The question everyone is asking lately is, "Has the U.S. economy seen its bottom?" Depending on who you ask, the answer will vary. The entrenched bears contend it has not and that rough economic times are directly ahead. The bulls proclaim the bottom is in and "happy days are here again!" Then there are those whose views lie somewhere in the middle. Call them the "muddle through" crown, a sentiment best expressed by economist John Mauldin, whose "Muddle Through" scenario sees the economy inching along at 2-3% growth for the next few quarters. In other words, not bad, but below potential.

My own view combines elements of all three major camps. For the next few years, I believe the "Muddle Through" camp will come closest to being correct. Ultimately, the bears will be correct but that "ultimately" could take several more years. The past three years have provided a rough blueprint for how the next six years (more or less) should go. In that time frame we've had one very bad year (2002) and one very good year (2003) with one year (2001) combining elements of both. So what will the next few years unfold? Before answering this, let's take a look back at the recent past.

It wasn't too long ago that U.S. equities were soaring to great heights with seemingly the sky as the limit. Looking back, things really got underway for the stock market and the economy in 1995. You may recall the extreme pessimism that was pervasive that year with even the most respected analysts bearish on the economy's prospects. This was about the time that the book title, "The Coming Economic Earthquake" and others of that ilk, were made famous. It was also a time when a record number of financial forecasters were calling for a stock market crash. Neither one of these calamities materialized and instead the Dow chugged higher while the economy continued to expand.

Notably, this was just after the last 10-year cycle had bottomed (in late 1994). Allow me to state for the record that the 10-year cycle does NOT begin with the start of a new decade, as many cycle analysts erroneously believe. It starts in the middle of a decade, which is less obvious to the casual observer. And as 1994 was the second 10-year cycle series in the 120-year Master Cycle that began in 1894, it also marked the bottom of the 20-year cycle. Thus, the market -- and by extension the economy (since the economy is mainly an extension of the financial markets, not the other way around) -- had a major weight lifted off its shoulders and was free to rally in the remaining part of the 1990s.

Let's not forget that for every cycle bottom there is a corresponding cycle peak. So when the 20-year cycle bottomed in 1994, its double component, the 40-year cycle, peaked. This explains why for each major cycle bottom along the 120-year Master Cycle, the corresponding equity price advances and economic expansions have less depth and substance than the previous one. So the 1990s bull market was not as fruitful as the 1980s bull market, during which the 40-year cycle was still rising.

Another important event along the path of the 120-year cycle took place in 1999/2000, when the last of the long-term cycles which compose the 120-year cycle, namely the 30-year cycle, peaked. Of course, the stock market peaked right along with it and we've been in is a bear market (in varying degrees) ever since.

The year 2002 was a nasty one, a fate that was determined by the falling 12-year cycle, which bottomed late last year. This lifted an extraordinary amount of pressure from the market and the economy, the positive effects of which we're still witnessing. But alas, with the 12-year cycle having bottomed, the larger 24-year cycle has peaked, leaving only one more long-term cycle that has not yet peaked: the 20-year cycle. This particular cycle is due to peak late next year (2004) while its half-cycle component, the 10-year cycle, bottoms.

Now here is where things get interesting. Can we expect the bearish effects of the 10-year cycle alone to collapse the stock market and economy next year as many have forecasted? Likely not, especially since the 20-year cycle is still peaking and the 12-year cycle, along with one of its fractional components, the 4-year cycle (a.k.a., the Presidential Cycle) is still up. Granted, the better part of 2004 should be bearish (especially the second half of the year) but at this point along the curve I seriously doubt the Dow will make a lower low between now and late 2004. Indeed, I am confident that we have seen the low in the Dow for a while (in terms of price) with the area between roughly 7200-7600 a veritable Berlin Wall of support. This will only be confirmed if the upper 8000 area remains solid between now and the end of the year.

The reason we probably won't experience the "Crash Now" economy (per the Bob Prechter ultra-bearish camp) is because there are not more major long-term cycles due to bottom in unison until around the year 2014. The market's biggest chance for a major crash was last year, and it nearly happened, but the Federal Reserve came to the rescue with heavy amounts of securities lending, interest rate reductions, plus other forms of interventionism. This was a first-hand example of how modern advances in central banking can exert a powerful influence (at least temporarily) over the markets.

I recently asked Samuel "Bud" Kress, who discovered the 120-year Master Cycle, what he felt, based on the configuration of the cycles, was a comparable time frame in the past century to the one we are now entering (between roughly 2004-2009) and he likened it to the period between 1974-1980. You will recall that this was a period with alternating periods of bull market and bear market within the context of a rather well-defined trading range. In a nutshell, that is essentially what we can expect for the next 5-6 years ahead.

Specifically, the years 2004, 2006 (8-year cycle bottom) and 2008 (6-year cycle bottom) should be overall bearish, while 2005, 2007 and perhaps 2009 bullish with the year 2005 offering the most bullish potential. After about 2009, the bearish effects of the crashing 120-year cycle should be felt into the scheduled bottom around 2014. This is also when the "Muddle Through" economy turns into the Mud Economy.

Now what about the "wild card" of the U.S. economy, the Kondratief Wave (K-save)? Although this has a theoretical time frame of 55 years (give or take), it must be remembered that the K-wave, as its name implies, is not a true cycle but rather an economic long wave. As such, it is subject to the machinations of Central Bank engineering and can be extended for as long as 70 years (according to Ian Gordon, the recognized authority on the K-wave). Theoretically, the K-wave should bottom around 2004-05, but clearly this will not happen. Instead, it is reasonable to expect the Fed to pull out every stop to extend the K-wave further out along the time line. Would it not make sense for them to push it out closer to the bottoming process of the 120-year cycle next decade, when the inexorable forces of deflation take control? We have not even felt the full forces of deflation despite being one year away from the *theoretical* bottom in 2004. This proves that the *actual* bottom is several more years away.

If all of this be true, what can we reasonably expect from gold in the years ahead? There is no denying the long-term bear market in gold has ended (in late 1999 by my reckoning), yet there is also no denying that much overhead supply still remains, as the long-term chart for gold clearly shows. The going will be slow at times as gold will have to eat its way through the various layers of resistance along the way, but the overall trend should remain upward. In view of the anticipated trading range stock market and the "Muddle Through" economy of the next few years, can we actually expect much of a performance from the gold sector? I put this question to Bud Kress recently and here is what he had to say, "When people are faced with a long-term, agonizing sideways trend across many investment sectors, their collective frustration could easily lead to an inflow of funds into gold since gold will become widely recognized as the last remaining asset preserver. Almost by default, gold could easily become the investment vehicle of choice over the next few years."

Can't argue with that logic!