Euro – Capital Flows or Speculation?


QUESTION: Is the euro really going up on capital inflows or speculation leverage?

ANSWER: We are not picking up any real net capital outflows from the USA to Europe. It appears to be speculation on the currency markets in anticipation of higher interest rates coming down the line. But real capital has not begun to move and will not seriously move in until there are higher positive rates.

More concerning has been net outflows from the USA to emerging market debt. This has been a trend led by pension funds trying to earn higher yields. They need higher returns to try to cover net losses in interest income because of the lower rates. This is very dangerous for when the dollar reverses and rises into 2021, that emerging market debt will go into default. This will only further the Monetary Crisis we see coming in the 2020-2021 time period. Meanwhile, Excess Reserves at the Fed rose during 2017 up from the low in 2016. European banks have been parking cash at the Fed since 2016 to avoid the negative rates at the ECB. We need to see that rate rise at the ECB back to a positive return before the banks will return that capital.

The Precision of Markets is Beyond Belief – But It is Why The Majority is Always Wrong


COMMENT: Marty; I really do not know how anyone cannot recognize what you have discovered. The euro began its breakout precise on your target of the ECM on November 22 last year. You have proven beyond a doubt that there is a hidden order to everything if we care to just look.

My hat is off to you.

REPLY: Yes, the Euro broke out above the Downtrend line, then fell back to retest it on the 21st reaching 11713 when the support was 11708.  It turned back up precisely on the 22nd. These things amaze me. I try to emphasize all the time that this is not me making forecasts in so many markets. There is a hidden order that exists if we do just pay attention.

Nevertheless, on the higher up level of the ECN, that turning point was the 24th, which was that Friday. So it was a perfect fit even for the week as well.

Now, here is the Dow Jones Industrials. It too changed course and exploded after the precise target on the ECM of the week of November 24th.

Here is Crude Oil and how it responded. How markets interact at critical periods identifies the trend it will take. The whole key is to abandon personal opinion. You have to stop trying to always rationalize a move by reducing it to a single explanation

Is Climate Change a Tool to Eliminate Democracy?


COMMENT: Your view on denying climate change is supporting the capitalist model. This shows you have no credibility.

OD

REPLY: Climate is changing and it is part of the normal cycle. You are actually correct that I support capitalism and freedom and am against authoritarianism and totalitarian systems. What you fail to understand is that climate change is an agenda to eliminate your freedom. The entire argument is to support a move toward an authoritarian state. You better wake up. This not truly about the climate, it is all about controlling society, eliminating democracy, and changing the entire economic model that changes society.


It’s a well-kept secret, but 95 per cent of the climate models we are told prove the link between human CO2 emissions and catastrophic global warming have been found, after nearly two decades of temperature stasis, to be in error. It’s not surprising.

We have been subjected to extravagance from climate catastrophists for close to 50 years.

In January 1970, Life magazine, based on “solid scientific evidence”, claimed that by 1985 air pollution would reduce the sunlight reaching the Earth by half. In fact, across that period sunlight fell by between 3 per cent and 5 per cent. In a 1971 speech, Paul Ehrlich said: “If I were a gambler I would take even money that ­England will not exist in the year 2000.”

Fast forward to March 2000 and David Viner, senior research scientist at the Climatic Research Unit, University of East Anglia, told The Independent, “Snowfalls are now a thing of the past.” In December 2010, the Mail Online reported, “Coldest December since records began as temperatures plummet to minus 10C bringing travel chaos across Britain”.

We’ve had our own busted predictions. Perhaps the most preposterous was climate alarmist Tim Flannery’s 2005 observation: “If the computer records are right, these drought conditions will become permanent in eastern Australia.” Subsequent rainfall and severe flooding have shown the records or his analysis are wrong. We’ve swallowed dud prediction after dud prediction. What’s more, the Intergovernmental Panel on Climate Change, which we were instructed was the gold standard on global warming, has been exposed repeatedly for ­mis­rep­resentation and shoddy methods.

Weather bureaus appear to have “homogenised” data to suit narratives. NASA’s claim that 2014 was the warmest year on record was revised, after challenge, to only 38 per cent probability. Extreme weather events, once blamed on global warming, no longer are, as their frequency and intensity decline.

Why then, with such little evidence, does the UN insist the world spend hundreds of billions of dollars a year on futile climate change policies? Perhaps Christiana Figueres, executive secretary of the UN’s Framework on Climate Change has the answer?

In Brussels last February she said, “This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time, to change the economic development model that has been reigning for at least 150 years since the Industrial Revolution.”

In other words, the real agenda is concentrated political authority. Global warming is the hook.

Figueres is on record saying democracy is a poor political system for fighting global warming. Communist China, she says, is the best model. This is not about facts or logic. It’s about a new world order under the control of the UN. It is opposed to capitalism and freedom and has made environmental catastrophism a household topic to achieve its objective.

Figueres says that, unlike the Industrial Revolution, “This is a centralised transformation that is taking place.” She sees the US partisan divide on global warming as “very detrimental”. Of course. In her authoritarian world there will be no room for debate or ­disagreement.

Make no mistake, climate change is a must-win battlefield for authoritarians and fellow travellers. As Timothy Wirth, president of the UN Foundation, says: “Even if the ­(climate change) theory is wrong, we will be doing the right thing in terms of economic and environmental policy.”

Having gained so much ground, eco-catastrophists won’t let up. After all, they have captured the UN and are extremely well funded. They have a hugely powerful ally in the White House. They have successfully enlisted compliant academics and an obedient and gullible mainstream media (the ABC and Fairfax in Australia) to push the scriptures regardless of evidence.

They will continue to present the climate change movement as an independent, spontaneous consensus of concerned scientists, politicians and citizens who believe human activity is “extremely likely” to be the dominant cause of global warming. (“Extremely likely” is a scientific term?)

And they will keep mobilising public opinion using fear and appeals to morality. UN support will be assured through promised wealth redistribution from the West, even though its anti-growth policy prescriptions will needlessly prolong poverty, hunger, sickness and illiteracy for the world’s poorest.

Figueres said at a climate ­summit in Melbourne recently that she was “truly counting on Australia’s leadership” to ensure most coal stayed in the ground.

Hopefully, like India’s Prime Minister Narendra Modi, Tony Abbott isn’t listening. India knows the importance of cheap energy and is set to overtake China as the world’s leading importer of coal. Even Germany is about to commission the most coal-fired power stations in 20 years.

There is a real chance Figueres and those who share her centralised power ambitions will succeed. As the UN’s December climate change conference in Paris approaches, Australia will be pressed to sign even more futile job-destroying climate change treaties.

Resisting will be politically difficult. But resist we should. We are already paying an unnecessary social and economic price for empty gestures. Enough is enough

2018 – Panic Cycle Year


QUESTION: Mr. Armsyrong; Thank you for an eye-opening conference. Can’t wait for this year. You said 2018 was a Panic Cycle Year and that it would be unlikely to create an outside reversal in the Dow, but we should expect wild times ahead. Is this panic cycle impacting many other markets as well?

JV

ANSWER: Yes. This is the beginning of the Monetary Crisis Cycle that will go into 2021. That is probably where we will see the dollar rally break the world monetary system. This year, we should expect most markets to test BOTH sides of the game so pay attention to the Global Market Watch and the Reversals. This will tell us when the trends shift. There will be the classic fool who thinks that just because the euro finally exceed last year’s high or gold has rallied that this is it and that means the next four years will be the same.

Panic Cycles are notorious for trapping people on either the long or short side. You always have to trap the majority in order to create the slingshot to the upside of the waterfall to the downside. This is why they remain fools for they rush in based upon a few day’s price action. So far, everything is running its course. We are finally getting closer to the 125 threshold of resistance in the euro and the pound sterling has rallied with many starting to bet that BREXIT will not happen. Buying the Euro because interest rates are expected to rise with the ECB backing off of QE is just not being thought through rationally. QE has AILED to stimulate the economy after nearly 10 years, and all it has done is subsidize EU member states. Rates will rise when they start to have to sell to real buyers. Then the sentiment will shift mid-year and we will test the opposite side.

This is going to be a crazy year that seems to be divided into two trends in many markets (not all). We are going to issue the 2018 Canada Report, 2018 Gold Report, 2018 stock market report as quickly as possible. The Canda Report will be available at the Vancouver event in February. I will also be the keynote speaker this year at the Hack Miami 2018 programmer’s conference May 19-21, where I will be delivering the lecture on the future and AI Programming.

How Will Interest Rates Double in Europe from Here


QUESTION: Marty

 Thanks for all your guidance and help in navigating these markets. You mention rates are going up soon in Europe but how can the ECB achieve this when they are still implementing QE. I work in the European HY market and the technicals are horrible as so much money is flooding in chasing yield driving up leverage and deteriorating lending conditions. If rates do go up soon can we expect a spectacular unwinding of the HY bond market that has ground so tight due to CSPP?

Thanks so much, keep up the amazing work.

NS

ANSWER: Central banks can only control short-term rates for brief periods of time. They cannot control the long-end. The problem the ECB has is by backing off of QE, it will require private buyers to replace them, which will not happen at negative to low rates. The interest rates will be set by the private sector – not the ECB. The QE program has degenerated from an economic stimulus to simply life-support for member states. The “stimulus” never made it past the governments and we have nearly 10 years of QE that has just failed completely. Once the government have to turn back to private buyers, that is when you will see rates rise sharply to try to sell new debt.

The Blizzard of 1899


A lot of people are claiming that the extreme cold is part of Global Warming and human-induced climate change. Well, all we need do is look to the Blizzard of 1899. That is the record cold where it snowed also all the way into the capital of Florida, Tallahassee. It was snowing also in Tallahassee this season.

February 1899 was the coldest winter on record all the way up to 2017. All of these claims are just nonsense that this extreme cold is created by Global Warming or climat6e change caused by humans. We have been there and done that before prior to the invention of automobiles and massive expansion of the Industrial Revolution. Let’s see if we break the record come February. It is even 72 degrees in Abu Dhabi.

Greenhouses Gases Are a Product of Civilization for Thousands of Years


QUESTION: Do you believe we are going into an ice age?

ANSWER: No. At best we return to a mini-ice age. There are those who argue that a decline in solar activity, which they cannot deny, will not be enough to offset the human created Global Warming. There are so many things wrong with the Global Warming theories it is even hard to figure out where to begin. Long before the Industrial Revolution, the assumption was that our planet’s atmosphere was still untainted by human-made pollutants for it was somehow pristine. That assumption is dead wrong, but nobody wants to challenge it because if there were periods of human air pollution before, then perhaps their theory that this will destroy the planet and we will all burn to a crisp, as Christine Legard said, is nonsense.

All one has to do is read the contemporary accounts from ancient Rome. The residents of ancient Rome suffered from pollution that was primarily caused by burning wood to cook and stay warm rather than fossil fuels. There was a great smoke cloud they wrote about called gravioris caeli (“heavy heaven”). Others referred to it as infamis aer (“infamous air”). Complaints about this infamis aer and its effects can be found in classical writings. “No sooner had I left behind the oppressive atmosphere of the city [Rome] and that reek of smoking cookers which pour out, along with clouds of ashes, all the poisonous fumes they’ve accumulated in their interiors whenever they’re started up, than I noticed the change in my condition,” wrote in 61AD Seneca the Younger (c. 4 BC – 65AD) the philosopher, statesman, and adviser to Emperor Nero who ordered him to commit suicide.

Moreover, there were lawsuits over air pollution in ancient Rome. The Roman courts heard civil claims over smoke pollution. The Roman jurist Titus Aristo, who was also a member of the council of Emperor Trajan. He was an author of annotations to the works of some jurists of the Augustan period, declared that a cheese shop could not discharge smoke into the buildings above it. Pollution had become so bad that the East Empire in Constantinople even enacted the first known Clean Air Act. In 535AD, then Emperor Justinian proclaimed the importance of clean air as a birthright. “By the law of nature these things are common to mankind—the air, running water, the sea.”

Further evidence that refutes the Global Warming crowd is the discovery of bubbles trapped in Greenland’s ice which revealed that humans began emitting greenhouse gases at least 2,000 years ago. Célia Sapart of Utrecht University in the Netherlands led a team of scientists from Europe and the United States in a study that charted the chemi­cal signature of methane gas in ice samples spanning 2,100 years. The methane gas naturally occurs in the atmosphere but it is considered a greenhouse gas emitted landfills, large-scale cattle ranching, natural gas pipeline leaks and land-clearing fires.

Célia Sapart employed a 1,600-foot-long ice core sample extracted from Greenland’s 1.5-mile-thick ice sheet representing 115,000 years of history. The team chemically analyzed the methane in microscopic air bubbles trapped in each ice layer. They sought to prove global warming is a modern consequence of human activity. They assumed that they would be able to prove that the warmer climate since the 1700s was caused by an increase in methane gas levels.

The found that indeed methane concentrations went up. What they proved was the fact that the rise in methane gas did not correlate with warm periods. What they ended up proving was the simple fact that the theory of greenhouse methane gas was NOT the cause and that the rise in temperature must have been caused by something else. The focused then change and the “something else” was still attributed to human activity, of course, but it was then said to have been due to metallurgy and large-scale agriculture starting around 100 BC.

Indeed, the ancient Romans did keep domesticated livestock and their passing of gas in methane gas, a byproduct of digestion and in China the rice fields include a methane-producing bacteria. So methane gas is a natural part of the planet and the assumption that we should all commit suicide to save the planet is really just nuts. So the team turned to blacksmiths who produced methane gas when they burned wood to produce metal tools or weapons. They noted in the ice core samples that as civilizations collapsed following the fall of the Roman Empire, then there was a moderate decline in methane gas emissions.They concluded that between 100 BC and AD 1600, methane emissions rose by nearly 31 million tons per year. They argue that the United States alone generates some 36 million tons of methane per year.

Célia Sapart had to admit that such emissions of methane gas were by no means enough to alter the climate. The conclusion was still that humans were altering the atmosphere on a global scale in ancient times as well. The study has proved that the assumption that it has only been only of a modern invention that human activity has produced methane gas and the world was pristine before 1800 is just a fantasy. Ice Ages and warming periods have existed well before human civilization where they began to burn wood to stay warm. All they were able to accomplish was prove that greenhouse gases have been produced for thousands of years. If anything, this study shows that the end is not necessarily near based upon greenhouse gas.

The Euro on Yearly Models – Let the Crazy Times Roll


QUESTION: Reviewing the private blog, at the end of 2016 on December 31 you wrote “When it comes to the Euro, the Major Yearly Bearish Reversal lies at 10365 and the intraday low for 2016 was 10352 closing the year at 10513. This too warns that we may not be ready to meltdown just yet.” You called for the Euro rally into the German elections but it did not reach the 125 and stopped at 120. Then for the close of 2017 you wrote on the private blog: “On our Yearly Models, we have had THREE Directional Change targets all back-to-back from 2017 to 2019. From a technical perspective, we achieved an outside reversals to the upside in the Euro making 2017 the low but closing above the 2016 high. We never quite reached our target in the 125 level, so it appears we still have time to do this here in the coming New Year.” You also wrote: The year-end signals we achieve in the Euro for the closing of 2017 will be significant for the overall tone of what is to come reflecting how fast things will develop. Our models are reflecting a sharp rise in volatility in 2018 as well.”

My question is this. With three yearly directional changes from 17 to 19, I assume this means choppiness. Your volatility models show a sharp rise in 2018 as well. Do you think we can really reach the 128 or 135-140 level by March?

HS

ANSWER: In order to create the greatest amount of chaos, you always have to swing to extremes. If we are going to really create total havoc that will bring down the monetary system as we head into 2021 and force some sort of a new Bretton Woods, the only way to do that is a dollar rally. A dollar decline means sovereign debts issued by other nations in dollars will be devalued encouraging them to issue more. The way to break the system is only a dollar rally which forced Roosevelt to devalue the dollar back in 1934 and it forced the Plaza Accord in 1985 that gave birth to the G5. The US always wants a lower dollar to reduce the trade deficit. This is Trump’s policy as well. The market will NOT be that forgiving.

A rising Euro will increase the debt burden in Europe and deflation reducing exports. Ending QE by the ECB will result in rising interest rates. But that is always a bell curve. What people constantly get wrong is the classic one-dimensional analysis. They assume whatever trend is in motion will remain in motion. Rising interest rates will always at first support a currency as should be expected with the Euro short-term. However, that will be the trend provided the confidence in government remains. If confidence collapses, then suddenly the interest rates will continue to rise exponentially and the currency will collapse along with asset values.

The high in US interest rates took place in 1899, It was 1896 when J.P. Morgan had to bail out the US Treasury because they were broke. Following America gaining control of the Philippines as part of the ending of the Spanish-American War, in 1899 the Philippines declared war against the United States requiring independence from America. The war continued until 1902 when the Philippine President Emilio Aguinaldo surrendered. In 1916, the United States granted the Philippines autonomy and promised eventual self-government, which came in 1934. In 1946, following World War II, the Philippines was granted full independence. The fact that the USA was at war with Spain led to questions of its ability to cover its finances. The USA nearly doubled the output of $20 gold coins during 1898 and 1899 to pay for expenses of the war. When confidence declined, this is when we see the highest levels of interest rates.

This is what will happen in Europe. It is all depending upon the fleeting whims of confidence. Only a complete fool thinks that a trend set for a few days will continue forever. Nevertheless, the first level is the technical resistance just below 124. Then we have 125 and 12890. These remain possible and will help to create the impression the euro will rally and the dollar will collapse. That will suck everyone in and then you have the stage set for the slingshot in the opposite direction.

We should see the flurry build once the Downtrend Line is exceeded. Then you will hear the big sucking sound bringing in all the dollar haters and we then set the stage for crazier choppy trends.

This is NOT going to be an easy people between 2018 and 2021. So hang on to your socks. This will be a very interesting time. The key is to survive it.

The Rush to the Euro with QE Ending?


QUESTION: Mr. Armstrong; You have been calling for the dollar to decline against the Euro and it should test the 125 level. Do you see the dollar continuing to decline which then breaks the back of Europe with deflation and then everything flips?

WK

ANSWER: Last year was an outside reversal to the upside meaning it made a new low since 2008 reaching 10341 and then closed above the 2016 high. That confirmed we should see a lower dollar in 2018 and our target in the 125 level has been slow in coming. There is no reversal of fortune without a closing above 140. Our minimum target was 12570 with the next forming at 12890. Thereafter, we reach the major resistance in the 135-140 zone. The technical resistance begins just shy of 124.

The Euro is rallying because the ECB is seen to be abandoning its QE program which has failed. The rush to the Euro is the assumption that with higher rates, at last money will come home. We still have a minefield of political issues. Creditors are dissatisfied with the lack of austerity in Greece as well as Italy. Our critical turning point remains March 2018.

The crisis yet to unfold is will there be buyers of European debt to take up what the ECB has been buying? This is part of our forecast with rising rates and the more they rise the worse the budget will get. There is just no way out of this crisis without serious reform. So people rushing into the Euro thinking this is a turn-around long-term for the dollar will be shown that the old saying fools rush in where wise men never go will be carved in stone.

So for now, we still await the test of 125-128.

Just How Fast Can Things Freeze?


When the weather goes against Global Warming, they flip it into volatility and claim cold is now the byproduct of Global Warming. Al Gore’s environmental group, Penn State University climate scientist Michael Mann wrote, “the unusual weather we’re seeing this winter is in no way evidence against climate change,” it’s “an example of precisely the sort of extreme winter weather we expect because of climate change.”

They offer no evidence that human have caused climate change, just constant opinion. Only they can possibly be right and dismiss any evidence that points to such rapid declines pre-1850. The frozen woolly mammoths discovered in Russia completely frozen and intact with plants still in their stomachs have long made many ponder just how fast the planet can freeze.

When woolly mammoths began to be discovered intact and frozen in Siberia back in 1772, this changed science forever. The sudden bitter cold took place long before humans were around driving cars. As always, such evidence is always ignored. This is the real inconvenient truth they cannot explain so it is best just to pretend it does not exist.

Some people have written in asking will Toronto or Chicago suddenly emerge under a sheet of ice without notice? The evidence from Siberia suggests that yes it can happen in the blink of an eye. However, there is no recorded history which we could put into the computer to answer that question in a precise manner.

This is the known record so far. This is very approximate and it is plotted in terms of millions of years. We really cannot make an accurate forecast that Chicago or Toronto would suddenly find itself under a sheet of ice in days, weeks, months, or years. What is certain overall is the trend. We are headed toward a bitterly cold period ahead. Does that mean we will see glaciers down into Spain or Texas? That may very well be the case, but we are also looking at a time frame measured in millions of years, which is not relevant to our immediate lifespan.

Taking this data and assuming 450 million years ago was a good date target, there is a 72-million-year cycle the computer has determined from this data set. Therefore, it would appear that we are headed toward the biggest glacial period in the history of the planet. However, we are probably looking at that in about 30 million years. Nevertheless, it will get colder in our lifespan and this initial bout with getting colder should be moving into 2028. You will still need heating pads and warm clothes if the power grids hold up.

The biggest problem with this cold is the fact that the environmentalists have stopped coal-generated power and they are not so fond of nuclear. Solar panels work if not covered in snow and wind turbine will freeze in place. That leaves wood and coal burning stoves. This winter in New England, found power companies struggling to provide power to meet the demands. Ironically, people like Al Gore and Michael Mann may end up responsible for killing more people than any war. Yes you can die from too much heat, but you can also die from too much cold