Collectibles Are Still in Bull Market

Posted on January 12, 2014 by Martin Armstrong

The first gold coin produced in the American Colonies is known as the 1787 Brasher Doubloon Realizes that was just sold at the Heritage auction for $4,582,500. Ancient coins are generally up substantially over the last 10 years with pieces that sold for $20,000 in 1994 bringing today $150,000 to $200,000. Money continues to move out of banks and bonds looking to get off the grid. These market may still rise sharply and the peak appears to be actually 2025 or the peak on the next 8.6 year wave completing a cycle wave from the 1994 low.

Cycle inversion ?

What Are we Waiting for in Markets?

Posted on January 9, 2014 by Martin Armstrong

At some point we will experience a Cycle Inversion meaning the targets remain the same, but what we get is the opposite event. Why will this INVERT? At some point the THINKING process must flip whereas the FLIGHT to quality has been traditionally people sell private assets and run to government paper. But what happens when government is the problem? Capital will start to flee from government to the private sector assets. Although the USA did not default or even suspend its debt during the 1930s, the contagion affect from Europe still impacted the trends within the United States. Here we can see that the spread between AAA corporate paper and government paper began to narrow as people realized that government debt might be a problem. The City of Detroit defaulted back then as well,

The timing targets will not change – we just get the opposite event. I have demonstrated how the fixed cycle in gold produced highs going up and then the same cycle produce a low by 1985. We achieved a similar even on the ECM in 1987. The turning point came precisely to the day, but we achieved the LOW rather than the high. That enabled us to forecast that the low was in place and new highs would be seen by 1989.

What is possible currently is that if the share market backs off and moves into a February low, then a rally into late Summer is likely with the Fall correction. That could continue into a low for 2015.75 and this would suggest a possible cycle inversion meaning the flight to quality reverses post-2015.75 and instead of government debt, we see capital move into private assets. However, a high in Feb reverses the outcome.

The question that will need to be answered is what happens post-2015.75? We will go over this at the conferences. The traditional Flight-To-Quality being a rush to government paper may be the opposite so we see a rally as the flight unfolds with government paper. Even gold rallied with the downside of the ECM dramatically. It experiences a tough of the flight to quality.

These events are determined not by OPINION, but by the correlation of how all markets are responding. This produces a movement that is unified on a global scale. This is part of understanding who everything is connected. As long as the Dow does not exceed the December high, we cannot rule out a February low. That low may not be much to write home about. The depth is irrelevant unless we elect Weekly Bearish Reversals.

US and Europe-2014. February - cycle inversion ?

Euro – Cycle Inversion or Phase Transition

Posted on January 9, 2014 by Martin Armstrong

Reply

QUESTION: Martin
In your latest post you go into very good detail of how the Euro continues to be strong(although it has been noted the model expected it to fall) and that when the Euro does fall it will take the European markets with it. Are we to assume that if the dollar does rally it will take the DOW with it as well?  Any update on the cycle inversion?
Regards,
JCL
ANSWER: This whole extension of the markets is early. But it is not yet complete and it is still not certain if we are getting the Cycle Inversion or the Phase Transition.We may not know this until February. Ideally, the Euro would normally have declined into Jan/Feb and so should have the share markets. We warned last summer that the Euro could rally into Jan/Feb, which was based on the preliminary capital flow trends. That has been the case, but the euro has not blasted up to new highs – it has just traded sideways while remaining strong thanks to deflation yet stuck between the Reversals at 14700 and 12950. It has neither elected Bullish or Bearish Reversals. The model has provided no buy or sell signals as of yet.

The share markets have rallied. But look closely and you will see the Dow just backed off with January. So it is not yet definitive. February is a turning point. We should get the opposite trend thereafter into the Spring. The timing never changes which is why I specify these are TURNING POINTS not specific highs or lows. It is a chain reaction process of extraordinary dynamic complexity. Absolutely every market movement around the world combines into creating the OVERALL trend. Nothing moves in total isolation.

If we get the Cycle Inversion early, that would push the rally beyond 2015 and we may then see the market rising when the ECM declines for capital would then realize government is the problem and it then has no choice but to move into private assets. The question is do we get this now or on the next wave where Panic Cycles are already projected for 2024 the top of the next wave.

To some extent, this is what happens in a hyperinflation of a revolutionary government where people neither hoard cash nor keep money in banks. The hyperinflation is spending money as quickly as you get it so the VELOCITY of money rises tremendously. Deflation is the hoarding of money and assets. This has nothing to do if money is fiat or not since in truth all money is fiat when when it is gold coins. The gold standard was fiat where the government dictated gold was $35 and never changed it. In that case, they undervalued gold. Fiat historically has worked both ways and the Swiss pegging the franc to the euro is again a dimension of fiat dictating the value of money.

We are not in a hyperinflationary situation but deflationary where established governments are trying to hold on to power and hunt down everything and everyone in the private sector. This is the opposite of a revolutionary government that has defaulted on all national debts of the prior government. They have nothing to pay off and no assets so they print to cover expenses. We are in the nasty government phase where as Herbert Hoover said when a government becomes enraged, it will burn down the bard to get the rat.

Capital is already shifting from bonds into equities in the USA at the pension fund level (not retail) because they have no choice. We are UNLIKELY to see the Dow decline when Europe fails, but this will be more akin to the Nikkei rising into a bubble for 1989 after the 1987 US Crash.


We have a convergence of several trends. First there is the chaos in Europe from the insanity of government self-destructing the economy, but that domino has not yet fallen over. When it does, it will send cash pouring into the dollar as it did in 1931. Secondly, we have the crisis in pensions that is driving money away from bonds and into equity just to survive, The third major aspect yet to materialize will be the classic bubble with the retail market buying the highs on hype. Thirdly, there is the change in energy that has indeed impacted the global economy as 15 refineries in Europe have been forced to close as the USA no longer imports from Europe.

Europe at risk in 2014

Europe – What Crisis? DAX At New Highs

Posted on January 7, 2014 by Martin Armstrong

Many European shares have been the best performers in 2013 and the general optimism in Europe for 2014 is far more bullish than in the USA. Even Reuters’ poll of more than 350 strategists, analysts and fund managers, shows the expectations are for more gains. Indeed, looking at the Frankfurt DAX, its gains in 2014 were very impressive and the consensus  forecast for 2014 puts a continued rally expectation to be another 10% up. At the same time, Reuters’ poll shows most see the Euro as overvalued and that a decline in on the horizon.

The trend in Europe seems to suggest there is no crisis. Rising share prices, as always, is misunderstand and is rarely investigated in-depth. But buying something for the wrong reason can prove to be very dangerous. If you are going to be long equities, you better understand why or when the trend changes, you will be caught entirely off-guard.

There was an initial inflow of foreign capital into European stocks that has supported the euro. But as with all economic declines, it is more capital repatriation that has contributed to the strong euro. Oddly enough, the rise in a currency actually is bearish for we saw that in the dollar during the Great Depression and between 1981 and 1985 with the collapse of the pound to $1,03 in 1985 that sparked the whole scheme of the Plaza Accord and birth of the G5 (now G20)

It is actually the persistent strength in the Euro that also introduces tremendous risk to European investment for when it declines, the foreign capital will sell based on the currency rather than fundamentals. This is rarely understood and was the cause behind the 1987 Crash. The Brady Commission report at the end finally admitted that perhaps the crash had something to do with currency.

BRADY REPORT- Full text of _Report of the Presidential Task Force on Market Mechanisms 

The high value of the Euro has a deflationary impact upon Europe for it also makes the value of their exports rise and un-competitive, which is why the Swiss pegged the franc because of capital inflows. The economy cannot recovery in Europe until the euro declines. This was the very advice of George Warren to Roosevelt. However, the German austerity position is the same as Roosevelt’s Brains Trust back in the 1930s and we are seeing the same result – massive rise in unemployment mixed with a decline in economic growth.

From the international perspective, the rising euro makes European share values appear to be a good investment. German cars carved out a market in the USA creating an image of quality that appreciated during the 1970s. I biught German cars back then and they never cost me anything to drive because their value kept rising. It was not the car that appreciated, but the Deutsche mark against the dollar creating the image that the cars were a good investment when it was currency.

A turn south in the Euro will cause foreign investors to dump European stocks just as the Europeans dumped US shares in 1987 when the expectation of a further 40% decline in the dollar was on the horizon. Forget the domestic fundamentals. European stock indexes typically trade at a 12-month forward price-to-earnings ratio and that will get confusing to those relying on domestic fundamentals.

The European stock market rally is also unfolding as a hedge against the rumblings of the IMF proposal to confiscate 10% of all cash in banks. Then the DAX has been driven higher due to the hedge internally against the collapse of the euro with many people expecting to get Deutsche marks if they have German bonds and shares. In the case of Switzerland, they created the peg because the capital was rushing into that economy as the hedge against the euro. When that was pegged, then the capital move into Germany as well but that can only be seen as a rise in share values since the currency is still the euro.

The diverse trends surrounding the euro crisis has resulted in asset price inflation manifesting in Europe’s stock market as capital is just trying to park or is enticed by currency. This is not moving into creating new business or industry for the taxes are far too draconian to create jobs leaving the unemployment staggeringly high. Wages are not rising for their international value is already too high and un-competitive on a global scale. Consumer prices in real terms have not declined, but remain steady within the major economies such as Germany and France, while they have declined significantly in Greece. With rising taxation and stubborn consumer prices, the net standard of living in Europe is declining and this is leading to a rise in civil unrest, which can also have a negative impact on European shares in 2014.

We are seeing some very choppy trends between 2013 and 2015 with key turning points in 2013, 2017, and 2022. A Panic Cycle is showing up for the peak on the ECM in the next wave.

At the very least, 2014 presents very interesting trends with an admixture of tremendous risk and confusion with conflicting international trends driven by capital flows that are at odds with the classic domestic analysis.

The Real Threats of 2014

Martin Armstrong

We are facing 2014 perhaps with blinders on as a society. Western investors have largely ignored the trend in Europe, Japan, and China and are more likely than not going to be dramatically surprised. In Chine, the high in the Shanghai market remains 2007 and new lows are still possible going into 2014. The cash crunch in China back in 2013 was important from the perspective of demonstrating the conflicting perception of China internally compared to externally. China is not the bulwark of economic growth that the world has suspected. Its retracement back to support has been bearish for the commodity markets as a whole.

The crisis in Europe not merely remains a major disruption to the entire world economy that again the public and general media have failed to grasp its potential significance. This Euro Crisis has the capacity to totally destabilize the world economy sending capital fleeing into the dollar. The Eurozone’s very existence is hanging in the balance. The urgent cry from the French controlled IMF to seize people’s accounts is about as practical as exposing Europe to radiation and just see what happens.

This alone has the potential to destroy the Eurozone as civil unrest is already starting in Greece, Italy, and Spain. Will this become a North v South crisis? This weakening of Europe as a whole invites the rise of Russia. Where people in the old communist block have a different attitude and do not trust government sleeping always with one-eye open, in the West, people still see government as God on earth who really cares.

Switzerland we will be covering in-depth at the WEC Conference. We can see from the chart that the decline in the dollar has been consistent since World War I. However, the Swiss have made the fatal mistake of trying to beat the free markets not merely sacrificing their banking industry on the altar of governments demanding taxes and the end of secrecy, but they have bought so many euros they stand to take the biggest loss from the collapse of the Euro than any nation. Their real estate cycle is approaching a 26 year high and the downside for Switzerland appears to be foreshadowing the fall of Europe.

The USA share market has surprised most. Its pushing to new highs has been a relentless journey that the vast majority of analysts still do not believe and was missed calling for once more a Great Depression back in 2010. Even the oscillators on a yearly level are turning up at the close of 2013. These repeated crises around the world are a sign that the foundations of the global economy are crumbling and the economy growth model coming out of World War II is falling to dust beneath our feet. This unsettling economic decline with rising unemployment among the youth in Europe and 65% of graduating students cannot find employment within the USA in the field that they majored in. This has demonstrated the collapse in education and the institutionalization of a field that historically had been built upon a structure of apprenticeship since ancient days.

The implication for the rest of the global economy from the combination of these trends has been monumental. We are looking at a contagion of untold proportions that can fly around the world perhaps faster than ever before. The rise in taxation and hunting down the rich has caused capital to withdraw from investing and thus liquidity has not recovered to its former levels back in 2007. This only opens the door to wild times and the bull market in volatility we first announced would begin back 1985 is still in motion. We should now start to move into the Phase Transition phase of volatility as we approach the peak that should unfold in 2032.

This is indeed the time that will try the souls of human kind. We face a rising trend of violence and stubborn politicians desperate to retain their current power and thus will only press down upon the brow of citizens more and more draconian measures. No one will stop and look at the trend in motion and that ensures we must crash and burn.

The key is CAPITAL FLOW ANALYSIS – only then will you come to see the world as a whole and comprehend how markets rise and fall. It is not the standard domestic analysis that is put on TV and newsletters. This is a dynamic world we live in and you better start opening your eyes if you wish to survive.

EU elections on May 25th- crazy period in 2014 in the September/October period

IMF Proposed Expropriation for Europe

Posted on January 3, 2014 by Martin Armstrong

  The IMF proposal to just take 10% of all European deposits would certainly not take place before the EU elections on May 25th. We do show higher volatility and a crazy period in 2014 in the September/October period. That will be the beginning of the crisis period that will not end until about 2020. We are preparing the 2014 Gold Report and the report on the Pension Crisis. There is a tremendous paradox that has the market befuddled. Why are long-term interest rates so low when the norm had been 8% for so long? Why has the financial system not collapsed? The answers will be in this report and the results of our study of both the Supply and Demand will shock many. Sometimes trends evolve right under our nose and we forget to look closely until it is too late.

IMF Proposed Expropriation for Europe

Posted on January 3, 2014 by Martin Armstrong

  The IMF proposal to just take 10% of all European deposits would certainly not take place before the EU elections on May 25th. We do show higher volatility and a crazy period in 2014 in the September/October period. That will be the beginning of the crisis period that will not end until about 2020. We are preparing the 2014 Gold Report and the report on the Pension Crisis. There is a tremendous paradox that has the market befuddled. Why are long-term interest rates so low when the norm had been 8% for so long? Why has the financial system not collapsed? The answers will be in this report and the results of our study of both the Supply and Demand will shock many. Sometimes trends evolve right under our nose and we forget to look closely until it is too late.