What Kind of Trader is Trading

 

Posted on December 31, 2013 by Martin Armstrong

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COMMENT: Trading:
I cannot do stock trading on the exchange as I will always loose. Trading is a zero sum business if you include seller, buyer and bank/broker fees. I believe that the winner on trading are the banks and the brokers. I believe that “Naked” trading and speculation by the big banks has ruined the free market and the capitalistic system.
I believe that Armstrong Economics will only be successful as long as you follow the big banks.
I wish you a happy new year.
Regards
FK
REPLY: Day Trading is a full-time job and many people produce more in fees than they earn. The real TRADING is simply moving with the overall trend. You would be long primarily from a strategic position that may be held for months or years. It is selling the high in gold in 2011 and flipping into stocks. Hold a position when it declines long-term is dangerous. Long-term bear markets decline sometimes to one-third or half your life. The Nikkei declined for 23 years. Gold for 19 years. That is way too long to hold on to something and pray for a recovery.

The point is if you LEARN how the business cycle moves, you will be successful. Gold may bottom here in 2014. I also warned it could invert and bottom in 2015. Look at the stocks. They have exploded since 2011. This is about economic survival – not just one market. If you see the world for what it is, you will move with the flows rather than clinging to one thing to preserve your future. What if you are wrong? They you will try to blame someone else for your unwillingness to the see the world for what it truly is – a complex network of interconnections.


If you open your mind’s eye and allow yourself to see the interconnections that are like a rain forest with millions or species all interacting. If you remove just one, you will set off a chain reaction that will readjust the entire complex system. That one species may have been the exclusive food source of another that now dies out. The chain reaction becomes a tidal wave of complexity. The entire complex system can collapse to varying degrees. Look at the koala bears in Australia. They only eat the leaves on one tree. Remove those trees and you will kill the koala bears. Everything that happens is for a reason and has consequences. This is the system upon which everything in the universe was constructed. It is the same design everywhere – it is fractal.

Waiting for your day to make real money focused in just one market will be disaster. Understanding that when one market moves lower, it is being offset by another’s rise. Some economies bottom at the peak in the ECM wave while others peak. Gold did not explode to the upside until the ECM turned down in 2007. This is a divine scheme how everything works in harmony. Governments have been trying to manipulate it to control it. The big banks tried to manipulate it to make money. It cannot be manipulated for everything in interconnected. Lower interest rates to help banks, you render pension funds insolvent.

THIS IS STRATEGIC TRADING NOT DAY TRADING

As far as following the big banks, they are being driven out of proprietary trading because of their greed and manipulations. They will start to go bust after 2015.75 all by themselves. The days of them being bailed out for their bad trades are over, In Europe and the USA there is no political will to keep writing checks for their disastrous trades based upon bribes and rigging rather than analysis and judgement. The banks never went with the cycle. They were too impatient for that. It was all about quarterly earnings. Just watch.

224 Year Collapsing Wave Structure Points to Breakup of USA

Posted on December 26, 2013 by Martin Armstrong

The CONFIDENCE in government is truly collapsing. The latest CNN Poll shows that 73% of Americans feel Congress has done nothing worthwhile. The approval rating for the Democrats has collapsed by 6% and this is all part of the process of shifting from a Public Confidence Wave to a Private Confidence Wave.

There are two types of waves on the 224 Year Cycle – the Collapsing Wave and the Protracted Wave. It appears that the USA is in the Collapsing Wave formation meaning that the 224 year runs from the birth to the peak with the total duration running minimum 296 years with the optimum being 309.6 years meaning the society splits and does not remain intact. A Protracted Wave is a society view where the wave is measured peak to peak totaling 224 years. The second Protracted Wave formation is where governments come and go, but society survives and reforms remaining intact. In the Collapsing Wave structure where it is 224 year from birth to peak, the overall duration appears to be is 296-309 years. for the conclusion whereby society breaks apart and fragmentation emerges..In the case of Rome, 309 years from the assassination of Julius Caesar in 44BC is 265AD where Rome broke apart and the Gallic Empire emerged under Postumus (259-268AD).

This Collapsing Wave structure that the United States appears to be in means it is a one-time-wonder and that the United States will break-up and the there will be no more “united” union. This is becoming self-evidence in the polarization of politics with tremendous differences in culture on a regional basis. The Obamacare is just one aspect revealing the undercurrent whereby one segment of society believes it has a right to force their viewed upon another group.

So unfortunately, the USA does not appear to be destined to remain intact otherwise we would have seen and overall structured wave of 224 years. We seem to be in the Collapsing Wave with the 224 years was from birth to peak. This appears to be like the wave on Rome itself whereas from the assassination of Julius Caesar in 44 BC to the peak in the glory of Rome under Marcus Aurelius was 224 years in 180 AD. The decline that followed brought total chaos, sovereign debt crisis, massive government seizure of capital, fragmentation of the Empire, and in the end, Rome was no longer the Capitol and that became Constantinople followed by the split of East and West. We are much more akin to the this type of Wave formation whereby society collapses and now we have the Cycle of War turning in 2014.

We will be reviewing this aspect as well at the Cycle of War – Gold – Sovereign Debt Crisis Conference on March 21st in Philadelphia.

The Cycles of War & Sovereign Debt Crisis Conference is an important event because this cycle on civil unrest is turning up with a vengeance. The combination of a Sovereign Debt Crisis and Economics has a long history of creating civil unrest of a grand scale.

Will 2014 Crack the Euro? -2016 ?

Will 2014 Crack the Euro?

Posted on December 27, 2013 by Martin Armstrong

The Euro officially began trading January 1st, 1999. That was an eventful year for its also market the low in Gold. Now at the pre-Christmas Euro summit, the mood was rather grim and even Merkel is wondering if the Euro will survive. The Euro should serious crack 17.2 years from its birth and that would bring us to 2016. However, the French virtual-communist at the head of the IMF may push the seizure of 10% of all accounts in Europe in 2014. The overvaluation of the Euro, thanks to deflation, will continue to cause the German economy to now shrink and as goes Germany – there goes the Euro. The single currency is actually reducing the economic growth in Germany.

Cycle Inversions – Critical to Understand

Posted on December 17, 2013 by Martin Armstrong

QUESTION: You write: could be a major protraction/cycle inverson. Is this a flip flop? what happened to capital flows? Dow 21,000 possibly 31,000?

ANSWER: There MUST be a cycle inversion that takes place going into the end of this 51.6 Year Wave. If you do not understand cycles, you better start paying close attention. This is a chart of silver. It has a fixed cycle of 18 units. During the bull market, each target produced a high. Once the high was in place., the cycle INVERTS whereas what use to produce highs flips and produces lows. The target dates NEVER change – only what is produced!

We are laying this out in an important report. Cycles are moving in every market on a multi-dimensional level. In other words, there are cycles within cycles and when they converge, you get the Superposition outcome.

The year 1983 was the start of the breakout and 31.4 years warns of 2014 is important. The start of this wave was 1985 and that projects to 2016. The 2009 low also projects a normal phase reaction of 23 years and that gives us the peak of this wave in 2032.

We may see a high, with a brief  correct of max 2 years, that then would complete an early cycle inversion and project out into 2032. The high on such a protracted extension would then be idealized at 40-42,000 on the Dow. These issues will be illustrated in the coming report.

There is no flip-flopping. The TIME remains unchanged. The event differs and that is simply because the thinking process must reverse.

Greece- Bust and recovery of nations.

Depression Never Ends At the Same Time For Everyone

Posted on December 17, 2013 by Martin Armstrong

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QUESTION: Hello Martin.
A few months ago you wrote:

Greek Depression Will Not End until 2020

I have explained the Golden Rule of Corrections. Once you extend in anything beyond a time unit of 3, you are then in a change in trend. The Greek recession, and most of the Western World, began in 2007. We began with the Greek Debt Crisis precisely to the day on the Pi Target from the 2007.15 high in the Economic Confidence Model. That was the 3 year mark and signaled we were beginning a serious major change in long-term trend. That means at the very least, we are looking at the first possible low being 2017 but it is more likely we will extend into a 13 year decline if the pressure is extreme pushing the low into 2020.
… Can you elaborate please when you think the global depression (Europe,USA) began ,where is the mid-cycle,and where is the end? My opinion is that it will correspond with the commodity cycle and the world depression will last till 2032.
Thanks Martin.
E from Belgium

ANSWER: A very important book is being finish right now that is part of my goal to try to get out what I have learned from running around the world with my front row seat as Milton Friedman use to tell me. Each nation entered the Great Depression and exited it at different times and this is tracked in the forthcoming book two people are editing now.
Greece will most likely exit this Depressionary cycle in 2020. I do not think that they government will endure if they were to follow the austerity measures. The risk for Greece is will it be allowed to exit the Euro. Yes, Brussels is actually a strong-arm organization that is unlikely to accept withdrawal lightly. They deliberately intervened to manipulate the Italian elections to prevent their exit from the Euro. They threatened the Greek government that wanted to put the bailout to election that there would be no bailout deal if they allowed the people to vote.

The entire Greek Debt Crisis erupted as we approached the π (Pi) Turning Point  on  the Economic  Confidence Model  2010.29  (April  16th, 2010). Had it NOT been for the free market there would be NO check and balance.

The free market was correct from the outset for pictured here is the Greek Drachma per Euro on a weekly basis for 1999 and 2000. This shows how the Drachma fell from nearly 320 to 340.75 to the Euro in anticipation of future problems.
In the case of Greece, even if we start at 1999, the turning point for a Depression would be 23 to 26 years max. This would bring us to 2022 or 2025. Any way we look at this, Greece should be the FIRST to exit and for that reason it warrants close observation.

Greece will default on its debt and when that happens, we will see the turn in its economy. Britain exited the Great Depression when it abandoned the Gold Standard and was the first to rebound. That was an example that George Warren used to convince FDR to devalue the dollar and it worked. Austerity is the killer for it send the value of the currency into a bubble top with purchasing power as assets turn to dust. France was the last to exist the Great Depression until they had to abandon the Gold Standard fixed high levels only after the USA.
A country-by-country analysis is required for this question and that will take up way too much space. But this will be covered in a report next year.

Fed's existence in 2025

When the next ECM Wave turns down, it is highly likely to take the Fed with it. The risk of failure of the Federal Reserve will arise 112 years after its birth in 1913 and that brings us to 2025. So yes – the Fed may fail at that time because it is incapable of doing the job as the politicians have constantly changed its focus and design.

The entire central banking system is in serious trouble. They have manipulated rates lower but fear what happens when the economic pressure forces as rise. Even the BIS was calling for a crash last September, but the share markets rallied to new highs and they remain baffled to say the least. Sorry – Dorothy. You ain’t in Kansas anymore. Not even the Yellow Brick Road can be restored.

When the next ECM Wave turns down, it is highly likely to take the Fed with it. The risk of failure of the Federal Reserve will arise 112 years after its birth in 1913 and that brings us to 2025. So yes – the Fed may fail at that time because it is incapable of doing the job as the politicians have constantly changed its focus and design.

The entire central banking system is in serious trouble. They have manipulated rates lower but fear what happens when the economic pressure forces as rise. Even the BIS was calling for a crash last September, but the share markets rallied to new highs and they remain baffled to say the least. Sorry – Dorothy. You ain’t in Kansas anymore. Not even the Yellow Brick Road can be restored.

Retail investors buy at tops

The Dow – To Be or Not To Be – Blowing Bubbles or Hot Air?

Posted on December 17, 2013 by Martin Armstrong

While the amount of bears in the stock market are truly amazing, there are simply countless economists and analysts all claiming this is the all time high and a crash is imminent. They claim the classic feature of a speculative bull market peak is identified by the margin debt on the NYSE. Tracking this indicator, they argue there has been a surge to the highest level in history in of course nominal terms. They cite this is nearly 2.5% of GDP, which exceeds all but two months in 2000 and 2007. This is no big deal and would need to reach 17% of GDP to match a real crisis in debt. Even the 1929 Bubble took place with total Broker Loans at about $6.5 billion against $104 billion GDP in nominal terms. That means 1929 Broker Loans were 6.25% of GDP making 2.5% no big deal. You can see from the broker loans during the 1929 Bubble, there was no retest of former highs. It was a clear Phase Transition, which is by no means replicated by the current levels.

Having long-term databases is essential to map out what is real and fake. Sorry – 2.5% is nothing. To match 1929, we need to get to 6.25%. If we look at real panics in government, now we are at 17%. The historical high in call money rates came in 1899 at nearly 200%. The peak in rates only reached 20% in 1929 BECAUSE of all the foreign capital inflows whereas in 1899 there were capital outflows leaving a shortage of cash in the USA driving interest rates much higher.

The problem with this type of analysis besides being too short-term, it is simply the domestic focus as if the world did not exist. This analysis is also focused on the traditional flight to quality between assets and cash. The ONLY alternative to a stock market bubble is to run to cash and bonds. But government debt is the problem right now and pension funds need 8% to survive. What this analysis is ignoring is how does capital act when the crisis is in government rather than the private sector.

We are not dealing with a mere speculative bubble. The money coming in is institutional and foreign by the overwhelming majority. I speak to stock brokers and it has been unanimous that retail clients are not in the market as was the case previously. Those who invest all the time may be there, but the average person who buys tops when everyone is in is not there yet because the TV financial-evangelists are bearish all claiming to be picking the high.

We will have a report out on this shortly. The issue is the potential for a coming CYCLE INVERSION where everything must flip so that private assets rise with the decline in theECM rather than decline. The PUBLIC and PRIVATE aspects must flip in a serious economic implosion that we face known as the Sovereign Debt Crisis. This chart illustrates how bonds collapsed with the Sovereign Debt Crisis of 1931. This is the other side of the coin. There are times when the private sector is the problem. However, then there are times when government is the problem. You better understand how capital moves under each scenario.

The Dow – To Be or Not To Be – Blowing Bubbles or Hot Air?

Posted on December 17, 2013 by Martin Armstrong

While the amount of bears in the stock market are truly amazing, there are simply countless economists and analysts all claiming this is the all time high and a crash is imminent. They claim the classic feature of a speculative bull market peak is identified by the margin debt on the NYSE. Tracking this indicator, they argue there has been a surge to the highest level in history in of course nominal terms. They cite this is nearly 2.5% of GDP, which exceeds all but two months in 2000 and 2007. This is no big deal and would need to reach 17% of GDP to match a real crisis in debt. Even the 1929 Bubble took place with total Broker Loans at about $6.5 billion against $104 billion GDP in nominal terms. That means 1929 Broker Loans were 6.25% of GDP making 2.5% no big deal. You can see from the broker loans during the 1929 Bubble, there was no retest of former highs. It was a clear Phase Transition, which is by no means replicated by the current levels.

Having long-term databases is essential to map out what is real and fake. Sorry – 2.5% is nothing. To match 1929, we need to get to 6.25%. If we look at real panics in government, now we are at 17%. The historical high in call money rates came in 1899 at nearly 200%. The peak in rates only reached 20% in 1929 BECAUSE of all the foreign capital inflows whereas in 1899 there were capital outflows leaving a shortage of cash in the USA driving interest rates much higher.

The problem with this type of analysis besides being too short-term, it is simply the domestic focus as if the world did not exist. This analysis is also focused on the traditional flight to quality between assets and cash. The ONLY alternative to a stock market bubble is to run to cash and bonds. But government debt is the problem right now and pension funds need 8% to survive. What this analysis is ignoring is how does capital act when the crisis is in government rather than the private sector.

We are not dealing with a mere speculative bubble. The money coming in is institutional and foreign by the overwhelming majority. I speak to stock brokers and it has been unanimous that retail clients are not in the market as was the case previously. Those who invest all the time may be there, but the average person who buys tops when everyone is in is not there yet because the TV financial-evangelists are bearish all claiming to be picking the high.

We will have a report out on this shortly. The issue is the potential for a coming CYCLE INVERSION where everything must flip so that private assets rise with the decline in theECM rather than decline. The PUBLIC and PRIVATE aspects must flip in a serious economic implosion that we face known as the Sovereign Debt Crisis. This chart illustrates how bonds collapsed with the Sovereign Debt Crisis of 1931. This is the other side of the coin. There are times when the private sector is the problem. However, then there are times when government is the problem. You better understand how capital moves under each scenario.

Linked currency

When they Hang Bankers – The New “Financial Terrorists”? Beware!

Posted on December 16, 2013 by Martin Armstrong

Those who think the Gold Standard brings stability must also believe in the Tooth Fairy. There was a huge CONTAGION that became widespread because of debasements during the 14th century. The silver to gold ratio was disrupted everywhere in Europe thanks to French debasements. The ratio stood at 13.1 in Florence compared to 12:1 in France during 1316 who was trying, like the Silver Democrats of the 19th US Century to overvalue the price of silver. By driving the price of silver even higher relative to gold, they forced the ratio in France down to 5:1 in 1343, setting off riots in Florence. Silver was being drained from the local economy flowing to France where it was over-valued and this created a sharp recession in Florence with the shortage of money (silver) for domestic use.

Why? For you see, wages and local commerce were conducted in silver. Gold was used only for international trade. Driving the price of silver higher raised the cost of production which simultaneously reduced the value of trade and even outstanding loans made to individuals and sovereigns alike. This caused a drop in production and rising unemployment. Hence, the first riot came in 1343 whereby the French Debasement had contributed to the impatience of the population. Switzerland did the same thing pegging the franc to the euro because the franc was rising and manufacture threatened to leave. Hence, Switzerland has imported massive inflation raising the cost of living and doing business there to TWICE that of the United States.

The Florence monetary system was a Two-Tier system whereby gold was used ONLY for settling international trade and silver was used for domestic commerce. Those who simply think because coins were precious metals and thus were not “fiat” yielding some land of Utopia where the value of money was constant while assets rose and fell, cannot grasp the simply concept that assets rise and fall ONLY in terms of purchasing power of the currency regardless what you use for money be it gold or St Patrick’s discovery or Slave Girls that were the unit of account for money in Ireland.

Bitcoin is a bubble

Dow Jones Industrial & BitCoin Correlation?

Posted on December 14, 2013 by Martin Armstrong

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QUESTION: Hi Martin; It is very interesting that both virtual currencies, Dow Jones Industrial Average(US Stock Market) and Bitcoin, topped out on November 29, 2013. I’m not saying that this is the top of the markets, I’m saying the Dow(US Stock Market) is Bitcoin for the Super Rich. I’m saying that they are both are now correlated. Both are being valued as a way of protecting wealth from bail-ins. Therefore, as goes the Dow, so goes Bitcoin. Is the Dow Jones Industrial Average in a bubble? Your answer may correlate to Bitcoin. What do you think?
Thanks,
F
 ANSWER: Congratulations! You are starting to see the interconnected world. The reason both Bitcoin and the Dow peaked the same day is because human collective behavior is the same regardless of the instrument. Why has the Economic Confidence Model worked so well? Because it was NOT based on a single individual market. It was based upon what you just observed. Humans speculate like clockwork. What they speculate in honestly makes no difference. Some people feel more comfortable with gold. Others stocks, others real estate. They will ALL act for the same reason, to preserve capital. What they invest in depends upon the mood and what they BELIEVE in.
The Goldbugs have taken this so personal that the world is wrong and only gold will survive and they attack anyone who disagrees. Their dream that EVERYONE will buy gold is stupid for it is no different from expecting everyone to vote Republican or Democrat. I am a political-agnostic because I see both sides and yet they agree on one thing – government needs to control society albeit for different reasons.
Both peaked because it is a cycle of human trends, not per se a specific market. So yes, you get these correlations that verify the overall trend. However, Bitcoin is a bubble for its value soared in a Phase Transition that the Dow Jones has not yet accomplished. Keep in mind that the Dow can absorb huge capital where and Bitcoin or even gold cannot.

2014 for a reaction high in the Euro

How to Interpret Consecutive Directional Changes

Posted on December 14, 2013 by Martin Armstrong

Reply

QUESTION: Martin – how should consecutive “Directional Change” indicators be interpreted?
Regards,
DR
ANSWER: Normally this type of pattern produces just a sideways churning back and forth. This is why in the Euro there has been nothing to write about. It is just a deflationary contraction. The dollar rose sharply between 1980 and 1985 also 1929-1932. Whatever the currency is during an economic decline will rise in purchasing power as people sell assets and need cash.

What we are facing on this cycle is highly unusual and it is why it has become so confusing. The traditional flight to quality is you run from PRIVATE assets into cash/government bonds (PUBLIC). However, what do you do when it is government that is collapsing? You will have no choice but to run to PRIVATE assets. This is why we are seeing real estate rise and equities.
The models have targeted 2014 for a reaction high in the Euro. That appears to be lining up with the EU elections and people are starting to become more violent. That is the distinction between pre-2014 protests and post.
We are expanding the Forecasting Arrays to include more models. This will include different types of volatility so you can see when to expect over-night moves versus intraday.

Deflation Causes a Currency To rise

Posted on December 12, 2013 by Martin Armstrong

The so-called Flight to Quality is the shift in money flows from one sector to the other that traditionally is reflected in the currency. The inflationary boom into the 1980 crashed and burned into 1985 sending the dollar to records highs for the century. Money moves fromPRIVATE to PUBLIC and that is where it is. The rise in the currency is NOT indicative of an economic boom or strength. The currency will rise as money flees from assets. The higher the currency moves, the greater the decline in trade and the higher unemployment will rise.

The Plaza Accord of 1985 was all about manipulating the dollar lower to reduce the trade deficit at the time and in theory create jobs. As Europe declines in economic activity, people move from bonds currently into cash. But the Euro is not exploding to the upside. It is really just holding for this is not the normal flight to quality. Capital is very confused regarding where to go in Europe, which is why the DAX has done well because people are moving internally within Europe into Germany in anticipation that if the euro cracks, they will get Deutsche Marks.

Bubble in Stocks?

Posted on December 11, 2013 by Martin Armstrong

The Amazing thing is people are already talking about this is a BUBBLE that is unsustainable. They are now claiming household income is down 4% yet the S&P 500 is up 70%. They are incapable of any real analysis. The RETAIL investor is NOT involved in this market. There is no wild speculative fever. They are obsessed with this being a bubble purely based on new highs with no regard for the pattern.

There has to be a Phase Transition for a Bubble. That requires a near doubling in the value within often the last year. We have new highs in the DAX as well. Why? Is the European economy doing well? No way!

Capital is fleeing from PUBLIC to PRIVATE. This is capital preservation – not wild speculation. Pension funds are moving into equities. Central banks are even putting out their reserves to be privately managed. The IMF is proposing taking 10% of all accounts in a bank in Europe. They are arguing for a SuperBank in Europe that will have the power to directly tax people in Europe and no nation can stop them.

HELLO! Just where is the wild speculation these people are yelling about that make up a bubble?

Euro & Its Rise with Deflation

Posted on December 11, 2013 by Martin Armstrong

QUESTION: Dear Mr. Armstrong,

You have not reported on the sinking Dollar for a while. Is this just one of the phases of competitive devaluation between the majors  with the US selling  or is it China liquidating.  With the Euro in a mess, the Swiss banks cracking and the $ falling where is the sense of it all and how much further  can the Dollar fall from here.

Thank-You,

PF

ANSWER: No, the Chinese are not liquidating dollars, they are shifting from PUBLIC to PRIVATE assets. They will curtail accumulating dollar reserves and invest more domestically. Nobody is buying Euros right now outside of Europe. The number for the Euro have not changed. Keep in mind that the higher the Euro moves, the greater the economic decline. The Swiss have shot themselves in the foot. This is a question of timing rather than price. We will have a report on world currencies very soon.

The greater the economic decline, the more deflation and the higher the Euro. But the numbers remain unchanged.