Confused Confidence


confused

QUESTION:

Hi Marty!

I am reading and studying your blogs and Socrates for quite some time and I would really like to thank you for all the insights!

Some days I listen to bloomberg radio for knowing what ‘they’ are saying about the market developments. As I am not an experienced trader as you are, I must admit I don’t understand the ‘collective market behaviours’ e.g. besides all the traps the central banks got themselves into, my normal logical mind tells me that whenever interest rates rise, money gets more expensive, so consequently the only true reason for doing so would be that underlying economic data shows the economy is doing well and can do without ‘help’.

A simple mind like I am tells me that a stock index should rise in case of a well doing economy. Instead I only hear markets fear a interest rate hike. Seems to me that the collective wants interest rates remain low, so stockindex growth driven higher by debt.

The same for example in the case of oil. With my simple mind global economies aren’t as healthy as the financial markets might imply. So in short lower demand and risk of even demand lowering. Instead of a lower price eg. crude oil futures, the futures contract keeps on rising. I am wondering what the fundamentals are that drive up these prices?

Could you give some insights on the real fundamentals that drive markets as from a real- economic perspective I can’t figure it out!

Thnx Marty!

R

Confidence-wide

ANSWER: The fundamentals flipped after the shift from a private to public wave following 1929. Under the pre-1929 economics of laissez-faire, the government did not attempt to manipulate society with monetary policy. They attempted to lower U.S. interest rates to deflect capital inflows back to Europe, but they did not practice manipulating interest rates domestically to try to manage the economy. Therefore, raising interest rates before 1929 was often seen as bullish because it showed there was a demand for borrowing money due to economic expansion.

Today, the fundamentals are interpreted through the eyes of Marxism. Raising interest rates is now considered a punishment to society intended to deter them from borrowing. Yet, deflation involves declining interest rates due to the lack of interest to borrow. Some say that higher rates are bad for stocks, but they are solely looking at it as a punitive measure that will cost people more to borrow. You even have people cheering gold with lower interest rates.

None of this makes any sense economically. Nonetheless, we are looking at a sharp rise in stocks and gold along with rising interest rates, which will confuse everyone. Interest rates are the manifestation of expected inflation. If you think inflation will be 10%, you will lose money if you lend it at 5%. Interest rates are the price of expected inflation alongside the perceived risk.

Therefore, everything will take off to the upside and the majority, whom will be following the Marxist version of fundamentals, will feed the rally because they will be short. This view of fundamentals will eventually flip back, but only when the public at large sees this flip and goes with it. That is the point of no return where confidence in government collapses.

ECM-1970-2084 - R

Why ReportI should point out that these fundamentals tend to apply only to the investing class. I remember 1981 when interest rates reached their peak. My mother and her sister went out and bought bank CDs at 20% for 10 years. They did not ask me. They made the decision on their own and said they would never see that much interest again. They are countless others changes the trend and made that peak in the Public Wave 1981.35. This class of people act out of common sense and do not listen to the fundamentals applied in the investing class. This is the real group of people who are the movers & shakers. The rest of us are trying to figure out what they are doing. Keep in mind that within the investing class, they always try to assign some fundamental to explain something. Everyone wants to know WHY. I named by debut report on the ECM back in 1979 – “WHY”.

German 1918 Revolution

German Hyperinflation WheelborrowTake gold for example. How long have they been saying the dollar is fiat yet gold has not advanced to the same degree as the Dow since 1970. It is one of those fundamentals they always throw at you which become sophistry. Sounds logical and they mix in Germany with wheelbarrows of money, but omit the fact it was a Communist Revolution in 1918 where Germany invited Russia to come take their country wanting to join the Russian Revolution of 1917. Who would keep money in a bank under such conditions?  There was a collapse in confidence.

Is the Supreme Court Acting Unconstitutional?


US Supreme Court

QUESTION: 

Dear Mr. Armstrong,
Re: The Ted Cruz/John Kasich Conspiracy and your comments about the Constitution and USC
In your opinion, might it be a crime to deny registered independents the right to vote in a primary?
Pennsylvania, one of only 11 states remaining with this law, is a prime example.
Thank you for a life devoted to the education of those with inquiring minds,
JS

ANSWER: Absolutely. Because we have created these “primary” elections even though they are for delegates, once the state creates such a right, it cannot deprive you of it without violating your civil rights. Now here is the REAL MONUMENTAL problem. Does the Supreme Court even act constitutionally or has it also denied citizens the right to absolutely behead as declared by the Constitution itself? We hear all this yelling about the Republicans blocking Obama’s Supreme Court nominee. I specialized not just in history, but the rise and fall of nations and how this unfolds. I also studied law intensely and lawyers will often call me on constitutional questions. Why? When you go to law school, you spend very little time on the Constitution. The bulk of law concerns statutory law which is everything written and passed by Congress from civil rights to Obamacare. Very little cases end up challenging the constitutionality of a statue – merely the unconstitutional acts of government’s agents such as police and politicians.

I am going to make a statement here I have made to Constitutional Lawyers that makes their eyes pop-out and say – OMG! The Supreme Court has ABSOLUTELY no right to exercise discretion to hear any case. They must in fact hear EVERY case presented to them for that is dictated by the Constitution and cannot be circumvented by either a statute written by Congress or by its own rule making practice. The Supreme Court receives approximately 7,000-8,000 petitions for a writ of certiorari each Term (year).  The Court grants and hears oral argument in about only 80 cases in a country of over 300 million. That is outrageous and denies the people the constitutional guarantee of a tripartite government with each branch acting as a check and balance against the others. Let’s review what the structure of government crafted by the Founding Fathers created.

Marshall John Chief Justice - 1Chief Justice Marshall held in the landmark case Marbury v Madison, 5 US 137 (1 Cranch) (1803) in which he declare the role of the Judiciary branch; “It is emphatically the province and duty of the judicial department to say what the law is.” id/177. At the very beginning of the nation, the Supreme Court justices rode “circuits” meaning each justice heard cases in their assigned circuits traveling around the country. Article III, Section I of the Constitution expressly states: “The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.” The Constitution only guaranteed the Supreme Court no other! It gave the option to Congress to create inferior federal courts around the country, but this was by no means mandatory. The implications of this are quite profound for it means that Congress can close all the federal inferior district and appellate courts, but it cannot close the Supreme Court. The tripartite structure of government requires the Supreme Court – not inferior courts. Justice Reynolds explained this succinctly.

“The accepted doctrine is that the lower federal courts were created by the acts of Congress and their powers and duties depend upon the acts which called them into existence, or subsequent ones which extend or limit.”

Gillis v California, 293 US 52, 66 (1934)

Your absolute constitutional right to be heard is being DENIED. That right is being circumvented by demanding you go to a district court judge, then appeal to that circuit court, and then apply to be heard as one of the 7,000+ petitions when they only accept 80. What if a child cannot speak to their father who will only communicate to them by some nanny. Is there a relationship bond between the father and the child? Of course not. Inferior courts are under NO OBLIGATION to apply even a uniform legal code. Each have their own rules and precedents are unique to each circuit. There is absolutely no guarantee to EQUAL PROTECTION OF THE LAW when these circuit courts are free to do as they like.

Chief Justice Marshall also held in 1821 a very important decision holding:

“If the constitution does not confer on the court, or on the federal judiciary, the power sought to be exercised, it is in vain that the act of Congress purports to confer it…” 

Cohen v Virgina, 19 US 264 (6 Wheat) (1821) id/324

Therefore, regardless of the fact that Congress reduced the power of the Supreme Court eliminating the constitutional status of the court by injecting their discretion to decide if they want to hear a case in the Judiciary Act of 1925, that act is totally unconstitutional for no statute can amend the constitution. Any statute or rule created by Congress, a political party (Republicans right now), or whatever, it cannot circumvent the Constitution – PERIOD!

Judge Richard Owen

Owen Changing Transcripts

The inferior federal courts have become a joke. They are there to defend the government, not the people. In my own case, I confronted perhaps the most corrupt judge in New York City; Richard Own. He had the audacity to actually alter the transcripts in court changing the words people would say to support the government. I submitted an affidavit outlining whole sections he removed. There were so many people who showed up in court that day and lawyers were telling me I was crazy because you cannot accuse a judge of a crime. I responded, they all say he does that. They replied; yes, but you cannot say that in public. There were so many people there he became nervous. He admitted changing my transcripts but denied he ever made any material changes. The whole place went silent. When he refused to step down I appealed and the Second Circuit refused to even hear the case. Like police, they just all protect each other. Without a circuit court taking that appeal, I was denied the right to even petition the Supreme Court on that issue.

There is no honest rule of law in the United States. We are no different from some backwater court or a third world country. This is in direct contradiction of the rule of law. The federal court exists to protect individual citizen’s rights under the federal constitution and laws for it has been acknowledged that this is in fact the core purpose of their creation. (see Bivens v Six Unknown Named Agents, 403 US 388 (1971); Bell v Hood, 327 US 678 (1946), Marbury v Madison, 5 US 137, 177 (1803). Good luck. There is absolutely no right to anything because the inferior courts all know the odds of you getting to the Supreme Court are virtually zero.

In Marbury v Madison, Chief Justice Marshall also stated bluntly: “The very essence of civil liberty certainly consists in the right of every individual to claim the protection of the laws.” id/ 5 US at 163. Chief Justice Earl Warren  stated in 1967: “It is a judge’s duty to decide all cases within his jurisdiction that are brought before him, including controversial cases that arouse the most intense feelings in the litigants.” Pierson v Ray, 386 US 547, 554 (1967). None of this has any force of law unless the Supreme Court is returned to its constitutional role mandating that right to be heard.

Bank-Of-US

Princeton Bank ProofWe have no rule of law today all because of an unconstitutional Act of Congress known as the the Judiciary Act of 1925 (43 Stat. 936). This barbarous act reduced the workload of the Supreme Court of the United States and in effect denied the right to be heard by all citizens. From that moment on, your constitutional rights all became discretionary. Congress and the Supreme Court held you have the inferior courts. This is the same chaos created when Andrew Jackson closed the Bank of the United States and every bank began issuing their own money which all defaulted in the 1840s. Without a central bank controlling the inferior banks, we destroyed the financial system. The Judiciary Act of 1925 did the same to our constitutional rights. I was personally release ONLY because I won that lottery and the Supreme Court ordered the government to respond signally I made that cut – one of the 80 out of 7,000+.

The inferior courts are statutory, not constitutionally required, and as such exist at the pure discretion of Congress. We have 94 U.S. judicial districts which are organized into 12 regional circuits. They are not bound to a single unified rule of law or rules and that results in the denial of equal protection of the law. The ONLY court secured by the Constitution is the Supreme Court. That’s it folks! If you cannot be heard in that court, then you are denied your Constitutional right to Due Process of Law. Therefore, someone in the 9th circuit in California will be treated differently from the 2nd Circuit in New York. The Supreme Court is supposed to settle such differences, but it is not obligated to do so. This is what the Judiciary Act of 1925 pulled off – the undermining of our entire Constitution.

Previously, the Judiciary Act of 1891 created the United States courts of appeals and rendered a small part of the Supreme Court’s jurisdiction “discretionary” subject to grant of writ of certiorari. This began the process of reducing the workload of the Supreme Court, yet it remained obliged to rule. In December 1921, Chief Justice William Howard Taft appointed three justices to draw up a proposal to further reduce the obligation of the Supreme Court to hear cases. This became the Judiciary Act of 1925. It was Chief Justice Taft who pushed the passage of this bill in 1925, which rendered the majority of the Supreme Court’s workload discretionary.

Taft WilliamThe Judiciary Act or 1925 was clearly unconstitutional since Congress could not reduce the jurisdiction of the Supreme Court. Yet, William Howard Taft (1857 – 1930) served as the 27th President of the United States (1909–1913) and then became the 10th Chief Justice of the United States Supreme Court (1921–1930). It was Chief Justice Taft who lobbied with Congress to effectively reduce the role of the Supreme Court. This is up there with Goldman Sachs sending in Robert Rubin as Secretary of Treasury to eliminate Glass-Steagall which was enacted because Goldman Sachs lost more money than any public trust during the Great Depression. The Supreme Court was involved and has NEVER ruled on the constitutionality of the Judiciary Act of 1925.

Asset Recycling – Robbing Pensions to Cover Government Costs


Pension-Crisis

Part of the Pension Crisis we face thanks to negative interest rates destroying pension funds, then we have a temping pot of money government just cannot keep its hands out of. Governments are turning to “asset recycling” which includes even Canada. The federal government of Canada, for example, is looking at a potential source of cash they can rob to reduce the cost of government by shifting Canada’s mounting infrastructure costs to the private sector. They want to sell or lease stakes in major public assets such as highways, rail lines, and ports. In Canada, they sneaked in a line hidden in last month’s federal budget which reveals the Liberals are considering making public assets available to non-government investors, like public pension funds. They will sell the national infrastructure to pension funds robbing them of the cash they have to fund themselves. This latest trick is being called “asset recycling,” which is a system designed to raise money for governments. This idea is surfacing in Europe as well as the United States especially among strapped cash States.

The Other Side

3d_text_perspective_10915This is the other side of 2015.75 which was the peak in government (socialism). Everything from that point forward is a confirmation that these people are in crisis mode. They are rapidly destroying Western Culture because they are simply crazy and they people who vote for them blindly are out of their minds. They are destroying the very fabric of society for they cannot see what they are doing nor where this all leads. Once the wipe out the security of the future, this is how government crumble to dust to be swept away by history. We deserve what we blindly vote for.

Failure of Abenomics


Abe Prime Minister Shinzo

Abenomics (アベノミクス Abenomikusu ?) in Japan are the economic policies advocated by Shinzō Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. Abenomics is based upon “three arrows” of fiscal stimulus, monetary easing and structural reforms. This has been a complete failure as the economy continue to implode. The Bank of Japan hinted possible proposals to take rates even further negative and the likelihood banks passing these levels on to the general public.

IBJYVJ-Y 4-23-2016

The dollar rallied against the yen right on target for 43 months (8.6 / 2), and has declined about 8.6 months from the high in June of 2015. It appears to be on target and the latest suggestion of further negative rates being passed on by the banks will most likely cause a flight from the yen besides admitting Abenomics has failed. This has also contributed to the Dow Jones Industrial Average rising and holding last year’s low distinct from the S&P500 and NASDAQ.

What Are Tangible Assets


Assets Tangibile

QUESTION: Hi Martin,

In your April 20 blog post, you stated “You are better off with tangible assets for the transition when it comes.

Please explain what “tangible” assets are, and what “non-tangible” assets are, assuming these also exist.

Thanks for the wonderful education,
M.

ANSWER: Tangible Assets are non debt related – fixed assets in general. This includes commodities, equities, and real estate. The commodities include non-perishable such as gold, silver, platinum, copper, etc.. The agricultural commodities are not really sustainable on a long-term basis. The primary advantage to silver and gold is that they are the same commodity in different nations where as you have even difference between Texas and Brent crude oil. Real estate varies depending upon location. You definitely have two problems. First, there is the risk of tax increases, and Second, there is the geopolitical risk in some areas. Equities (shares in public corporations), serve well and blue chips have never defaulted. Even if a company goes bust, you get something back. When government debt goes bust, you get nothing.

Illinois is Brooke and Cannot Pay the Politicians


Muger Leslie

I have warned that Illinois is on the brink of bankruptcy. Now, Illinois Comptroller Leslie Geissler Munger says she will delay monthly paychecks for lawmakers and statewide officials since there isn’t enough money to pay the state’s bills and other services should come first. This is really interesting. What will happen next when the politicians cannot get paid?

Negative Interest Rates Destroying the World Economy


Negative-Rates

QUESTION: Mr. Armstrong, I think I am starting to see the light you have been shining. Negative interest rates really are “completely insane”. I also now see that months after you wrote about central banks were trapped, others are now just starting to entertain the idea. Is this distinct difference in your views that eventually become adopted with time because you were a hedge fund manager?

Just curious;

Bob

Summers-Larry-CareerANSWER: I believe the answer is rather simple. How can anyone pretend to be analysts if they have never traded? It would be like a man writing a book explaining how it feels to give birth. You cannot analyze what you have never done. It is just impossible. Those who cannot teach and those who can just do. Negative interest rates are fueling deflation. People have less income to spend so how is this beneficial? The Fed always needed 2% inflation. The father of negative interest rates is Larry Summers. He teaches or has been in government. He is not a trader and is clueless about how markets function. I warned that this idea of negative interest rates was very dangerous.

Yes, I have warned that the central banks are trapped. Their QE policies have totally failed. There were numerous “analysts” without experience calling for hyperinflation, collapse of the dollar, yelling the Fed is increasing the money supply so buy gold. The inflation never appeared and gold declined. Their reasoning was so far off the mark exactly as people like Larry Summers. These people become trapped in their own logic it becomes irrational gibberish. They only see one side of the coin and ignore the rest.

Central banks have lost all ability to manage the economy even in theory thanks to this failed reasoning. They have bought-in the bonds and are unable to ever resell them again. If they reverse their policy of QE and negative interest rates, government debt explodes with insufficient buyers. If the central banks refuse to reverse this crazy policy of QE and negative interest rates they will see a massive capital flight from government to the private sector once the MAJORITY realize the central banks are incapable of any control.

alarm_clockTime ClockThe central banks have played a very dangerous game and lost. It appears we are facing the collapse of Social Security which began August 14th, 1935 (1935.619) because they stuffed with government debt and robbed the money for other things. Anyone else would go to prison for what politicians have done and prosecutors would never defend the people because they want to become famous politicians. We will probably see the end of this Social Security program by 2021.772 (October 9th, 2021), or about 89 weeks into the next business cycle. These people are completely incompetent to manage the economy and we are delusional to think people with no experience as a trader can run things. If you have never traded, you have no busy trying to “manipulate” society with you half-baked theories. So yes. The central banks are trapped. They have lost ALL power. It becomes just a matter of time as the clock ticks and everyone wakes up and say: OMG!

Roman-Army

We have government addicted to borrowing and if rates rise, then everything will explode in their face. Western Civilization is finished as we know it just as Communism collapsed because we too subscribe to the theory of Marx that government is capable of managing the economy. Just listen to the candidates running for President. They are all preaching Marx. Vote for me and I will force the economy to do this. IMPOSSIBLE! We have debt which is unsustainable the further you move away from the United States which is the core economy such as emerging markets. Unfunded pensions destroyed the Roman Empire. We are collapsing in the very same manner and for the very same reason. We are finishing a very very very important report on the whole pension crisis issue worldwide.

Bundesbank Bank’s Thiele Against Electronic Money


Thiele Carl-Ludwig

The Bundesbank (German Central Bank) has come out opposed to eliminating cash. During the pre-Euro years, the Bundesbank was providing us with inside info on the Euro preparations because they were outright against it. Those who always hate central banks do not realize that they are not always what it seems. The Bundesbank is now clearly positioning itself against the drive to eliminate cash. Carl-Ludwig Thiele said this past week at an event in Berlin that the attempt to abolish and criminalize cash is out of line with freedom. He said that citizens should continue to decide how and in what form they want to use their money.

Thiele’s main arguments were:

  • Every citizen has the right, with his money to proceed as he wants. If action is taken at this point in the right to freedom of the citizen, it must be well-grounded. And so the question arises: How does a cash limit restrict crime in other countries? Thiele said he was not aware of any support where a cash limit, such as Italy or France, prevents crime. Crime should be correspondingly lower than in countries with no upper limit on cash, but that is simply not the case
  • The arguments that are made against cash and cash payments, are unconvincing, Thiele said. He went on to argue that cash protects the privacy of the population. That benefit is not a reason to twist into a benefit for criminal ignoring the majority of honest citizens. The right to informational self-determination and respect for private life is a valuable asset which should not be watered down or abandoned. “Cash is coined liberty” – this modified Dostoevsky quote has not lost any of its validity.

European Court of Justice say Banks Cannot Rely on Secrecy Laws to Deny Taxes


General view of the buildings of the Court of Justice of the European Communities

General view of the buildings of the Court of Justice of the European Communities

The European Court of Justice (ECJ) has stated that banking secrecy established in Austria cannot be relied upon by German Bank branches in Austria to defeat tax authorities. Branches of German credit institutions in Austria must therefore provide information on accounts and assets to German tax authorities if a German customer is deceased to allow Germany to get inheritance taxes. The highest German tax court, the Bundesfinanzhof in Munich, had gone to the ECJ after the Sparkasse Allgäu refused to reveal to the tax office disclosing all account balances of their deceased clients. The hunt for money is endless. Whatever may have been the rule of law is pealed away when they are desperate for money.

Meanwhile, the United States also wants inheritance tax on Canadians who simply own property in the United States even if they are Canadian only. This entire turn of events going after inheritance taxes of non-citizens and the ECJ ruling that the laws of one country cannot block inheritance taxes in another continues to reveal the desperate increase in taxation.

The Other Side of a Phase Transition


BoilingCurve

QUESTION:

Dear Marty,

Whether in a Phase-transition or a Slingshot Move in the Dow, you made it very clear that such moves will be driven by capital inflows to the USA due to the alternative flight to quality to the private sector, both internationally and domestically. It is now just so obvious, it is unfolding in front of our eyes.

The question, however, will be whether capital will remain parked there for long time, or else leave abruptly to go elsewhere? For as high as it can go, that market sooner or later will eventually run out of steam, just like any other system. We are now focusing on the flows towards it, but can you please shed a light on what will come next? Will there be a trade to the downside too? Where will all that capital go at that point, simply repatriate, go to Asia? Your knowledge and wisdom on this would be highly appreciated.

Thanks in advance.
SB

ANSWER: What goes up must also come down. A Phase Transition is the culmination of a collapse in public confidence which is now rising before our eyes.. The question really becomes rather blunt. Will we simply readjust? Or will we crash and burn? This appears to be the end result of socialism. Therefore, we are more likely to see at this time a collapse of the world monetary system. A rise in the dollar will break the back of the US economy and that is what is needed to create the next step toward monetary reform.

WorldEconomy

We are most likely going to see a new monetary system where the dollar will no longer be the reserve currency. That will probably become some form of a basket. This is the collapse of the West just as Communism collapsed and altered the course of China and Russia. Therefore, we are looking at the shift of the financial capitol of the world from the West to the East dominated in India/China. As we can see, the financial Capitol of the World always migrates.  After Rome and the fall of Byzantium, the capital moved to India. It then moved to China. When Christopher Columbus set sail, he was trying to get to India because that was where all the money was. You do not set sail to be to a slum in a third world country. Europe was rising, but it had been reduced to a third world status.

Priebus ReinceThe other side of a Phase Transition will be the fall of the West. That is just how things evolve. We are plagued with politicians who are incapable of making any changes to save the country because they are too busy grabbing the free soap in the hotel room. Republican National Committee chairman Reince Priebus responded to Donald Trump’s recent complaints that the nominating process is rigged against him by saying: “Give us all a break.” Priebus demonstrated by his response that the game is rigged. He said: “Nomination process known for a year + beyond. It’s the responsibility of the campaigns to understand it. Complaints now? Give us all a break.”  Priebus is an American attorney and politician so he is a trained and know how to lie when necessary. Note what he says: “Give me a Break”. He does not deny anything nor does he say Trump is wrong. He simply says they rigged the voting system more than one year ago so why complain now. This is a typical response designed to fool the majority as if Trump is wrong. All he is saying you knew this was the game so it is not fair to complain now after a year has passed. Priebus did not deny anything Trump had to say. He only said you did not complain soon enough. This is like someone who robs you and they justify keep your goods claiming you should have complained before. Yes, Priebus, give us a break from this clever double-talk. Unfortunately, this is the classic example of how dishonest politicians have become. There is no honor nor is there any accountability. They will distort and twist things around right before your eyes and do not care because the media will never analyze what they just said. This is why we just have to crash and burn. We cannot reform with people like this trying to maintain an unfair system.