Earlier today President Donald Trump sat at a desk with large computer screen and a phone as he teleconferenced with troos stationed in Afghanistan, Iraq, Turkey Bahrain and aboard the U.S.S. Monterey.
♦Army: 82nd Airborne in Afghanistan; ♦Marines: Direct Support Team Golf (2ndMarine Raider Battalion) in Iraq; ♦Navy: The USS Monterey 5th Fleet at sea; ♦Air Force: 74th Expeditionary Fighter Squadron in Incirlik Turkey; and ♦Coast Guard*: USCG Wrangell at Kuwait Navy Base.
President Trump thanked all of the troops as a group and then addressed each group individually. The media were then excused from the room as the president began to take questions from the troops:
QUESTION: Possible Correlation with ECM-peak in Nov. 2017? Mr. Armstrong, just today I became aware of your story and your life’s work. Your theory is captivating, especially in the light of a series of unsettling changes in my work environment. All of this near Nov. 24-25, a predicted turning point within your ECM forecast. I am a self-employed agent, working mainly on behalf of a … German finance [company] which specializes in selling mortgages for public housing projects ….
Since it´s foundation … [we] operated with a strict lending limit of 80%. Upon so-called “customer-demand”, those limits have now been raised to enable 100% lending at almost the same interest rates (Nov. 9. 2017) while additionally allowing fixed interest rates for 25 years and amortization terms up to ca. 40 years. I have seen even more outrageous offers from competitors. These factors, combined with the unnaturally low-interest rates caused by the ECB, enable almost every household to acquire a house of one’s own.
However, these amortization terms fail to include future investments and a possible future increase in interest rates. In my opinion, households with an average income have a high risk of debt overload or at least a risk of constantly living in debt. It seems to me as if the public model of never repaying one’s debt is slowly being transferred to the private sector.
My observation might just be a small part of the picture, probably a peak in one minor cycle you observe. Yet it does make me feel uneasy, for this peak correlates with your next predicted ECM turning point. Although the public opinion states the opposite, I fear a massive housing bubble on the German market. Even minor changes in interest rates or household income could cause substantial problems for the average homeowner.
I would very much like to hear your thoughts on this subject. Please excuse my rusty English, I did not have practice for a very long time. Thank you in advance for your response. Also, I want you to know that I have the highest respect for your resolve in those times of imprisonment.
From Germany, FW
ANSWER: Unfortunately, Germany has allowed its own housing bubble not much different from the USA that burst in 2007. Normally, like fashion, things tend to start in Europe and then migrate to the USA. In the case of real estate, the value of property in areas such as Bavaria was very cheap compared to international levels. The market has been rising since 1996. Even back in 2015, Sparda Bank (http://www.sparda-bw.de) was offering just over 1% fixed rate mortgages for 10 years.
Our timing models do suggest that there is a pause in the trend due here in November (4th quarter). There should be a decline of softening in the market going into the first quarter of 2018. Thereafter, the trend will shift and the next big turning point will be the 4th quarter 2018.
The risk of fixed rates even out now for 25 years will not be on the back of the home-buyer. That risk will belong to the lenders. Yes, the ECB with its negative rates has caused tremendous distortions in the debt markets. They were unsuccessful in creating inflation or expanding the economy. What they have created is asset inflation, which does not show up in the economic statistics as they are focused upon by the media.
The central banks are focused on DEMAND inflation. That has been defeated by any expansion in the money supply is sterilized by a net rise in taxation. Consequently, the consumer is buying assets and hoarding cash. They are not spending it frivolously in dinner, wine, cloths, and song.
The risk to the borrower will be the rise in taxation that then eats into their disposable income. Lending 100%+ to buy houses is insane. Those who have no equity are highly prone to default. As this group defaults, they increase the supply of property coming to the market and thus all prices are suppressed. This is the process that creates the major high in REAL TERMS.
The homeowner who has equity will lose short-term. However, the euro will crack and in this regard, a low FIXED rate mortgage that they can maintain will be a HEDGE against the currency. The market will shift from asset inflation and cross-over to currency inflation.
Nonetheless, in terms of INTERNATIONAL VALUE, the market is peaking now in November. Housing prices have risen to world standards so the foreign capital will back off and not see this as cheap anymore. As the euro declines, then the property in real value terms globally will also decline.
QUESTION: hi martin
During the 3rd century, it was the collapse of the monetary system of Rome that sparked the biggest wave of Christian persecutions. Why? The Pagans believed the gods were angry because the Christians would not pray to them. So the evils befalling upon the empire was blamed on the Christians. In turn, the Christain said their gods were impotent and only the true God would save them. Eventually, many Pagans left and became Christians praying for help.Yesterday while exiting the White House, President Trump told reporters he had just finished a 90 minute phone call with Russian President Vladimir Putin:
“We had a great call with President Putin. We’re talking about peace in Syria — very important. We’re talking about North Korea. We had a call that lasted almost an hour and a half. We’ve just put out a release on the call. But we’re talking very strongly about bringing peace for Syria. We’re talking about very strongly about North Korea and Ukraine.” (transcript)
Important to note that conversation was longer than would have been possible at any of the Bilat’s (Bilateral Discussion) during the ASEAN Summit or APEC Meeting in Asia. A further review of the White House readout:
President Donald J. Trump today spoke with President Vladimir V. Putin of Russia for more than one hour. The presidents affirmed their support for the Joint Statement of the United States and the Russian Federation, issued at the Asia-Pacific Economic Cooperation Summit on November 11.
Both presidents also stressed the importance of implementing U.N. Security Council Resolution 2254, and supporting the U.N.-led Geneva Process to peacefully resolve the Syrian civil war, end the humanitarian crisis, allow displaced Syrians to return home, and ensure the stability of a unified Syria free of malign intervention and terrorist safe havens.
The two presidents affirmed the importance of fighting terrorism together throughout the Middle East and Central Asia and agreed to explore ways to further cooperate in the fight against ISIS, al-Qaeda, the Taliban, and other terrorist organizations.
President Trump and President Putin also discussed how to implement a lasting peace in Ukraine, and the need to continue international pressure on North Korea to halt its nuclear weapon and missile programs. (link)
♦President Trump wants Putin to withdraw any strategic interference surrounding the North Korea denuclearize plan he has assembled with regional allies and China. President Putin would prefer being able to retain a position of influence toward the DPRK.
♦Russian President Putin seems to want Trump to shift/modify his position on allowing Bashir Assad to remain in power in Syria. President Trump and SoS Rex Tillerson have outlined a prior plan for a regional governorship and a unity government framework.
It would appear there’s some deal-making in the works.
Aside from the common vernacular of ‘broken arrow‘ referencing a loss of a nuclear weapon it also means:
“a code phrase that a ground unit is facing imminent destruction from enemy attack and all available air forces within range are to provide air support immediately.”
In essence, with enemy completely overwhelming a position – a military commander calls in direct fire upon themselves in a last-ditch effort to at least retain some of their own forces in the aftermath.
For the sake of this discussion do not consider the reference ‘federal politicians’ (ie. DC congress and Senate); but rather consider the term “broken arrow” a metaphor for the totality of the past eight years and the collapse of the Democrat political apparatus in state House seats and state Senate seats.
If you put a blue marble on a table for each of the Democrat politicians in state office and a red marble on the table for each of the Republican politicians in state office the table would be roughly 65% red marbles and 35% blue marbles.
If you are DNC Chairman Tom Perez the challenge is daunting. However, one rather extreme strategy would be to call in a “broken arrow” sledgehammer on the entire table. If your attack smashed a quarter of the total marbles, the majority of the marbles smashed would be red. Yes you would lose some blue marbles that way but your losses would be less than your opponent simply because you have less marbles on the table.
Still with me?
OK. Now, think of that sledgehammer as “Sexual Harassment Claims”.
See the strategy?
Your political enemy has twice the exposure to risk. Hollywood starts the narrative, and the Media can be counted upon to assist the strategy by over emphasizing the scale of the enemy losses and downplaying the scale of the friendly losses.
If you started with a total of 1,000 marbles (650 red, 350 blue) and lost 25% in the strike, the end result would be 250 casualties (163 red, 87 blue). You would have killed off twice as many state/national republicans as you would state/national democrats.
It’s an extreme strategy; it’s a desperate strategy; but it’s a strategy nonetheless. This is DNC Chairman Tom Perez we are talking about. Former head of the DOJ Civil Rights Division (CRS); before becoming Obama’s head of the Department of Labor.
Perez is a life-long fellow Alinsky traveler inside the cause; and was ‘installed’ as DNC Chair the same way Hillary Clinton was installed as candidate in 2016.
Democrats, the institutional system that is constructed of people, are pretty good political strategists but their modern Achilles heel is their lack of patience. The system supporting the ideological hand of Perez is demanding immediacy – they’re desperate.
The 2010 (“shellacking” of Obama) through 2014 gains were all Tea Party. The 2016 gains, including the presidency, was MAGA; the evolution of the exact same people. The Trump MAGA Team in 2016/2017 was the Tea Party Team in 2009/2010. The commonality was/is ‘cold anger‘. Strategic. Purposeful. Resolute. Deliberate. Long-term and sequential.
Current 2017 Democrat anger is hot. It’s reactionary; easily provoked to act to spite itself. That anger is fueling stupid…. It thrashes. Look around, it’s childish.
Play stupid games, win stupid prizes.
Try stupid strategy, win stupid consequences.
Alabama campaign officials who support Roy Moore held a press conference yesterday to outline the reason for their continued support. Additionally, several officials confronted and deconstructed the accusations.
The audio is a little sketchy in the beginning:
QUESTION: Dear Mr. Armstrong, Thank you for your work in “educating” us in your “University of the Conscious Investor”! My question relates to your “Trading a Vertical Market” report. I am slowly digesting this report which is truly fascinating and a must read for any rational minded investor. My experience tells me (and you have reaffirmed this within your report) that being able to trade correctly for the market is critical. In analyzing the correct actions we must take I have reached the conclusion that we must also investigate deeply the trading company we use and how any wild ride will impact their ability to actually fund the successful trades we have managed to get into and out of. I recently was issued new T&C’s for my accounts to accept and that makes for scary reading in the light of any major reset or mammoth gap or moves we anticipate. How would you recommend we evaluate the companies actually holding the bag to be able to pay up at the end of the day? This appears to me to be a most crucial question in the light of what Socrates is pointing out.
Be Well,
ANSWER: Yes, you are absolutely correct. Your broker/clearer is an additional risk.
The kind of market conditions we are about to face will force questions beyond extreme volatility, no bids and the gapping of price and trade. What Traders must realize is that these extreme price actions themselves trigger increased margins, which again could trigger a liquidity crisis. Under such panic moves, prices can gap ‘without’ a trade and is worth remembering people sell what they can not what they should. This forces other markets to move just to raise cash. If market movements are violent everyone is pulled into the mix.
This is when you have to hope that every one of your fellow account owners (under the broker/clearer you are using) is liquid enough to honor margin requirements. This type of information is rarely going to be available to all and so makes many remain vulnerable.
Just to make you aware, it is possible that your money is vulnerable even if you do not have an open position and is just sitting with your clearer if they were to fail.
Merkel faces the worst crisis of her career and many behind the curtain are starting to wonder if she will even survive. The German Federal President Steinmeier could not actually order new elections immediately. The procedure in this regard is quite complicated in Germany. The earliest possible alternative would be to hold new elections come the spring of 2018. It is likely that the AFD is likely to gather even greater support from new elections. Nonetheless, the CDU will continue to support Merkel at least right now. However, the CDU has been severely weakened by the election and if we do not see new elections until the spring, there is a distinct possibility that Merkel’s support even within the CDU could collapse if they see the AfD will win even greater support.
The head of the Federation of German Industries (BDI), Dieter Kempf, has chastised the political leaders calling on the SPD, FDP and Greens to form a coalition. The price that the SPD will demand is that Merkel leaves before they would consider any compromise. There is just bad blood now between the SPD and CDU. Of course, this makes it even more likely we see and even more difficult Brexit. The practical crisis is the fact that Merkel must attend to domestic issues and will not truly have the time or authority to assume a leadership role in Brussels.
This turmoil in German politics is actually shifting the stage to Macron. The uncertainty in Germany may be opening the door for Macron to reform the EU and the Eurozone pushing Germany to second place. The political fortunes for the EU may be far more uncertain than many suspects.
From a market perspective, political uncertainty in Europe still creates uncertainty in markets rather that confidence.
COMMENT: Dear Mr. Armstrong,
Really glad that you again warn us of impending famine moving into 2020 – 2030 and give us ample time to prepare though many still do not believe in your forecast. Your blog have done a great service to humankind.
Also pertaining to your recent article pertaining to skills needed to be a successful traders or fund managers. I tend to agree that going against majority view at important turning points require nerve of steel to pull the trigger. Not many can do it as emotions can overwhelm our decisions. Being a fund manager myself, I find that how we perform and react during bear markets, crisis and panic moments will distinguish me from others (my peers). During rising tide, our performance mask our real ability to handle crisis.
As you say, life is a journey of learning. Socrates provides a valuable tool for my investing journey while your blog helps in allowing me to view the world in different dimensions. I do make mistakes along the way but thank God I become a better investor as day goes by.
Regards,
SS
Malaysia
REPLY: Yes. Funds that are just a buy and hold are not traders. The regulation also creates much of the problem. Because we have the CFTC and the SEC, these two agencies do FAR MORE HARM than good. They each have their own lobbyists to retain and expand their power. I was once offered a fund to manage in the USA with $50 billion+. The problem that confronted me was the blunt fact it was a buy and hold affair. Because it was equity, it would come under the SEC. I would not be allowed to hedge using futures greater than 15% at the time or else I would then violate the CFTC rules and cross into a futures fund. This was all because of a turf war between the two agencies. In other words, if I saw an imminent crash, I could not protect my clients by hedging more than 15%. You had to sell outright everything, which would then also raise red flags. I turned down the offer for I felt my reputation would be destroyed because I would have to suffer a serious loss and could not prevent it. That was while hedge funds were created offshore because you could not trade everything do to regulation to create government jobs rather than provide the best management service for investors.
Because of the regulation, the field is dominated by buy-and-hold managers who have no real trading skill because they were never allowed to trade. Then you have exchanges closing the floor pits and going all electronic. It was the floor trading that forged the souls of traders. You could smell the blood from the screams on the floor. Today, that is reduced to just flashes of light. Actually trading with other people is who you learned to trade. Dealing Rooms were set up with everybody on one floor – not in cubicles. You heard the phones ringing on every desk when the markets were hot. It was that interaction that made great traders. Eliminating that human interaction makes me wonder if we are not losing the core of understanding markets.
I have created this site to help people have fun in the kitchen. I write about enjoying life both in and out of my kitchen. Life is short! Make the most of it and enjoy!
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