Trading v Socrates


QUESTION: Marty; All of these Robo trading plans are simply a flat model. Socrates is forecasting short and long term rather than just trading a flat model. Am I correct?

PT, Canada

ANSWER: Correct. The approach to modeling is traditionally flat. It will take one market and attempt to create a buy/sell model on that market exclusively to the exclusion of all other markets. This is the reason these flat models will blow up even such things as the Black & Scholls, which won the Noble Prize before it created the Long-Term Capital Management collapse in 1998. That is the subject of the book titled – When Genius Failed.

The flat model approach is a disaster. They will work for a while and the blow up BECAUSE they are incapable of grasping the wildcard contagion. That is what happened in the LTCM collapse. The illiquidity in the collapse of the Russian market led to the selling of all other markets to raise cash. There are plenty of people who are soliciting money claiming they have “mastered” our model. That is absolute nonsense because they are interjecting their own OPINION and that will be a guaranteed loss down the road. This requires NO OPINION and the fact that someone will try to supplement by writing reports on markets shows they are basing their trading on opinion.

Here is the Euro traded by Socrates just using Reversals without cycles from a pure hedging perspective. There is a huge difference between being more active using short and long-term Reversals. Hedging models are either long or short and DO NOT add to positions as they unfold as is the case with Speculation.

 

The Speculation models also differ depending upon using just the long-term Reversals and if you use both the Short and Long-Term.

In both instances, this is using the Weekly Level of activity. You can step back and use just the Monthly level. The trading performance will vary differently depending on what your objectives are.

Obviously, anyone soliciting model trying to claim they are using Socrates are just not telling the truth. They will inject their own OPINION and that will override everything.

We are reviewing REPUTABLE firms that will use our model WITHOUT interjecting OPINION. During the 1987 Crash when the Brady Commission investigated what they thought was caused by computer trading, the discovered that the computers were right, the traders did not follow them.

Bitcoin To Be or Not to Be?


QUESTION: Hi Martin,
despite the Bitcoin fanboys arguing that Bitcoin is untouchable by governments, would you agree that once governments, in particular, the Chinese government, make it unlawful to own Bitcoins, the additional introduction of proceeds-of-crime legislation would make it extremely difficult, if not impossible, to use Bitcoins to acquire assets, and dealing a permanent blow to Bitcoins’ value? At some point, Bitcoin owners need to be able to interface with the real market to buy assets, and that’s where the government can catch them and ask them to prove how an asset was acquired.

Will you be giving a forecast on Bitcoin’s price at some point?

Keep up the great work.
regards

AG

ANSWER: Bitcoin has replaced gold as the hot anti-establishment medium which has been gaining momentum. In light of India canceling their currency, there is a growing position against government currencies. This is certainly part of the entire shift from a Public to a Private Wave on the Economic Confidence Model. The overall confidence in government has been declining significantly on economic and political levels – i.e. the election of Trump, BREXIT, and Merkel collapsing to 32.5%.

In a purely economic sense, Bitcoin is really the medium of exchange in a barter situation. That is what BARTER was all about. It was some object that was recognized as acceptable among a group of traders so it becomes the medium of exchange. The problem with Bitcoin is that it is limited and therefore does not represent a true currency that many expect to compete against the government when there is not enough to go around for everyday use among the people.

Historically, when the government of Japan abused its power to issue money, people simply refused to accept it and used Chinese coins and bags of rice. Japan lost the power to issue its own money for 600 years. Even in Zimbabwe, the hyperinflation resulted in people using the currencies of other countries with the U.S. dollar at the top of the list. The same trend unfolded during the hyperinflation of Germany. There is a long historical record of people using the currencies of anyone other than their home government. We see this in ancient times as well. India, back in the day, struck imitation gold coins of the Roman Empire. They were often even overweight. Nonetheless, the image of a Roman coin was more trusted than a local issue.

Much of the entire problem with Bitcoin stems from the fact that it is in a very gray area. Is it truly a currency or an investment product like a stock? Or is it just a commodity serving as a medium of exchange in a barter situation? The tax implications are strikingly different for each.

If we look at foreign currency, the way this is handled is significantly different from shares. Any transaction under $600 is exempt from taxation due to fluctuation gains or losses. This is typically in play for those who travel on vacation. Exceed a transaction of $600 and you are liable to report that transaction gain to the government for taxation. Profits are theirs and losses are yours.

However, when you are dealing with a currency, then you must always be aware of the crime known as Structuring which is the act of parceling what would otherwise be a large financial transaction into a series of smaller transactions to avoid scrutiny by regulators or law enforcement. In other words, you are going to make a transaction of say $35,000. To avoid the bank reporting that transaction, you withdraw $9,500, $9,500, $9,500, and $6,500. You beat the regulation and that is a crime for which the government commonly throws people in prison and confiscates all the money involved.

Dennis Hastert 2

Dennis Hastert, the former Speaker of the House, was indicted by a grand jury on charges of structuring and lying to the FBI. Back in 2014, a Hartford, Connecticut man was sentenced to 18 months in prison for structuring $48,195 to buy a Corvette and a 2012 BMW 650i. They took the money and the cars. Also, a doctor from Georgia was sentenced to 36 months in prison and ordered to forfeit $870,238 which he engaged in Structuring to beat the reporting. This is far more common than people suspect. Retail stores accepting cash often have problems and must explain their operation to the bank to avoid the bank reporting them as a Structuring violation.

Under stock investing, your stockbroker issues you an IRS report under the 1099-B form which accounts all your gains and losses. This is a major difference between currency and legitimate stock market investments. Under currency, you must report your gains and losses. As I reported previously, I retired from making-markets in precious metals because the IRS declare me to be a bank and thus a financial institution. In the case of the summons against Coinbase users, the Department of Justice demanded the turnover of everyone. There are no rules so those people will be audited.

The IRS can simply make a rule and that will be the end of the issue. Congress has introduced the Cryptocurrency Tax Fairness Act which requires the Treasury Department to issue guidelines for informational reporting on digital currency transactions for which capital gains is due. The agency will make the rules and those rules are sufficient as laws that carry criminal penalties. The interpretation belongs entirely to them and the courts will defer to them as the expert. So much for courts being independent checks against arbitrary government.

The critical issue will be what does the IRS do? Will they declare everyone who mines Bitcoin is a financial institution and must then report every transaction of $10,000 or more and suspected s as financial institutions? The regulatory burden will severely curtail those involved with Bitcoin.

All of that said, what if Bitcoin is just a commodity? Normally, if I have an apple and I trade it with you for an orange, that is not a cognizable transaction for tax purposes. The problem with Bitcoin is its marketing as a currency. It may really just be a commodity for all practical purposes economically speaking. However, because it is presented as a cryptocurrency, it may be a duck that quakes as a commodity since it is NOT “legal tender” and acceptable by any government for taxes, but, if they call it a pig, it is a pig for tax purposes.

Bitcoin is included in Socrates basic level right now. The Futures contract on the CBOE will make prices much more tangible since people can put up prints with just one Bitcoin trading at $17,000.

The futures contract will for the first time put a legitimate price mechanism that is not as easily susceptible to fraud and market manipulations as cash markets are. Just go watch the Big Short. The banks would not make a real market until then off-loaded their own risks. That is why CDOs were regulated to go through a clearinghouse – no more off-exchange quotes. This advance for Bitcoin will be the first MAJOR step in really making it a viable market. Up until now, the quotes are always subject to fraud. It is easy to put up prints. Then everyone things all their Bitcoin is suddenly worth that new high price. Let everyone say SELL, and watch the price collapse

EU To Restrict Movement of Cash


The EU is now developing strict rules for carrying cash when traveling to non-European countries and returning to Europe. The revision of the First Cash Control Regulation from 2005, which stipulated that EU citizens should register cash in excess of € 10,000 when leaving the EU or when returning to the customs authorities have to, is what is under review. They want to lower the number and include gold, gemstones, and cash debit cards.

Interestingly, cryptocurrencies are not to be regarded as cash. Why? They are not sure how to detect them. The EU explanation reads: “Despite the high risk emanating from cryptocurrencies like Bitcoin, these are not added to the cash. The reason for this is that the customs authorities lack the technical means to discover cryptocurrencies. “

The customs authorities can now seize any amount of cash less than € 10,000 if they suspect that the money is somehow involved in any criminal activity. This is authorizing the Civil Asset Forfeiture that has been so profitable to the United States. Hence, the EU does not clearly define what suspicion is required to classify as a possible criminal activity. That will be avoiding taxes.

The EU is also extending the new rules to any freight shipment involving cash. Already, one cannot send cash by mail. This is now freight shipments. A friend used the service where you can send your baggage ahead of you for a trip. He was called down and had to remove $2.75 cents that were in a suitcase headed back to London. So there is no amount too small.

The purpose of the rules is now openly being justified to fight against tax evasion, along with moonlighting and terror financing. The government clearly understands that cash is the only way for citizens to protect their savings from access by states and banks and any special levies or wealth taxes. Closing this door merely opens the door to cash investment turning to movable assets particularly shares.

Failed Attempts to Overvalue Money


On July 12, 1722, William Wood (1671–1730), who was a hardware manufacturer, ironmaster, and mintmaster, received a contract from the British Crown to strike an issue of Irish coinage from 1722 to 1724. He also struck the ‘Rosa Americana’ coins of British America during the same period. Wood’s coinage was extremely unpopular in Ireland for being overvalued in monetary value compared to the intrinsic metal value. It was seen as the King attempting to create money from nothing or fiat despite the fact they were coins.

The British coins minted for Ireland were recalled and exported to the American colonies. Wood was also granted a patent to mint 300 tons of coppers for the North American Colonies over a 14-year period for an annual fee to the Crown of £300.149. He produced the “Rosa Americana” coinage which was very attractive, but they were an alloy of 75% brass, 20% tutenague, 5% silver. One pound of the alloy was to produce 120 halfpence, which was a substantial profit of about doubling his money. The obverse depicted the laureated head of George I, while a Tudor rose with the inscription ROSA AMERICANA, UTILE DULCI was on the reverse.

In response to the Wood contract by the British Crown, Massachusetts issued small change bills to compete with Wood’s Rosa Americana coinages being introduced into New England. They issued in 1722 this Hexagonal Three Pence, as well as a two and one pence paper note. This issue of small change paper notes was authorized in June 1722. These geometrically shaped parchment notes were clearly authorized in Massachusetts in response to the Rosa Americana flood of coins from Britain.

Wood’s effort was a failure as was his Hibernia series in Ireland. Their lightweight and overvaluation rendered them unacceptable as money by the American colonists as well as the Irish. Therefore, the rejection of Wood’s underweight coinage even took place during the extreme shortage of small change shortage that created a real crisis economically. The failure of the Rosa Americana series to be accepted by the Colonists is why so many of these coins remain in uncirculated condition today.

Shortly before his death in 1730, Wood proposed to the Board of Trade that he mint coins in gold and silver for the colonies at 75% of the sterling rate once again a scheme to overvalue the coinage. This scheme was rejected by the Crown based upon his previous failures.

Dow from the A$ Viewpoint


QUESTION: Hi Martin,
I was unable to attend your WEC in Orlando but purchased it to view remotely. I’ve read the vertical market report and look forward to watching the video of the even when its ready. My only question is with regard to currency. With my currency in AUD I realise the place to be is in the DOW however with you’re previous reports of Australia being one of the few countries with Super Annuation and the fact longer term you have predicted the AUD to surpass the USD will investing in the DOW be detrimental on a purely currency basis or will the USD rally against all currencies before many years ahead seeing the AUD rally against it? Is the Aussie Dollar included when you say all other currencies etc or is it unique like you’ve mentioned before in a 2010 down under report?
Thanks for all the effort you go to helping us all navigate through these interesting times.
Cheers,
G

ANSWER: The US$ has been moving higher against the A$ since 2011. It has NOT reached the Yearly Bullish Reversal which stands at 14252 on the cash. The technical resistance stands at the 160 and 170 levels. There is no indication that the US$ will make all-time record highs against the A$ just yet.  Exceeding that 14250 area will ring the alarm bell for the A$.

Here are the technicals for the Dow in A$. Here we have elected four Yearly Bullish Reversals whereas, in the currency, we have not elected any so far. This makes the 14252 number very important.

Why the Dollar is not Fiat


QUESTION: You have said that coins were still fiat and not tangible hard money. Nobody else has said that. Can you support that statement?

DS

ANSWER: Of course. During the American Colonial period, there was a shortage of silver in particular in Britain. They impose restrictions on what coins could be used to pay Americans for anything. That restriction was imposed on silver and gold. Therefore, payment to Americans from Britain was always in copper coins. If Americans wanted to buy something from Britain, it was typically demanded in silver or gold. This was one of the reasons for the American Revolution.

Because of these restrictions, the monetary value of copper coins was twice its actual metal content. All governments produced coins ONLY at a profit, which is called the seignorage. Here is a table of the weight and metal content of a U.S. penny. Not only has it declined in weight, in 1982 it ceased being a copper-based coin. The penny today is zinc copper plated to maintain the appearance. The price of copper became worth more than 1 cent and that was not profitable. In May 2012 Canada stopped minting one-cent coins altogether became the metal content exceeded its value ending a tradition since 1858 when Canada established its own currency.

Even in ancient Roman times, the mines belonged to the government. They financed their spending by producing new coinage every year. That covered about 80% of their budget. They set the value of the coin which was ALWAYS over the intrinsic metal content. So no matter what people you look at, the coinage value was ALWAYS greater than its pure metal content. Even Bretton Woods fixed the price of gold at $35 per ounce in 1944. They failed to raise that value and it eventually caused the monetary system to collapse in 1971. That was the very same result we see in the penny as well as the debasement in the Roman Empire of the silver coinage.

Therefore, anyone who tells you that ONLY paper money is fiat, they have absolutely no idea of the monetary system and how it has evolved with time. ALL money, when fixed in value by the government, is fiat. Even the infamous Soros attack on the British pound was based upon Britain trying to “fix” the pound at a high rate within the European Rate Mechanism at a high rate for pride.

Only a floating exchange rate system ends the fiat. So yes – that means as long as the “paper” dollar floats in value on world markets, it is not actually fiat and more than Bitcoin trading. The term “fiat money” means an arbitrary order or decree declaring the value to be fixed. The dollar was “fiat” when it was arbitrarily established by Roosevelt at $35 to the ounce of gold.

Today. as long as a currency floats, it is not an arbitrary declaration of its value by the government and is therefore not “fiat” as popularly stated by the hard money crew. This mythical idea that a currency should be a store of wealth has NEVER existed even once in history from one decade to the next. Those who argue for such a system are incapable of comprehending the business cycle and like Karl Marx want to freeze the system because they cannot cope with it.

EU Commission v Eurogroup


Most people do not understand that there is the Eurogroup, which is an informal body of finance ministers from the Eurozone member states that are intended to discuss matters relating to their countries’ common responsibilities related to the Euro.  They do not keep any minutes so nothing emerges with respect to policy. There is now a clash building between this Eurogroup and that of the European Commission. The Eurogroup will most likely oppose the EU Commission’s plans for an EU finance minister. This, of course, is one more step toward federalizing Europe. The view in Brussels is that their dream project is collapsing. The answer is not more freedom, but to centralize power to prevent the collapse of the Euro.

The Commission wants to impose its own finance minister over the Eurogroup and in turn, the Eurogroup will insist on having its own presidency. There is a rising belief within the Eurogroup that it should delineate the role of the Eurogroup from the role of the Commission. They see the Commission as attempting to grab more power unto itself.

Its main task is to ensure close coordination of economic policies among the Eurozone member states and promote conditions for stronger economic growth. This was seen as a critical element to maintain stability in the Eurozone as a whole.

However, as I have made clear before, the failure of the euro has been due to the refusal to consolidate the debts. Then you would have had a clean federal European government and each member state would then have its own budget that would not be dependent upon the federal government. Now because of this refusal to consolidate the debts from the outset, we have the idea of creating an EU Finance Minister who will then have dictatorial powers over Eurozone members.

This is going far beyond the United States of Europe, but a single government eliminating the sovereignty of individual member states. The USA has a federal government with its debt and 50 states which are all on their own. The Feds are not impacted by the budget of an individual state whereas the structure of the Euro is dependent upon each state. This is also why the EU opposes all separatist movements. The design is seriously flawed.

The Eurogroup exists without any real power collectively. There is no transparency because it had no real power. The group was effectively mandated by governments to conduct financial operations but without any formal means to carry any directive out. The finance ministers have acted with no more success than the ECB. The European austerity policy has been a huge mistake and this has been imposed upon the whole by Germany.

Cycles Suck


 COMMENT: The market is always wrong, if all people had all information the eurodollar would not move like in casino in either short or long period, it would be quite smooth.

And overall I hate money, if all people were good willing there was no need for money, so money equals bad people and there is no reason why I should like bad people. Period, your work sucks

REPLY: Anyone who thinks that someone can create a model and the whole world will follow it just does not get it. There always has to be someone on the opposite side. That is what makes cycles even exist. This person demonstrates that people exist who want to believe in Karl Marx. They do not want to be concerned with earning a living. They just want the government to take care of them like their parents until they die.

There is no real response I could offer to change their mind. There is no point. We need them to remain on that side of hopelessness to ensure the cycle will always exist. Why should someone work hard and plant crops and then give it to people for free so they can survive without creating something the farmer needs in return?

Monkeys & Marxism


There was a very interesting study that reveals what Marxist socialism is all about. It is one of the Ten Commandments that we should not be envious of what others have. Yet this is the entire aspect that politicians exploit to retain power. This video reveals that even monkeys get upset when one is fed grapes and the other only gets cucumbers

The Shifting Trends in Germany


QUESTION: Hello Martin,
Thank you very much for opening my eyes to what is going on in the world. As you well know the public here in Germany is not informed about any problems concerning pensions, banks, economy or trade whatsoever, so most of the people I have spoken to are convinced that “we have never done better”. Everyday news report on the forming government – since the elections.

My first question is: will the Eurozone be in worse trouble than the European countries not belonging to it – if I understood right they can debase their currencies & thus make their goods cheaper. Or shall the worldwide distrust in banks ruin any trade advantages?

My second question concerns my great WORRY, as I´m not a German native, that when the things get worse the foreigners might not be as welcome as they are now. Would it then be better to leave the EU & go back to one´s home country (in the Balkans) or is this idea completely nuts?

Thank you in advance. I hope I´m not taking up too much of your time. Do keep informing those who are ready to listen what to do & when – YOU ARE THE CONSCIENCE OF THE WORLD!!!!

All the best
EZ

ANSWER: Yes I am well aware of what is going on. I appeared on a TV show there and the most curious thing took place. There was a girl who came in dressed in jeans. She appeared to be part of the camera crew, but she was just listening to me. She was not actually working. When I was done, she walked out of the high-security facility, hopped on a scooter, and drove off. She was there to monitor what I would say about government. The same in France. I have been in Europe this week for meetings, both public and private. I have probably spent at least 1/3rd of my life in Europe.

The problem with the single currency is that the policy of austerity creates deflation, causing higher unemployment, and lower economic growth. The idea is that money should retain a store of value quality, which historically has NEVER been the case. This conflicts with the debt issued in Southern Europe and it all about the federalization of Europe. As you are well aware, the AfD is rising and the likelihood of new election come March/April 2018 appears very good.

Now concerning the safety of foreigners. Unfortunately, the rise of the AfD is due to the refugee crisis. What happens as things get worse is that society will turn against ALL foreigners. During the Sovereign Debt Crisis of 1844, there were riots against the Irish immigrants. People viewed their unemployment was caused by foreigners coming in and taking jobs.

In China, there was the Boxer Rebellion (拳亂), which was a violent anti-colonial movement that expanded into an anti-foreign and anti-Christian uprising as well. That took place in China between 1899 and 1901, toward the end of the Qing dynasty.

History warns that when you turn the economy down, people will turn against the foreigners. That is the entire reason the AfD is rising.