Origin of BUY the rumour but SELL the news

Confidence Game

Posted on July 31, 2015 by Martin Armstrong

QUESTION: Hello Mr. Armstrong,

humans often decide based on faith rather than thought if they have to choose one. Your ECM cycle is amazing, because it visualizes the change in confidence which influences so many decisions in the world!

Is it possible to reach human minds trough logic at all?

How can we communicate important concepts like your studies to others in the best way?

Sincerely,

P

REPLY: The vast majority of people want to believe in some definitive higher power. Like the conspiracy issue. People just cannot grasp that perhaps there is nobody really in charge orchestrating everything and we are at the mercy of the whims of finance. I took my son-in-law to Washington for some high level meetings. I told him he better think twice before stepping behind the curtain for he really did not want to see what I see. When we left Capital Hill, he was stunned to realize that this is a runaway train. There is nobody in charge. All they do is try to deal with each crisis as it appears. There is no long-term strategy and certainly no planning. Everyone creates wonderful conspiracy theories trying to create plots of destroying the world with no rational comprehension that the people they are fantasizing about just are not that smart.

The G5 and Plaza Accord was all about talking the dollar down to reduce the trade deficit. The Fed is all about a confidence game. Everyone who knows anything about what really goes on will tell you – it is also a confidence game. People act in anticipation right or wrong. This is the origin of BUY the rumor but SELL the news.

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Fed is looking to raise interest rates because pension funds are in trouble. They need higher rates to survive.

The Fed Hike in Rates & The US Equities

Posted on July 30, 2015 by Martin Armstrong

Sometimes it really does not matter what the underlying truth might be – markets move based upon anticipation and typically reverse with the news. The Fed is looking more and more like it will begin to raise interest rates for it can see that the pension funds are in trouble. They need higher rates to survive.

The US share market should drop with that anticipation creating the false move. So a decline into the ECM would be very healthy for the longer-term. A drop in equities would send the last bit of capital rushing into the US short-term debt taking those rates negative to the extreme. That would tend to cement the major high in government. Thereafter, the reality of a failed political system should begin to gradually make its way to the general understanding by early 2016.

Gold standard never worked simply due to new discoveries caused massive inflation

The Supply Side of Gold

Posted on July 30, 2015 by Martin Armstrong

The primary reason why a gold standard never worked was simply because the “money” supply can increase based not upon economic conditions, but simply due to new discoveries. The 19th century was plagued by the gold discoveries in California, Alaska, and Australia. Likewise, the discovery of gold in South America by the Spanish created massive inflation in Europe during the 16th century. The idea that gold provides some tangible value for money is absurd, for it has always risen and fallen in value based upon market conditions. Gold would no more provide a check against inflation than paper money. The only way to provide a stable money supply is to eliminate career politicians and stop the borrowing by government.

Well, when it rains it pours. A new discovery of gold has been made and the quantity expected is up to 46,000 tons of gold, whose market value is estimated to 298 billion US dollars if the market stays the same. The entire USA gold reserve is 8,000 tons. So we are talking about a sizable discovery in the Sudan.

From a supply-demand perspective, this could crush gold. The likelihood of the dollar collapsing is zero right now. The crisis is manifesting in Europe first. The dollar will be driven higher as capital seeks to get off the grid and hide. The US debt of $18 trillion is still a tiny fraction of the near $160 trillion in total world debt. It’s all a matter of perspective. Simply put, gold will rally ONLY when the stage is set. They it will rise to the monetary crisis in the future – not right now.

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Diamonds The Wildcard

Posted on July 28, 2015 by Martin Armstrong

Yes a lot of email have come in about the collapse in diamond prices which is correlating with gold very closely without bank manipulations. This is part of the deflationary trend and the 2011 high was on target for the reaction high. The 37 year target could produce a cycle inversion with a high instead of a low. That would line up with a phase transition in US equities. Otherwise, a low going into 2017 would imply a rally thereafter into 2023 during the next wave in the Economic Confidence Model.

Gold - Yearly Bearish Reversal lying at $681

Gold the Pending Question

Posted on July 28, 2015 by Martin Armstrong

QUESTION: Martin,

With your recent comments on gold; you seem to be implicitly suggesting people to sell their gold, since there is a good chance for it to bottom-out at a sub-$1000 level. Wouldn’t it make far more sense to hold onto it at least till November?

1) We don’t know for sure whether some of the central banks actually have all the gold they claim to hold:

2) Not all of the large scale gold transactions are performed overtly:

3) The gold accounts without physical holding/delivery go unaccounted in the total global demand for gold.

Kind regards,

REPLY: Whether there is more or no gold in Fort Knox is really irrelevant. The odds of anyone in government admitting to such a fact is ZERO. Most of these scenarios are meaningless. It all depends simply upon the overall belief in government by the masses – not those predisposed to buy gold for they will believe anything that supports a predisposed bullish bias.

The question as to if you hold physical gold and what to do is a separate issue from“investing” in gold. Sure I own $20 gold pieces and give them as gifts to the children in the family on their birthdays. That is really for Plan B. My concern is not with such physical basic holdings that you should have a hedge – my concern is when the Gold Promoters tell people ONLY gold will rise and everything else will crash and burn. That is the snake-oil fraud which has no support in history whatsoever.

If we as a civilization self-destruct because of the greed of politicians and go all the way to a Mad Max event, then we are looking at even gold will have no value. For the complete control-alt-delete reboot would reset the stage where the only thing of value would be food. Not even gold would have value for historically it only came to have value as a luxury – not for a practical utilitarian purpose.

If gold is your total portfolio investment – that is sheer madness. If you have some gold and it is a VERY SMALL proportion of your net worth, fine, for the question should be - CAN YOU survive a drop to the Yearly Bearish Reversal lying at $681? That is your max risk so that is what you must consider. Otherwise, you will panic at the low and sell everything for you will have no choice. Then when a rally begins, you will not be there.

An experienced trader who survives NEVER enters a trade without knowing where he is right and where he is wrong. If you keep making excuses for losses and hold your position all the time, you will lose your confidence and conviction and never see the light of day. That is a fool’s game and anyone who advises that is by no means an analyst. The BUY & HOLD advice has been applied to stocks, gold, silver, and whatever. It has NEVER proven to be correct even just once. You may have bought gold when it broke $1,000 on the upside before 2011. Nice. But did you sell when it came close to $2,000? If you did not sell, then you are in danger of enduring losses you perhaps may not be able to withstand.

The Gold Bugs believe only in gold and cannot see reality. There is nothing wrong with selling at $2,000 and buying twice as much at the low. Anyone who argues against such a strategy is a promoter – not someone you should listen to. That message is nobody can forecast anything so just buy and you will eventually be right like some broken clock. That sales pitch ruined stock investors during the Great Depression. Is your family’s survival worth such a fool’s game?

Diamonds entered a 37 year bear market, which often follows such a major Phase Transition- final major low unfold in 2016

What About Diamonds?

Posted on July 28, 2015 by Martin Armstrong

The diamond market has never came close to the insane levels reached during the investment boom which peaked in 1980. Diamonds entered a 37 year bear market, which often follows such a major Phase Transition. This warns that we could yet still see the final major low unfold in 2016 on an annual closing basis and 2017 perhaps even intraday.

We did see diamonds reach a reaction high in 2011, yet that high should stand right now as prices move back to retest support. Keep in mind that this is correlating with gold to a large extent. Likewise, gold did not exceed the 1980 high either when adjusted by inflation. The 1980 high is about $2,300 in current dollars.

Gold- 2 week bounce - panic to the downside and a test of the 1980 ($875) high now

Gold – It Ain’t Over Until the Fat Lady Sings

Posted on July 23, 2015 by Martin Armstrong

The problem with gold has been the Gold Promoters who have made up sophistry to sell their product convincing so many people to lose everything they invest. While the hate mail has started again claiming I am “bashing the gold bugs” as if this were a sport for no reason, it sadly illustrates that some people will always go down with the ship because they are married to a concept and are unwilling to see the world for what it truly might be – complex and dynamic which defies their idea of what is money.

The Associated Press says: Investors are running out of reasons to own gold. The AP is a wholesale news agency so their story runs around the world in numerous newspapers. The AP summed it rather well:

The dollar has rallied in recent months, diminishing the allure of holding gold. The U.S. economy has been on firmer footing, and tumult in China’s markets and Greece’s debt crisis have failed to restore the metal’s appeal as a haven from global turmoil.

It is a shame they some just cannot see that gold had to decline and the dollar had to rise because of the fundamental unsound structure of the Euro and that this is just one piece of the puzzle as to how the world economy shifts from the West as it dies under the theories of Marxist socialism and moves to Asia for 2032. This is also deflation caused

• (1) by rising debt within government which propels higher taxation resulting in lower economic growth and government’s hunt for taxes is destroying the LIQUIDITY and global free-flow of capital.
• (2) the technology age of creative destruction is manifesting within the internet age whereas we are displacing the old with the new that requires less manual labor.

So as politicians try to force minimum wages higher, companies turn to robots and it becomes a deflationary spiral. Robots replace manual labor eliminating pensions and healthcare costs which have become the largest part of many business costs. Starbucks spends more on healthcare costs than of coffee. This is all part of DEFLATION measured not simply in prices, but is the decline of disposable income for prices will rise with cost-push inflation rather than demand-inflation that marks a boom.

Yet others have written realizing that just perhaps there might be something to this concept that everything is connected, which indeed forms much of the core of Asian philosophy.

“First, your insights and comprehensive knowledge have turned a light on for me with respect to how the world works.  Thank you.  I especially resonate with your fundamental given: that everything is connected, dependent on everything else.  Yours is the first practical application of this fundamental insight of the mystics — especially the Eastern masters — that nothing and no one has an existence independent of everything and everyone else.  The Vietnamese Buddhist teacher, Thich Nhat Hanh, coined a term for this: Interbeing.  If only the would-be rulers of the world could understand this.  Instead, they pursue their doomed dreams of the supremacy of Me and Mine over everything and everyone else, and so we all suffer — temporarily.  Everything always changes…

Now a practical question:  You mentioned benchmarks that you expect gold to reach on its trip down, but you haven’t mentioned what they are.  I suspect that this information is contained in one of the special gold reports you have listed in your Store.  Is this correct? …

 Yes, the Benchmarks are the targets for it is ALWAYS not just PRICE but it must also beTIME. These two objectives must be reached. So do we have the low yet? No. To create the low, the MAJORITY must turn bearish. Their target forecasts will be in the $600-$700 level. The key Weekly Bearish Reversals are 1084 and 1075 followed by 1042 and 1026. So we have four Weekly Bearish providing support before the break of of $1,000.

Even those who use Fibonacci retracements were looking at 1282, 885, and 243. All the fundamental sophistry of the Gold Promoters has amounted to propaganda if not outright fraud since typically they have have a business selling gold or are deeply invested in it and cannot see beyond their personal investment. Some are also more likely than not of the payroll of someone else to put out bogus analysis to trade against. They did that in the Dot.COM bubble as well.

I we hold 1084 for the weekly closing, then we can see a 2 week bounce and everyone will proclaim the low so hurry up and buy more. If we close below these numbers, then we can see a 2 week panic to the downside and a test of the 1980 high now. If that unfolds, then the latter target may be further down. So we play it by the numbers.

There is still a risk that the SECOND BENCHMARK will be the final low rather than the first. That would fit best on the yearly model and it appears that what comes after October 1st is going to be anything BUT normal. OPINION will not matter much for we are entering a period where only the computer will be able to cope with the future. Nobody alive has gone through what we are embarking upon – so OPINION won;t mean much.

The problem for gold in the future is the hunt for taxes may in fact eliminate it as a viable means to transporting wealth as it once provided over the centuries. You cannot legally store in a safe deposit vault, hop on a plane with it, or go buy a cup of coffee at Starbucks. The hunt for money may seriously impact gold as a medium of exchange except in a very black market reducing it to the modern day drug business.

CalPERS Posts Gain of Just 2.4%

Posted on July 17, 2015 by Martin Armstrong

CalPERS (California Public Employees’ Retirement System) posted a profit of just 2.4% for its fiscal year (which ended on June 30) that was well below its 7.5% investment target. This is illustrating the crisis emerging in pensions. Even the pensions that were funded are now underfunded because they counted for so long on 8% bond yields. Interest rates were lowered to help banks and this set the stage for the next real crisis post-2015.75. You cannot manipulate interest rates to help banks without screwing someone else.

Now the pension crisis looming on the horizon is becoming a major concern for the future. The pension funds are either not funded or seriously underfunded. Either way, when it comes to government workers we will see tax increases that will destroy the economy, transforming many cities into the next Detroit. What really crushed Detroit was when the pension payment exceeded 50% of total revenue. Pensions will continue to rise, crowding out current expenses.

Steady hold of higher price levels implies the "False Move" will be to the downside and not the upside.

The Dow & the Two Paths To Chaos

Posted on July 16, 2015 by Martin Armstrong

We have a Daily Bullish Reversal in the Dow at 18105.00. A closing above that will warn of a retest of the May high of 18421.13. We still do not see a major crash unfolding and the next three months will remain choppy.

We have a serious risk of two patterns. Do we get the correction into the ECM, or do we get an initial high with the ECM? The first would be the more normal pattern. However, we do not live in normal times. If we penetrate the May high, expect a rally into the ECM with the traditional crash. The talking heads will proclaim their infallibility once again. But such a pattern would more likely that not be short-lived and then blast to a new high, a Phase Transition will most likely follow.

Keep in mind either way we must get that False Move, which sends the majority to one side and creates the energy like a pendulum to rapidly swinging back in the opposite direction. We are not swinging to new highs in a dramatic fashion, so this does not appear to be the False Move taking the market to new highs for a major crash. That would be more akin to a doubling in the price within the last year, which has not taken place. Therefore, the steady hold of higher price levels implies the False Move will be to the downside and not the upside.

Now you can see why we made the World Economic Conference AFTER the ECM for this will be the beginning of a move – not the end.

The Long Depression – the First Great Depression

Posted on July 16, 2015 by Martin Armstrong

What actually constitutes the Long Depression has been debatable, for at first it was called the Great Depression, and then that title was transferred to the 1930s. Consequently, some limit the term Long Depression to the worldwide price recession beginning in 1873 and running through the spring of 1879. Six years is not exactly a “long” depression, that in our analysis is 26 years – the typical maximum period which Japan entered following 1989.95. Europe appears to be completing a 13 year depression from 2007 into 2020 thanks to austerity – deliberate deflation to support bondholders.

Domestic analysis of the  Long Depression event of the 19th century USA centered on the Panic of 1873, which the inflationists/Silver Democrats dubbed this financial crisis the Crime of 1873. Of course, this view ignored the global economy and this set the tone for a 26-year economic depression plagued by numerous financial panics that finally culminated in the Panic of 1893, which were devastating to say the least and the Panic of 1899 with the peak in US interest rates reaching nearly 200% in a situation similar to Greece today.

Unfortunately, as always, analysts try to reduce everything to a single cause and effect plus they wear blinders like a horse only looking at this six-year period 1873-1879 with exclusive domestic analysis. Much of this contraction of this period was traditionally attributed to a monetary contraction leading to the resumption of specie payments in 1879. This was an extremely narrow view for this had the impact of introducing austerity, but that was at the end of the period. The bubble going into the event peaked with the Panic of 1869 and the birth of the Transcontinental Railroad on May 10, 1869, and of course the Gold Panic where Jim Fisk attempted to corner the market forcing gold up in price. The scheme was that when the USA would return to a gold standard they would have to accept the market price. You can watch the old black & white film Toast of New York on this event which inspired me as a kid to explore financial history.

The Transcontinental Railroad spawned a wave of innovation that unfolded as creative destruction. Mail order companies began to develop. Previously in 1845, Tiffany’s Blue Book (the jeweller) was the first mail order catalogue in the United States.  However, after the development of the Transcontinental Railroad, what emerged was the internet of the 19th century whereas trains now opened the continent as a market. By 1872, Aaron Montgomery Ward of Chicago, produced a mail order catalogue for his Montgomery Ward mail order business. Like Amazon today, Montgomery Ward began selling over 20,000 items in a 540-page catalogue directly to customers reducing prices and eliminating local stores, exactly as Amazon has eliminated local bookstores.

In 1986 in Toronto, Irish immigrant Timothy Eaton founded T. Eaton Co. The first Eaton’s catalogue was a 34-page booklet issued in 1884.  However, it was Richard Sears who began a business selling watches through mail order catalogs in Redwood Falls, Minnesota in 1888. By 1894, the Sears catalog had grown to 322 pages, offering sewing machines, bicycles, sporting goods, and even automobiles that produced from 1905–1915 by Lincoln Motor Car Works of Chicago.

The period of the Transcontinental Railroad lead to creative destruction event similar to the internet today whereas on one level the economic numbers looked good, yet unemployment was gradually rising. The price deflation was caused by innovation, as well as a decline in demand, laid the seeds for Marxism that people supported for they did not understand what was happening. They blamed industry and this fueled the development of unions as well in addition to working conditions. Hence, it was this period of a Long Depression that ignited social change insofar as it was a shift in employment to from agriculture to industrialization. Employment within agriculture was 70% in 1850, which declined to 40% by 1900, and would ultimately crash to 3% by 1980 all because of innovation from fertilizers to the combustion engine.

This economic evolution of the real Long Depression (1873-1899) created a “depression” for many as unemployment rose yet monopolies grew as did corporate profits for many in the right field. It wiped out Philadelphia as the financial capitol of the United States and J.P. Morgan would move that to New York City with his innovation. From this highly volatile period, as we are entering today, what emerged of socialism/Marxism that burst to the surface producing Coxley’s Army which marched upon Washington following the  Panic of 1893. It was this march that led to the idea of socialism for FDR took most of the demands first argued by Coxley that government should create jobs for the unemployed. This led to the Antitrust Legislation and the Progressive Movement of Teddy Roosevelt.

Coxley’s March became the subject of Lyman Baum’s Wizard of Oz –We’re off to see the wizard the wonderful wizard of Oz (Congress) following the Yellow Brick Road (gold standard & austerity). This economic event created serious change.

So those who argue that there was great expansion, yet ignore the social and global impact of the Long Depression, became commonplace. Today, the drive once again for austerity risks tearing Europe apart at the seams. This is what Brussels is dangerously doing and the surrender of Greece exactly opposite of their election and referendum mandate threatens to create civil war for this policy of austerity will once again destroy the social fabric of Europe.

Yes, there was an extraordinarily large expansion of industry, railroads, and physical output during the Long Depression fueled at the same time as a wave of creative destruction, but at the price of shifting trends within employment as we are seeing today with the internet. People lacking new skills to make the transition will be left behind and will blame something other than the trend which is typically corporations. So we once again have people looking at corporate profits and excess cash levels, yet there is rising unemployment, not to mention politicians demanding to raise minimum wages, and the introduction of Obamacare that provide the incentive to replace such workers with robots or client automation – “Press 3 to speak to…” etc.

The Long Depression was a conflict between innovation and the clash between Silver Democrats funded by silver miners to inflate for their benefit that caused silver to be overvalued leading to silver imports and gold exports. The Silver Democrats thought they could force the price of silver higher to 16:1 to gold and Europe would have to accept the higher prices but the reverse unfolded. They sent silver to the USA and exchanged it for gold which to them was undervalued. By 1896, J.P. Morgan had to organize a gold loan to prevent the USA from going bankrupt. This led to the famous speech of President Grover Cleveland who could see the world in a connected manner. He observed that capital could flee the nation or hoard and refuse to invest as we are witnessing today. But labor, he warned, could neither flee nor hoard itself. Therein lies the danger we face today for social change.

Grover Cleveland also said of taxes that it was unjust for a government to tax the people beyond what was necessary for it becomes “ruthless extortion and a violation of the fundamental principles of a free government.” Hillary Clinton’s economic plan, force corporations to raise wages – not reform government and reduce payroll taxes which is in the hands of politicians. Wages are not. We are plagued by people who want to rule the world yet are clueless about how it functions.