under publications.
Mukul Pal we can take a few more questions
Mukul Pal from the members
Cosmin Grozea Bill what do you think about a Short equities and Long commodities now and in June also scenario? is it advisable?
Bill Meridian I think it is viable.
Mukul Pal we have a question from one of the Orpheus members posted now on the internet
Mukul Pal what is a viable business in the times ahead
Bill Meridian OK
Mukul Pal what sector
Mukul Pal what should a businessman do
Bill Meridian I use the 1966-1982 period as a guide.
Bill Meridian I think any commodity-related biz will do well.
Mukul Pal industrial metals, agro, energy
Bill Meridian In addition, there is lots of liquidity and uncertainly, so trading will be profitable, if you get the markets right.
Mukul Pal yes i agree
Bill Meridian In the last period, Frankie Joe and the traders cleaned up.
Bill Meridian Long-only fund managers did poorly, and they will do so again.
Bill Meridian I have shifted to try to fit the times.
Mukul Pal a large % of the market is still long only
Mukul Pal no?
Mukul Pal investment managers
Bill Meridian People used to ask why I did not stock with managing a big tech fund-the answer came in 2000-2002.
Cosmin Grozea Can you pls tell us what are the cycles saying about VIX: short, medium and long term ?
Bill Meridian I can add bps to long only funds, but they are still swimming upstream.
Mukul Pal yes i agree
Bill Meridian i think that the VIX is due to rise short and intermediate term.
Mukul Pal Bill it was wonderful having you here. It was pleasure talking to you like always. From all of us here at the Orpheus technical analysis forum, we thank you for coming.
Mukul Pal we would like to invite you soon again
Cosmin Grozea Thanks a lot Bill for the time and answers
Bill Meridian Great-thank you from Vienna.
Domnita Pascut Thank you Bill!
Orpheus Research Yes, thank you Bill
Bill Meridian OK
Mukul Pal you can visit
Mukul Pal for subscriptions to Bill’s newsletter and his latest books

Orpheus Events - Interview with Bill Meridian - 8 April

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Bill Meridian on DOW, GOLD and OIL (Archive)

Published on 24 Aug 2008

Cycles theorist Bill Meridian began on as a fundamental analyst at the Value Line Investment Survey. Then in 1978, he began to design computer programs to perform the number-crunching required to relate stock market movements to cycles. He has worked both the buy and sell sides of Wall Street, most recently spending 14 years in the Middle East as a fund manager and strategist. He currently operates his own business from his home in Europe, traveling to Vienna, London, Tokyo, and Abu Dhabi for his clients. The gold timer of the year 2006, Bill talks on cycles, Gold, Oil and DOW and how to interpret cycles for global cues in an interview with Mukul Pal, from Orpheus Capitals.

1. What sparked your initial interest in CYCLES? And how long have you been studying them?

I began to study cycles in 1972 in NYC. I bought my 1st stock in 1966 and then went to New York University and received my BS and MBA. After reading about panics and crashes, I wondered if there were any methods to forecast the future. Reading the microfiche of old newspapers in the NYU library was very instructive. I joined the Foundation for the Study of Cycles in 1972 and began to study. In NYC, we also had the Society for the Investigation or Recurring Events (SIRE), which had monthly meetings. After this, there was no doubt in my mind that cycles were real and could be utilized profitably.

2. Could you briefly define a cycle and classify the broad cycles for us?

A cycle is a recurring event or rhythm in nature. The cycles that show up most often in nature are 18 years, 19 years, 10 years, 20 years, 36 years, and 60 years.

3. CYCLES work better in Bull or bear market? In other words efficiency of CYCLE signals in trends and counter trends.

Cycles work in both bull and bear markets.

4. Just like Technical analysis are short term CYCLES prone to noise, while long term more consistent in turn signals?

Short-term cycles are more prone to noise. Long-term cycles are less vulnerable to noise, but keep this in mind. If a 30-day cycle is off by 10%, this gives us an orb of 3 days one way or the other. If a 3-year cycle is off by 10%, then it can ‘wander’ plus or minus 3 years from the date of exactitude.
I have often joked about cycles in the following way. How do we know that there is not a 3000-year cycle that wiped the pharaoh out of all of his wheat positions on its last occurrence? We do not know. So be aware that a seemingly isolated event can occur that is actually part of a very long cycle that exceeds recorded history. When the known cycles seem to fail, I think it is simply the fact that the known cycles are being overridden by a stronger and less known cycle.

5. How good are CYCLES as a standalone tool? Are you a purist or do you follow trend following systems along with CYCLE study?

I utilize other methods to confirm cycles. Technical analysis is important, especially in the area of sentiment. When I turned bullish on oil, no one believed me early in this decade. My friends in the Middle East told me that the USA would put tremendous pressure on them if oil exceeded $35 per barrel. I went to the guys who run the International Petroleum Investment Company (IPIC) in Abu Dhabi and asked about the fundamentals. IPIC invests UAE money in energy infrastructure around the world. They told me that world demand was rising well above supply levels. One cannot simply build an oil factory like one can build an auto factory, therefore prices had to rise. The long-term graph of oil from 1865 was bullish. And, I felt that the 18-year cycle was indicating that a period similar to the 1970s was about to begin. In this example, all of the pieces of the puzzle fit.

6. In terms of your cycle work, what time frame do you focus on between minor, intermediate and primary?

Minor is daily; intermediate is weekly, and primary is monthly.

7. Do you use more individual cycles or do you use composite cycles?

I use both for the following reason. In the 1960s, technical analysis developed composite indicators. The problem was that the lagging indicators could mask the effect of one indicator that simply happens to be very accurate at that time. I did a study of long-term cycles of Japanese interest rates from 1880. I then altered the in-sample and the out-of-sample periods. I found that the lengths of the cycles did not change, but the rankings of the cycles did. It reminded me of the standings of football teams. One cycle or team was in first place for one decade, but it was in last place in another decade. The length of the cycles did not shift, but their rankings did. So here is a ripe field for study- is there a periodicity in the rankings of these cycles? To go back to the question, I look at composites, but I am aware that, say, the 18-year cycle may be more valuable than the others cycles within the composite.

8. What’s a good method for spotting commonality among STOCKS and Indices or between assets?

Divide one by the other and create a relative index. Divide oil stocks by oil; divide airline stocks by oil.

9. Are there periods of synchronicity between CYCLES? Should one only use synchronous CYCLES?

I do look for simultaneous highs or lows of the major cycles within markets. If they do confirm, then we should see strong moves either up or down. If they move counter to each other, then we will likely see a trading range. In a trading range, stochastics and Bollinger Bands work better than they do in strong bull or bear markets. Thus, the foreknowledge provided by cycles can be a guide at to which techniques will be valuable in a coming time period.

10. Would you suggest us some technique for spotting CYCLE lows?

Yes, sentiment is valuable. At cycle lows, one should see excessive bearishness. In NYC in the 1970s, there was one company that computed the number of square inches of advertising in each weekly issue of Barrons. The number was very low at bear market bottoms. I used to keep an index of the bullish versus bearish comments in the Heard on the Street column in the Wall Street Journal when I was with Paine Webber in the 1980s. During the entire bull run in the 1980s, that number was a net negative figure most of the time. Thus, the bearishness was a confirmation of the bull market. Paul Montgomery pioneered the analysis of the covers of magazines. He found that, when there was an investment-related story on the cover of Time, the price moved in the opposite direction to that suggested by the cover about 80% of the time with a period of 4 months from the publication date. Paul also found that the effect was greater when the story was on the cover of a non-financial publication. Thus, stories of bear markets and the end of the world in the non-financial media are signs of a low.

11. Do cycle periodicities differ with assets? Or are there larger and prominent cycles that appear on most assets?

The following are the most common: 18 and 10 years.

12. What kind of software does your use for your CYCLES study? Do you use some proxy indicators to STUDY CYCLES like momentum indicators?

I have my software written for my own use. I gave up on the development of commercial software. I also use Tech Signal by Richard Mogey, and Dynamic Trader by Bob Miner. One service that I use is the Notley Information System in Ridgefield, Ct. in the USA.

13. Most top analysts look at a host of assets, like you do. How does looking across global assets help?

It helps in that one market can confirm another, such as hard assets moving inversely to paper assets.

14. A few CYCLISTS claim Elliott is not the ‘THE RULE OF LAW’ but a part of CYCLES. What is your view on this controversy?

I had not thought about it before. I think that Elliott is a separate discipline.

15. International battle cyclicality and world wars are cyclical too? When are we approaching that time frame? Have you done some work on that?

Yes, Wheeler’s War Index peaked in 2008. I have studied military history, so I can analyze the fundamentals. If one has an unbiased source such as, then we can see that Al Qaida was routed in Iraq. The USA has employed technology that has made city warfare winnable. For example, aerial vehicles can enable the military to view enemy movements. This developed into armed aerial vehicles-the Predator and the Reaper. The latter costs 25% of that of an F-16 fighter and requires no pilot. It stays in the air for many hours and can perform maneuvers that would damage the human pilot. It flies above the height of any weapon that can bring it down and cannot even be heard on the ground. In addition, weapons that beam intense sound waves have been in use. It disorients the enemy without injuring him. Reports from Iraq tell us that the enemy simply drops his weapon and runs. My point is that the USA is very far ahead in such technology and has an advantage that will last for years, just like the Ottomans developing artillery and Napoleon developing combined arms. This advantage will last for years, and coincides with the top in the cycle.

16. Where are we now globally on the equity economic cycle according to the CYCLE theory? Any particular time windows you would like to share with us regarding Dow Jones Industrial Average?

We are in a period like that of 1966-1982, in which much debt must be liquidated. The Dow has been in a downtrend, but is likely to bottom in December. But any resultant uptrend will not go to a new high. We are back into the decade of the trader.

17. You have been awarded the TIMER of the year award for GOLD many times. Is Gold your strength? Would you tell us your view on Gold for multi months and multiple year time frames and when should we buy it?

Gold has been easier than stocks. As WD Gann said, there is only one commodity called gold or oil or wheat. Thus, the effect of a cycle on a commodity is easier to detect. A cycle effect on stocks may simply manifest in one sector or a group. Gold usually bottoms in August, and I bought it early. I think it will move up from here and will peak in 2012-2013.

18. What is your view on OIL?

Oil is in a bull market that will likely peak in 2013-2014. The current pullback is a bull market correction.

19. Last year at the Vienna conference you mentioned about the rising interest rate scenario. You also mentioned about the inflationary scenario and possible end of global financial system after 2015. Would you like to share us the updated view on the same?

The view has not changed. I think that the financial structure will change. It did so in the 1930s. We are likely to see big changes in financial market regulation and especially in pension plans. We will see more socialism and less freedom.

20. What should be the survival strategy for this? How should we start preparing?

I took the advice of a PT, which is a Perpetual Traveler: have a passport from a second country, live in another country, and have your business in a third. In this way, one can shift with the trends. I recently developed business in the Mideast-that is where the money is and I know the area. I would not leave money in a bank over the limit of government insurance. Also, own some gold.

21. Though so important, CYCLES RESEARCH companies like yours are few in the world. Why?

Most people cannot combine different techniques. This is due to their character structure. Some people like vanilla and some like chocolate, and most people like fundamental analysis and few like technical analysis. I trained to be a bio energetic therapist for 7 years, and learned to classify people by their structures as defined by Wilhelm Reich. Thus, the choice of investment techniques is a personal and emotional, and not an intellectual issue. I made a presentation before a bond fund run by a group of PhDs. When I mentioned seasonal cycles, one PhD objected. I pointed out to him that the March-April issue of the Financial Analysts Journal (FAJ) featured a study that validates the end-of-the-month upward bias in the US stock market, which is a seasonal phenomenon. He ignored my comment and ran on. I recognized him as an editor of the FAJ, so I repeated my words. No effect. So, I finally asked him if he ever read the FAJ, the magazine which he edits. No response. He could not deal with the feelings that my words were eliciting.

22. Please tell us about your company CYCLES RESEARCH, your current role as a fund manager and why Japan? Can we invest in your fund?

CR simply takes cycles, technicals, and fundamentals and attempts to project future scenarios and to suggest investment strategies that can cope with the scenario. I have institutional clients in several countries. I do not have a fund that is open to the public.

23. Your book Planetary Economic forecasting is very rich in historical facts along with your CYCLE work. We really liked the chapter on Expansions and contractions. Are you working on any new book?

Yes. I am re-writing a book by an old Greenwich Village friend, George Lindsay called The Other History. He took the market technique of cycles counting and applied it to history. I have been using such a technique for 30 years and decided to write about it. In addition, my old teacher, Charles Jayne, was an expert on eclipse analysis. I studied his methods and have a book 75% completed.

24. What is a must read for someone keen to get into CYCLES?

Ed Dewey’s book, Cycles, convinced me that cycles in nature are real and pervasive.

25. We know you are an avid reader. What are you reading these days?

..books about nanotechnology, which is the next scientific revolution. To keep apace of military affairs, I read, which is run by an old NYC friend, Jim Dunnigan. I also seek alternative news sources, such as The New American magazine and Soviet Analyst. Reading about past historical events is important.

Thanks a lot Bill for taking out the time