Bernie’s Victory Inspires a Panic Next Week?

Just to let everyone know, since more than 50% of our clients are outside the USA, we have a very international reach with sources around the globe. Get prepared for volatility next week. Despite the Democrat’s personal hatred of Trump, the international view is that Trump is the ONLY sane leader in the world right now. The world is leaning so far to the left everywhere, capital is deeply concerned about where to hide. The #1 question we are getting from overseas:

What if Bernie beats Trump?

Capital can flee and seek shelter offshore. Labor cannot hoard itself nor move offshore. The average person is stuck for they cannot protect their labor so the working guy suffers the arrows that come from politicians who never understand that capital will just abandon their crazy agendas leaving only the wage earner to pay the bills which ends in revolution.

Bloomberg is the authoritarian dictator whose staff has just been “yes sir” and that was self-evident in his debate skills. He could not respond to negative attacks because he was not use to that. Bloomberg is really is no match for Trump no less Bernie. Despite all his money, he did not even make a respectable showing. He cannot buy the White House. Hillary tried that and spent 10x what Trump did and still failed.

The Democratic elites are beside themselves. They are not going to take this lightly. In United States politics, a brokered convention (sometimes referred to as an open convention and closely related to a contested convention) can occur during a presidential election when a political party fails to choose a nominee on the first round of delegate voting at the party’s nominating convention.

This time, the unpledged delegates, better known as superdelegates, will make up about 16% of Democratic Party delegates in 2020. These are the real party insiders who are not committed to voting based on the outcome of the state’s primary or caucus which flies in the face of the very purpose of primary voting. As Stalin said about elections, it is not the votes that matter, but who counts them.

The 2016 election was stolen from Bernie when many superdelegates announced early support for Hillary Clinton. The Democrats have claimed that they made a significant change for 2020. Superdelegates will no longer vote on the first ballot at the convention unless there is no doubt about the outcome. To win on the first ballot, the frontrunner must secure the majority of pledged delegates leading up to the Democratic Convention.  There are 3,979 total pledged delegates, so they are supposed to use the total required being 1,991. There is a loophole. If they can prevent Bernie from a majority on the first ballot, Hillary takes 16% again and they will then flip to her camp. That assumes they abide by this latest rule and do not change them again.

We are looking at the split of the Democrats for the elites are not about to accept Bernie and they will lose the financial support of both the corporates and the 1%. The rumblings are to draft Hillary. That will most likely be the straw that breaks the back of the Democratic Party.

Meanwhile, brace yourself for while markets next week. We may begin to see European and Asian liquidation of equities in fear of the 2020 election ahead.

World Recession Outside USA?

Japan’s economic performance plummeted at the end of 2019, and a recession seems inevitable. The downturn in the land of the rising sun is a bad omen for the global economy. Nevertheless, the entire coronavirus scare has resulted in a sharp collapse in many areas globally that depend on tourism. We are seeing sharp declines in South East Asia, Hong Kong, and even in Dubai. We should expect that the first quarter numbers for many areas around the world will show recessionary trends. This is only further pushing the dollar higher as capital continues to flee from Asia, in particular, as well as Europe and heads into the dollar.

The Rise of the Left

I work as a Professor of Surgery and read your blog every day. I’ve worked all over the world and remain intrigued by the changes your model is now predicting. Here in Ireland, we’ve seen a massive move towards the left with the recent general election results. Capital is fleeing in advance of a new left-wing government. Do you see this throughout Europe or will Britain remain immune from this change?
Many thanks

ANSWER: Yes. This shift to the left is really coming to a head and has been a primary mover for a capital flight to the dollar. The general view has been that Trump will win and this has given support to the US dollar, which is why the US economy has been the only thing to hold up right now.

The British economy will also hang in there and the best thing they could have done was to exit the EU. Europe will shift more to the left and Greenpeace has become a threat to the European economy just as Goldman Sachs was back in 2007.

We are involved in a period where the economic instabilities of past socialistic policies and unfunded pensions will push the left to be much more aggressive because they are losing ground. This is really the same pattern that emerged before the collapse in communism both in China and Russia. It was not some brilliant strategy from the USA, it was plain and simple economics that took down communism. We face the same thing here with socialism. They will get very aggressive in a desperate attempt to keep their dream alive.

Gold in Currencies & Cryptocurrencies

QUESTION #1: Marty; On the Private Blog 1/19, you wrote “When we look at the Weekly Array, we can also see volatility rising this coming week. The two key weeks ahead are those of 01/27 and 02/17. Therefore, failure to make a new high warns that we may see a retest of support ahead. We see February is a Double Directional Change. This is clearly warning that we have to play this by the numbers. Do not anticipate the future for when we look at the Overnight Volatility indicators, this too has begin to rise sharply here in January.”

We have reached your next target and during the week of 02/17. Is this all being driven by the Repo Crisis and what seems to be a panic to the dollar?

PS: Thank you Socrates. He has traded gold very nicely.


QUESTION #2: I have read your blog for a few years, and to be honest since I’m so far from whats happen behind the shine, I really not understand everything. Then is the language against me as well since it’s not my native language.
Know to the question.
We who are a little older think gold is safe heaven. But if I talk to younger people do they see a future in cryptocurrency. I have read a lot about them. The best known is Bitcoin. The main issue is for payment. Then does it exist a few thousand others with many other characteristics, everything from follows golds, paying bus tickets to smart contracts. Whats is common of all those in the ledger is public and almost impossible to tamper with even for a state with all its resources. In a central database can a state always go in and change things, but in the blockchain is it not possible in the same way.
Some people think it will be internet 3.0
Money and value have been represented by many things throughout history.
How do you see on blockchain and its future?
Is it possible for governments to stop development in the long run?

QUESTION #3: The goldbugs are cheering the rally and you can see them foaming at the mouth. They really do get so emotional with every rally. You mentioned at the WEC and again in Vancouver that gold has been doing much better in foreign currencies which is why it has been rallying. Do you think the goldbugs will ever understand gold’s role in the financial system via the dollar? Or will they just always be wrong claiming the stock market and the dollar must crash so just buy gold?


ANSWER: There were many markets which were lining up in February and then we have important turning points come May/June. There is clearly a panic to the dollar on a global scale and this is part of the Monetary Crisis Cycle we are headed into. It would have been nice to see a pull-back that would have created a fake sell-off in the share market etc, but this is shaping up to be something much more serious. With the insane machinations in politics with Bernie Sanders leading and Biden seems desperate at this point with Bloomberg trying to buy the White House, the 2020 election will certainly contribute to the instability later in the year.

The election of the Yearly Bullish Reversal in gold at the end of 2019 was a warning that we are facing this Monetary Crisis Cycle and we see the Euro dropping like a stone. The old scenario that the dollar must crash to see gold breakout is turning into a bedtime story for children. As I have warned many times, when the real crisis is upon us externally outside the USA, then gold would rise with the stock market and the US dollar. This is all about capital flows.

There is definitely a major shift among generations that does not speak well for gold long-term The older generations see gold as a safe haven but not the younger generations in India and China are still buying gold, but to a lesser extent than their parents. That is more of a hedge against their local currencies.

Even BitCoin was scheduled for a rally into February and it has yet to test the Downtrend Line. Here too, March remains as a Directional Change. As far as Blockchain is concerned, I do not think that is the issue. The pitch that was coming from the IMF under Legarde was that countries should create their own cryptocurrency and then she implied that they would effectively outlaw private cryptocurrencies. I believe, based upon reliable sources, that governments have stood-by to observe if the public would embrace electronic currencies. Once they became acceptable, then they would end paper money and private cryptocurrencies and force all money into their version where they could get 100% of the taxes they ever dreamed of. They will also use terrorism as a justification.

As far as looking at gold or anything in terms of currencies has never been a common trend. Nevertheless, it is critical to see the overall trend. I have stated MANY MANY MANY times that my definition of a REAL Bull Market is something that rises in ALL currencies. This is what gold has been doing since the Pi target on the ECM and once it elected the Monthly Bullish Reversal at 1362.50. We can see that in terms of Euros, gold broke out to the upside well in advance of its movement in dollars.

On the Pro Version of Socrates, you get the arrays for those who are more traders. There you can see the key days, weeks, and months. The goldbugs tend to keep preaching the very same scenario today that they did in 1975. Everything must crash and only gold survives. That is just not plausible. They tend to get a fresh crop of people to burn in an endless cycle. True, they are getting all emotional and are judging the entire next 10 years all because gold just exceeded $1600. How quickly they forget that every market oscillates up and down.

The Repo Crisis is a major liquidity crisis that reflects the collapse in confidence impacting Europe and Japan in particular. This is the precursor to the Monetary Crisis Cycle and the Mother of All Financial Crisis which is on the horizon.

Real Estate & Foreign Investment That Drives Up Prices

QUESTION: Hi Martin, Thank you for your free blog–I’ve learned heaps. I believe the greatest disservice a government can make is to allow foreign investment in real estate in their country. I have lived in Canada, New Zealand, and Australia where real estate is no longer affordable for many first home buyers. Inflated prices have destroyed the dreams of the citizens in these countries where empty (investment) houses are common. Governments have failed to protect the interests of the people. For first home buyers who manage to buy their first home they are burdened with astronomical mortgage repayments. I am wondering if Socrates saw this coming and what it anticipates will happen in the future.

Thank you.


ANSWER: We have to understand the CAUSE of such capital movement. The more aggressive governments become with taxes, the more capital will seek to move. I have suggested that Europeans should open a bank account in a US bank that does NOT have branches in Europe. I have recommended that because the European government is highly Marxist, and it is a natural human instinct to leave. Capital can be moved, but labor cannot.

However, in many regions, real estate has risen also because of domestic shifts. In China and Italy especially, people have tended to look at real estate as a place to park money that is safe and outside the banking system. The rise in real estate has been greatly diverse and it is not entirely based upon capital inflows from foreign investors.



Then there is also the currency factor. I have written many times that I was living in London in 1985 when the pound fell to $1.03. The Americans were buying real estate in London like it was on sale at Harrods. The Brits saw the prices as exceptionally high and thought the Americans were going to lose a fortune. The pound nearly doubled, and in dollars they made a fortune. Remember when the Japanese were buying the trophy real estate in New York City? They also turned around and sold it back when the currency moved against them.


As far as Socrates and its forecasts on real estate, it is objective and looks at the patterns, cycles, and price movements on a daily basis.

Nothing is permanent. Everything flows in a cycle.


Next Financial Crisis – Stocks, Currency or Bonds?

QUESTION: Hi Martin! Would you please clarify the difference between an economic collapse and the currency crisis? Are they one and the same?
In one of the pro-private blogs you mentioned a collapse in government debt before the slingshot move. Would that mean that my pension investment plan may disappear before the currency crisis and the slingshot move you have been talking about?

I just would like to know while I have time to pay off my home.
Thank you for all you do for us common folk.

Thank you


ANSWER: The volatility that surrounds a financial crisis depends upon the origin of the sector. When there is a crisis in confidence in the private sector, corporations or banks, the capital shifts and sells private assets and runs into government securities (bonds/notes), which we call the “Flight to Quality” that typically is used only in this context.

However, when capital realizes that the risk is on the government side, the Flight to Quality reverses and capital seeks the safety of the private sector. The decline in confidence in government will manifest in two primary manners. First, because capital responds in anticipation, we can find that markets move first based upon the perceived risk.

The spread between AAA Corporate bonds and those of the United States, initially rose in premium over the government when the perception was confined to the stock market crash. That dipped slightly in 1931 as all the foreign debt was going into default. It turned back up going into the final low in 1932. The Dow did drop nearly 50% at that time. The Dow closed 1931 at 77.90 and then fell to 40.56 in July 1932 for the low. Percentage-wise, that was a substantial decline in 7 months.

There were numerous foreign bonds that were trading on the New York Stock Exchange. When the Sovereign Debt Default of 1931 took place, the perception shifted to the point that it was then expected that the United States would default in some way because everyone else did. Then you see the spread between AAA corporate debt in the USA declined sharply against the federal debt levels.

Now enters the nonsense of creating the euro. The promise was that creating the euro would make companies more competitive because there would be no more currency risk and they would all pay the same interest rates pointing to the dollar as a misrepresentation. The Observer in London, England, wrote on June 7th, 1998 (id/Page 51), “Within the euro-zone, exchange rates will be a thing of the past. Participating countries will also share the same interest rates. Euro interest rates will probably be lower than the UK’s – the base rate in Germany is 3.3 per cent; the UK’s is 7.5 per cent…”

The fallacy of the entire euro project was the intentional lies that were spun just to sell the euro. Creating the euro was in effect a means of fixing the exchange rate as if they had returned to the days of Bretton Woods. However, even under Bretton Woods, despite the fact that the currencies were fixed, the volatility simply transferred to the debt market.

Under the Eurozone, Greece and others began to issue debt like it was going out of style because they were taking advantage of the stupidity of investors willing to buy debt believing that everyone would pay the same interest rates simply because they used the same currency.

There are many states that peg their currency to the US dollar. That does NOTmean that they will pay the same interest rates as the US government. That was NEVER true under Bretton Woods and within the United States, each of the 50 states pays according to its own credit risk.

Hence, the crisis we face will be felt in the debt markets FIRST, which is why we have the Repo Crisisthat people are not paying attention to anymore. Therefore, your question of a collapse in government debt before the slingshot move means that “my pension investment plan may disappear before the currency crisis and the slingshot move you have been talking about.” It all depends upon the country you live in.

If you are in the United States, the debt crisis begins OUTSIDE the United States so the US market is the last to go into a bond crisis.

Online v Brick & Mortar


My daughter works at a brick and mortar pet smart store as a 33 hour per week employee. She told my wife that PetSmart bought the online pet food store ie their online competition. What’s also interesting is that they are focusing on non-online activities such as training and semi non-online activists like pet adoptions. That’s in line with your retail store’s comment.

I just checked the hospital bankruptcies. I can’t find a complete source to check for yearly closings. It seems though that 2019 was a banner year with the periphery having a good showing.

In the physician arena, the radiology services are being outsourced on the internet with Indian based sources. In this editorial, it seems that primary care physicians are also being outsourced.

Keep up the good work


ANSWER: The trend in retail is moving toward online. Shopping malls across America are slowly dying. Many are spending money and adding restaurants to attract people in hopes they will buy something in person v online. I have explained many times that the economy has always evolved, as Schumpeter put it, in waves of Creative Destruction.

For those in the retail trade, you must consider providing services not attainable online. You must look at your competition. Move into areas where you need not compete with the online world of impersonal service. The cycle will eventually flip back but you are probably looking at post-2032. For now, immediately look to refocus the distinction between online and local touch and feel businesses or services. You can buy the dog food online, but the puppy can’t be put in a box and sent via FedEx.


Big Bang v REPO

QUESTION: Mr. Armstrong; I can see your warning about Big Bang and the bonds markets would crash after 2015.75 going into the bottom of your business cycle on January 18, 2020. However, it seems that the negative interest rates have created your bond crash not in price but in participation. There is no viable bond market outside the United States with small exceptions of Britain, Canada, Australia, and New Zealand. Is there any way to come back from this destruction? Do you see the bond markets ever reviving or is this destruction permanent?


ANSWER: If there was a free market, then you would have witnessed the bonds crash price and interest rates rise as people perceived risk. The introduction of negative interest rates which began in late 2014 going into 2015.75 and Quantitative Easing, shifted the risk from the free market to the central banks. This is what I mean that they are now TRAPPED! If interest rates rise, their portfolios crash in value (price). Such an outcome would raise the question of will the private sector return to the government bond markets when they see there is a rising risk factor? Our model shows that this will not be the case. In other words, the Sovereign Debt Crisis has taken place and to prevent the PRICE crash, the central banks became the buyer to hold interest rates down and bond prices up.

Some would think that the forecast was wrong simply because the prices have not crashed. We have had the Bank of Japan saying they will buy government bonds on an unlimited basis. This is NOT a free market. It has “crashed” from the perspective of participation.



It is like the creation of the Euro. Yes, it effectively eliminated the volatility in the currency markets between the Eurozone members. However, it really only transferred the volatility from the currency market to the spreads between the bond markets of member states. Obviously, Greece and Germany both use the Euro. The volatility which would have been reflected in the currency simply moved to the bond markets.

Now we have a serious crisis that has shifted from the bond markets exclusively to the central banks. This is now part of the crisis unfolding in the REPO Market. There does not appear to be any recovery on the horizon. Politicians are undermining the confidence in government, to begin with, and that will influence bond buyers.


Can Interest Rates Rise when Central Banks are the Only Market Maker?


QUESTION: How can interest rates can rise when central banks are the only market maker, & pension funds FORCED to buy gov.debt by their statutes?

but why is the REPO crisis starting in the US where rates are WAY higher than in japan & Europe?
you would expect this crisis to start somewhere in European debt markets/ instruments…why isn’t all the capital that is fleeing to the US not financing REPOs?
thank you



ANSWER: This is laid out in the Repo Crisis Report (an update goes out this week). Central Banks do not control long-term rates. They set the short-term rate such as Fed Funds and Discount Rate. That is what Quantitative Easing was all about. The central banks began to BUY the long-term debt in hopes of “influencing” the long-term rates by reducing the supply of government long-term debt and in theory then the free market would have been willing to buy private long-term debt such as mortgages. That failed because banks had no confidence in the real estate market and were loaded to the gills with real estate debt which people were defaulting on.

The Repo Crisis has begun in the states BECAUSE this is the only viable free market to speak of. Both Japan and Europe have destroyed the bond markets. The Repo Crisis is the manifestation of our forecast that we would enter a liquidity crisis by September 2019. We listed that as one of the major points to take homes from the May World Economic Conference in Rome.

The Repo Crisis is a liquidity crisis because of the collapse in confidence. Banks are unwilling to lend to each other because they are deeply concerned about a crisis in the international banking sector. The Fed was lowering short-term rates into August 2019 because the yield curve inverted on the 10yr-2yr during the 3rd quarter of 2019. Then the Repo Crisis hit on September 17th. That forced the Fed to stop its intended policy to lower rates for the Free Market dictated otherwise.

The image that central banks are in control is an illusion. They too are subject to the Free Market. They are not in control of interest rates as they like to make everyone believe. If that were true, then there would have been no Repo Crisis to start with.