Gastritis and Greek Yogurt: Is It Safe? A Complete Diet Guide for Gastritis

on

Benner Cycle : Periods when to make money

on

 

benner cycle

In the world of economics and investing, the concept of a “market cycle” has long been studied, with various attempts made to predict future market movements by analyzing cyclical patterns. Among these, the Benner Cycle—an idea developed by Samuel Benner, a farmer and investor from 19th-century America—is often highlighted as a cycle theory that, over the course of more than 100 years, has displayed remarkably accurate predictions of commodity and market prices. The core of the Benner Cycle is that stocks, commodities, and asset markets move through a sequence of Panic Years, Hard Times, and Good Times, and that one should identify these moments in order to pinpoint so-called “Periods when to make money.”

This post explores what exactly the Benner Cycle is, its historical and structural aspects, and how we might apply it in real-world investing or trading.

1. The Historical Background of the Benner Cycle

(1) Samuel Benner’s Life and Research

  • Farmer and Investor: Samuel Benner was a wealthy farmer in Ohio in the 19th century. After losing his fortune during the financial panic of 1873, he became curious about why such panics occur and how the markets behave.
  • Market Cycle Studies: Benner witnessed how seasonal cycles in agriculture could affect harvests, supply, and prices, and he believed these insights might transfer to financial and commodity markets. In 1875, he published a book predicting business and commodity price fluctuations, introducing terms such as Panic Years, Hard Times, and Good Times as distinct phases of the cycle.

(2) Over a Century of Predictions

Benner’s cycle has reportedly lined up with actual market movements over a span of more than 100 years. For instance, it famously pointed to 2007 as a peak year, suggesting that it was an ideal time to sell stocks—shortly before the 2008 global financial crisis sent the S&P tumbling. Such instances have made many investors pay close attention to the Benner Cycle.

2. The Basic Structure of the Benner Cycle

(1) Panic Years

  • Period of Extreme Volatility: In a Panic Year, markets tumble into a panic, with investors buying or selling assets irrationally, leading to sharp price swings.
  • Traditionally Cautious: According to the Benner Cycle, one should be very cautious during a Panic Year. Mistimed action in an environment driven by fear and greed could result in substantial losses.

(2) Hard Times

  • Buying Opportunity: Benner characterized Hard Times as when prices are near rock bottom. It’s a chance to buy stocks, commodities, or assets at significantly lower valuations, setting the stage for profits when the market eventually recovers.
  • Patience: In a Hard Times period, it may be less about immediate gains and more about positioning—acquiring undervalued assets that one can sell later during the upswing.

(3) Good Times

  • Prices at Their Peak: Markets show strong enthusiasm, with investor sentiment peaking, and stocks, commodities, or assets reaching high valuations.
  • Time to Sell: The Benner Cycle states that this is the ideal moment to sell assets, locking in profits before the market potentially cycles back into Panic or Hard Times.

3. Why Call Them “Periods When to Make Money”?

Samuel Benner’s main idea is that the market naturally cycles through three phases (Panic → Hard Times → Good Times), and that wealth is accumulated by strategically buying in Hard Times and selling in Good Times. Summarized:

  1. Panic → Observation: During panic conditions, markets move dramatically in response to fear or euphoria, so it’s often wise to watch carefully rather than make large, hasty moves.
  2. Hard Times → Buying: Asset prices are relatively low, so purchase quality assets at bargains to prepare for a future bull phase.
  3. Good Times → Selling: When markets reach a peak, disposing of holdings can lock in profits. Then, wait again for the next downturn.

This cyclical structure is the core principle of the Benner Cycle, and the times at which actual profit is realized—buying near the bottom, selling near the top—are indeed the “Periods when to make money.”

4. Primary Commodities and Cycles: Corn, Hogs, and Iron Ore

(1) Corn and Hogs

Benner’s research was rooted in agriculture and livestock. He identified an approximately 11-year cycle in corn and hog prices, which coincided with an 11-year sunspot cycle. According to him, solar activity affects crop yields, which in turn shape supply, demand, and ultimately prices.

(2) Iron Ore (27-Year Cycle)

He also proposed a 27-year cycle for iron ore prices, with patterns showing lows every 11, 9, and 7 years, and peaks every 8, 9, and 10 years. The underlying premise is that industrial demand for iron ore (e.g., manufacturing, construction) follows a multi-decade repeating pattern.

5. Forecast Through 2025?

Benner Cycle advocates say that until about 2025, no dramatic shift was highlighted in the cycle. Hence the market might generally remain on an upward trajectory, after which a collapse or downturn could be in store. However, this is still speculative; the modern world’s global finance, policy shifts, and technological advancements differ substantially from the 19th century’s environment. Most experts recommend using Benner Cycle as a reference rather than an absolute blueprint.

6. Tips for Applying the Benner Cycle

  1. Combine With Other Long-Term Indicators
    Because Benner Cycle deals with extended periods, it’s more appropriate for medium-to-long-term investing rather than short-term trading. Observing 5–10 year intervals, you can combine it with macro data (GDP, interest rates, trade surpluses) or other cycle theories (Kitchin, Juglar, Kuznets, Kondratieff) to get a well-rounded perspective.

  2. Beware of Psychological Bias
    During Panic phases, fear can prevent investors from capitalizing on low prices; in Good Times, greed might tempt them to buy at the top. Knowing the Benner Cycle can help keep a level head by providing an objective framework.

  3. Maintain a Log of Long-Term Data
    Whether you’re an individual or institutional investor, it’s crucial to record data (price trends, trading volume, major economic events) over an extended timeframe. This helps compare real market behaviors to the Benner Cycle’s suggested phases.

  4. Serve As a Warning Signal
    The Benner Cycle might not guarantee immediate buy or sell triggers, but it can serve as a cautionary or confirmatory signal about where the market is heading in a big-picture sense.

Conclusion

The Benner Cycle is a cycle theory from the 19th century proposed by Samuel Benner, a farmer who lost his fortune in the financial panic of 1873. By studying how seasons affected crops (and thus supply, demand, and prices), he concluded that the market moves in a broad cyclical pattern of Panic, Hard Times, and Good Times. Leveraging these phases, one would buy in Hard Times (low) and sell in Good Times (high), effectively zooming in on those “Periods when to make money.”

Despite its antiquated origins, the Benner Cycle has garnered attention due to its historical alignment with multiple real market turning points—most famously, it anticipated 2007 as a top, prior to the 2008 financial crisis. Nonetheless, modern global markets can differ greatly from 19th-century agricultural economics. Consequently, investors often consider the Benner Cycle as a complementary long-term signal, blending it with personal risk management and other analytical tools.

In an era where volatility is high, and caution is paramount, revisiting an old framework like the Benner Cycle might offer a refreshing lens on market rhythms. History does tend to repeat itself, and cyclical patterns remain a core part of economic and financial study. While not a magic bullet, the Benner Cycle’s emphasis on “buy low, sell high” around certain cyclical phases can still provide valuable insight for patient, research-driven investors.