Euro- first 115, then maybe 120 at best

The Euro & the Press

Posted on May 13, 2015 by Martin Armstrong

           

It is typical how much of the European press is saying the Euro decline is over and a Greece default will not harm Europe. This seems to be the standard propaganda from government that comes out with every serious change in trend be it Japan in 1990 to the US 1929 Bubble where it was also immediately pronounced the fundamentals were all sound.

We warned that the first area of resistance was at the 115 level on the weekly models and that we did not expect a break of the 80 cent level just yet – that was more after 2015.75 than before. Yet we need a daily closing above 11360 to stabilize the Euro. A daily closing back BELOW the 11120 level will warn that a retest of the lows will follow.

The decline is still in motion. This is a reaction rally and the very best we can hope for is a retest of the 120 level. However, we must break through the top of the channel on this chart to make that happen. Otherwise, the 115 level may be the maximum on the upside. That channel stands at the 11427 level at this time and the 109 level under the market. Break the channel on the downside on a closing basis and the lows will be retested. The main support still lies at the 103 zone.

When Genius Failed

Why do Most Computer Models Fail?

Posted on May 11, 2015 by Martin Armstrong

Computer Models typically fail for the same reason why human forecasting from a gut personal perspective becomes a joke. In both cases, if there is no experience with the past, neither can possibly forecast the future. Such models have failed because they lack the historical database on a global scale. How is it possible to create a model that only goes back to 1971 where free data is available? What will happen is catastrophic. It will work for the period that everything is normal, but it cannot predict the major events like the Great Depression and Sovereign Debt Defaults for it has never seen such events in the data.

The models that resulted in the collapse of Russian bond debacle in the Long Term Capital Management in 1998 were created by brilliant men who had no trading experience. The book,When Genius Failed, went into the arrogance of the firm and the era. Long-Term’s partners relied upon what they though was the magic formula that could predict markets. Their arrogance in mathematical certainties created a new age culture of Wall Street that set the stage for its collapse, yet it has still not quite gone away. This arrogance remains and it has contributed to both the rise and the fall of Wall Street in search of the Perfect Trade.

When Long Term Capital Management (LTCM) was founded in 1993, it was touted as the most impressive hedge fund in history. Its mathematical models were blessed even by the Nobel Prize much like Obama was handed the Nobel Peace Prize simply for being the first black president. Yet in just 4.3 years, the wave of the ECM 1994.25 to 1998.55 had dazzled Wall Street as a $100 billion moneymaking juggernaut, I was personally told to join the “club” for with these mathematical models and Nobel Prize winning players combined with rigging the game and paying bribes to politicians, it was the Perfect Trade in Russia. I told them our model said it would collapse where their’s said the party would never end.

Long-Term Capital Management suddenly suffered catastrophic losses that jeopardized not only the biggest banks on Wall Street but the stability of the financial system itself. This resulted in the Federal Reserve, without any authority, bailing out a hedge fund for they would have taken down the high-flying banks who all bet on this Perfect Trade.

The dramatic story of Long-Term Capital Management’s fall illustrated that the Federal Reserve could have saved both Bear Stearns and Lehman Brothers but this was Wall Street’s payback. Bear refused to contribute money to bailout LTCM because they were not involved. Goldman Sachs’ Hank Paulson let them go because I believe they were competitors to Goldman and he wanted to steal their clients. There was plenty of precedent to bailout LTCM which was not a bank, so Paulson’s excuse was nonsense since the next day he rushed to bailout AIG that owed Goldman a fortune. Bush, in my opinion, was a fool manipulated by the people around him with their own personal agendas.

 So the Black & Scholes Models failed for it lacked the historical depth to back-test the model under all conditions. This is why we spent so much money on creating a database all the way back. Even the model used for the CDOs, failed. David X. Li, the Canadian math wiz was blamed for that failure.

In truth, many people have tried to copy what we have accomplished tying together the fact we have used physics and then assume they can bring in math guys to create something they have no trading experience in doing. That has proven to be a wild ride to say the very least. It is the database that makes forecasting possible.

To put together this chart would cost over $100 million today. It was a major research project that was necessary to predict the future. The burning question was HOW DO EMPIRES FALL? Was it like a 747 plane coming down gradually for a landing, or was it a collapse out of the blue? If you do not spend this money, you cannot possibly predict how society will perform.

The 8.6 year frequency has been back-tested into ancient times. The discovery has been that amazingly it is part of everything that spans the centuries. This was like discovering the earth was round and not flat. Of course people will refuse to believe there is a business cycle and that cannot imagine that they will be compelled to act. What they fail to grasp is that the business cycle has always existed for it is partly influenced by nature, not just mankind.

There were people who refused to believe the earth was round for to them you would surely fall off if you were standing upside down. That was Issac Newton who had to discover gravity to explain that one. Today, there are people who cannot believe that something in the business cycle would be so precise. To comprehend what is going on and why, may take yet another discovery along the lines of gravity.

The database is the key. Without spending the money, you cannot even form the correct question. Hence, this is not been my theory of how the world should work, it has been my discovery of how it works and what remains not is to figure out why.

Even when the USA overvalued silver placing it at 16:1 when everyone else was 15-15.5:1

Wash Trades & Manipulation

Posted on May 11, 2015 by Martin Armstrong

QUESTION:

Marty;

How effective are Wash Trades in manipulating markets? There are people now suggesting that gold has been suppressed because of wash trades. Isn’t this just another excuse admitting they will not look at anything but gold?

Thanks

LW

ANSWER: Wash trades are not capable of manipulation beyond very short-term events. This is largely just another exaggeration, for in trading sometimes you simply have to play poker to get off a trade. This is because of the practice of front running. When I had to hedge Aristotle Onassis’ platinum positions, it was a nightmare because everyone knows the size of your position. This common knowledge makes it extremely difficult to trade. If you try to sell one ounce, they jump in front of you assuming the whole stockpile is coming. Hence, I would have to buy gold and then silver in small quantities, and then go in for a quote of platinum and sell. They saw I bought the other two and PRESUME I am a buyer. They immediately move the spreads (bid & ask) in ANTICIPATION I will be a buyer. I would then sell the platinum taking small losses on the gold and silver.

A wash trade today is used to create the illusion of volume where a trader acts as both a buyer and seller to create the impression of depth. This can create thinking among buyers or sellers of an instrument who are waiting in the wings, where others attempt to front run such positions, thereby nudging the market price in one way or the other. But these types of wash trades are not really manipulative of the price direction. The market will move in ANTICIPATION but the trader will then immediately take the profit. Such trades are not capable of sustained manipulation.

These are all very short-term. Even the high frequency trading computers will tend to do some front running. A serious trader with money can easily set them up and actually manipulate those types of systems playing off their algorithms.

You cannot manipulate any market against its trend for once it is out of line, capital will be attracted against that trend. Everything is subject to international arbitrage. That is where those who constantly preach that they would be right EXCEPT FOR manipulation are dead wrong.

Audio Player

00:00

00:00

Use Up/Down Arrow keys to increase or decrease volume.

Even when the USA overvalued silver placing it at 16:1 when everyone else was 15-15.5:1, that manipulation was broken by international arbitrage. The gold moved from the USA and silver came to the USA where it was overvalued. That led the USA into virtual bankruptcy where J.P. Morgan had to organize a $100 million gold loan to bailout the USA. It was William Jennings Bryan who assumed the U.S. could arbitrarily overvalue silver at the request of the silver miner. They assumed that they could force the rest of the world to adopt their overvaluation of silver. It backfired and the USA became flooded with silver and void of gold.

No matter how many times I say it, or how much evidence I put forth, there are simply people who WANT to believe they have been wronged because of some manipulation. They will cling to these ideas and that will be their doom, for they cannot make the transition to a savvy trader to survive what lies ahead

Decline in the share market 1st sending capita into gvnt paper

The Shift in Public Confidence: 2015.75

Posted on May 5, 2015 by Martin Armstrong

There are many aspects that are lining up with the turn in the ECM (Economic Confidence Model) from the Blood Moon and the Jewish Year for forgiving the debts, to France imposing restrictions on cash in September, and even in Germany the laws that protected about half a million people so-called dachas there in East Germany expire. To date, a law protecting the tenant against dismissal by the municipality will also expire October 3, 2015. Everywhere we look, there are changes coming to a head, right down to the U.S. Federal budget with 2015.75.

Understanding why there is a regular rhythmic pattern to the world economy has baffled many. I believe this is caused by the convergence of so many aspects of life that the turning points are a rhythm of everything, yet simultaneously, we are individual creatures of our own fate.

The ECM is the global composite where each and every financial instrument has it’s own unique cyclical frequency. However, the complexity of cyclical movement is far more than the untrained eye can ever see. Simultaneously, the 8.6-year frequency also applies in two primary ways. First, the ECM 8.6 frequency will operate on each market as illustrated above. Gold peaked on January 1, 1980, which is 1980.0575. Adding the first quarter frequency of 2.15 years brings us to 1982.2075, which is March 16/17, 1982 (16.92 days into March). We can see that this turning point produced a temporary low to the day. Such precision is just astonishing, yet it raises a vast array of questions that I believe will set the stage for a new way of investigating the environment in which we live.

The second aspect of this ECM model is the convergence. In other words, we are able to see where the boom and bust will take place by determining which market sector aligns with the major turning points. Of course the 1987 crash bottomed to the day with the ECM confirming that was the low. The same took place in 1994 where the U.S. share market bottomed right to the day, once again confirming this was an important low. Therefore, it has been the alignment of the individual market with the major ECM global frequency that determines the outcomes.

This next turning point should be the peak in the concentration of capital and confidence in government. From there on out, 2015.75 should mark the change in trend where people will start to disbelieve government on a grand scale. The debt markets that peak precisely with the target are going to get the worst of it. What we do need to pay attention to is there a decline in the share market first that send capital rushing into the short-term government paper to create the final rally?

Euro will most likely break the 80 level AFTER 2015.75 moving into the 2017. Could see August as a reaction high on a closing basis.

The Reaction in the Euro

Posted on May 2, 2015 by Martin Armstrong

           

The reaction rally in the Euro appears to be on schedule. The March low at 104.58 held during April so at the very least that implies a 2 to 3 month reaction rally. Bank dealing desks reported to us that their trading lines have been cut. We previously reported that we suspect the ECB has asked behind the curtain for the banks to stop selling the Euro. Liquidity has dried up even in the bond markets and this is not a good sign for the fall warning that we may see high volatility after the ECM turning point.

Weekly Bullish Reversals begin at 114.50 and 115.35. A weekly closing above this area should spark a rally back to retest the more important resistance forming in the 120.00 followed by the 125.00-126.00 area. We also have technical resistance in the 118.00 area during May.

Those looking to convert from Euros to dollars should wait for just now since we have completed a 10 month correction holding the primary support at the 10300 level. Yes, the Euro will most likely break the 80 level. However, that is unlikely to unfold until AFTER 2015.75 moving into the 2017 time period. This type of a reaction should shift the general view of the Euro back to a positive position briefly.




We still see June is where higher volatility should start and keep in mind that the main turning point in still the September time period lining up with the ECM (9/20-10/1). We could see August as a reaction high on a closing basis.

Technically, the Euro fell below the Uptrend Line intraday, but has held above this technical support on a monthly closing basis. We have remained within the Breakline Channel so everything is still within a normal trading range with nothing unusual unfolding so far.

Why the Top 1% Get Richer

Posted on April 30, 2015 by Martin Armstrong  

The socialists love to tout that 1% of the world’s population will own more wealth than the other 99%. From the socialists’ viewpoint, this justifies stealing from one group to give to another, despite this model failing in the past. It is also in clear violation of the Ten Commandments. But why does this trend even happen? Is it that the 1% suppress the 99%? Or could it be that government suppresses the 99%?

We have to look closely at how wealth is even measured. This is not cash in the bank, but market value of assets. In other words, unrealized gains. It was this way of thinking that destroyed the independent farmers. The land values soared and estate taxes came into play, the government valued the land at levels as if it was stripped mined for housing. Farmers had to sell off land to pay the taxes.
This standard of measuring wealth is really dangerous for it amounts to unrealized gains, not cash.

I donated my time trying to save Social Security by transforming it into a real investment account back in the 90s. The money should have been invested in equities. The Dow Jones Industrials would have been about 3500. The rich get richer from investments – not salary. I was trying to transform Social Security into an investment fund. I gave up because politicians could not agree on who the managers would be because they effectively wanted kickbacks. Social Security is now broke; the 99% paid into the fund and now its gone. Had the money been invested in equities rather than pretend U.S. government debt, they would have made almost 500%. There would have been real assets for individual retirement.

The 99% cannot get richer because government robs them every day. What should have been put into savings and investments, was squandered as usual by politicians. So is it the fault of those who actually invest on their own? The socialists want to blame the rich and rob them, handing more and more assets to the political class who waste it on themselves.

 

 

 

 

 

 

The 99% need to wake up. It ain’t the 1% – It is those who pretend to be on your side who deprive you of your real right to economic freedom.

Peak in government - 2015.75. So much cash & nothing to invest in, companies buying back their own stock

Negative Interest Rates = Tax of Savings

Posted on April 30, 2015 by Martin Armstrong

Reply

The current trend in Europe towards negative interest rates amounts to taxing whatever cash you have left after paying 50% in taxes. The bond auctions are starting to show signs that people will wake up and see what is going on. The incredible fact is that now, about 30% of all government debt in Europe is trading at negative rates, which amounts to about €2 trillion of securities in total.





The most important discovery I made was bumping into the 8.6-year frequency. The second was observing that each cycle wave focused into a different sector, both domestically or internationally. Capital has moved wildly over time but we tend to learn from the last mistake by trying something different, expecting to find that perfect investment that never crashes. That Utopian idea does not exist, for human emotion dictates how markets function.




We have the last three major business cycle waves to confront within this major generational wave. Hopefully you can see that these waves peak, and once you understand how things function, you are able to see the wave coming. The wave that peaks on October 1st should not produce an instant event as we have seen in the past, with certain wave peaks producing a major high or low in various private sector markets. This is the PEAK IN GOVERNMENT. Polls already show that 75% of Americans do not trust politicians. The same is true everywhere.




Our model on the Euro has been interesting. It began a new wave 2008.83. The economic failure of constructing the Euro began to burst through the cracks.




The major high for the Euro came right on target with the model in 2008. We have the Greek crisis that began in 2010, to the day on pi, from the high in 2007 on the Economic Confidence Model. Whenever something lines up with the international ECM to the day, such timing CONFIRMS that will be the intense focus.




The alignment of the Greece Debt Crisis to the day on the pi cycle is a warning that this cycle is all about government and the Sovereign Debt Crisis. The turning point on 2015.75 should begin the more obvious debt crisis that is brewing. Then the general public will become aware.
We have an insane policy at the European Central Bank, which is quantitatively easing on taking the interest rates negative, rather than doing what even Keynes suggested – lowering taxes to stimulate. Unemployment among the youth is over 60% in parts of Europe, and American students are oppressed by loans they cannot escape. Yet, 65% of college graduates cannot find employment in their field of study that they paid so much money to obtain. They cannot escape the debt, thanks to bankers paying bribes to politicians. In America, we too have a lost a generation that now lives in their parents’ basements. Student loan debt prevents them from starting a life – they cannot afford to start a family, or even buy a home.

The negative interest rates are oppressing the elderly, robbing them of their dreams. They were told to save for retirement, but now they face negative interest rates after paying a lifetime of taxes. Four months ago, when 10-year Swiss yields turned negative for the first time, demonstrated that capital was scared of the Euro and was just looking to park somewhere. Larry Summers was the herald of that event which has snowballed into a veritable avalanche of negative rates across European government bond markets, faster than in real life from the top of the Matterhorn.

There is so much cash around and nothing to invest in, that we see companies buying back their own stock. This will set the stage for a potential Phase Transition and a bubble top in U.S. stocks, which could be a doubling in the Dow. This is the same problem during the 1920s, where companies were also buying back stock even during the crash. When companies buy back their own shares, it reduces the supply and sets the stage for a shortage.

This is clearly the PEAK IN GOVERNMENT. We are facing a collapse in confidence of government on an unprecedented scale. Politicians are predominantly lawyers with ZERO practical experience in running a business or understanding currency flows. They only know how to write laws. We need people from all walks of life in government – not more lawyers. No one would go to a taxi driver for brain surgery. So why call a lawyer to manage an economy? This demonstrates that education is worthless, for all the money spent on degrees mean nothing if a lawyer can do any field without such degrees.

2015.75 = the PEAK IN GOVERNMENT

&

Negative Interest Rates are a Tax on Money Itself