The Myth of Fair Value

Armstrong Economics Blog/Understanding Cycles Re-Posted Mar 13, 2023 by Martin Armstrong

QUESTION: If the metals are not trading at a fair value relative to everything else, then does that not prove they are manipulated?


ANSWER: Your problem is the assumption that everything must be trading at some fair value. That is up there with the theory of random walks.  ALL markets trade for periods where they remain well below fair value. That was the entire takeover boom of the 1980s which they also blamed on me because I was advising many of the takeover players. I simply showed these charts back then which show in terms of book value, the Dow Jones bottomed in 1977. The market was grossly undervalued because you could buy a company, sell all its tangible assets, and double or triple your money. Michael Douglas’ famous speech in that movie about “greed” would not even be possible if everything always trade like some mythical robot at fair value. Everything overshoots and undershoots.

The metals are NO DIFFERENT. Every market swings between grossly UNDERVALUED and then grossly OVERVALUED. This is part of the business cycle. If there were no periods of gross undervaluations, there would not be a sudden boom either.

This is what you have to come to grips with. There is such a thing and the business cycle. Our cyclical analysis would not be possible if everything was trading at a flat line of fair value. This nonsense in metals is made up of people who have been wrong, and need to blame someone else. It is like blaming climate cycles on CO2. This notion of fair value is rooted, I hate to tell you, in Marxism, because he too did not understand  the business cycle.

Can the Future be Altered?

Armstrong Economics Blog/Armstrong Economics 101 Re-Posted Feb 7, 2023 by Martin Armstrong

QUESTION: Good afternoon – Will try to make this one quick. Know you are busy. Have you ever asked Socrates how to “defeat” its predictions? Or to reduce volatility/amplitude of projected events?

(Really, you should be recognized alongside Adam Smith, Ricardo, et al. for your discoveries and contributions.)


ANSWER: Because the entire world is connected, it does not appear that it is possible to prevent an event from unfolding. I have come to the conclusion that the best we can ever hope to accomplish is to reduce the magnitude of volatility.

The CFTC had even subpoenaed me demanding a list of all my clients worldwide. I defeated them in court. Their argument was that I had been manipulating the world economy and by turning over my client list, they would prove the magnitude of my influence. These people do not believe in forecasting for they only believe in manipulating society. Even Larry Summers claimed that if you create a model that actually worked, then that would dictate the future.

What these people miss is the fact that we are all connected globally. This is why government IS THE PROBLEM for they think that they can manipulate the future. But since we are all connected globally, it is impossible for one nation to alter the course of the global trend.

The world economy cannot be manipulated. It is far too complex to alter the course of the entire globe. It has been governments that have always created war. Look at every time the bankers thought that they had the guaranteed perfect trade, they have blown up and run to the government for bailouts.

Their allegation against me has never changed. If I say gold will double and it does, it is ONLY because I have too many people as followers rather than the fact that the computer has identified the trend.

So Socrates has confirmed on many occasions – the world economy must travel through these cycles. It is just how society functions.

What investment would have produced 4,414% Gain since 1932?

Armstrong Economics Blog/Traders Re-Posted Dec 13, 2022 by Martin Armstrong

Imagine if you could have bought a loaf of bread in 1932 for 7 cents. That 7 cents would be $3.09 today would be a gain of 4,414%. Of course, you could not even freeze it that long. That is also the problem with many who sell investments. Gold was $20.67 in 1932 so that has been a gain of 8990%. On the other hand, the Dow Jones Industrials bottomed in 1932 at 40.56. That has been a gain of 83,992%.

In 1955, the Dreyfus Fund was established by a New York stockbroker named Jack J. Dreyfus, Jr. (1913–2009)  It was Dreyfus who acquired the open-end Nesbett Fund, which had $2.3 million in assets.  This ambitious stockbroker renamed the fund bestowing his own family name upon it which would become a household word in the decades ahead.  By year end, the assets grew to $5.6 million as 1955 drew to a close.  The best decision Dreyfus made was to buy 400 shares of an unlisted stock.  That “sleeper” stock was Polaroid which he bought for $31 7/8.  Dreyfus would watch this single purchase rise to $6,372 per share – not counting splits – in the years ahead.  This outstanding performance almost single-handedly led to the mutual fund boom in the 1960s.

Sometimes a new technology paves the way for something that changes the game.

The Discovery of Intelligence Most Never Expected

Armstrong Economics Blog/Nature Re-Posted Dec 10, 2022 by Martin Armstrong

Futility of Price Controls

Armstrong Economics Blog/Economics Re-Posted Dec 7, 2022 by Martin Armstrong

You were correct again. Price controls do not work in the long run. The Hungarian government introduced a price cap on gasoline and diesel a few months ago, but a few hours ago this evening they had to let it go(they “tried everything in their power to help but the damn bureaucrats in Brussels who voted for the sanctions”.etc etc.).

The holiday season, panic buying, no gas another nail into the trust in our government’s coffin.
Marty these people really have no clue what the hell they’re doing. We have several food products that also have price controls: Wheat, sugar, eggs, etc. And interestingly supermarkets simply stop selling them or they sell brown sugar (no price control) instead of white sugar (price controlled, the maximum amount you can purchase in one go is 3kg i believe). When will they learn (not admit) or at least stop blaming others for their own brain-dead decisions?

I honestly hope that whatever the hell comes after 2032 will be better than this nonsense.
Thanks for all you do Marty. Keep up the fight, and get some well-needed rest during the holidays. I reckon you’re getting more phone calls than usual…
All the best,

ANSWER: You know the most astonishing fact is that this was not even my personal opinion. All one need do is consult history. NEVER has any attempt to freeze prices to prevent inflation EVER worked even once.

The Roman emperor Diocletian (284-305AD) tried to impose wage and price controls in an effort to prevent inflation that was soaring because of a collapse in confidence in the Roman government. The Edit on Maximum Prices was imposed during 201AD. It was an utter failure.

Even if we go back to the 4th century B.C., the Roman government bought corn (grain) and, in times of shortage, it re-sold it at a low fixed price to try to prevent inflation from shortages – as we have today. In 58BC, the Roman Senate went even further and granted every citizen free wheat. The politicians were trying to bribe the people as they are doing once again today. What happened was that the farmers began moving back to the city of Rome because they could live and eat without working – it was free. By the time Julius Caesar (100-44BC) crossed the Rubicon, one in three Romans was receiving government wheat. He was forced to create a census and found there were more people claiming welfare than there were possible people.

Those in government ALWAYS assume that since they possess a pen, they can write whatever law they desire and they will comply or be thrown in prison until they die. I was named FOREX Person of the Year in 2015 because we forecast the Euro/Swiss peg would break. I even met with the Swiss Central Bank and warned that the peg would break. I was told they would be able to hold it. I replied I think the odds are on my side since NOBODY in history has ever been able to do this. There was the British pound peh into the ERM the broking making Soros all his money. In 1997, there was the Asian Currency Crisis where all the pegs broke. then there was even Bretton Woods which was a fixed exchange rate that broke in 1971 and in 1973 I was called in for the first bank failure due to foreign exchange.

I have done my best trying to warn governments that they CANNOT fix currencies and even when they were forming the G5 with the Plaza Accord in 1985, I was called in and warned that lowering the dollar by 40% would lead to a major currency crisis and a crash by 1987. Never have they ever listened.

Perhaps, the ONLY time anyone in Europe or the United States than anyone in government ever listen was perhaps in 1997. They were starting the jawboning of the Yen for trade purposes once again. I wrote to Robert Rubin and he has Timothy Geithner respond who later became the Secretary of the Treasury. China has listened, but other than in 1997, I cannot say any central bank or government has EVER heeded my warnings that history is on my side – pegs NEVER work.