Dear PGM Capital Blog readers,
In this weekend’s blog edition, we want to discuss with you the ‘SHEMITAH’ 2014-2015, which began on Thursday, September 25, 2014.
WHAT IS SHEMITAH:
Shemitah is a Hebrew word that literally means ‘release’ and refers to a biblical commandment found in Leviticus chapter 25 that calls for a release of the land from the demands of production (lay fallow) for 1 year out of every 7 years. It is intended to be a Sabbatical year of rest.
At the end of that sabbatical year, which falls on Elul 29 on the Hebrew calendar, all financial debts and accounts are Acquitted. The slate is wiped clean, paving the way for a fresh start.
Note:
Elul is the twelfth month of the Jewish civil year and the sixth month of the ecclesiastical year on the Hebrew calendar. It is a summer month of 29 days. Elul usually occurs in August–September on the Gregorian calendar.
In ancient Israel it was the family farm. In today’s, world it is Wall Street.
The current Shemitah started on Thursday September 25, 2014, and continues through September 13, 2015.
LOOKING BACK TO PREVIOUS SHEMITAHS:
Nearly every major U.S. stock market collapse since the early 1900s has happened during a Shemitah year and the six biggest economic crashes of the last 40 years – 1973, 1980, 1987, 1994, 2001 and 2008 all occurred during a Shemitah year.
The 2007 – 2008 Shemitah:
The previous Shemitah year started on September 13th 2007.
Exactly 1 Hebrew calendar month later, the stock market topped out at 1576 on October 11th, 2007, when housing prices started to fall quite clearly in the United States and Europe.
The Shemitah year ended on September 29th, 2008. Two weeks prior to this the US federal government took over the home mortgage government sponsored enterprises Franny Mae and Freddie Mac, and Lehman Bros declared Bankruptcy.
The stock market began a free fall on September 28th, and on October 15, 2008 the Dow and S&P fell respectively over 774 points and 90.17, as can be been from below charts.
The 2000 – 2001 Shemitah:
This Shemitah year started on September 30th 2000 and ended on September 17 2001.
The Nasdaq took the biggest hit on March 20, 2000, when it lost over 10 percent on that day, as most of the stocks that make up that index were internet and technology related stocks, which were caught up in the infamous ‘Dot Com’ Bubble.
At the end of the trading week on September 29th 2000, the Nasdaq closed right at a key supporting trend line at 3672.81 points. The Shemitah year started with the blowing of trumpets on Saturday September 30th.
When the markets opened the next Monday, the Nasdaq Composite confirmed its slide by breaking through key supports. The Bubble collapsed 55% to a low in October 2002, from which the index did not recover from the Shemitah Year break-down point of 3645 till 2013.
The Shemitah year ended with another Feast of Trumpets on September 18th, 2001, exactly 7 days after a terrorist attack upon the United States on September 11th 2001. Since then, a resurgence of war and violence has spread along with the curtailing of civil liberties around the globe.
The 1993 – 1994 Shemitah:
This Shemitah year started on September 16 1993 and lasted until September 5, 1994.
From October 1993 to November 1994 US 10-year yields climbed from 5.2% to just over 8.0% fueled by concerns about federal spending. With some guidance from Robert Rubin, the Clinton Administration and Congress made an effort to reduce the deficit.
The yield of the 10-year note dropped to approximately 4% by November 1998.
That ugly chapter began in February, when the Federal Reserve began boosting short-term rates in response to signs of a strengthening economy, as well as rising prices in the commodity markets.
In a normal, unleveraged environment, the rise might have calmed inflation worries and even brought long-term rates down a bit. But instead, the initial 25-basis points increase, from 3% to 3.25%, in the overnight federal funds rate triggered an immediate 40-basis-point increase in the 30-year Treasury rate as leveraged bondholders were forced to quickly liquidate their positions to curtail mounting losses in their bond portfolios.
In this bond market massacre bond investors suffered over one Trillion US-Dollars in loses.
Below are some additional events of this Shemitah year that changed the world financial landscape:
- On January 1st 1994, the North American Free Trade Agreement (NAFTA) between the USA, Canada and Mexico was approved.
- On November 1st 1993, the Maastricht Treaty, undertaken to integrate Europe was signed on 7 February 1992 by the members of the European Community in Maastricht, Netherlands, and became effective.
The 1986 – 1987 Shemitah:
This Shemitah year started on October 4th 1986 and ended on September 23rd 1987.
On Monday, October 19, 1987, (Black Monday) stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin. The Dow Jones Industrial Average (DJIA) dropped by 508 points to 1738.74 (22.61%) as can be seen from below chart.
The 1979 – 1980 Shemitah:
This Shemitah year started on September 22, 1979 and ended September 13, 1980.
In 1980, the Saving and Loan crisis was blooming and everyone was talking about the “stagflation” that we were experiencing under Jimmy Carter. The Federal Reserve raised interest rates dramatically to combat inflation, and this helped precipitate the very deep recession that we experienced early in Ronald Reagan’s first term.
In this period Oil prices spiked above US$ 33.00 a barrel, which corrected for inflation, is today the equivalent to US$ 200.00 a barrel. Gold also surged to USD 860.00 an ounce, which corrected for inflation, is today equivalent to US$ 2,300.00 per Troy Ounce.
In this period, on the geopolitical front we experienced the start of the 8-year IRAQ – IRAN war, when Iraq invaded Iran via air and land on September 22nd, 1980.
The 1972 – 1973 Shemitah:
This Shemitah year was between September 9, 1972 and September 26 1993.
On October 6 1973, 10 days after the end of this Shemitah, the Yom Kippur War, Ramadan War, or October War started. This war was between a coalition of Arab states led by Egypt and Syria against Israel and lasted until October 25, 1973.
As a consequence of the Yom Kippur War, the 1973 oil crisis started in October 1973 when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC (consisting of the Arab members of OPEC, plus Egypt, Syria and Tunisia) proclaimed an oil embargo. By the end of the embargo in March 1974, the price of oil had risen from US$3 per barrel to nearly US$12.
Below graph shows the oil prices from 1861–2007, in which a sharp increase in 1973, and again during the 1979 energy crisis. The orange line is the adjustment for inflation.
The spike of oil prices in this period triggered a 1973-1974 stock market crash and recession that began in 1973 and ended up stretching all the way until 1975.
It is worth mentioning, that the original World Trade Center featured twin towers landmark, which were destroyed in the September 11, 2001 attacks (Shemitah year 2000 -2001), for which the groundbreaking activities had started on August 26, 1966 (Shemitah 1966-1967) had been officially opened / inaugurated in the Shemitah year 1972-1973, on April 4, 1973.
List of shemithah (sabbatical) years and major events that happened in the this 100-year period:
- September 28, 1916 – September 16, 1917
- United States joins WWI.
- Collapse of the Russian government and the 1917 revolution.
- September 17, 1917 – September 6 1918
- Jubilee – Balfour Declaration.
- September 11, 1923 – September 28, 1924
- Hitler writes Mein Kampf.
- Death of Lenin, Stalin wins power struggle.
- September 23, 1930 – September 11, 1931
- Nazis gain in German elections.
- Japanese occupation of Manchuria.
- September 6, 1937 – September 25, 1938
- Japan invades China, Hitler marches into Austria.
- September 18, 1944 – September 7, 1945
- Establishment of IMF and World Bank.
- Atomic bomb dropped on Japan, End of WWII.
- United Nations established, Model of the World Trade Center designed.
- October 1, 1951 – September 19, 1952
- Establishment of European Coal and Steel Community.
- Treaty of San Francisco officially ends World War II.
- September 15, 1958 – October 2, 1959
- Establishment of European Economic Community.
- September 27, 1965 – September 14, 1966
- Start of the New York World Trade Center construction.
PGM CAPITAL COMMENTS:
It is not our intention to produce an encyclopedic reference on this subject. Those interested can do a Google search or pick up a Bible. Instead we present the basic foundation for what is one of the most fascinating occurrences in our time.
Some of you may be familiar with Jonathan Cahn’s book ‘The Harbinger’ or John Hagee’s book ‘Four Blood Moons’, both of which touch on the fascinating earthly ‘coincidences’ that surround the recent Shemitah years and biblical blood moon tetrads. But as a market watcher, we have taken the unique dates associated with these celestial occurrences which we have shown to you in this blog article.
The big question most investors would be asking themselves is;
Is the Shemitah year 2014 to 2015 a repetition of calamity?
Last Thursday, September 25, another Shemitah began (New Moon Sept 24th) and will end on September 13th 2015. The last two iterations, as we outlined above, were ‘book ended’ with calamity at the beginning of the cycle and at the end of the cycle with an aftermath.
We are only reporting the facts, you decide if these dates and events are just coincidences or set in place by a higher power. If calamity were to strike again, will it be a break-out of war or terrorism? A financial meltdown in stocks, bonds, US dollar, political upheaval, environmental catastrophe, like a major earthquake or pandemic or perhaps world peace? God only knows.
If this Shemitah cycle is potentially market impacting, perhaps the technical tools and fundamental research that we employ will help us identify a major market movement in this period.
Until next week.
Yours sincerely,
Eric Panneflek