UKIP Wants Nigel Farage Back Claiming May Has Betrayed BREXIT


 

Theresa May’ Florence speech is being seen by many as a betrayal of BREXIT. Instead of getting on with it, she has said that there will be a longer transition period even two years beyond 2019 into 2021. She said that Europeans will still be able to come and work in Britain into 2021 but under a “registration system” that many fear will still allow terrorists to enter from Europe.

Prime Minister May said that the temporary transitional arrangements “will not go on for ever”and will end around two years after Britain leaves the European Union (EU) in 2019. She made it clear that “[d]uring the implementation period, people will continue to be able to come and live and work in the UK.” She did also say that “[t]here will be a registration system, an essential preparation for the new regime.”

Dragging this on has many concerned. While she says businesses should have the time to plan, quite honestly, two years is plenty of time. The way the markets are looking going forward, Britain may find itself engulfed in the European banking crisis even before 2019.

The Yorkshire MEP Jane Collins, who was preparing to run for the leadership of UKIP, has said she would step aside and Nigel should come back. Most people say he is by far the most effective politician perhaps in Europe as a whole. In my opinion, all Nigel has to do is show this chart on TV. British GDP has gone nowhere but down since it joined the EU. Britain is in Europe, but it should never be part of the EU – plain and simple.

 

Germany To Tax VAT Just Billing People Before they Pay


The German government is desperate for money and what they are doing now is just unbelievable. Germany is looking to order companies to prepay VAT tax before they even collect it.  Companies in Germany will now have to pay the VAT immediately to the government on any amount they have billed to a customer. This is very drastic. Normally, someone who pays a bill in installments would pay the VAT on that amount that they pay. Under this new scheme, the company must pay the full VAT tax before they get the money. Even a sports contract would require paying the VAT on the entire contract which may be for 5 years up-front.

European Banking Crisis


Perhaps this period will be looked back upon as the Draghi Deflation. After nearly 10 years of this failed policy, the European banking industry is contracting on every possible level. The merger of Commerzbank to Merge with French BNP is one possibility. Commerzbank is a takeover candidate or shotgun wedding candidate, for good reasons. Its shares have fallen and are trading now at half their book value. When interest rates rise to bring back deposits, then the bank could perhaps get out of its deep hole. The German government, which has a 15 percent stake after a bailout in 2009, is ready to sell looking to raise cash itself.

The Draghi era of negative interest rates has proven to be a complete disaster. People have withdrawn money and preferred to buy safes. Major banks with branches in the USA have shipped their cash to the American branch and deposited at the Fed in excessive reserves. Meanwhile, with deflation dominating the European economy and rising taxation, the average person is just not interested in borrowing until they see the economy turn around.

On top of these issues, to survive, European banks have been withdrawing from proprietary trading, firing expensive staff with experience, and replacing them with inexperienced kids. Additionally, the low-interest environment and the decline in deposits has resulted in a major contraction in bank branches. As banks also move to online banking, they have been able to reduce staff. In 2016, the banks let go some 50,000 jobs. They were also able to close some 9100 branches throughout the EU, according to the European Banking Association.Consequently, now the banking work force has been reduced to 2.8 million people contracting back to 1997 levels. We will most likely see a further reduction of at least 5% going into early 2018. We will see further mergers and consolidation reducing jobs and branches into 2020.

Merkel Poised for 4th Term as Head of Europe/Germany


The German election takes place tomorrow, with Chancellor Angela Merkel the favorite to defend her position against Martin Schulz for a fourth term in power. The AfD will for the first time win seats Bundestag elections. The the union parties and the SPD are losing approval while Merkel’s party, CDU / CSU, polls at just 34%, which is two percentage points less than the last election. The SPD is polling at just 21% with the left at 11% and the FDP at 9%. The AfD, according to the opinion research institute Insa, is gaining two points and comes to 13%, the Greens increase one point to 8%.

Polls currently show that Merkel’s Christian Democratic Union (CDU) party – with its Bavarian sister party, the Christian Social Union (CSU) – will be the largest party after the Bundestag election, but they will fall short of a majority once again so there will have to be coalition government with the SDP. This is what is harming Germany and Europe for it gives the impression that Merkel has a mandate when she cannot win 51% of the German vote.

Therefore, the wildcard remains the AfD and if they come in at a higher level than expected, there will be an ongoing battle that will turn against Merkel in the next two years. If the AfD come in above 15%, then the shape of the coalition government may be different than expected. As one German politician put it, you will have to drag Merkel out by the hair to get her to to leave office. Therefore, expect no change in the course of direction for Europe. As long as Merkel is still there, it will be more of the same but worse with ever increasing taxes and more deflation. You cannot reverse the course of Europe without changing the leadership.

Commerzbank to Merge with French BNP


According to a the latest spin, the German federal government’s withdrawal from the Commerzbank has left the favored shotgun wedding merger. Commerzbank is the Frankfurt money house which will be merged with the French BNP Paribas. This is being presented as if it were a strong German-French merger which is suggesting that there is a deeper European banking union unfolding. Additionally, they are also going to merge a troubled Italian bank into BNP.

Behind the curtain, the concern is that Commerzbank could not be merged with Deutsche bank because they have the same portfolios that are in trouble. BNP Paribas is about 10 times the size of Commerzbank. Therefore, the real world view is this is just a shotgun wedding rather than a new German-French merger.

German Elections Void of Any Critical Discussion


The German Bundestag election campaign has seen a total black-out of any discussion of the major crisis that is building in Europe. Nobody is mentioning that Euro crisis, ECB monetary policy, disintegration of the EU, refugee crisis, pension crisis, the municipalities on the brink of insolvency, or the drastic increases in taxation coming AFTER the election that will only lower disposable incomes and extend deflation.

The politicians, and the press, are in full swing to hide the real trend at foot. The press is running stories why the Germans Love Merkel, yet she has never won even 40% of the popular vote. Even the press outside of Germany is in on the “selling” of Merkel because she is the leader of Europe – good – bad – indifferent.

Perhaps the monetary policy of the ECB has set the stage for a serious monetary crisis over the coming years that will seriously disrupt the German economy, in one way or another, depending upon the industry. Mario Draghi has experimented with negative rates which has kept the Eurozone governments on life-support – but they have not used the time to reform anything.

Draghi’s experiment has altered the economy and the financial sector in Europe. They now are faced with two equally unfortunate alternatives: if the ECB continues its monetary policy, many banks in Europe will slip into bankruptcy. Today, the traditional business models are no longer working because most banks with zero and negative interest rates have lost the most important source of revenue – deposits. A simple mathematical calculation projects widespread bank insolvencies in Europe as we enter the next decade.

The events in Barcelona demonstrate that there is a denial of any democratic government in the Eurozone. The elites have made the decision to federalize Europe and nobody is allowed to leave. Brussels learned nothing from BREXIT and this disintegration of the EU will worsen as the economics turns against it. The disintegration of the EU is only further enhanced by the refugee crisis. No other Arab country will accept the refugees such as Saudi Arabia or UAE. They know better. Two of the terrorists in Britain were refugees.

The negative interest rates have carved out huge holes in the pensions of Europe. Some members have issued 100 year bonds at less than 2.5%  and 50 year bonds as in Switzerland below 1%. This is merely a reflection of deflation projected out for extended periods of time.

The German Bundestag election is void of any discussion of the trouble in the EU or how Germany will be affected in beginning after the election. There is no mention of imposing a turnover tax on the internet and no mention of forcing companies to prepay all the VAT even on a 5 year contract covering installments. The desperate need for cash among the governments is not being addressed. Nobody seems to think twice that the governments constantly need a greater proportion of  private sector money to stay afloat and this in itself is driving the deflation.

Spanish Stock Market Reflects The Bearish Outlook for Spain


The one thing I have always said, markets never lie. The fact that Spain is showing that its government is still fascist is reflected in the performance of the share market. Spain has never exceeded its 2007 high and it is warning that a lower closing for 2017 may just see this market collapse into 2020. We will be looking at Spain closely at the WEC. This chart has been screaming – all is not well in the European project.

Spain Showing the World It is Still A Fascist Government – Sell Spanish Debt


The Spanish government is facing the real moment of truth. It is displaying that it is by no means concerned about human rights nor is it a true democratic system. Spain has reverted to Franco fascism as now more than 40,000 people have gathered in Barcelona to protest over the Catalan independence vote being shut down as the Spanish Government sends in 16,500 troops to deal with the activists. This is showing just how far out of touch this entire EU anti-democratic government has gone. The people no longer matter – the elite know what is best for them.

This is 86 years from the beginning of the Second Republic in Spain so 2017 is precisely on target for this type of civil unrest. What this is demonstrating is the old adage – the king is dead, long live the king. No matter what form of government takes power, it will ALWAYS, and without exception, seek to act only in its own self-interest precisely as Thrasymachus argued against Socrates.

You cannot short Spanish debt. So those who hold it, had better sell it to the ECB before it is too late. This is a very serious event that reflects upon the entire European Project. It should have been a trade union – not a political union by force of arms. Napoleon and Hitler tried that one before. It cannot work. Human rights include the dignity to assemble and the freedom of thought. Article 17 provides that no one may use the rights guaranteed by the Convention to seek the abolition or limitation of rights guaranteed in the Convention. This addresses instances where states seek to restrict a human right in the name of another human right, or where individuals rely on a human right to undermine other human rights (for example where an individual issues a death threat). Human Rights includes the freedom to hold opinions, and to receive and impart information and ideas. Spain has ignored the European Convention on Human Rights and is pretending that its national security overrides human rights – i.e. self-interest.

 

Dow High or Low


QUESTION: Hi Martin,

I am confused with the Dow Jones Index, could the index explode up through 23,000 to 40,000 from here or does there need a downward move then explode up through 23,00 (a sling shot).  Could you tell us what you see for the next 6 to 9 months.  Probably the most important investment for us all!
Thank you for all your help!
KC
ANSWER: The cycle is in the basing mode. Therefore, it need not drop sharply. Remaining within the channel is perfectly fine. A Slingshot would be more powerful to retest the bottom of the channel.  The explosion to the upside is still not yet unfolding and we need to be concerned about 2018 and the year-end closing. We will issue a special report to deal with that issue.
Part of the basing is concluding this year from political hell. The German elections are the 24th. Keep in mind that AfD will gain seats for the first time. Merkel has NEVER won a majority and she relies upon the FDP to hold power. The more the FDP declines and seats are taken by the AfD, the more chaos will unfold.

Central Banks Investing in Equities


QUESTION: There is a new trend that central banks are investing in the stock markets Is this true? What is the impact of this move?

ANSWER: Yes. The reason has been rather straight forward. The only game in town has been US government bonds. Many have seen this as a problem the defeats diversification. Consequently, there has been a major effort to attempt to diversify into the private sector when there has been such uncertainty in the public sector. Behind the Curtain many are simply asking of Europe: What the hell is going on? This has been a “euro crisis” that simply never seems to end. What has happened to Greece, Portugal, Italy, Spain, Holland and now even France. Many outside of Europe are simply asking has Europe just lost its mind? Hence, there has been a move to diversify out of government debt by central banks themselves.