THE BENNER CYCLE, THE FIBONACCIS & THE NUMBER 56

David McMinn

MOON - SUN FINANCE

Samuel Benner, a prosperous farmer, was wiped out financially by the 1873 panic and a hog cholera epidemic. In retirement, he set about to establish the causes and timing of fluctuations in the economy. In 1875, he published business and commodity price forecasts for the period 1876 to 1904 (see Diagram 1). In his book, charts were produced giving;

*           an 11 year cycle in corn and pig prices with peaks alternating every 5 and 6 years.

*           cotton prices which moved in a cycle with peaks every 11 years.

*           a 27 year cycle in pig iron prices with lows every 11, 9, 7 years and peaks in the order 8, 9, 10 years.

E R Dewey, Director of the Foundation for the Study of Cycles, assessed Benner's pig iron price forecasts over a 60 year period. Remarkably, he regarded this cycle as showing a gain - loss ratio of 45 to 1, which was “the most notable forecast of prices in existence”.

Benner's pig iron price cycle may be broken down into three series, all of which were based on 9 years and its regular deviations (see Diagram 1). Those years listed by Kindleberger (Appendix B, 1996) as containing major financial crises have been presented in BOLD throughout the text.

Diagram 1      THE ORIGINAL BENNER CYCLE CHART AS PUBLISHED IN 1875.

The 54 Year Panic Cycle arises from panics every 16, 18, 20  years, with this series repeating every 54 years (see upper line Diagram 1). According to Benner, “it takes panics 54 years in their order to make a revolution or to return to the same order”. The key years were 1819, 1837, 1857, 1873 which were all found in the 36 ysc Series 1 of the 9/56 year cycle (see Table A, Appendix 1).

Pig Iron Price Highs of good years took place every 8, 9, 10 years (middle line Diagram 1) repeating every 27 years. The high years were 1810, 1818, 1827, 1837, 1845, 1854, 1864, 1872, 1881, 1891

Pig Iron Price Cycle Lows of his business cycle occurred or every 11, 9, 7 years (bottom line Diagram 1) repeating every 27 years. The low years were 1816, 1823, 1834, 1843, 1850, 1861, 1870, 1877, 1888.

Benner's cycle worked well throughout the 20th century and was a very good indicator of US crises and/or recessions (McMinn, 2004). The links between Benner's cycle and the 9/56 year panic cycle have been covered extensively by McMinn (2004) and thus will not be discussed in this paper.

Alas, Benner's cycle is surrounded by some confusion. Either Benner is not given credit as the originator of the cycle or his name is misspelt - Banner and Brenner are two variations given by some sources. 

A J Frost's Adaptation

A J Frost presented a variation on Benner's theory (Prechter & Frost, 1978). This gave peaks in the US stock market occurring every 8-9-10 years and two additional 54 year cycles of historic DJIA lows based on cycles of 16 -18 -20 years. Most importantly, Diagram 2 is not an extrapolation of Benner's earlier work into the 20th century, but rather was based on his time cycles of 8-9-10 years and 16-18-20 years. These cycles were aligned with observed chronological trends. 

Diagram 2      THE BENNER - FIBONACCI CYCLE CHART 1902 - 1987 

The 54 year Cycle in Table 1 may be strongly linked to financial trends, as only the year 1995 did not align with a DJIA bear market low.  Importantly, the years 1903, 1921, 1941, 1957, 1975, 1995 all happen within the combined 36 ysc Series 3 & 4 (see Table 6.2, McMinn 2004). Taking this series and adding one year gives 1904, 1922, 1942, 1958, 1976, 1996 - all of which occurred in the 9/56 year cycles as presented in Table B, Appendix 1. The only year in Table 1 that cannot be linked to a bear market low was1995.

Table 2 gives the second 54 year cycle of major trough years - 1913, 1933, 1949, 1967, 1987, 2003  - only the latter year did not fall in the 9/56 year cycle  (see Table B, Appendix 1).

The 16-18-20 year cycle in Tables 1 & 2 are artifacts of 9/56 year patterns presented in Table B, Appendix 1 and Table 6.2 McMinn (2004). Many such artifact sub-cycles can be generated from the 9/56 year cycle (Section 2.4 & Chapter 6, McMinn, 2004).

8-9-10 Year Cycle of DJIA Highs

Diagram 2 by A J Frost also gives the 8-9-10 year trends in DJIA highs since 1902. There is a consistent pattern for peaks in the DJIA to take place every 8-9-10 years in line with Benner's findings. This cycle has persisted throughout the 20th century, with great accuracy. Only 1964 and 1983 were markedly out in the timing of major highs.  For 1964, the secular peak occurred somewhat later in February 1966, whereas the November 1983 record peak marked the beginning of a DJIA correction market. 

11-10-7 Year Cycle of DJIA Lows ????