Trump Threatens to Cancel NAFTA If Congress Interferes


QUESTION: Mr. Armstrong; Do you agree with Trump that if he canceled NAFTA, the United States would be better off?

SN

ANSWER: Ironically – YES from a jobs perspective, not the consumer. What you have to understand is that these trade deals are all nonsense. They are NOT Free Trade in the least. They are compromises so politicians can pretend they have accomplished something.

Take the deal with Europe. France’s position was that nothing can be called “Champagne” unless it comes from that region in France. Every trade negotiation is a compromise that maintains protectionism. In that regard, if Trump actually canceled NAFTA, his boast that the US would be better off is meant that all products would then be subjected to tariffs and all of the American industry would be protected.

Now, that said, this view is that of the worker – not the consumer. All of these trade negotiations are one-sided. They are always focused only on jobs and not producing the best price for the consumer which in turn raises our standard of living. I have never encountered even one politician who has EVER defended the consumer in trade deals. This violates the principle of Comparative Advantage put forth by David Ricardo. It’s true that Saudi Arabia could grow lettuce but the cost of irrigation in the desert would make the cost 10 times more than simply buying it from Europe or North America. It would cost the consumer far more to simply grow that product in the desert than importing so it is best to buy it elsewhere and focus on your productive capacity in which you have some comparative advantage over others.

Don’t Cry for Me Argentina – It’s a Global Debt Crisis


QUESTION: Mr. Armstrong; Our government here in Argentina has told us we should expect more poverty and there is no hope for the future. Socrates has been amazing on its forecasts on our currency. There are enough of us down here who would sincerely ask would you consider advising Argentina to straighten out our economy and nation? You have forecast this emerging market crisis long before anyone else and your solution video on YouTube is very thought-provoking. If we can demand the government meets with you, would you do it?

KRD

ANSWER: The song maybe Don’t Cry for Me Argentina, but it applies to the entire world for what happens in Argentina is merely the beginning of the global debt crisis. We can see from the chart that the dollar has been soaring. However, the Array picked August as the Panic Cycle and that has been spot on. Unfortunately, it does not look like this is going to calm down. We may be headed into a real Emerging Market crisis by October.

The reason why we are able to forecast such events well in advance is rather common sense. As I have said before, every solution to a crisis sets the stage for the next crisis. The Emerging Market debt crisis is unfolding because central banks in the USA and Europe lowered interest rates to “stimulate” the economy and they have no idea about how an economy truly functions. This is all based upon Keynesianism which is in turn based upon an isolated theory of the economy. They never consider that you lower interest rates and there are pensions who simply need higher rates to break-even. Then emerging markets issued debt in dollars with higher yields for the pension funds bought it assuming there was no currency risk. Now we have Portuguese and Spanish banks who would not lend to their domestic economies for there were way too many nonperforming loans so they ran and bought Turkish debt.

What began in Argentina and Turkey has snowballed into broader collapse complete confidence in Emerging Market debt and the pension funds stopped buying and simply are now trying to get out as fast as they can. This now has officials in Indonesia, India, South Africa, and Brazil scrambling to protect their economies. The debt party is over! The ECB has created a global nightmare for so many European institutions ran into emerging markets because the ECB maintained NEGATIVE rates. Draghi has created a global debt crisis and now he himself is trapped. This is why Italy now wants to change the structure of the ECB so they can buy member debt directly rather than in the secondary market which they have destroyed. Draghi cannot stop Quantitative Easing for the 28 member states will be unable to sell their new-issue debt at rates that are similar to the current levels. Rates will soar in Europe if Draghi actually stopped buying and then we will see a global debt crisis you cannot imagine.

Left unchecked, more nations are going to be swept up in this debt crisis as their bond values collapse. This is threatening the entire world’s economic growth and confidence. As institutions begin to wise up for once, we will see the confidence in public debt collapse. This will become a game of musical chairs and the one left standing with government debt will lose everything!

The Turkish lira, which has been relentlessly setting new all-time lows and this is creating the contagion. Rumors are that Erdogan is such a tyrant, he will sooner turn to Russia and default on all Turkish debt just to retain personal power. Institutional Traders are the first to worry about countries with large current account deficits and a large stock of dollar-denominated debt in a world with rising interest rates and a stronger dollar. But their management often lags and do not listen to their trading desks because they tend to be more politically correct. The phones were actually ringing at the top and it was the ECB telling the banks to stop buying dollars because they were making the dollar rally. You can play those games only for so long before the whole house of cards comes crashing down.

I would be glad to fly to Argentina to help if the pain reaches their eyeballs so they will do as directed to save the country. Half-ass maybe’s are a waste of time. It is only worth it when they realize they have no choice

Foreigners Selling UK Debt as Hard BEXIT appears


Foreign investors have been withdrawing on a large scale from British government bonds since July when the Conservatives seems to be splitting. Bank of England data released revealed a net outflow of £17.153 billion from foreigners in July, the largest since records began in 1982, Reuters reports. Even in June, there was still net capital investment from foreigners of 1.362 billion pounds. The decline in foreigners’ holdings is due to sales as well as to non-reinvested, expiring, bonds.  According to International Monetary Fund data, the UK has the largest current account deficit of the major industrial nations and is heavily dependent on foreign capital inflows. Theresa May’s refusal to stand firm and defend the people’s vote has seriously undermined the confidence in Britain.

We can see on our Capital Flow Map where we trace the net movement of capital that Britain has turned RED. We have been monitoring the significant net capital flight from Britain thanks to Theresa May. This is also one primary reason it appears that the British pound is still is a distinctive bear market trend with respect to the broader term.

 

While we did not elect any Monthly or Weekly Bearish Reversals, the pound is still is a broader bearish position at this time.

Cryptocurrency Scam?


There are way too many cryptocurrencies out there and even if we accept the theory that ONE will survive and become mainstream, what happens to the rest? This is the great unanswered question. You certainly cannot replace the dollar and central banks with thousands of currencies. We tried that once when Andrew Jackson revoked the Bank of the United States charter. We ended up with EVERY bank issuing their own paper money and we ended up creating the Great Depression of the 1840s that led to violence in the streets, defaults of State debts who tried to bail out failed banks, and eventually, a civil war that was not entirely over slavery. (You can buy catalogs of Broken Bank Notes that are published per state because there are way too many to be just one book).

There certainly is no possible viable economic system where there are thousands of cryptocurrencies. For the theory to even be viable aside from technology and every person being able to use computers or smartphones, In other words, the mere existence of a product does not necessarily mean that the product is working. After all, is a there has to be just one at least per nation. A single currency for the entire world will never work because not everyone has a current account and trade surplus. Someone must have a deficit. A single currency would result in exaggerated inflation and deflation globally in different regions. This is the problem with the dollar. If the Fed raises interest rates, it impacts the world because other nations are issuing debt in dollars. This is what results in losing DOMESTIC policy objective to INTERNATIONAL policy realities.

A recent study found that only 36 out of the top 100 cryptocurrencies has any working product. Most are just promises. Some people have gotten so caught up in this whole mess that they have lost a fortune. One borrowed $127,000 to invest in cryptocurrencies and lost 85%. Understanding that cryptocurrencies are no different from anything else. They are trading vehicles when you at least stick to the majors. Socrates picked the high in Bitcoin perfectly. How? Why? Very simple in fact. No matter what instrument you look at, the chart is not actually that instrument. It is a chart of HUMAN emotion relating TO THAT instrument.  The chart of silver from 1980 is similar to that of BitCoin. Back then, they were touting silver would go to $100. They swore it would do that any day for the next 19 years. We have people in Bitcoin swearing it is going to $100,000. That is such a joke for any currency to be worth that much would guarantee it cannot be used in commerce since most transactions are small.

 

No matter what bull market we look at, we find the same patterns. People get all emotional and rush in and buy the highs. The curious element is that they continue to believe the decline is only temporary. This seems to be standard human bias when people get caught up in the fever and lose all sight of history or reality.

This is why PROFESSIONAL traders have one PRIMARY RULE! ———–  Never marry the trade!

Trump Tries to Deal with the Pension Crisis


 

Most small businesses do not offer retirement plans because the excessive regulation which drives the costs significantly higher. Trump’s new Executive Order is primarily designed to reduce those costs by streamlining the excessive regulation. The order further makes it clear: “Within 180 days of the date of this order, the Secretary of the Treasury shall consider proposing amendments to regulations or other guidance, consistent with applicable law and the policy…”

The biggest problem with retirement plans has been the pretense that they should be “conservative” and that has meant they buy government debt. As the Fed lowered rates to “stimulate” the economy, they have remained well below 8% for more than a decade which has sharply reduced the ability to plan for retirement using bonds. Unless people begin to select more private investment into equities, they stand to lose a fortune and find themselves unable to retire. The sharp decline in the birth rate has also created a dangerous situation. For centuries, you had children to ensure you would be taken care of in your old age. Socialism has destroyed the family unit and taxation with student loans has drastically reduced the earning ability of children to save no less take care of their parents. The entire historical family structure has been undermined and the pension crisis poses a huge social threat in the years ahead

Tampa v St. Petersburg for Migration


QUESTION: Dear Mr. Armstrong:
I have a question in regards to your recommendation from last year’s WEC. You recommend to move to Tampa, FL and I have been following your recommendation. I have been wanting to move out of Stockton, California, which a bankrupted city in the late 2008 Financial Crisis. Stockton has been a mess and it never been recovered and plus the testing site of Universal Basic Income. I believe it will never recover.

I have been in Tampa and St. Pete lately, there are lots of newly constructed high rise and building. It seems booming here in Western Florida. My question is comparing Tampa between St. Pete, which city is good to move to. I asked the local St. Pete is a bigger city, lots to do and more finance companies located there. Could you clarify and give your two-cents thought?

Will the housing price correction effect in these cities so much while we enter into 2020? Either way to me, both cities are booming and beautiful.

Thank you in advance,
JC

ANSWER: In my opinion, St Pete is far better than Tampa. It is a city that is more like a village with better restaurants and things to do. You can drive to Tampa to go to Starz if you like Broadway Plays, they come here from New York and rotate. It’s a much nicer venue compared to New York. St Petersburg is a more lively town and more “artsy” and if you need to run to Tampa its 30 minutes. There is a lot of new construction going on for a lot more people are just leaving the states with high taxes. California and Illinois along with New Jersey have net migration leaving to other states. The prices for this area are still half that of Miami or California. I was considering buying a second house to entice my family to migrate but I had to run off to do the Singapore conference. I told the realtor when I got back I would put in a bid. By the time I got back, the house sold.

Another unpublished tidbit is that the “bugs” in Florida people hear about are inland. You will encounter them in Tampa, but they do not seem to make it across the bay to St Pete. There are a few high-rise condo buildings under construction in St Pete. Rush hour is minimal at worst 15 minutes compared to 45+ for Tampa. It’s a younger area, not one of the real retired areas like Marco Island where you can’t go to dinner at 9 pm since everything is closed down. Additionally, it has one of the top 10 beaches in the USA if not the world. The most fantastic sand you will ever feel – far better than the coarse Atlantic or Pacific. We get the sunsets rather than the sunrise. They really make every day a new experience. I took this picture myself.

Florida housing on the West Coast will do better than the East. The New Yorkers drove prices really high to the point they are twice as high if not more on the East Coast and the South American buyers bought up Miami. Tampa is also one of the best airports. You can get direct flights to Europe. If you need a direct flight to just about anywhere, even Moscow, then you go to Orlando and that’s 1:30 away. The drive is much better than to JFK in New York or LAX not to mention Chicago.

Cyclical Synchronization & the Global Economy Make Manipulation Impossible


 

A metronome is an instrument to measure the time and that the musicians use for their work. One of the most curious phenomena is observed when different metronomes that have a different frequency between themselves end up synchronizing perfectly. This symbolizes what I find so fascinating in the world economy. No nation stands alone. This is why even contagions appear in the world economy. However, it also makes my point that politicians can promise whatever to get elected, but they are indeed powerless to separate a nation from a global synchronize.
Below is another fascinating experiment with wave motion and frequencies. There is just a lot more behind the curtain than people realize and despite all the conspiracy theories, it is IMPOSSIBLE to manipulate anything and alter its trend. The best someone can do is move in within the range of “noise” but it cannot adopt a counter-trend move to the synchronization. The proof of this statement is the failure of Communism as well as Keynesianism. Any attempt to return to a fixed exchange rate will always fail for the same reason. You cannot eliminate the business cycle.

The US Share Market Reality Exposed


The US share markets are being driven up by two main factors. First, institutions have sold the market assuming there would be a major crash. In February at the lows, Goldman Sachs was forecasting that the market could plunge another 25%. In May, Goldman Sachs again was warning that the next crash will be worse because of computerized trading. Investopedia published an article last January: Why The 1929 Stock Market Crash Could Happen In 2018. Fox Business reported on October 18, 2017: Stock market crash inevitable, financial historian saysThe number of forecasts that keep calling for a major crash has been truly amazing. This has been one reason why I have said that this is the Most Hated Bull Market in History! For at least the final 18 months going into the high on September 3rd, 1929, the general consensus turned bullish. People were also bearish and in fact, the Wall Street Journal even accused Jesse Livermore of turning bullish to try to influence the presidential election. Strangely reminiscent of Russian hackers in 2016. As long as the major remain bearish calling for every top to be the last one, you know we are nowhere near the high yet.

Besides the constant selling that has led to repeated short-covering, we also have the excuse that the rally is primarily being caused by massive buybacks by corporations of their own shares. They point out that corporate-buy-backs will also reach an all-time high in 2018. They present this as evidence that somehow these purchases are not legitimate. In truth, the excess cash has led companies to buy back shares which will have two interesting impacts. First, it actually creates a shortage of shares. This was one factor in creating the 1929 bubble.  Indeed, some of the last stocks to be floating going into the high of 1929 were Mausoleum companies.

Additionally, the US share market has benefited from the political-economic turmoil outside the USA – especially in Europe. Even IMF acknowledged that the European Central Bank’s pledge to buy government bonds set in motion a capital flight and the financial fragmentation of the eurozone back on October 9th, 2012 the return of global dollar capital to the US as a result of the central bank’s interest rate hikes also contributed to the positive trend. When we look at the Dow Jones Industrials, we can easily see that it continues to make new highs in Euro. This foreign buying has absorbed domestic selling.

The Significance of the Velocity of Money


QUESTION: Greetings Marty,

I have followed you since the old Money Radio days!

Can you help me understand the disparity between the declining velocity of money, the growth of the economy and what the natural consequence may be?

Thank you for your willingness to share your knowledge!

Regards,

MRM

 

ANSWER: Oh yes. Buzz Schwartz was a fantastic guy. I enjoyed doing his show there in California. The economic growth has been declining for decades as has the velocity of money, As the velocity declines, it shows that people are either saving more or they do not have disposable income after taxes to spend.  Normally, the velocity will decline and that is a sign of a recession. This is the normal reaction when people save and do not spend. However, if you are not in an economic recession/depression there is no FEAR FACTOR of what the future will bring, then the velocity declines because people really do not have the money after taxes to spend. This is one reason I keep harping on – it’s the taxes stupid!

In the USA, the velocity bottomed during the 2nd quarter of 2017 and has started to turn up with Trump lowering taxes. This is the first uptick since the decline began from the 3rd quarter of 1997 when the capital flows began to shift creating the 1997 Asian Currency Crisis. When Obama raised the tax rate from 35% to 39.6% in 2013, that began the real sharp decline.

The decline in the velocity of money and the rising burden of taxation is very alarming. That has been the worst combination which has suppressed the Euro zone economy. We see this with central banks setting targets for 3% inflation and they cannot reach that level.

Why are Robots Changing the Future?


QUESTION: Do you think that robots will eliminate a lot of jobs in the future?

EH

ANSWER: Yes. But you have to understand WHY are we even turning to robots. The answer to that question is TAXES & SOCIALISM! The bottom line is rather blunt. Any routine job that can be replaced by allowing the consumer to choose their own order to be it at a fast-food store or the internet will be at risk along with jobs that are easily be defined by a mathematical or logic equation will be at risk in the future. Many companies are now limiting workers to 33 hours per week or less to simply avoid having to provide benefits and pensions.

Health reform is ABSOLUTELY vital for the future. To be able to provide REASONABLE health care at a reasonable cost DEMANDS tort reform. This is what is driving the cost of medicine really high because the doctors have to pay huge insurance fees because of the lawyers. Turn on the radio and you hear ads for lawyers all the time. They are the NUMBER ONE occupation among those in Congress so you can bet they will NEVER provide tort reform against their own industry. This idea of universal health care is a real joke. They will make comparisons to Europe, but fail to explain that doctors work for the government in most cases.

Obamacare really escalated the entire problem. What Obama pulled off was the idea that forcing the youth to buy insurance would reduce the cost for those who really needed it. There were ZERO reforms and just more bureaucracy. You cannot get the benefits without reforming the system.

Then throw in the pension crisis. This is leading to growing part-time employment and makes robots VERY attractive to replace jobs because they do not require benefits and salaries. As for universal income, here we go again. This is another ploy where we keep trying to come up with schemes that support a system that is failing. Deal with the heart of the issue and just maybe we might get somewhere.

Let’s eliminate the income tax and adopt a new system which will not make labor outrageously expensive.