Tuesday, December 30, 2014

A year-end closing below 1227 will signal we will see new lows next year.

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GCNYNF-Y 12-23-2014

Well despite all the hate mail, accusations, threats, and bad-mouthing not to mention the silent-treatment, gold continues to reflect the real deflationary trend that has engulfed the entire world. The metals promoters keep trying to ignore reality causing many to lose their life-savings. They remain ignorant of the fact that the dollar has become the world currency by default and hence a mere increase in money supply does not transform into inflation when the demand is global. They continue to cling to old theories that no longer work while ignoring the fact that the markets have proven them wrong as they continue to try to blame anyone but themselves.
The dollar debt alone has reached nearly $6 trillion among emerging markets which contributed to soaking up dollars from QE1-3. The demand for dollars has sky-rocketed since 2007 assuming rates are low it was like a Boxing-Day sale at Harrods in London so issue dollar debt now and save a fortune. That works until the dollar rises. Dollars are thedefacto circulating global currency among so many nations. This of course will change. However, there must be first severe economic pain before we get the change. What people do not grasp is the extent of bad loans outside the USA that amounts to massive capital destruction (deflation). Increasing the supply of money remains far less that the destruction of money through de-leveraging the global economy and bad loans. Liquidity remains still about 50% below 2007 levels.
We achieved the “pop” in gold but there remains little follow-through. Gold is fading into the distant memories of so many investors that its luster is nearly gone outside the diehard believers. A year-end closing below 1227 will signal we will see new lows next year. A year-end closing BELOW 1155 will guarantee that drop below $1,000 is coming. The main support next year lies well below the market between $778-$618. We will provide an update to the metals report after the year-end closing.
For now, mid-January remains the target. However, a low will push the rally off, but that will be just another reaction. Nothing appears to change the forecast for the low to form on the benchmarks.

Yearly Bearish in Euro 121.56 – Woe is Europe

The fear of a resurgence of the Euro Crisis has weighed on the common currency driving it down sharply trading at 1.2156 at 6:05 EST. The euro fell to $ 1.2122 intraday, marking the lowest level in two and a half years. However, our Yearly Bearish Reversal is 1.2156 precisely where we are trading at the time of this update. A closing beneath this area will bring all our forecasts into being.
Politicians and economists have NEVER understood what they have done. Southern Europe saw their national debts RISE in real terms with the Euro. Hence, repaying any debt to them was more akin to strip-mining the national wealth. Let’s say you agreed to borrow gold at $300 and it comes time to repay the loan but gold is now $1,200. The debt appreciated rather than declined. The Euro has been one giant bad trade gone seriously wrong for all of Europe. The Greeks have really been hurt deeply by the rise in the Euro.
Now the fears of a Euro Crisis are returning with the upcoming elections in January to be held in Greece. Should the Left Party SYRIZA be the strongest force, this could mean the end for the austerity of the highly indebted euro country. The closer the date for the elections, the more sensitive the euro will become to speculation and uncertainty.
The conservative Prime Minister Antonis Samaras, slated the elections for January 25th after his candidate failed for the presidency. There will be a realistic potential for Greece to leave the Euro and this will open the door to sovereign defaultsA Greek exit will no doubt set off a contagion that will shake the pillars of confidence throughout the Euroland.
Unfortunately, politicians are trying to retain their power in Brussels for their own self-interest. They are not looking at Europe and any way to reform the structure to save the economy or the livelihoods of the people going forward. What was intended to eliminate war within Europe is fueling the rising tensions within. Having protesters dressing up as Nazis illustrates the rising problems for everyone will blame anyone but themselves in a crisis.

Wine Industry Confirms Same Trend in Energy

One industry which reflects the same trend that we see in crude oil, the massive deflationary vortex of economic decline, is none other than the wine industry. The wine industry is also suffering from a major glut and here too wine producing real estate has peaked in France back in 2007 and is not scheduled to bottom until 2020.
Real Estate sales in the Champagne region of France with its 300 houses and 15,700 vineyard has continued to decline. There was an initial low in 2009 following the 2007 high with the rebound into 2011 correlating with oil. The wine industry has suffered tremendously within this deflationary implosion confirming that what we see in oil is by no means some CIA plot. This dovetails in with the sharp decline in liquidity in the financial markets as well. All of these signs are pointing to a very serious economic decline ahead that may in fact reach Great Depression levels since we are starting from much higher levels of systemic unemployment.
The supply glut unfolding in wine in recent years reflects the decline in consumer demand coupled with the rising taxation and declining economic growth. The further decline in the wine industry appears on target into 2020. This reflects the same divergence during the Great Depression whereas commodities peaked in 1919 and declined also for 13 years into 1932 where they bottomed WITH the stock market.

We can see here reflected in the silver yearly chart of the era that the major high was 1919 and low was 1932. It took the devaluation of the dollar by Roosevelt to turn the tide. The strength in the dollar forced all commodities much lower. This is what we must go through as well today. As economies decline and move into default, the dollar will be driven higher.
Back in 2007, the wine industry in the Champagne region assumed the bull market would never end. They increased their production sharply just as new gold mines open going into the peak. In France. they agreed to increase planting of vineyards starting in 2008. This also coincided with a downturn in the economy that further escalated the glut in supply. When you look at the buyers, 55% of the Champagne region’s shipments are consumed in France with the balance being exported. The UK has been the biggest buyer of French wines accounting for 10% of all production followed by the USA coming in at just 6% with Germany taking third place at 4%. True, China has been a rising buyer. However, China’s demand for French wines does not even make the top ten.
Consequently, looking at the wine industry correlates to the trend emerging in oil. This confirms that what we are seeing in energy is part of a major overall trend. We see this also unfolding in the precious metals as they head into their benchmark targets.

Cycles & the Flow of TIME

More and more emails are starting to recognize that cycles are all about time. Albert Einstein’s theory of relativity is one of the most ignored fundamentals that applies even to economics. We see many people in general are unable to grasp the deep meaning of what Einstein truly discovered. This blindness stems from our linear perception of time. Relativity was something much more important than providing plots for movie adventures.
Einstein wrote:
“Since there exists in this four dimensional structure [space-time] no longer any sections which represent “now” objectively, the concepts of happening and becoming are indeed not completely suspended, but yet complicated. It appears therefore more natural to think of physical reality as a four dimensional existence, instead of, as hitherto, the evolution of a three dimensional existence.”
In reality, the theory of relativity applies in markets far more than most would even ponder. True, it is extremely complex. It is virtually impossible for most people to contemplate the fourth dimension outside of a straight line concept of a steady flow in one direction. How do we measure and deal with a dimension that can be altered by gravity? If there is no real “now”, is it possible that waves of time flow through all dimensions yet yield the illusion of “now”?
Time dilation is an actual difference of elapsed time between two events as measured by observers either moving relative to each other or differently situated from gravitational masses. Nevertheless, being able to map the flow of time and relate it back to a three dimensional world is tricky, but our only hope.
We are withdrawing from Afghanistan this weekend. This comes after 13 years of a NATO involvement. Gold rallied for 13 years as did oil. Curious. Is TIME unpredictable? Or is it that the complex nature of time is unknowable by simple minds?

Oil- year-end closing BELOW $57 will signal a sharp decline should continue, retest of the $35-$31 level

Crude Oil – In the Grips of Massive Deflationary Cycle

Our original forecast for oil back in 1997 was that it should rise to reach the $100 level at least by 2007. We reached $99.29 in 2007 and then 2008 was a wild trading year reaching $147.27 intraday crashing back to $35.13 and closing the year at $44.60. Oil made the intraday low in 2009 and then rallied back into 2011 to score the highest yearly closing at $98.83. We can see from the chart above back to 1902, the rally from the 1998 low was a perfect 13 year event.
We warned that a year-end closing BELOW $57 will signal a sharp decline should continue. It certainly appears that will be accomplished and then we will look for a retest of the $35-$31 level. We see a Panic Cycle ahead on our yearly models as well.
Overall, this is part of the meltdown for BIG BANG. There is not going to be much left standing as every field of investment and economy should be hit rather hard. We will be looking at putting out a special report on Energy for this is part of the massive global deflationary cycle underway.

Monday, December 29, 2014

Understanding BIG BANG 2015.75

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The Trading Money Center New York bankers did a brilliant sales job on policy makers, central bankers, and economists that the way to stabilize the world economy was to securitize everything. This combined with what they called the “Originate and Distribute Model” would lead to the promised-land in finance. Indeed, financial intermediation has changed dramatically over the last two decades as banks have changed the historical model of banking. The new model adapted by banks has really departed from the long-established relationship model where banks channelled funds between lenders and borrowers to build the economy. In today’s Wild West banking, an important change in the way banks provide credit to corporations has altered everything. Banks have replaced the traditional the Originate-to-Hold Model where they historically originated loans and kept them on their balance sheets until maturity. This required knowing your client and indeed was what I call Relationship Banking. Over time, however, banks began increasingly to distribute the loans they originated giving birth to a more Transactional Banking establishment known as the Originate-to-Distribute Model. With this change, banks limited the growth of their balance sheets but maintained a key role in the origination of corporate loans, and in the process contributed to the growth of non-bank financial intermediaries. Hence, everything became the Securitization Model that truly has inspired then Wild West style banking of Transactional Banking that has led to trading for profit.
Glass-Steagall Signing-Repeal
The bankers have sold this panacea of a new world financial order to Washington and with this vision Glass Steagall was repealed opening the gates to financial hell. In 2003, Allan Greenspan even made the comment Although the benefits and costs of derivatives remain the subject of spirited debate, the performance of the economy and the financial system in recent years suggests that those benefits have materially exceeded the costs.” Clearly, Greenspan became a believer and supported the repeal of Glass Steagall under Bill Clinton.
Unlike most people who preach that derivatives will blow up the world, I concede that derivatives are in fact a vital component of furthering the world economy. The question has emerged as with all things – crossing the boundary of moderation breeds chaos. Everything functions in a bell curve. Some government is necessary and can benefit society. Yet 100% government control leads to economic collapse for government cannot plan and direct an economy from a central detached position. Consequently, the manner in which the derivatives have been implemented on an ad-hoc basis absent a central clearing-house presents the greatest of all dangers – not the mere fact that derivatives exist at all since they are perhaps the oldest financial contract of all extending back to Babylonian times. However, everything cannot be transformed into a derivative absent a central clearing house for that leads to chaos and corruption no different than the broken-banknote era that resulted in the Panic of 1837.
The problem with derivatives lies in the decentralization of their market makers and as such, there is no manner in which anyone can really gauge or actually judge the true risk and rewards. Since banks create derivatives on their books and such contracts are not fungible, if the bank becomes exposed to risks it did not anticipate, they run with their hands out to government for a bailout every single time.
As we approach the start of BIG BANG (2015.75), which is 26 years from the first crack in Marxism 1989 first observed in China followed by the fall of the Berlin Wall within months, ever since the world has been drastically altered economically. The collapse of the Soviet Union in 1991 was part of this process. That was not a CIA plot, but the unravelling of the Marxist Era. We should witness dramatic political and economic changes going into 2020.05. The bottom of the ECM 2020.05 will also be 31.4 years from the start of the fall of Communism that should culminate in the final stages of the collapse of Socialism. This is part of the cause of BIG BANG that will become focused most intensely between 2015.75 and 2020.05.
What the Banks have pulled off is really highly dangerous. This entire new model of Transactional Banking  known as the Originate-to-Distribute Model is far too short-term to provide any insulation from the swings within the business cycle. As in markets at the first sign of a down-draft, the market-makers withdraw, This will dramatically increase volatility and destabilize the world economy far beyond anything we have seen since the birth of capitalism, Volatility will rise with illiquidity and that is the Petri dish for PANIC.
Laissez-faire death of Marxism
In a very important special report we will be producing on this problem, hopefully our comprehension of BIG BANG and its many facets will come into focus.

Wednesday, December 24, 2014

Dow Jones Industrial Index Going Into Year-End 2014

Dow Jones Industrial Index Going Into Year-End 2014

DJIND-Y 2014

The Dow continues to press higher despite the yelling and screaming this is a huge bubble. The oscillators even dispute that claim. Here is the Dow reconstructed back to 1790. We are just starting to poke through to the upside warning that high is not yet in place.
Our year-end number for 2013 was 16312 and the Dow closed at 16576. This year, our key resistance for the annual closing stands at 18546 with support forming at 17436 and 16990 until next October. The Dow has broken into the 18,000 level and this warns we must pay attention here for a closing ABOVE 18546 will signal a test of 20965 should follow next year.

Modern Day Marriage License

Prima Noctum (jus primae noctis) (First Night) = Modern Day Marriage License

A few people have asked what is my source for Prima Noctum since Wikipedia claims it is a myth. Sorry, but Wikipedia is seriously wrong in this department for the problem in their research is the classic error in politics – research not the act but the right. They have concluded it must be a myth because they cannot find written evidence of a king taking a bride on her wedding night. That is not actually the issue at hand. Research the RIGHT or PRIVILEGE and then follow the MONEY.
Some have argued that there is no strict evidence of Prima Noctum being a legal right of kings in medieval times. This is really shallow research. There is actually a ton of a substantial amount of evidence that surrounds this “right” that many have tried to argue is only a myth. The right or privilege of Prima Noctum emerges from the actual act of marriage. The financial records of every king and everymanorial lord are full of fines paid by women at all levels of society to be allowed to choose their own husbands or to stay single. There are even records of a fine paid by a village man to avoid marriage with a particular widow of the village in England. We will publish this research in an up coming special report for BIG BANG – the Pension Crisis.
The legal status of all people was rather simple. You were the PROPERTY of the king which was a major legal question for the founding of the United States. If you were English and killed someone in Paris, the French king could not prosecute you. Instead, he sent you in chains back to your king who OWNED you for ONLY he could punish you. The Founding Fathers revolted against this principle and as such territorial jurisdiction was born so anyone who commits a crime on US soil is prosecuted here and not shipped back to their monarch. The United States was actually more than freedom from taxation, it was a revolution against the medieval RIGHT of a king who owned you as property.
Consequently, to understand Prima Noctum you must comprehend the entire legal right of ownership of the king, which those who drafted Wikipedia do not. The marriages of all children, including girls, were also subject to the permission of the father’s actual lord and peers. His fellow vassals at the upper levels of society or fellow villagers at the lower had to approve each marriage. There was no freedom to marry whoever you wanted. None of this Hollywood love at first sight nonsense. Anyone who ran off and married risked death, any offspring labelled bastards, and the confiscation of all property. So thisPrima Noctum (jus primae noctis) stems from the fact that even a father had no legal right to consent to the marriage of his daughter without the permission of the king or lord. We will include the research to be published in coming Pension Crisis for this was also the origin of pensions as well.
If a father died, it became the king or lord’s duty to provide for the marriage of the surviving daughter or son. There was some abuse of this duty that became known as Prima Noctum, however, this is were we must follow the RIGHT or PRIVILEGE rather than just the mere act itself.
Prima Noctum was a RIGHT or PRIVILEGE that appeared in ancient Asia or modern day Middle East that surfaces in Europe after the fall of Rome when people become serfs and private property vanishes. Herodotus ( c. 484–425 BC) in fact mentions a similar custom among the tribe of the “Adyrmachidae” in distant ancient Libya: “They are also the only tribe with whom the custom obtains of bringing all women about to become brides before the king, that he may choose such as are agreeable to him.” The nobleman’s right to a woman’s virginity appears very early in written stories. King Gilgamesh of Uruk makes use of his noble right to bed the female (and the male if he chooses) in the epic poem Gilgamesh.
This was not a Roman custom for there the family was sacred. Augustus (27BC-14AD) instituted family laws. His goal in restoring public monuments and reviving religion was not simply to renew faith and pride in the Roman Empire, he had hoped that these steps would restore moral standards in Rome for the Republic fell into a period like the ’60s Free Love rebellion. Augustus also enacted social reforms as a way to improve morality. He felt particularly strong about encouraging families to have children and discouraging adultery. He politically and financially rewarded families with three or more children. This incentive stemmed from his belief that there were too few legitimate children born from “proper marriages.” On the other hand, he penalized unmarried men older than 38 years old by imposing on them an additional tax that others did not have to pay. They were also debarred from receiving inheritances and attending public games. Furthermore, the Lex Julia de maritandis ordinibus prohibited celibacy and childless marriages, as well as made marriage compulsory. Yet, marriage was voluntary and a human right since you were not considered to be the property of the state.
Augustus 3Augustus Denarius Showing His Family
Augustus also amended divorce laws to make them much stricter. Prior to this, divorce had been fairly free and easy. Someone just said I hereby divorce you and marry someone else on the same day. In addition, after Augustus’ reforms, adultery became a civil crime instead of a personal crime under the Lex Julia de adulteriis coercendis. In other words, it became a crime against the state, which meant that the state (not just the husband) could take an adulterer to court if there was evidence of adultery. Penalties for adultery included banishment, or sometimes the husband or father of the adulterer could kill an adulterous wife. Augustus’ own daughter, Julia, was banished for adultery after this new legislation. She was exiled to a desolate island called Pandateria.
ProstituteTokenAugustus also sought to outlaw prostitution indirectly by ordering a coin with his image could not be used to pay for sex when all coins bore his image – clever, but not clever enough. Hence, we find prostitute tokens have survived where the customer bought the token to pay the prostitute and she could then redeem it. Clearly, one was free to marry and divorce without the state’s approval.
Therefore, the medieval myth that this privilege of Prima Noctum emerged from Rome was popular but totally unfounded. This right or privilege emerges in Europe AFTER the fall of Rome where people then sell themselves to a local lord for protection. This begins the age of serfdom where people became the property of the lord.
The earliest mention post-the Dark Age of the right of Prima Noctum appears in a text from 15th Century Switzerland which references the Lord of Maur demanding the right to take either the virginity of a bride or a fee, to be paid on the behalf of the betrothed. This right or privilege seems to emerge post-Black Plague during the 14th century. This is when labor becomes scarce after about 50% of Europe dies. Two things converge – (1) shortage of labor causes wages to emerge and (2) with the reintroduction of wages comes taxes, fines, and fees.
This right of Prima Noctum appears to be merely symbolic, as the fee was now required to be paid by the husband or the lord would take the girl on her wedding night. It is a blend of the right of ownership of all serfs with the implementation of taxes. Clearly, this right is commingled with the right of the king or lord to grant permission to get married.
Nonetheless, during 1556 in the Recueil d’arrestz notables des courts souveraines de France of French lawyer and author Jean Papon (1505-1590) mentions this right of Prima Noctum. There had been previously two types of marriage in France known as temporary and permanent until the Catholic Church insisted on only permanent marriages.  Charlemagne married all his daughters in only a“temporary” marriage meaning that they possessed no legal right to the throne or property. That was the distinction between the two types.
The practice of Prima Noctum was perhaps indeed more of a tax/fee that emerged from such a right as a threat – pay-up or the king plays. It may have indeed been the abuse of some lords or kings after the black death given the shortage of women, but written records are scarce during this immediate period. Obviously, this privilege emerged from the fact that the lord or king possessed the supreme decision over whether or not the girl could marry and to whom. This was like the Speaker of the House in Congress is the only one who decides to bring some act to the floor for a vote. The ultimate blackmail.
Actual intercourse in the exercise of the alleged right is difficult to prove, and there is no hard evidence to suggest that it ever actually happened. The surviving records show all sorts of fees being paid concerning marriage but no ledger entries concerning the lack of a fee paid. Clearly, people paid a fee to the king for a marriage instead of sending their bride to his bed-chamber. If she did go, there was no need to make an entry in the accounts since no money changed hands.
The idea that Prima Noctum was a right always executed by a king or lord must be looked at in the full context, not just if he took some girl for the first night. He might be too busy to do that every day. It always came down to money and the threat of that consequence was a good incentive to pay-up. Keep in mind that taxes during medieval times were actually fair. The king had NO RIGHT to tax the people unless the money was needed for defense of the nation. The king of England was forced to seek the consent of Parliament to impose taxes. To this day, a bill must be entered into Congress to impose a tax. This is all historical tradition. Prima Noctum was not a tax “legally”, it was a “fee”. The entire trial by jury forced upon the king in Magna Carta was to curb the king’s revenue quest by fines and fees – not taxes.
Nevertheless, the idea of Prima Noctum absent the money alternative became rather accepted belief in France after Voltaire (1694 –1778) accepted this practice as historically standard in his Dictionnaire philosophique.  Indeed, there are several instances of this practice which have been observed elsewhere including as late as the 19th-century where some Kurdish chieftains (khafirs) reserved the right to the first night with brides on their wedding night.
Therefore, the records are plentiful demonstrating fees and fines being paid to the king concerning weddings. Could a king take a particular girl on the first night – of course. It was absolutely his right for nobody could even be married without his permission. The obligation to pay the state some “fee” to this day to obtain a marriage license is the final evolution of this practice.

Sunday, December 21, 2014

Will they Hang Bankers Again on Wall Street?


What took place in Washington over the past two weeks with the repeal of Dodd Frank and then the effective repeal of the Volcker Rule sounds strikingly familiar to at least three previous periods in American History that led to total disaster. There were of course the Northern “carpetbaggers”, whom many in the South viewed as opportunists looking to exploit and profit from the region’s misfortunes following the Civil War.The “carpetbaggers” would play a central role in shaping new southern governments during Reconstruction period who were joined by Southerners who saw economic gain in joining the Northerners in the exploitation of the South. There were called “scalawags”.
Then there were the Silver Democrats who were bought and paid for by the mining industry. William Jennings Bryan’s red-hot emotional speech at the 1896 Democratic Convention will forever live on in history. The shenanigans of the Democrats and Republicans who tried to overvalue silver led to the near bankruptcy of the nation and made JP Morgan famous thanks to the Panic of 1896 when he had to arrange a gold loan to save the country.
Then there was what people called the First Gilded Age more than a century ago, when senators and representatives were owned by Wall Street and big business. This culminated in the 1929 Crash.
What did all three of these period have in common with the last two weeks? Then, as now, those who footed the bill for political campaigns were richly rewarded with favorable laws. This is standard operating procedure in Washington and why we are in such desperate need of political reform.

In all three such periods there was a rising underbelly of rising tension and rebellion against the powers that be. Today, people are increasingly becoming fed up with Washington and the rebellion unfolds ONLY when the economy turns down. There was Charles Dazey’s Broadway Play The War of Wealth (February 10, 1896). This 51.6 year ECM Wave that peaked in 1929.75 (#919-924) was a Private Wave that began with the death of Karl Marx and the previous 51.6 year Wave peaked in 1878. In 1882, because of anti-monopoly laws, Standard Oil is organized as a trust, which would become the target of all time.
Indeed, what the bankers pulled off these past two weeks was done on the basis that they ASSUME the people have such a short-attention span that (1) they did not expect any press, and (2) they expected this will blow over with the holidays.
The bankers have made the greatest MISTAKE of their career. Their desire to exploit the world economy through trading preferring to be TRANSACTION oriented rather than RELATIONSHIP (meaning there is no long-term plan here just trade by trade), will be their undoing. The bankers have ALWAYS become the most hated within society. It was the bankers that caused the Panic in Ancient Athens, Rome, and even caused countless riots and civil wars. It was Philip IV of France who confiscated and imprisoned the Italian Bankers for lending money to England to wage war. He seized even the Papacy moving that to France. He wiped out the Knights Templar who were a major banking organization. Julius Caesar crossed the Rubicon because of the corrupt bankers in the Senate and the people cheered him as the bankers fled to Asia.
One a time scale, the Panic of 1896 came 13 years into that 51.6 year wave. Relating this to the current wave that began with the formation of G5 in 1985, that brought us to 1998 and the first bailout of Long-Term Capital Management. Then 26 years into that wave brought us to 1908. It was the 1907 Crash that shifted the focus from the Railroad to the Industrial Age. Currently, 26 years into this wave brought us to 2011 and the peak in all commodities from gold to oil. This has marked the beginning of the Euro Crisis with the first crack in 2010 being Greece.
We are embarking on a new shift and the stock market is reflecting this change. What the bankers just puled off will leave to their demise  They have played with a historical fire that may end in actual bloodshed. It would not be the first time they have been dragged from their palaces and hanged on the streets. That is what the term “BLACK FRIDAY” really stood for – the day a mob hanged bankers on Wall Street.