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FEATURE

JAMES HALL

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Eric Von Baranov has advised investors through the use of K-waves since the mid 1970s; despite the 2008 crash, he says the economy is on the upside of a period of incredible growth.

... and you’ll be sittin’ on top of the world — at least according to Eric Von Baranov by Jason Walsh

M

ost Marinites have never heard of Nikolai Kondratiev. And no wonder—few high school teachers or college-level history professors are familiar with this century-old mid-level economic bureaucrat from Bolshevik-era Russia. And yet some believe he holds the key to the end of the Great Recession—perhaps the end of all recessions. As well as the beginning the next great economic boom. And, alas, the beginning of the recession to follow. Kondratiev believed that economic booms and collapses followed a pattern of predictable cycles that peaked and ebbed just about every 53 years—what he called the “long wave of economic life.” His long-wave theory held that history’s seemingly random assemblage of innovations, social trends, economic moods and geopolitics invariably resulted in an enigmatic consistency—an economic harmony

12 PACIFIC SUN JULY 22 - JULY 28, 2011

that wasn’t swayed by the chaos of human events. In fact, it almost seemed fueled by it. Kondratiev—pronounced kon-draw-teeiv—was a young agricultural economist in the early days of the Bolshevik Revolution, when his in-depth studies of farm cooperatives landed him in the good graces of Vladimir Lenin, and the Soviet premier made him an authority in the New Economic Policy of the fledgling communist government. But Kondratiev, who favored export markets and fair worker wages, soon grew disillusioned with the inefficiencies and growing corruption of the Soviet system. Following Lenin’s death, Kondratiev’s theories about what history can teach about economics were viewed as a threat by the tyrannical Joseph Stalin—who didn’t like any economic practices he couldn’t control. Kondratiev was arrested by Stalin’s secret police in 1930 and the 36-year-old husband and father was sentenced to eight years in the

Gulag. Upon completing his sentence in 1938, Kondratiev was tried on new charges and condemned to 10 more years of forced labor. To make doubly sure the economist would keep his mouth shut, Stalin had him shot following the trial. But the ghost of Nikolai Kondratiev lives on—at least he does in the minds of marketbased economists who are forever crusading in search of the investor’s Holy Grail: the key to predicting market trends. One local crusader, Eric Von Baranov, believes the “long wave” to be that grail—and Kondratiev to be its silver chalice. For more than three decades, Von Baranov has overseen the Kondratyev Theory Letter, a personal and online financial consulting business through which he has guided investors upon when to buy low and sell high using the dead Russian’s long-wave theory. The long wave has paid off for Von Baranov—he says his initial publication of

the “letter” in 1974 accurately predicted a bottoming of the Dow; later he foresaw a “major bull market” in the early ’80s; and when that appeared to peak he withdrew his money from stocks and put it into the thenbottoming out real estate market at the dawn of the 1990s. That kind of timing, as everyone who bought a house in Marin at the peak of the market knows, is worth its weight in gold. But while the Kondratiev waves (“K-waves” for those in the know) do seem to follow a predictable 50-year flow—see the chart—it’s not so simple as to merely wait for the bottom and then pour money into the market for the next 25 years. There are shorter cycles within the long Kondratiev cycle, there are mini-booms before the big booms, there are plateaus, there are crashes. Von Baranov even suspects the astrological phenomena of “sunspots” affects the cycles—but he’s not sure why or how. If it sounds spurious, the first to agree would probably be Eric Von Baranov. (If that were his real name, which it isn’t.) Today, the jovial 64-year-old Kentfield resident says he spends his time consulting with a select clientele of international investors and “dabbling with my collection of old Porsches.” We recently asked Von Baranov about the long wave, the Great Recession and if he has any hot stock tips for us.

So how can centuries of random people doing random things produce the same economic outcomes every 53 years? My take on it is that life is a sequence of random events that we have very little control over. And so what we do as a society is we come together and make rules to overcome the randomness of life. And that randomness, combined with society’s organizational structures, creates harmonics—which other people before me have isolated into cycles. They tend to be fairly accurate. Is it something like the wisdom of crowds? Correct. And a lot of times the decisions that face us are very narrow. It depends on our age and demographics and a lot of things, but we choose between one or two or three things, not a broad spectrum. So this whole concept of free will is in some ways dictated by our age, our position in life, all that. And those things tend to get repeated from generation to generation. And therefore, we end up setting up some of the same historical events that can be paralleled over time. And knowing where you are in a particular cycle allows you to see one of these events and know the outcome—maybe not always predict them,

Pacific Sun Weekly 07.22.2011 - Section1  

Section 1 of the July 22, 2011 edition of the Pacific Sun Weekly

Pacific Sun Weekly 07.22.2011 - Section1  

Section 1 of the July 22, 2011 edition of the Pacific Sun Weekly

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