QUESTION: Mr. Armstrong; I know my friend sent an email to you and is finally listening only after racking up losses. I explained how I followed you since 2015 and bought the Dow back at the end of 2015. I made almost 10,000 points and paid off my house. My family toasts you every Thanksgiving around the table. I know you warned that April could make a new low in the Dow and the first half of this year would be a period of consolidation. The rally into March made new highs in the Nasdaq but the Dow failed. You have taught me to just follow the numbers and I appreciate your comments trying to explain events as they unfold. The Global Market Watch was fantastic. On the yearly level it said potential major high in January and then it flipped back and now says new highs remain possible. To watch how that sifts on the yearly level has been a tremendous indicator in itself. That gave me the confidence to sell the close of January. My question is simple. Do you see this as a major buying opportunity? How long should I keep the powder dry?

Thank you

SJ

ANSWER: This is a consolidation period and it will be difficult to guess where the market will go from one day to the next. Yes, the Global Market Watch has been fluctuating on the yearly level on the Dow and that is a reflection each day what the future would look like assuming that was the end of the year. It did by itself state potential major high and that confirmed the correction into February. Now it is saying new highs are possible which is reflecting that we are indeed in a consolidation mode.

This will provide a major buying opportunity. We needed this pause in trend to shift the majority back to bears. When the market rallies and breaks out again, they will fight it as they have all the way up. The biggest losers have been the asset allocation followers. They assume they cannot forecast the future so they spread their assets hoping that the traditional 60% equities will make up for the losses on the 40% bonds. That will bankrupt most people on this next move. It has failed to save pension funds.

Just remember. You MUST be disciplined. The hardest part of successful investing is to remove your emotions as much as possible from the decision process. This is why the decision must be on the NUMBERS and not even what I have to say. Nobody can forecast a market from a gut perspective. If they are looking for someone to be a guru, then kiss your portfolio goodbye right now.

I will be doing video updates for those who purchased the 2018 Share Market Report. We will be holding a WEC in Singapore in June. We will be opening up both Singapore and Orlando for general ticket sales shortly. Prior attendees get first dibs. We will be covering all of Asia in Singapore and the world in general. Orlando will be focused on Europe and North America with also a general overview of the world. That will be held after the 2018 US elections.

So follow the Reversals and the Timing. They will tell us when to ac

QUESTION: Interesting that $1.3T US spending bill was enacted on March 23, 2018, exactly 31.459 years after passage of US Tax Reform Act of 1986:

Also, the 86 year cycle in drought conditions in the midwest US seems to approach – is this why Marty thinks wheat will bottom this year?

The below Wikipedia link mentions a “short drought” in 1890 in the US Great Plains, and then a dust storm on November 11, 1933, in South Dakota (43 years later). Wikipedia also mentions that the US Great Plains entered an unusually dry era in the summer of 1930 (a little more than 86 years ago), with droughts coming in 1934, 1936 and 1939-1940.

Kansas is having drought conditions currently:

Poor winter wheat condition worrying Kansas farmers

I wonder if this is the year to go long wheat, especially since Marty forecast a bottom for this year?

Best,
J

ANSWER: Here is a chart of Wheat from 1259 to 2017 with the currency converted to dollars from British pounds using the conversion rate at the beginning of the US dollar extending it back in time. Here we can see the overall trend. Yes, there is an influence with respect to weather. However, the Dust Bowl was a local event.

What our computer is warning about begins next year with a Directional Change in Wheat. This cycle appears to be impacted by (1) significant climate change, and (2) the War Cycle. The combination of both is pointing to a bull market in nominal dollar terms.

I recently did an interview and was asked about the Federal Reserve. There is so much absolute nonsense sophistry that circulates where people think that ending the central bank will somehow cure everything. I really just laid it out plain and simple. The Fed’s balance sheet is a tiny fraction of the economy or the real money supply. Everyone blames the Fed for everything and they NEVER bother to look at (1) the fiscal policy of Congress, and (2) the banking system as a whole.

Even if you want to scream from the top of every hill that $4 trillion worth of Fed’s Quantitative Easing was pure evil and should have created hyperinflation (which it did not), the deficits created by Obama topped $1 trillion per year and those never die whereas the Fed’s QE evaporates as they do let the debt they bought mature and expire without rebuying it again, whereas Draghi and the ECB have conceded they will reinvest their holdings. Look at 2009-2012. Obama created $5.4 trillion that will never expire but will be rolled until there are no more buyers.

So let’s do the math. The entire Federal Reserve QE program was equal to 1/5th of the national debt. The ECB bought 40% of all public debt and the Bank of Japan bought 75% of new debt coming to the market. Yet all we get is dollar bashing and people actually have called the yen the safe-haven play. I really do not know if I am arguing is drunks, people with dementia, or just con-artists. All these people pushing the end of central banks because they are clueless about how the real world functions.

I have been trying to explain to the world that monetary policy using interest rates to impact the balance of payments is really voodo economics. The Australian even wrote an article back in 1989 about the advice I was given to governments. No matter how long I have been at this, trying to overcoming manipulating interest rates to try to control the economy is just totally insane. It reminds me of the skit in Blazing Saddles where the Black guy puts a gun to his own head and say if anybody moves, the black guy gets it. How can a central bank raise interest rates to fight inflation when the government is the biggest borrower in the system? The government deficits will rise because their interest expenditure will rise perpetually because they continuously roll their national debts and never pay anything off. The central banks have lost all control and the press is just too stupid to even understand the problem.

The Australian wrote about our recommendation: “He firmly believes the worldwide obsession with monetary policy, namely the use of interest rates to regulate inflation and demand, is misguided, and in a recent circular to clients described it as “voodoo” economics.”

We are hopelessly lost and the idiots who bash the Fed are doing so much harm to society it is not even funny. The bulk of the real world money supply is created by lending on a leveraged basis. It is not money created by the Fed and it goes well beyond that even created by the Congress.

AT the end of 2017, total household debt exceeded $13 trillion. Total non-financial business debt stood at $6.1 trillion at the end of 2017. The Fed’s balance sheet was $4.4 trillion of which $2.4 is US Treasuries. The national debt stood at $20.5 trillion at the end of 2017. If we look at this perspective, that means the money supply is $41.6 trillion just using the debt. If we then add M2 (all accounts _ money market accounts) which stood at $13.8 trillion at the end of 2017, this brings us to a liquid money supply of $55.4 trillion. The Fed’s balance sheet does not even reach 10% of that figure. Now let us add the stock market, which is liquid. That reached $30 trillion by the end of 2017. Therefore, the liquid assets/cash position stood at $85.4 trillion at the end of 2017. Now let us add total personal real estate (homes) in the United States which stood at $31.8 trillion. If we include illiquid real estate, now we are up to  $117.2 trillion. So how will shutting down the Fed and theoretically eliminate $4.4 trillion solve all the problems?

QUESTION:  Hi Armstrong,
I continue to read your blog for 2 years I say and find it educational.
I wanted to know what will happen to U.S. coins like pennies and nickels when the base metals are worth more than the coin value.
Will the U.S. allow hoarders/collectors to exchange them for spot metal value or melt value? either one would be of course more than 0.01 for the penny and more than 0.05 for the nickel.
I hope to hear my answer on the blog

A

ANSWER: When silver was removed from the coins after 1964, at first it was illegal to melt the coins down. The FBI were prosecuting people for melting the coins they called defacing. However, that quickly faded out as the law did not support their theory of defacement. $1,000 bags of US silver coin traded even on the futures market in New York.

This time around, it is not likely that we would see confiscation. We could once again see bags of coins trading as was the case even into the later 1970s.

QUESTION: Dear Mr. Armstrong,
I have a question please, taking the lead from your recent article in your blog “Noah’s Ark Commemorated on Roman Coins”
Question: Do you happen to have found a copy of the Apion Treatise (answers to Josephus) in your historical searches? (Apion — Historian from Alexandria)
Background: Titus Flavius Josephus, born in 37 AD in Jerulasem, 160 years before Septimus reign introduced to the Roman elite to the Jewish mythology of the Bible thru his writings. The historian Apion from Alexandria wrote a treatise answering to the historical claims of Josephus. Josephus also responded with his treatise – Against Apion, which has survived. Apion’s Treatise is not published or found (lost??), according to the results of my searches.
Can you please enlighten me.
Thank you Kindly,

DGP

ANSWER: Josephus has been a contemporary historical source with respect to the conquest of Judaea by the Romans under the command of Vespasian (69-79AD). It is also true that he became an adviser to Vespasian’s son Titus (79-81AD). However, most of his writings appear to be really trying to redeem himself among his fellow Jews. In the Preface to Jewish Wars, Josephus actually criticizes historians that misrepresented the events of Roman-Jewish War. He wrote: “they have a mind to demonstrate the greatness of the Romans, while they still diminish and lessen the actions of the Jews.”

The Jewish War was a very big and profound event. It came after the death of Nero (54-68AD) and the empire was plunged into civil war. Vespasian (69-79AD) was vying to be emperor and the Jews looked at this opportunity to seek independence from Rome. However, like Catalonia in Spain, if they are allowed to just leave, this threatens not just Spain but would encourage others to leave the EU. This is precisely the same set of facts that existed following the death of Nero in 68AD.

If Judaea was allowed to just leave, other provinces would have done the same. They even issued their own coinage. Thus, the punitive actions of Vespasian against the Jews must be understood within this context. We have the victory over the Jews appears on coins of Vespasian of every denomination.

It is highly unlikely that the other works of Josephus were widely read by Romans. Josephus’s Against Apion is a two-volume defense of Judaism as classical religion and philosophy. Josephus stressed its antiquity and suggested that the Greek religions lacked that ancient tradition and were more modern. Josephus attacks the Greek writer Apion and his anti-Judaic allegations. So once again, this appears to be a work that may be also out of guilt that he supported the Romans to pick the winning side.

The bronze coin pictured above of Apameia was struck for Septimius Severus (192-211AD). The reverse legend mentions the city’s AGONOTHETES (chief organizer of the games) or chief magistrate, ARTEMAS, who probably was Jewish. Noah’s name, given in Greek as NOE, which appears on the ark. The subject matter does appear to be very popular and it may be entirely attributed to Jewish magistrates. Apameia was a city in Phrygia, which during the 3rd century AD, was under Roman rule. The Noah coin design must have been very popular since it was struck for the emperors even after Septimius Severus such as Severus Alexander (222-235AD), Gordian III (238-244AD), Philip I (244-249AD), and Trebonianus Gallus (251-253AD), over the course of 61 years.

Apameia was a merchant city (today Dinar in western Turkey) whose ruins remain to this day. It was a very prosperous city during Roman times. It was a trade/commercial center that was connected to Asia by caravans carrying silks, spices, incense, perfumes, and medicines. The population of the city was very much like London and New York; very cosmopolitan with a mixture of Phrygians, Lydians, Cappadocians, Pisidians, Greeks, Romans and Jews. The common bond was mercantilism. They were a society composed of traders.

The origin of the city was founded by Phrygians prior to 1,000 BC and it was named Celaenae. It was located in a well-watered oasis at the source of the Meander River. Its coinage from the 2nd century BC shows an elephant head which is a clear symbol of its connection with Asia through trade. This city sat on the ancient old ‘Royal Road’ from the Middle East to the Aegean Sea that was originally constructed by the Persians some 500 years before this coin was struck. The location afforded Apameia control over all the caravan routes from Asia. Even when Alexander the Great invaded this region, he made the city one of his military bases.

Following the death of Alexander, it fell to the control of Antiochus I Soter (280-261BC)(meaning Savior) of the Syrian/Seleukid Empire. Antiochus I built a new city in 270BC below the citadel of Ceaenae and named it Apameia after his mother. Then Antiochus brought Babylonian Jews to serve as garrison soldiers, civil servants and royal administrators in his new city. This is most likely the connection why we ultimately find Noah coins being struck in this city. Some argue this was a punishment because the Jews had resisted Alexander’s conquest of Babylon where they lived at that point in history.

The Antiochus III (223-187BC), the Great, brought another large group of Persian Jews to Apameia in 188BC. Josephus in his work, ‘Antiquities of the Jews’ said that Antiochus III settled 2,000 Jewish families from Babylon in Lydia and Phrygia. Josephus goes on to say that these Jews were given special privileges including tax exemptions for ten years and were permitted to adhere to their own customs, laws, and religion. (Antiquities, Book XII, iii.4). These settlers may account for the large communities of Jews that suddenly emerged in the ancient Asian cities of Antioch, Apameia, Delos, Ephesus, and Sardes.

It is clear that by the time we reach Septimus Severus at the end of the 2nd century AD, the Jews had risen to high political positions in the city. Therefore, the Noah coins are unique to this city and are a reflection of the cosmopolitan culture that existed thanks to commerce. The ark is portrayed as a kibotos, which was an Apameian packing case used in trade with a lid. This is, therefore, blending the trade of the city with the Jewish parable.

QUESTION: Where does your overbought index stand on the stock market?

KL

ANSWER: This Index is proprietary. It peaked at 12.55 during October 1919 as capital had flowed to the United States due to World War I. The Index then declined thereafter into the August 1921 bottom at 10.40. From this point, the Index rallied into October 1925 peaking at 13.16, fell back for 15 months bottoming again in October 1927. The final rally lasted 14 months peaking at 12.95. The bottom came in July 1933 about 13 months after the actually low in nominal dollar terms during June 1932.

In nominal terms, the Dow tested the 1,000 level in 1966, 1968, and 1973 and again in 1980. We can see the shift in trend that came following the historical low in 1981. The core of this index is capital flows so it tends to reflect just how capital flees and concentrates moving relative to US assets. Looking at the most famous bull market of the Roaring ’20s, the duration was 97 months which we exceeded from the 2009 low in April 2017. The 2009 low was 6469.95 and the January high was 24,741.70. which was a rally of only 282% – not anywhere close to the Roaring ’20s.

This index is proprietary and it affords us a look at the asset class from a global perspective. This is part of the reason we have been warning that the bull market is by no means overbought and the bulk of forecasting out there has made this the most hated bull market in history because they look only at the nominal index without placing it within its global context.