COMMENT: Marty, the gold bugs are at it again desperately trying to say you are wrong as always and just misrepresent whatever they can. They acknowledge you called for new highs in the Dow, but claim even that was not until 2013 when I read about your forecast back in 2011 in Barrons. They seem to be so desperate to try to prove you wrong yet they have never been right. They do not understand anything about markets. You are correct. They are as bad as politicians preaching the same nonsense and then misrepresent your record to tell lies. They do not mention you said gold would rally up to 1362 and back down. Unbelievable how dishonest and unethical these people are especially ——–.

Thank you for being straight up

KW

REPLY: The gold promoters have a single agenda and are not students of the market. They are just wrong on their theories, and you are right, they are like politicians. Every election is vote for me for change. It seems like vote for me because I have been less wrong than my opponent. They cast everything into right or wrong and shun trying to learn anything the markets are telling us. They cannot learn because they have a predetermined fixed image of how the world should be. They only focus on gold and cannot see what else exists in the world or how everything is connected. They function the same as central bankers who try to talk markets up by giving false impressions of reality. It’s a shame how many people they ruin because they are fixed on one scenario (And yes, the forecast for new a high was made at the bottom of the ECM back in 2011 when Barrons reported that forecast). The lift-off for the Dow to move to new highs with our first target 18500 could NEVER have been correct if gold did not also peak in 2011 and turn down. They have fought that decline all the way.

Look. We need fools on the other side of reality in order to trade against them. They are the fuel that makes markets move. It’s a shame how many people lost money lining the pockets of bankers because of these people. Nothing happened on October 1 when the world was coming to an end because the IMF included the Chinese yuan in the SDR. They thought that Shanghai would start trading “real” gold, not paper, and that New York would have collapsed by now. Their scenarios are childish and absurd to say the least. They have no respect for people. They are like Hillary: it’s all about them.

This is a battle of us against them. They are on the side of the establishment, preaching the same story that made the bankers rich and selling into every high they chased up the flagpole.

QUESTION: Mr. Armstrong; So many people keep calling for a stock market crash. At the same time, it has hung on to the 18000 level in the Dow for dear life. Do you see such a devastating crash as even possible?

PJ

ANSWER: No possible way. Retail participation is at near record lows. It has just started to lift begrudgingly. Even the Gallup poll on Americans shows the same thing. Retail participation is at best 55% down from 65% in 2007. Liquidity, however, is still off by 50%. This does introduce the likelihood of Flash Crashes and Flash Rallies. Such events are by no means because of a pending major crash. Just where do you put money if bonds are dead and banks a questionable? Of course some will yell gold. But gold is for the individual. Pension funds and institutional investors with billions and trillions cannot invest in gold bullion with no yield. Gold stocks, yes, but bullion no.

Gold should bounce and rally to test the 1340 level by year-end. We need a weekly closing above the 1336 level to show some sustainability. Resistance begins at 1308 and we need a daily closing above 1319 to be impressive.

Keep in mind that this is the Year from Political Hell. The second election will be the USA and it is clearly a contentious race with the Bush family saying they will vote for Hillary proving that they too would screw the country to save the political status quo. This is like Obama going to Britain telling the Brits if they vote for BREXIT, screw you, get to the ‘back of queue‘ for the USA will prefer dealing with the French and Germans than British.

November is a Directional Change and then our next big target is January. We will be doing a Gold Video Update tomorrow.

QUESTION:
Mr. Armstrong:

I hope you are well. I ask you:

1. What were the contributions to the economy and international trade, of the great bankers of the modern history, such as, Medici, Fugger, Welser, Berenberg, Rothschild and Morgan?

I look forward to hearing from you as soon as possible.

Sincerely,

J.E.M.V.

ANSWER:The contribution was to facilitate the advancement of society by enabling the free movement of capital and thus the integration of commerce. Of course, people will immediately disagree with me by citing the Rothschilds who did lend to the governments of Europe. They were more of the exception rather than the rule.

The Medici were different. Raymond de Roover, who became a Professor of history at Brooklyn College, wrote “The Rise and Decline of the Medici Bank,” which was first published in 1966. It remains the seminal work on this period. He had access to contracts and internal documents. A special clause was entered into the core contract of the Medici bank “to deal as little as possible with the court of the Duke of Burgundy and of other princes and lords, especially in granting credit and accommodating them with money, because it involves more risk than profit.” (id/ p 343)

Obviously, Raymond de Roover makes it clear that the Medici did not wish to lend to the prices of Europe, for there was no way to collect a debt from a sovereign. The contract continued by warning that “many merchants in this way fared badly…our fathers have always been wary of such involvements and stayed aloof, unless it was a matter of a small sum lent to make or to keep friends.” The Medici policy was “to preserve their wealth and credit rather than enrich themselves by risky ventures.”

Indeed, later generations ignored this command, and once they lent to government, that was the end of the Medici. The Fugger’s were the German bankers wiped out by the default of Spain, which was rather stupid since they had previously defaulted after wiping out the Italian bankers.

Banking has always furthered the economy and raised the standard of living for all. When the bankers get in bed with government, society is placed in a dangerous position.

Merkel wants to regulate real estate loans in Germany. The Federal Government is planning to implement extensive regulations on real estate loans. Among other things, debtors will be required under certain circumstances to repay their loans within a given period. The Federal Government said on Monday that the draft law should be followed by recommendations from the German Committee on Financial Stability.

While there is no real estate bubble right now, it appears they are concerned about further capital inflows, perhaps caused by the failed euro. The new hurdles to be imposed for new loans may have the negative impact of making sales of property in Germany far more difficult as a whole. Such schemes have tended to have a negative impact upon price.

QUESTION: Mr. Armstrong; You have said that the only way to reverse the deflation is to raise interest rates not lower them. I understand that the low rates only reduce the cost of funds for banks, but it hallows-out savings and pensions. Has anyone listened to you and tried the opposite trend to raise interest rates? It seems the Fed is listening to you but the IMF and others plead to the Fed not to raise rates. Can you point to any hope in this regard?

Thank you for you do. Truly you make us think.

KS

ANSWER: Actually, all you have to do is look at Iceland. Not only did they throw the bankers in prison instead of giving them bonuses, but they also raised interest rates unlike everyone else in the Western world. In an attempt to stimulate their economies, Western central banks lowered rates and the European Central Bank (ECB) moved to negative rates after implementing a very unconventional monetary policy suggested by Larry Summers. Meanwhile, the Central Bank of Iceland (CBI) did precisely the opposite by raising interest rates and reducing the size of its balance sheet. This stands in direct contrast to the ECB, the Bank of England (BOE), Japan, and the United States.

Just step back and look objectively at the evidence. Back in July 2011, the CBI’s benchmark rate of 4.25% was significantly higher than the ECB’s benchmark rate of 1.50%, and it was substantially higher than the BOE’s benchmark rate of 0.50%. Since that point in time, the CBI’s benchmark rate increased relative to both the ECB and BOE.

Iceland now has the strongest economy in all of Europe where its GDP has risen more than 100%, doubling since 2009. This stands in amazing contrast to the ECB where European growth since 2009 has been just 14%, and in Britain, the total GDP growth since 2009 has been 27%. This is clear evidence that this policy of low interest rates is nonsense. The rate of interest reflects inflation and future opportunities. If rates are at zero, it demonstrates that there is zero confidence in the future of Europe. I think even an ape could figure out that this is not working.

QUESTION: I am beginning to see the light. It seems as though when gold rallies strong, the sentiment is reflected in these gold promoters. Then gold drops and they preach the same thing again. This leads them to buy every high and in fact they are merely cheering the news and are not analysts at all. They are not objective in any way. So are they just news chasers?

Thank you for the light to bring

KJ

ANSWER: Yes, of course. They act more like the most novice investor just starting out. Their forecasts are based solely on emotions, and they try to look for fundamentals to fit their predetermined conclusion. We are all human and that means we are subject to the same human frailties as everyone else. So, when these people see a strong price move, it is their emotion that takes over and the forecast is not connected to reality. They are convinced about a single theory. They are incapable of learning because advancing in knowledge requires admitting mistakes.

These type of people claiming to be analysts give the field a bad name because they are by no means analysts, but simply news followers. They think something has to have a reason behind every move. This is where they are dead wrong. Markets move in ANTICIPATION of future events. This is why professionals say, “Buy the rumor and sell the news.” It really does not matter if the event is real or not. If people THINK it may happen, they will act accordingly in ANTICIPATION. Deutsche Banks shares crashed because people ANTICIPATED it would collapse. They did not wait for a formal announcement, as it would have been too late to act. So they act, expecting something might happen. In the case of bank runs, that fear can lead to actual bank failure even the rumor was false.

Elizabeth Warren wrote to Obama demanding Mary Jo White, the head of the SEC, be fired. She wrote: “I do not make this request lightly.”  Warren has sought that the SEC require corporations to reveal their political donations. “I have tried both publicly and privately to persuade Chair White to direct the agency’s resources toward pressing matters of compelling interest to investors and the public, and toward completing those rules that Congress has required it to implement. But after years of fruitless efforts, it is clear that Chair White is set on her course. The only way to return the SEC to its intended purpose is to change its leadership.”

I know Mary Jo White and I can say, while I do not agree with Warren on much of her economic ideas, nonetheless, she is right on point here with the performance of the SEC. Mary Jo White was the head of the Justice Department in New York City when my case began. I did not know who she was. At my first bail hearing, my lawyer got the government to admit that they never bothered to call a single client. Instead, they repeated whatever the bankers alleged, and the judge in Trenton, New Jersey, was shocked.

After I won that hearing, the government never bothered to call any clients to verify anything the bank told them. Mary Jo White came up to me and was literally snarling and showing her teeth to the point where I looked at her and asked what the hell was her problem. I did not know who she was. All I knew was that she looked like she was about to bite me like some animal. My lawyer then told me who she was. It was totally unprofessional to say the least.

She did not understand anything about the transactions. In the end when they had to plead guilty and return all the funds, they were exempt from prison. It was exactly like the ending in “The Big Short.” New York bankers never go to jail.

Mary Jo White has ALWAYS protected the establishment. That is what she is there for.

The European banks are in much worse shape than their US competition. The reason being argued in Europe is that the US government imposed a ban on speculation after the financial crisis. However, that was imposed on September 19, 2008, and it ended on October 9, 2008. But some Europeans claim that is why US banks survived and want to outlaw short selling on banks stocks in Europe. The problem with this proposal running around behind the curtain is that Brussels would lead, not to short selling, but wholesale liquidation. They would have to suspend all trading, period. The problem is that it would not last for more than one month, as was the case in the United States. This would only destroy confidence in Europe altogether.