A number of people have asked about Elon Musk’s reference to us already being cyborgs and the possibility of humans being transformed into house cats dominated by Artificial Intelligence. I have been involved in developing AI since the 1970s. In coding the Socrates systems, I have not found it to turn me into a house cat. To the contrary, I have learned much more about the world using the systems.

Back in the early 1980s, I appeared on FNN (Financial News Netwrok) which was a finance and business news TV network in California that operated throughout the USA until it was bought by and merged with CNBC in 1991. I appeared on air with Walter Bressert and the computer forecast was that the British pound would fall from $2.40 to $1 going into 1985 following the Economic Confidence Model at that time. That forecast was done by the computer although I did not explain the scope of Socrates back then because it was too far ahead of the curve. The computer also forecast that the British economy would divert from Europe and move counter-trend aligning itself more with the United States. That forecast it made back in 1981. I had to develop a natural language in order to speak with it because I thought that forecast was insane and wrong. When I coded the ability to inquire how it was making its decisions, that is when it began to teach me. It picked up the discovery of the North Sea Oil fields which began to change the UK from a net oil importer to self-sustainable. The Gullfaks oil field was discovered in 1978 with the Snorre Field in 1979, followed by the Oseberg oil field and Troll gas field which were also discovered in 1979. The capital flows had been altered and then it made sense.

The idea of interfacing humans with a neural net is possible, but this is clearly something that would need to be approached with caution. It is once thing to have a unit in the house like Amazon or Google where we can ask questions and something that taps into your brain. The danger there is who control the neural net. Government could then use the net to control people. I would never submit to something of that nature.

Artificial Intelligence cannot take over the world with its own evil mind. My fear would be that someone steps in to direct it to control various things or people for their benefit.

We are getting close to unleashing Socrates. The hold up has been in the delivery rather than in the analysis. We have had some problem with pushing the results up to the cloud, which we hope to solve. The Pro version wrote this as of Friday concerning the Dow Jones Industrial Index. Note that while we are making new highs, we are losing momentum and breaching the bottom of the Breakout Channel. The support has been rising sharply so caution is now warranted. Note also beware the week of 07/24.

ANALYSIS UPDATED AS OF THE CLOSE OF  Fri. Jul. 14, 2017: This market has been making a new historical high this month on Fri. 14th at 2168153. Closing support on a weekly basis now lies at 2133300. A weekly closing below this level will signal a short-term correction is beginning. From a technical trading risk perspective, long positions should be exited if this level is broken on a weekly closing basis.

From the view of a position trading perspective, the market has exceeded the previous high made back in June at 2153503 reaching 2168153. So far we have a very dramatic event breaking last year’s low 1545056 and exceeding last year’s high of 1998763 making and outside reversal to the upside. The technical resistance stands at 2172761 with technical support resting at 2148041 and 2100653. Any long position should use a protective sell stop on a monthly closing basis at 2055344. Remember this is just a trading suggestion given it is merely a trading observation rule. Buy or sell signals take place on Reversals and Cycles.

QUESTION: Dear Martin,

You cannot forecast volatility in any of its flavors without interfacing TIME in every other aspect of this dimension. Creating flat models like a stochastic take one aspect of a market and then attempts to extrapolate the future based upon this single tool only to fail. We have a stochastic model you can plot and the interesting thing is it is never consistent since sometimes it’s peaking in advance to a turn and at other times after the turn. They never forecast a flash crash or anything on that nature. This Fourth Dimension is extremely complex. Far beyond any one dimensional model can map.

Even those claiming to be using the K-Wave cannot make real forecasts. The basis of Kondratieff’s argument came from his empirical study of the economy’s performance of the USA, England, France, and Germany between 1790 and 1920. Kondratieff took the wholesale price levels, interest rates, production and consumption of coal, pig iron, and lead for each economy. He then sought to smooth the data using an averaging mathematical approach of nine years to eliminate the trend as well as shorter waves. Kondratieff thus arrived at his long-wave theory suggesting that the economic process was a process of continuous waves of boom and bust.

The problem with his data was that it properly reflected the beginning of his study. But as the Industrial Revolution took place, agriculture, which was 70% of the economy in 1850, fell to 40% by 1900 and eventually to 3% by 1980. His model failed because there was a cycle to the economy as well which he did not take into account. We moves from a commodity based system, to industrial, and now to primarily service. As we move further down this road, we can see that economic growth has declined for government has growth too big and is now consuming 40% of GDP compared to less than 10% at the beginning of his work. Then we now have the internet displacing jobs in stores (service industry) just as the invention of automobiles displaced the horse and buggy. There is a cycle to change as well and this is absent from the K-Wave.

Under Marxism, seizing control of all private assets was supposed to eliminate this boom and bust cycle. Kondratieff suggested that changes in technology, wars and revolutions, and the emerging of new countries as well as the surges in the production of gold was the cause of this business cycle. (see his 1935 English Translation not someone else’s commentary on his work)

Anyone claiming to be using the work of Kondratieff to forecast the business cycle is most likely creating a smoke-screen since we can even see from the chart, that his original wave varied greatly both in time duration 47 to 63 years, as well as intensity. Moreover, Kondratieff himself explained the cause was shifts in production, war, and great booms and busts in the discovery of gold. So the K-Wave offers no reliable method to forecast the economy, yet it stands as a testament to the existence of a complex business cycle.

Kondratieff was by no means the first to discover the business cycle. There were many others trying to investigate the complexity of the business cycle.

Nevertheless, Kondratieff explained that the cause was complex and not a single thing. Any attempt to create a one-dimensional model will fall flat on the drown.

The pro-version should be available by September. I am pushing the staff as hard as I can.

This upcoming seminar in Frankfurt Germany will deal with both the short-term and long-term. This has been the Year from Political Hell, and it will not end until after the German elections. With the ECB finally throwing in the towel admitting (but certainly not publicly) that nearly 10 years of low to negative interest rates has utterly failed to reverse the deflation. Now with the expectation of higher interest rates, the optimism is returning on schedule in Europe as virtually 99% are touting that deflation is over and let the good times roll.

Of course, the greatest error with currency is the general public view it as a share price. They assume that the higher the Euro the stronger the economy becomes. Yet historically, the exact opposite is always true because currency is the medium of exchange which sits on the opposite side of the scale with tangible assets. Deflation is when assets decline because the currency rises in purchasing power.

When we look at the historical highs in the U.S. dollar, we can see the peaks are not marked by economic booms, but the economic depressions/recessions. The first peak in the dollar was World War I, then 1931 and the Depression, then 1949 post World War II, then 1985 and the steep recession that prompted the birth of the G5.

The rise in the euro and the decline in the dollar is part of the set-up before the Monetary Crisis begins in 2018. You must always swing to the opposite direction of the eventual trend. The lowered dollar is EXACTLY what Trump wants to increase US exports in theory to create more jobs. A higher dollar will reverse all the aspirations of Trump.

The real question become which target can the Euro reach before reversing the trend in 2018? Are we looking at the 116 level again or 125-128? This will be the topic for the upcoming Frankfurt Seminar on July 22nd. We reached our minimum target of 114.