No government has NEVER paid off its debt

Standard & Poors’ Reaction Shows Political Bias

Posted Jun 28, 2016 by Martin Armstrong

Rating Agencies Testify Before Congress for their AAA-Ratings after 2007

Standard & Poors downgraded United Kingdom (UK), which is comprised of England, Northern Ireland, Scotland, and Wales, from AAA to AA. This shows emotional and political bias rather than any substantial change in economics; they are making good on their political threats of 2015. S&P rates China at AA- and the European Union at AA+. S&P, who is notorious for selling its ratings during the last bubble, claims: “In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the U.K. We have reassessed our view of the U.K.’s institutional assessment and now no longer consider it a strength in our assessment of the rating.” First of all, such an excuse would be justified with every US presidential election. Additionally, this downgrade before anything is settled is entirely inappropriate, especially when no government has NEVER paid off its debt and continues to borrow year after year.

It would be astonishing, just for once, to listen to how can government debt be rated AAA at any point since they routinely default, impose cuts, and never honor their debt anyway. A historical review of top corporate debt does not reveal any loss in capital whereas government is often restructured. Moreover, with the long-term progression of inflation, you receive less in purchasing power upon maturity of 30-year debt, meaning you actually lose money. Now with negative interest rates, they are clearly defrauding investors who buy government debt. So if the criteria is that you would risk not being paid back when rates are negative, then no government debt should be rated above junk bond status.

S&P is once again playing politics and one must wonder who paid them this time. If we look at economic growth, it has been declining since Britain joined the EU and it has had chronic trade deficits post-1985. So all the hoopla over BREXIT will prove to be a lot about nothing.

Looking at the UK, it shipped US$460.1 billion worth of products around the globe in 2015. This amounts to about 2.5% of total international exports, which is estimated at $18.686 trillion. Now, breaking that down, about 53.6% of UK exports by value are delivered to European trade partners. On the contrary, 22.5% are sold to Asian importers, 16.1% to North America, and just 2.6% to Africa.

United Kingdom’s top 15 trade partners by dollar value during 2015 are below with the percentage of UK exports:

• United States: US$66.5 billion (14.5% of total UK exports)
• Germany: $46.4 billion (10.1%)
• Switzerland: $32.2 billion (7%)
• China: $27.4 billion (5.9%)
• France: $27 billion (5.9%)
• Netherlands: $26.6 billion (5.8%)
• Ireland: $25.5 billion (5.5%)
• Belgium: $17.8 billion (3.9%)
• Spain: $13.1 billion (2.8%)
• Italy: $12.9 billion (2.8%)
• United Arab Emirates: $10.3 billion (2.2%)
• Hong Kong: $9.6 billion (2.1%)
• South Korea: $7 billion (1.5%)
• Saudi Arabia: $6.7 billion (1.5%)
• Sweden: $6.6 billion (1.4%)

Yet, if we look at interest rates, the UK is at US levels departing from the ECB. They can only do that with a separate currency. The economic risk lies in the European Union, and not in UK. Clearly, S&P is playing politics to lower a credit rating before any action is even taken. One would suppose the same would be justified if Trump were elected. I would guess Hillary’s supporters will pay for that one.

GBP- monthly closing now below 13660, retest par level. Euro risk in August ?

Posted Jun 27, 2016 by Martin Armstrong

While everyone is busy blaming the Brits, the real culprit is the EU. The audacity of various EU ministers demanding immediate withdraw is akin to a spouse who just discovered their partner was cheating. They may say beware of a woman scorned, well it looks like this applies to male politicians as well. The brain-dead morons cannot grasp that they crossed the line and embarked upon a political union in which they have denied any democratic process because they assume the people are too stupid to see what they see.

The markets will settle down and then flip. The smart money will figure out that London will remain as a financial center, as will Zurich. But there will be no such center within the EU because the politicians have a mechanism in place to outlaw short-selling at their discretion whenever the markets say they are wrong. BREXIT is the survival of Britain, not its demise. The crisis brewing is eight member states will ultimately follow Britain and hold referendums. Brussels may be the most hated political entity exceeded only ben Venezuela.

We can easily see from the technicals, that the pound has not quite yet actually broken the broad trend moving into a panic. It has held the technical support warning that everything can flip against the EU come early July. We have also been warning of a coming dollar rally that will make the dollar bears’ nose bleed from vertigo. The critical monthly closing support remains at 13660 in the cash pound against the dollar. A June closing beneath this level will confirm the dollar rally is beginning in a broader trend.

When we turn to the long-term chart (Yearly 1791-Date), we can see technical support at 13755. This has been broken intraday, but this is critical from an annual closing perspective. We have breached the critical support long-term and a monthly closing now below 13660 will confirm that the pound will retest the 1985 low at the par level. This in part will be the result of European politicians ignoring the problem has been them and their elitist views.

The attempt by Brussels to create the United States of Europe and the arrogance of allowing uneducated “refugees” into Europe to interbreed to create one mixed race is just insane. The looked to the USA and saw interbreeding of European nationalities and they saw a single currency. What they overlooked was a single language. Once everyone spoke English, then the intermarriage process began. These elitists are insane and do not understand what they have done.

Things will be moving into August/September. June was a Directional Change and that seems to have been on target along with our computer forecasting this result years in advance.

     

Now, when we turn to the Euro/sterling, we get a different picture. This shows us clearly that the problem is by no means Britain – it is the EU. While the euro rallied on the first knee-jerk reaction, it did not breach the major resistance at the 85999 level. In fact, the euro fell against the pound and has been making only a reactionary rally. If Ireland and Scotland want to leave the UK and join the Euroland, they will be major shorts. Anyone with assets in those locations will need to convert to dollars.

August looks to be rather chaotic. We should begin to see other countries move more rapidly for referendums. As this process begins, then we should begin to the realization is that the euro is in crisis, not the pound.

We can see that the Yearly Bearish we elected at the 116 level at year-end 2015 has proven to be dramatic. We rallied back to retest the 116 level which took a little longer, but it has fallen sharply and we can see the trend is in motion for a big dollar rally.

Potential of the EU becoming extinct by 2029

Posted Jun 27, 2016 by Martin Armstrong

Many comments and emails are pouring in that our model correctly forecast BREXIT and years in advance. Here is the picture for the next big chaos period – the US Presidential Election in November.  You can see that 3 out of 4 models show a Republican victory. Two of these show 60%+, which is unheard of.  What we have just seen in BREXIT is a prelude to the US election – very anti-establishment, anti-immigration, and fed up with stagnant wages thanks to rising taxation.

Tony Blair’s comment were very elitist saying that the people really are stupid and the government should not rush to leave. He says it is too complex to split, but it is also too fix. He just doesn’t get it. People want REAL change and are tired of listening how stupid they are.

We also saw the biggest turnout in Britain ever for such an event. Trump has already gotten more votes in the primary than any Republican candidate in history. This is reflecting what is coming. We should also see a record turnout in November in the US elections.

BREXIT was the first of four major elections that our computer has been projecting a strong anti-establishment uprising building on a global scale. Our targets have been focused on 2016.

The peak in the euro against the British pound was 1985. The day of the low in the pound was February 26th, 1985 (1985.156). Even the Pi cycle from that date was 2016.556 or July 22, 2016.

Our model on the European Union projected the high in 2004 and its collapse into 2008 when the euro peaked over 160 to the dollar. Now we are in. This raises the potential of the EU becoming extinct by 2029.

What lies ahead is going to be amazing. Nevertheless, this is all set in motion by the incompetence of government intermixed with their pervasive corruption.

If we close June below 13660, we should expect the pound to decline sharply in the months ahead.

The British Pound & the Aftermath of BREXIT

Posted Jun 24, 2016 by Martin Armstrong

The pound sterling had a smashing day ranging between 15016 and 13226; penetrating the 2009 low of 13508 as well as the 2001 low of 13680. That leaves the prior low that formed in 1985 of 10520 on the cash (103 futures). This is rather important for it implies that we should see that test of the 1985 low as soon as 2017. A year-end closing below 14050 will signal that should follow course. Keep in mind that our model has been projecting a significant dollar rally and the weakening of the EU will make that happen.

We have two incredible important numbers coming into focus for the closing of June: 13660 and we also have a Quarterly Bearish at 13680 and 14280. Obviously, if we close June below 13660, we should expect the pound to decline sharply in the months ahead.
On the Weekly level, a closing beneath 14000 will keep the pound in a bearish position. A merely closing beneath 14300 today will also signal that the pound is weak. There will be bearish sentiment, but this will begin to subside as people start to see that the EU cannot be sustained without the UK.
The European Union peaked back in 2004. It is done – just stick a fork in it. The arrogance of Brussels and their anti-democratic approach to force their elitist views upon the people is coming back to haunt them. Unless Brussels reforms, we will see the collapse of the entire EU structure right down to the euro.

The slingshot comes WHEN everyone realizes the future will not be anything they dreamed of.

Dow – Down & Dirty?                  

Posted Jun 25, 2016 by Martin Armstrong

The Dow has been bouncing off the Reversals as well. Despite being above 17800, it would fail to close above that. The question becomes WHEN will the Dow breakout to test new highs with the next target zone in the 21,000 to 23,000 area? With the closing on Friday below the first Minor Weekly Bearish at 17434, the Dow should move a bit lower now to test the 17120 level. We have a serious gap there after both technically and on our Reversal system. We can yet see a thrust to test the 15000 zone before turning back up again. The numbers tell us when the big moves will come. But we need not move down that far. We can hold technically the 16900 level, fail to elect any reversals, and the flip back up.

The key to all the markets is CONFIDENCE. We are witnessing a global revolution against career politicians. BREXIT is the first of four critical elections we have been warning about. There is no real chance of a major stock market crash because retail participation (both domestic and foreign) is at historic lows. There is no retail market that would panic. The “professionals” are baffled trying to figure this mess out watching the Fed and reading headlines. More hedge funds are closing because performance is collapsing. Opinion really drives the bulk of investment and nobody is getting this right because there is nobody who has ever lived during such a period. Those in search of guru will lost everything. The ONLY way to trade this mess is DISPASSIONATELY and just go by the numbers. The market is the only one that is never wrong.




The slingshot is coming. These four elections will change the perspective of government for the next few decades. Those in power will fight back tooth and nail. You can see it. Republican Elite hate Trump just as the Democratic Elite hated Bernie. Both represented upsetting the apple cart. Nevertheless, we are looking at a serious issue here. The slingshot comes WHEN everyone realizes the future will not be anything they dreamed of. The negative interest rates are destroying pension funds, Central banks have lost control and credibility, and socialism is dying very hard because government is consuming the bulk to fund its own pensions. The slingshot comes when people realize governments are collapsing. Then there will be the mad rush into all private assets.

The real chaos is just extending into the next 8.6-year cycle.

Constructing a Future

Posted Jun 22, 2016 by Martin Armstrong

Our models have been targeting 2018 for the last 30 years as the first potential year for a monetary crisis and reform. There was a shot that we could have doubled the Dow and everything would have bottomed on the first potential, such as gold in 2013 to 2014, and then turn up into that target. But the markets have been dragging this affair out so long that it looks like this is the beginning rather than the end point, and the real chaos is just extending into the next 8.6-year cycle. This is why we have the Reversal System, for it provides the numbers we have to achieve to confirm the trend. Just as we missed the 17800 on the Dow for the close of May, everything happens for a reason.

The vast majority remains bearish on the Dow, and, of course, the gold promoters always say the dollar is worthless, but their forecasts have not changed for decades. The Dow has all these people claiming it is overvalued and has to crash. Then we have Fed watchers who just focus on domestic numbers and ignore the entire world trend.
It is clear that everything is within a staging position in preparation for something really big. While so many say this is the end of the world and everything will go to zero, such events have never corresponded to their scenarios in history.

The most likely course of action has not changed. When confidence in government collapses among the GENERAL MASS PUBLIC, everything will breakout. Listening or convincing oneself about fiscal mismanagement of government is nice, but the general population is what counts. They are the movers and shakers. We merely jump to their actions.

So the computer gives us the numbers and the time. They simply have to be elected to confirm a trend. All I can do is articulate the points and then say here are the points and the time.

What we are facing is nothing anyone has ever experienced. So it is not going to be easy to come up with some “gut feeling” or opinion that matters. Whatever we “think” will or will not happen is irrelevant. Everything is changing. Financial analysts are failing everywhere. Hedge funds are losing money. The only way to trade is with something definitive without the personal opinion.

The days of searching for some guru who is never wrong from an opinion perspective are gone and only fools seek such ideals. We are heading into the eye of a financial storm that will topple governments. The future is being constructed before our eyes if we wake up and just look. The hardheads always lose everything because they are too stubborn and incapable of adjusting their investment strategy. Those looking to buy growth or value in equities will also lose their shirt for this is not a normal trading affair.