Gold

Gold at $2000?

Posted on August 31, 2014 by Martin Armstrong

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QUESTION: Marty, do you think it is even possible for gold to close at $2,000 by year-end? This just seems to be the same story over and over again.
Thanks
SK

ANSWER: Sorry, no. Here is a chart of gold back to 1264. There is not even a pattern like that, which has EVER taken place. I am really at a loss why gold analysts keep proclaiming the same thing costing people their life savings. This is not how professionals trade. We have a huge professional client base because they have learned the hard way that OPINION is nonsense and not reliable. Is this not just a process of churning out novices and causing them countless losses to line the pockets of the pros. This is seriously impacting the lives of people and that needs to be respected.
Technically, this is the primary support channel in gold. It has not changed. These forecasts for gold are entirely out of context and ignore the entire world economic trends. You cannot even argue gold rises with war for that is not even true. Gold did not rally during World War II because it was fixed. Commodities did not rise because the government put in wage and price controls. This is not a simple if then do this formula. It takes a bit more - if then do this else do that.


The major resistance in gold stands at $2300. That is the old 1980 high in today’s terms adjusted for inflation. Gold has NOT been the hedge against inflation as touted. If you bought gold in 1980 at $875 and the Dow Jones Industrials at 1,000, you have about $1300 for gold and 17,000 for stocks. That cannot be excused away. Gold is NOT a hedge against inflation, it is NOT money for you cannot pay your mortgage with it unless you sell it for dollars for the definition of “money” is the acceptance by society as a medium of exchange. It is not even legal tender for you cannot pay your taxes with it without converting to dollars. It is an investment – plain and simple.

Gold remains the historical hedge against government. You should never reject all other investments waiting for gold to finally rally. I retired from the gold business after 1980 BECAUSE the model project a 19 year bear market. Sorry if that is impatient. But waiting 19 years is a bit too much for me personally. NOTHING always rises. There is a cycle to everything. You need to create databases to see what is even possible – not make up shit.

When gold has been money it DECLINES with inflation and rises with DEFLATION. It has never been a store of value for that would imply a communistic state where everything is fixed from assets and wages to ensure that money buys the same every day. These are simply stories for child for they cannot be real. The idea that money is a store of value is a pipe-dream for those who do not understand how to even invest so they want to prohibit everyone else from making money since they do not.

Gold will rally when it rises in ALL CURRENCIES – not just dollars. To even claim gold will rise to $2,000 implies the dollar will crash. What about BIG MONEY that really drives the global economy. Where does it go? Rubles, Yuan, Euros? Come on. The worst is yet to come but that is a Sovereign Debt Crisis and I hate to tell these people is it at an advanced staged in Europe and Japan. We have not even gotten a taste of it yet in the USA – only a whiff with events like Detroit. Sorry, the dollar is still center stage and the will set in motion the economic decline from the outside moving in.

Gold’s role will be completely different. We are addressing this in the upcoming special report. This is covering gold in all major currencies so you can see the change in trend and when it is really due. This report is over 300 pages.

Cycle Inversion & Staging Ground for 2032

 

Posted on August 28, 2014 by Martin Armstrong

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Everything is setting up for 2032 and while the Economic Confidence Model is a global model, how individual markets are performing with it is a guide to the future. Gold rallied into 1979 rising from $100 to $400. Then the Phase Transition hit into 1980 taking it from $400 to $875. Interest rates peaked with the ECM in 1981 and gold bottomed in 1982, rallied into 1983 making everyone think the decline was over, and then it collapsed into 1985 for the start of this Private Wave.
We can see the inversion process relative to the ECM. Where in 1985 there was a low, with end up with a final low in 1999. Then look closely and we can see the high in 2011. This is setting that stage for what is coming in 2032.



In a basket of currencies the 1982 low in gold was the major one. The change in the currencies and the birth of the G5 in 1985 helped to compel gold into its final low for 1999. It was not an intentional manipulation for gold, it was a vain attempt to reduce the trade deficit. Currency will be critical going forward especially with the birth of electronic currency on the horizon.
We are publishing the gold report by next week. We have included gold in each currency with the reversal and timing arrays. That is in A$, C$, Euro, Swiss, Yen. and yes, Chinese Yuan. Currency will have a major impact going forward. A real BULL MARKET takes place ONLY when it rises in ALL currencies not just one

Phase Transition – Cycle Inversion ? 2014- Q4

 

Posted on August 27, 2014 by Martin Armstrong

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QUESTION: Marty, you have said that the turning points are just that, turning points. So if we get a high or double top the first week of September, will the market still rally thereafter? Are we looking at a cycle inversion here, where the ECM begins to rise while the market declines sharply? If not, then what do you think will happen?
Thanks!
EH


ANSWER: Yes, these are turning points and they do not always reflect the direction because some markets are peaking while others bottom at these turning points are on a global scale since this is a world model. The 1987 turning point was to the day, but it picked the low of the crash not the high. The US share markets was not the focus but a reflection of the real change underlying everything – capital flows.


It was Japan and its share market that was in a perfect alignment with the ECM. The capital flows shifted with the ECM and became focused on Japan for the 1989.95 turning point. True, we stated there would be a crash in the USA and I even warned the White House of that 2 years in advance in 1985 because they were forming G5 to manipulate the dollar lower to reverse the trade deficit. That reversed the capital flows and the US share market was simply the casualty of war – collateral damage. That is why the day of the low we said that was it, the low would hold, and that new highs would be seen in sympathy with Tokyo going into 1989.



The US new high came the week of July 24, 1989. The first Weekly Bullish Reversal was elected the week of April 10, 1989, which was 77 weeks from the low. The US market followed the overall trend, but it was not the primary focus. Why did it bottom with the ECM? It was not the actual share market that was the driving force, it was the G5 manipulation of the dollar and the fear the dollar would fall another 40%. It was an exodus of foreign capital, not ONLY the share market.



The capital flows during the crash sent the yen soaring, but it then backed off into 1988 with the capital flows. Then the trend reversed and capital poured into Japan for 1989 as all foreigners then were buying Japan creating the bubble.



Currently, liquidity remains very low – still at about 50% of 2007 levels. The retail market is not in the US shares so we do not yet have the froth foaming. Once again, the forecast is NOT about the share market – it is concerning capital flows. The US share market is the only game in town for big money that is smelling a problem in the debt markets. We have Germany wanting to impose a 5% surcharge tax to bail out municipal debt and confiscate 10% of your bank account to bail out the banks. Hollande in France is firing everyone but himself and he is taking France down the tubes.



This is NOT the bull market of old. This is all about capital flows. That is what will start the turn here the first week of September. We have been stating that for a couple of years now and going into October/November has not changed.



Here is the monthly array from last year. This was showing the change in trend in July and then September. So nothing has changed from that perspective. We have the same problem right now. The US share market is NOT lined up with this wave of the ECM. This warns we are dealing with a casualty of war and the focus again is the shift in capital flows thanks to war, collapse of Euro, and the Sovereign Debt Crisis.



Looking at the current Array, we still see October November as rising volatility and December year-end remains a target. We still see the risk of a high 2015-2016 with exceptionally high volatility in 2017-2018.
The question we will address at an upcoming live internet conference will be this critical issue. Are we moving for a Phase Transition now, or are we extending the entire cycle because everything is crumbling around us even geopolitically?
We have been warning of a potential cycle inversion caused by all these trends converging. We have been warning this could not be determined until September.

Nasdaq- capability of reaching 6500,00

DEFLATION and yet another reason to Buy Equities

Posted on August 22, 2014 by Martin Armstrong

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With the Sovereign Debt Crisis, Bail-Ins, Cycle of War, Global Contraction if Capital Flows & Investment, welcome the age of DEFLATION and yet another reason to BUY equities. The NASDAQ Composite is up 50.9% from the 2007 high as of the close of July. This index still has the capability of reaching 6500,00 level compared to the 2000 high of 5132,52.The S&P500 is up only 22.49% for the same period while the Dow Jones Industrials is up 15.9%,
There is no question, where do you put your money? If you cannot trust banks, bonds are risky, cash is being eliminated, FATCA is reducing investing overseas, just ask yourself – what is left? Capital is being driven into equities and the retail public is still not in like it was, liquidity remains low, the talking heads keep saying this is a bubble so sell and buy exactly what? Then the Fed along with the Bank of England are contemplating rate hikes of quarter point changing the trend in interest rates. The central banks will recognize that Europe is caught in the Euro vortex of disintegration and will depart from their policies and pay attention to the asset booms domestically.
There will just be no place to stuff serious money BUT equities and corporate bonds. It becomes a process of elimination.

Cash SP500 should reach the 3,000 level

SP500 Still on Track to Test 3,000 Level

Posted on August 21, 2014 by Martin Armstrong

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We still see the US share market rising sharply. The cash SP500 should reach the 3000 level. We
have an important Monthly Bullish Reversal standing at 212342. Only an August closing below 193000 would be short-term bearish.

There remains no other game in town. With the lethal combination of the Sovereign Debt Crisis and the Cycle of War, the only place to park big money will be the private sector and that the smart money will choose equity while the so-called “conservative” will buy corporate debt, especially with corporate cash at record highs.

The real crisis seems to hit come September

Market Recap – US Shares

Posted on August 20, 2014 by Martin Armstrong

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The share market has peaked often in July but the real crisis seems to hit come September. This was the similar pattern at the July 20th, 1998 peak in the Economic Confidence Model. The share market made the peak precisely on the day of the ECM, but the crisis that unfold with the collapse of Russia followed and then the collapse in Long-Term Capital Market debacle.



This seems to be a similar set up. The volatility should rise and the key appears to be set up for the first week in September. So stay alert and on your toes.

Crisis Collapse in World Capital Flows

 

Posted on August 19, 2014 by Martin Armstrong

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QUESTION: Marty; You have emphasized how you track world capital flows and conducted your research even in the flows of capital and disparity of interest rates between regions in the Roman Empire. You have mentioned that liquidity has collapsed and that capital has fled from emerging markets that is also putting pressure on Russia before the sanctions. Is this part of the crisis you foresee and explains simultaneously the rise in corporate cash to record levels. It seems what you taught us at the conference appears to be on point connecting these dots. Do I have this correct?
Thanks for your enlightenment in the middle of a very dark age.
JB

ANSWER: Yes. You are seeing everything around you and connecting the dots correctly. The rise in corporate cash is a reflection of the collapse in capital flows that is now even being accelerated by FATCA. Liquidity has also collapsed and this is all reflected in the failure of conventional fundamental analysis to understand that the game has changed entirely.

Those who seriously think that the dollar will be impacted by oil or China will unseat the dollar as the reserve currency are simply living in a world of delusion. Such statements made by people display they have no clue about the depth of international capital flows remaining clueless to the FIRST Golden Rule - international capital flows that dictate why the dollar is even the reserve currency. This is the golden rule of a reserve currency always attributes to the most powerful and largest economy throughout history


The SECOND Gold Rule is that of finance over trade in the modern age that has been really accelerated globalization of the world economy since the fall of Bretton Woods. People fail to even comprehend why Bretton Woods collapsed. It had little to do with trade – it was a current account deficit of the USA caused by the global expansion of the military. Even John F. Kennedy understood this and stated bluntly that the US could end its current account deficit any time it desired. I personally believe Kennedy was assassinated because he wanted to curtail the military to support the dollar. That was the real economic issue that he understood.

This globalization of the world economy is best illustrated by trading in foreign exchange markets. Daily foreign exchange trading has reached over $4 trillion, including spot and forward markets and other foreign exchange derivatives that feature prominently in carry trades (cross currency swaps based upon interest rates). While still in the teens in the late 1970s, the ratio of yearly foreign exchange market turnover over merchandise exports had reached about 50:1 in the 1980s, and has doubled again since that time. The current ratio of around 100:1 implies that only about 1% of foreign exchange trading is actually related to merchandise trade. The bulk of money flowing around the world is INVESTMENT. So just how can China or Russia displace the dollar if trade is a tiny fraction of the world economy?


The conspicuous rise of derivatives has provided yet another indicator and symptom of the fragility of unfettered global finance, including credit derivatives such as credit default swaps and collateralized debt obligations. These instrument have been celebrated as welcome innovations in a new era of cherishing beliefs in self-regulation thanks to bank lobbying and the repeal of Glass Steagal. These products have only proved to be the most lethally destructive instruments ever contemplated far beyond their centers of origin in the developed world. What they have done is leveraged the entire game into a realm that few even contemplate the potential impact.


This is the real state of affairs and it is why in 2032 we could be facing a profound change in our political-social-economy. If we have leveraged the entire system far beyond our rational understanding of our management capabilities, then the correction will be equally leveraged on the downside. This is the danger we face for I cannot rule out a Dark Age as long as we over leverage the entire global economy.

The current economic crisis is truly an unprecedented collapse in international capital flows that has followed years of rising financial globalization since the fall of Bretton Woods. This collapse began with the 2007 turning point on the ECM from which we have witnessed a collapse in liquidity that is coupled with a major retrenchment in international capital flows. This amazingly alarming phenomenon has only been accelerated by the hunt for taxation by governments and their refusal to reform or even comprehend what they are doing. Across time, this astonishingly dramatic collapse in capital flows began in the wake of the Lehman Brothers’ failure. We saw this collapse in flows become manifest in banking flows being the hardest hit due to their sensitivity of risk perception. The collapse in capital flows has impacted emerging markets as capital has been recalled and that has also been accelerated by Russia’s aggressive posture. Therefore, across regional indicators such as emerging economies has been devastating. The retrenchment in developed economies has been the rise in risk in banks, investment, bonds, and escalating taxation.
A clear econometric analysis warns that the magnitude of the retrenchment in capital flows across countries has been linked to the extent of international financial integration and countries reporting to one-another what everyone is doing for tax purposes. Domestic macroeconomic conditions and their connection to world capital flows has been dramatic.

The US is now harassing even our people flying in for meetings from other countries all concerned about taxes and are they being paid in the USA. They are no longer harassing tourists for taxes on trinkets. They are harassing business people looking for money. This is highly destruction of international business and such discretion in the hands of low-level border officers who fail to understand anything is proving massively destructive to the world economy.

The week of 09/01 seem to be shaping up as a high with a turn back down thereafter. Phase transition ?

US Share Market – Correction Over or Posturing?

The S&P500 elected a Daily Bullish Reversal last week and a rally unfolded thereafter. But we see this as posturing just yet. The volatility will begin with the first week in September and then rise into November.

This market does not appear to be in crash mode – only a correction mode buying time. The directional change last week turned the market back up. However, we have another next week and the week of 09/01 seem to be shaping up as a high with a turn back down thereafter. So some caution is in justified. A high need not be new highs. It may be only a retest of the July high or a double top.

Corporate cash is at record highs so this market is by no means over-priced. We will still see a Phase Transition unfold. The question is timing. Once we get past this October/November people, we should see a trend form. It is possible that mixing this entire situation of a Sovereign Debt Crisis and the War Cycle we may see an extended rally into the 2016-2017 time frame and government crashes. If the markets peak in 2015 and fall back for 2 years into 2017, then it looks to be off and running into 2024.

The mixture of the Sovereign Debt Crisis and the War Cycle are the key to the future. We will try to do an update in September with a on-line session via a live-stream since that worked well the last time.

War & Commodities

Posted on August 5, 2014 by Martin Armstrong

QUESTION: Hello,

I am a fan of your research and forward it to my friends when I can. Reading your site has provoked a question..If the war cycle proves true which it very well could, and we see a downturn in Q3 2015, then will commodities such as crude and gold likely spike upward, or will they be pulled down deflationary like in ’08 in your projections?
Thanks for the great work we all appreciate it.
Thank you,

AJ

ANSWER: One reason gold and commodities are declining during the upside of the ECM is indicative of the cycle inversion in the wings. During war, base commodities rise in value. During World War I, there was the huge commodity boom. During World War II, governments imposed wage and price controls so prices did not rise as a matter of law. We even saw nickel being replaced by silver in the 5 cent pieces during the war.

Therefore, base commodities would rise like copper and nickel, and normally we should see gold and silver rise as well. This time, since there is no gold standard and silver is not being used for coinage, we stand a chance that there will be no wage and price controls in this respect. Our greatest danger will be the tax man.

Capital Flows – Domestic v International

Posted on August 5, 2014 by Martin Armstrong

QUESTION: Martin,

The problem with cap money flows is that they can turn quickly.

For instance, does socrates  take in to acct the drought in the west?

If so it must know that the cattlemen are preparing for major water

deliveries. This is happening all the way the the hills of the SF bay area.

Good luck with that.

It is Irish luck John

ANSWER: Actually yes. The Federal Reserve was first set up focused on the domestic capital flows for they caused the Panic of 1907 following the San Francisco 1906 Earthquake. The insurance companies were in the East and the claims in the West. This resulted in a capital shortage in the East and bank failures. That is WHY the Fed was created in 1913 with 12 branches and each branch had independent authority for interest rates to attract and deflect capital. It was not until FED usurped that power and vested it in Washington DC with one interest rates fits all. That to this day has not altered the domestic capital flows. We correlated the regions and have written about the Tex-New York arbitrage. When NY booms Texas is in the hole, and the greatest boom was the oil boom in Texas during the Great Depression in New York.

 What you are glossing over is that there are cycles in weather just as there are in war. They too are incorporated into the model and it is always nature first that causes reactions by mankind. Why does war unfold when our model targets 2014? Simple. The economy declines FIRST and this sets in motion rising tensions and discontent.l It is NOT war then the economy, it is the economy and then war. That means weather is also involved for as I have stated – EVERYTHING IS CONNECTED. Personal opinion and interpretations mean nothing at the end of the day. Capitalism only began because of the shortage in labor caused by the Black Death and that spread to Europe because of War in the Crimea. There was the Great Influenza after World War I that killed tens of millions of people.

It took me some time to understand how the computer could even predict the rise and fall of nations. This is NOT ME with some lucky opinion. The computer predicted every conflict with amazing accuracy based upon rapid shifts in capital flows. I came to understand the mechanism only after advising the Universal Bank of Lebanon. They discovered a ledger with the prices of the Lebanese pound recorded since the mid 19th century. They asked if we could construct a model on their currency back in the 1980s. We did. The computer came out and said 8 days until the currency collapsed. I personally thought it was crazy. But the client was paying me to report what the model said – NOT MY PERSONAL OPINION.

I was embarrassed to say 8 days. I had no choice. I did so NOT knowing the fundamentals at work at all. I expected them to say you and your computer are nuts. Instead, they asked what would be the best currency to move into? I told them the Swiss franc.They were calm in asking advice. Only after the fact did I understand why for they were seeing capital flows shift ahead of civil war, which the computer pinpointed to the day. If you know you will start a civil war, what do you do? You move your capital to safe ground. That is HOW the computer picked up events. It does not need to know the fundamental or who is doing what – it tracks the movements and people react in anticipation.

In 1985, under the leadership of Geagea and Hobeika, they split entirely from the Phalangists and other groups to form an independent militia which was the dominant force in most Maronite areas. The Command Council then elected Hobeika to be LF President, and he appointed Geagea to be LF Chief of Staff. In January 1986, Geagea and Hobeika’s relationship broke down over Hobeika’s support for the pro-Syrian Tripartite Accord, and an internal civil war began. The Geagea-Hobeika Conflict resulted in 800 to 1000 casualties before Geagea secured himself as LF leader and Hobeika fled. Hobeika formed the Lebanese Forces – Executive Command which remained allied with Syria until the end of the war.

By 1998, I was an expert. I came to understand capital flows and was able to articulate the events on the horizon in the capital flows regarding Russia that would result in the collapse. That became the collapse of Long-Term Capital Management. This war cycle is doing the same thing. It is possible ONLY because of the collapse in liquidity, the hunting of taxes that is shrinking the world economy, and the excessive socialism that is collapsing government as its pensions and debt become unsupportable.

After 911, the government used this information from our model observations to search to see who moved money in advance and who bought market positions the day before. I had communications on this to explain how it worked. After all, the CIA wanted our model after it pinpointed the Russian collapse in 1998. They suddenly saw not forecasting markets, but geopolitical events. That was important info to them.

So yes. Capital Flows shift and they are picked up equally rapidly on our models. Sorry – they are just far better indicators than personal opinions. You can think some fundamental operates in total isolation. But farmers would not be in a drought in the first place if it was not cyclical. This is the entire problem. Looking at everything as just personal Irish luck prevents you from opening your mind to entertain that just perhaps we are NOT the masters of our entire economy. We may be just a fly on an elephants ass with no concept that it is even an elephant. As long as you attribute everything to dumb luck, then you should fund me at a casino and see if that luck holds up. Sorry – there is far more order hidden behind the superficial chaos you think is random.

Gold may not reach its final peak until 2025

Beware 2025

Posted on August 5, 2014 by Martin Armstrong

QUESTION: Hi Martin,

As an avid reader of your blog I have the following question:

I follow the rationale for the coming capital concentration (and bubbles) in US stocks and then gold into 2016/7.  Once the bubble for gold bursts where do you see the capital flowing?  Is that when you foresee an even greater credit deflation meltdown than what occurred in Autumn 2008?

Best Wishes,

AR

ANSWER: We are most likely going to see a financial crisis that engulf the pensions and the sovereign debt crisis. The preliminary target seems to be really off in 2025. However, 2020 will be the first big crack.

We seem to be headed for the electronic currency as the first fix. But we will see this migrate to the replacement of the reserve currency, which I believe will be a basket of the major currencies administered by some agency, I sure hope will not be the IMF. However, I would bet against my luck on that one.

Gold may not reach its final peak until 2025. This will be a reflection not so much for gold as an investment, but as simply a reflection of the entire financial system.

Germany - the next pin ?

Sanction Against Russia Set the Stage for the Next Real Big Crash

Posted on August 4, 2014 by Martin Armstrong

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This entire war of sanction against Russia will contribute greatly to the economic decline next year from 2015.75. Even the US economic growth is slow and unemployment is more than twice as high as it was when the Great Depression began when it was just 5% back then compared to 10%+ currently. With China, emerging markets, Europe, and Russia all in a desperate declining phase economically, the USA is the last pin holding up the world economy. This pin will be pulled next year and from there into 2020, things can only get much worse.
The sanctions against Russia will push economic growth in Germany to zero. The Ukraine crisis is seems to have been felt even in the first quarter. In the coming years, Germany could still experience significantly larger problems economically from the sanctions. German Economics Minister Gabriel has apparently stopped a business of Rheinmetall with Russia. The company will now lose 100 million euros.
Against the USA, Russia is now looking at imposing capital controls with American dollar transactions. That will only hurt the Russian economy even more.

Meanwhile, the Russian authorities continue their counterattack against Western Imports. The Americans have an extensive product range of hard drinks. If the Russians now start to discover impurities that could give the Russian industry a boost. McDonald’s consumer protection authority now wants to stop the importation of precious whiskeys from the USA. In the U.S., the Americans have banned the best cigars from their market due to the Cuba sanctions. The sanctions cost government nothing, they shift the burden to the private sector and always cost jobs on both sides.