Tag Archives: Quantitative Easing

Jan 20 2017

From Behind the Wall – Mexico


Armstrong Economics Blog/Mexico

Re-Posted Jan 20, 2017 by Martin Armstrong

Mexico Border

US-Mexico Border in Arizona

COMMENT: Greetings from the other side of the Wall (i.e. Mexico)

Mr Armstrong! First, I would like to thank you for what you do, as a young person committed with helping the world thrive I cannot tell you how empowering it was to discover your work and get to know your story, and how inspiring it is to see upright people like yourself and your team take on the biggest challenges we face today as a planet, being consistent with what you say and actually doing something! That been said I wanted to share something that’s happening here in Mexico City, and because it is related to one of the main topics of your blog, i.e. the hunt for taxes I thought it would be worth sharing. Right now, Mexico City is going through some administrative changes. Beginning in 2018 Mexico D.F. (D.F. stands for Federal District) will no longer be the center of the powers of the federation but the 32nd federal entity of the union. That doesn’t only mean that Mexico D.F. will officially change its name to Ciudad de Mexico (CDMX) but that by the end of this month (January, 2017) CDMX will have its own Constitution. It is here that it gets interesting. In its 21st article, the draft proposed that “the increase in the value of the land derived from the process of urbanization, will be considered part of the public wealth of the city” that effectively meant that all the capital gains of a property will be taxed!! This resulted in a strong opposition specially from groups, associations and businesses concerned with the real estate business. The mayor of the city, surprised and pressured, answered that he would veto any new tax that comes into his desk and proposed an immediate modification of this article, which makes you wonder if he read the draft of the constitution in the first place! After the announcement, the commission in charge of the ruling of that article said it would be revised and modified so that a tax of this nature would not be allowed.

Fiufff!! That was close and everybody went home or headed out to the beach for some sunny winter holidays. Oh wait, except that our “public servants” being the way they are, apparently removed the provision from the draft of the constitution but still added it to the Housing Act which authorizes the administration to “implement mechanisms to capture capital gains, generated form urban development actions”. The Act was passed a nd approved the 26th of December!! The press reported this until the 28th which in Mexico is our April fool’s day, making us wish it was a terrible “December fool’s day” joke. I guess you have to have a sense of humour. I mean this guys are relentless when it comes to making a dishonest buck. I don’t know what Socrates says about Mexico but from my biased point of view it doesn’t look pretty. Higher prices, higher taxes, insecurity, a higher dollar, a debt worth almost 50% of GDP and growing, which at least I think it’s in pesos so I guess it could be worse. I was not alive then but there was a time when the peso fell greatly against the dollar maybe Mexico’s cycle is back down but I’m sure you know that. But there was also a time when the peso was close at par with the dollar, which makes me wonder when does the cycle turn up. Anyway, I guess by that time it’s either a strong peso or a worthless dollar!

Again, thank you and your team for all your work. Have a wonderful and spectacular year!

XA

8RealsPillarDol

Piece 8 St Lucia

REPLY: Hello from the other side of the wall. Most people do not realize that the Mexican 8 reales silver coin was commonly known as the “pillar dollar,” and cutting it up into pieces like a pie is what we hear in pirate moves — a piece of eight, meaning a piece of this coin. Here is a piece of eight stamped “St Lucia” for a Caribbean island.

EmergencyIssueThese pillar dollars or Spanish dollars as they were known, were widely used by many countries as an international currency in modern times because of its uniformity. Some countries countersigned the Spanish dollar so it could be used as their local currency, as did even Britain during the shortage of currency under George III. In fact, these pillar/Spanish dollars were the coin upon which they originally constituted the United States “dollar” as they refused to adopt the British system of pounds. In fact, pillar/Spanish dollars were actually considered to be legal tender in the United States up until the Coinage Act of 1857.

Mexican Peso 1700-1967

Mexico Colonial 8 Reales 1729-1733Most people have no idea that the Mexican peso (8 reales ceased to be issued in 1897 after it was replaced by the peso) was on par with the dollar, and in fact, the US dollar was based upon the peso. The debasement of the 8 reales (peso) began slightly in 1729 when it was reduced to .7972 of a troy ounce down from .8102. It was debased slightly again in 1772, dropping to .7858 oz followed by another slight debasement to .7797 in 1791.

Empire of Iturbide - Real (1821-1823) 8 RealsIt was restored back to .7859 oz in 1811 where it remained until the 8 reales was called the peso with .786 oz. It returned to .7859 oz in 1910, which lasted only until 1917. As silver rose in value during the Panic of 1919, and European demand rose for reestablishing a monetary system, the Peso was sharply debased to .4663 oz before it dropped further two years later in 1920 to .3857 oz where it remained until the end of World War II.

British Pound Post 1940In 1947, the peso was debased to .2251 oz and then the financial crisis of 1949, which saw the sharp collapse in the British pound, impacted the peso by dropping it further to .1286 oz in 1950. The crisis hit again in 1957, and the peso was debased to .0514 oz where it remained until 1967. The rising US dollar postwar was critical worldwide and Mexico was not exempt. That was the Recession of 1958, also known as the Eisenhower Recession, which began in 1957 and lasted for eight months. That led to a sharp worldwide economic downturn in 1958, aided by the Fed raising interest rates to try to fight postwar inflation. Then in 1967, silver vanished from the monetary system with the birth of the two-tier gold market in London during 1968.

Tequila crisis in 1994

The answer to the question, “When will Mexico recover from this political mismanagement?” appears to be due in 22 years — 2038. This is most likely reflecting the younger generation really taking charge.

Jan 19 2017

Inflation Moving Higher Thanks to Dollar


Armstrong Economics Blog/Economics

Re-Posted Jan 19, 2017 by Martin Armstrong

Inflation

Prices in the US are picking up strongly and support the Fed’s arguments for raising interest rates further. The rate of inflation rose by 2.1% in December, according to the Ministry of Labor. This is the highest increase since two and a half years. Some are suggesting this is due to higher gasoline prices and rents in particular caused the buoyancy. After all, the November rate was still 1.7%. The Fed has been targeting two percent. The Fed raised the key interest rate in December to 0.5 to 0.75%, and took three further steps upward for 2017.

With consumer confidence at record highs, that means consumers will spend confidently. This is the real issue behind the trend, which is polar opposite to Europe and Japan. Nevertheless, the rising trend in U.S. interest rates points to support for the dollar. The higher the dollar, the cheaper the imports. This will play at odds against the Trump policies.

Trump’s promise of bringing jobs home will run into a brick wall. There is nobody in Washington who seems to even understand trade, no less have any coherent police objectives. The stronger the dollar, the cheap the imports and that will lead to raising tariffs all because they do not understand their own statistics.

When the world set up the IMF, World Bank, and Bretton Woods, currencies were FIXED. It then made sense that if you tracked the amount of purchases and sales in dollars, that would translate into buying or selling more goods internationally. There was nobody at the dock counting the number of BMWs or Toyota entering the country. Now that currencies float since 1971, that accounting system does not work. Since the low in the US Dollar Index established during March 2008 at 71.800, this closed 2016 at 102.390. That means the dollar rose 42% since 2008. The Total balance of trade for the US improved only by 29% (US Balance of Trade). We must understand currency because the statistics only measure the amount of money moving NOT actual goods.

Jan 18 2017

Rogoff: An Elitist Who Has No Respect for the People


Armstrong Economics Blog/Interest Rates

Re-Posted Jan 18, 2017 by Martin Armstrong

Rogoff-Kenneth-2

Kenneth Rogoff is a Professor of Public Policy and Economics at Harvard University. Rogoff calls critics of negative interest rates “ignorant” despite the fact that negative interest rates have been used since 2008 without any success. He had the audacity to say that people should not look at their short-term personal losses, but rather look at the long-term vision of the central banks. He is such an elitist. I cannot find words appropriate to describe how this academic, who has zero experience in the real world, is incapable of comprehending that his Marxist style intervention is creating the next crisis.

1933 London Economic Conference

Yes, negative interest rates lower deficits. But who will buy the negative debt besides central banks? Why borrow money at all and compete against the private sector? Interest rates are negative to punish savers for saving. He wants them to spend their money. Fine – stop government borrowing altogether and just print what is needed for the expense of government. Stop this elitist Marxist concept that people like Rogoff can play the role of emperor and manipulate society to do whatever they believe is appropriate.

Just before his death in 1946, John Maynard Keynes (1883-1946) told Henry Clay, a professor of Social Economics and adviser to the Bank of England, that he hoped that Adam Smith’s invisible hand would help Britain out of its economic hole. “I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”

Checkmate

Economists such as Rogoff are still basking in the ideas of Karl Marx that government CAN and SHOULD manipulate society to achieve the public policy dreams of those in power. Rogoff is not willing to even think about what he has done to the pension system and how we are looking at states like Illinois becoming broke.

In California, less than four years have passed since it fought to achieve a balanced budget by raising taxes to the highest level in the nation. Politicians cannot manage the economy and negative interest rates are destroying pensions. There is no long-term gain, for Rogoff cannot imagine the next step. The central banks are trapped and can NEVER resell what they have bought under Quantitative Easing. We are rapidly approaching the point of no return or NO BID. That is when government tries to sell its debt to pay off the last chunk and there is NO BID. Oops! Checkmat

Jan 17 2017

Capitalism v Socialism – Good Perspective of the Difference


Armstrong Economics Blog/Basic Concepts

Re-Posted Jan 17, 2017 by Martin Armstrong

Smith-Marx

COMMENT: Martin, A story I received: A guy looked at my Porsche the other day and said I wonder how many people could have been fed for the money that sports car cost. I replied I am not sure, it fed a lot of families in Bowling Green, Kentucky who built it, it fed the people who make the tires, it fed the people who made the components that went into it, it fed the people in the copper mine who mined the copper for the wires, it fed people in Decatur IL, at Caterpillar who make the trucks that haul the copper ore. It fed the trucking people who hauled it from the plant to the dealer and fed the people working at the dealership and their families. BUT,… I have to admit, I guess I really don’t know how many people it fed.

That is the difference between capitalism and welfare mentality. When you buy something, you put money in people’s pockets, and give them dignity for their skills. When you give someone something for nothing, you rob them of their dignity and self worth. Capitalism is freely giving your money in exchange for something of value. Socialism is taking your money against your will and shoving something down your throat that you never asked for.

JS

REPLY: This is a very good example of the difference between Capitalism and Socialism. Hillary said during the campaign that Trump was worth a few billion – “Think of what we could do with that money.” They only do look at the wealth and not at the contribution to the economy and society. You can look at Henry Ford and say yes – another rich bastard. How many jobs did he create inventing the assembly line? The difference is jobs compared to just entitlements for existing.

I had an old friend from high school call me when I was around 40. He called to ask me for a job. I ask; “Frank. What have you been doing?” He told me he never worked. He has his plane, car, and boat. When we grew up, his mother own the luncheonette all the kids would go to for lunch and after school. She was a widow and spoiled Frank. She never made him get a job and just bought him whatever he wanted. When his mother died, the money stopped. When he called me and said he never worked, I was shocked. I said I did not have a job for him. He was the classic example of socialism.

Jan 16 2017

Gold Bullion v Coins


Armstrong Economics Blog/Gold

Re-Posted Jan 16, 2017 by Martin Armstrong

20-bullion

QUESTION: Marty; Do you still see 2017 as the end in the decline in gold or 2018? Also, I think I now understand that coins are better than bullion for confiscation purposes. Right?

ANSWER: We are starting to run out of time. We elected a minor Monthly Bullish of 1142 at the end of December, so that has given us the bounce. The benchmarks come into play in 2018, but they could be the first high rather than a low and that would confirm a change in trend. The 2015 closing is the lowest, and that would be a three-year reaction from the highest closing of 2015. Markets never act randomly. The failure of 2016 to produce the lowest closing was for a reason. It was not a fluke.

Yes, coins are better than bullion for they have some historical value. Their historical value could be an excuse to prevent confiscation if government simply declares that “gold is for criminals,” as they are trying to do with cash. I believe Trump would not go along with that move, but keep in mind that the left is the most violent of all. They pretend to be tolerant, but they are only tolerant if you agree with them. They have no problem assassinating anyone else.

The left has painted Trump as some sort of Nazi racist. They fail to understand that “Mexican” is not a race any more than “American,” just as “Muslim” is not a race any more than “Christian.” They mix up their slogans and accusations to get people chanting this nonsense because they are too stupid to think on their own. I would keep in mind that these people will try to assassinate Trump, for in their mind the rich have to be destroyed. They are very dangerous people.

We will be issuing the 2017 Gold Report soon

Jan 15 2017

Europe Plunges into Deep Freeze


Armstrong Economics Blog/Climate

Re-Posted Jan 15, 2017 by Martin Armstrong

COMMENT: Martin, Im a regular reader of your blog and I agree with you that the Ice Age is upon us. I fell on this video of ice on the Danube and would like to share with you. Even here in Singapore we can feel that something is going with the climate and it is not global warming.

Thanks for your regular post and look forward meeting in Singapore if you appear to come here.

L from Singapore.

REPLY: Scientists in both Russia and China are warning of an Ice Age. The real scientists in Europe and America are yelling this too, but the press preaches about global warming because the government uses it for taxes. Too much money at stake to say, “Sorry, we got this one wrong!”

Temperatures in Russia have plummeted, dropping to even -80 degrees Fahrenheit. This is very serious. The winters will keep getting colder and this is not good for economic growth.

We are overdue for the flipping of the poles. The poles reverse on the Sun every 11 years. On Earth, that is about 720,000 years. So there is no recorded history to document what has happened. Perhaps that is the 2032 event since the Minoan Bronze Age was sent into a Dark Age with the eruption of Thera. Geologists can tell you where the poles have been since rock is magnetized to the North Pole when it is formed. When volcanoes erupt, we can tell where the poles have been historically. Yet, there is no human record of what impact it has had. We do know that animals have been frozen with plants still in their mouths. It would appear to be very abrupt (see Maya Report). Most likely, this climate change has attributed to the migration of humans around the globe.

Europe is already experiencing a very cold winter now in 2017. Unfortunately, this is the real trend and not global warming. The reason I am so against the global warming crowd is that they put forth this proposition that man is causing this change and that they can reverse the trend if they tax everyone. My point is that a lot of people will die, as historically has always happened with such events. If you know what is REALLY happening, then perhaps you can take steps to deal with this real change in climate that no tax will prevent. I moved to Florida — so I follow our own model.

Jan 15 2017

What About Collectibles?


Armstrong Economics Blog/Collectibles

Re-Posted Jan 15, 2017 by Martin Armstrong

SilverCoins

QUESTION: Hi Marty! I would like to have your thinking about one important thing: the exit of this mess. I was in the last two WEC with my friend Mark and enjoy them a lot and we will be on the next one for sure.The two months that follow the last one in November 2016, I really connect all the dots for the first time even if I read you since 2008. So, I realize what we face to 2032,95 and after. The actual private wave of 51,6 is going to push money flow to the privates assets and end the confidence in government. This wave is the last one of the 309,6 years cycle that will end socialism. If we put in perspective that this 309,6 cycle is the last one of the mega cycle of the 1857,6 years (6 x 309,6), we know without question that what is coming to 2032,95 and after, will be epic and horrible time for the world. If you add the war cycle and the maunder minimum cycle to that, it’s become even worst. I Know that the private assets are suppose to improve in value to 2032,95. I know that the government will do whatever he can to tax us to death and in some cases, confiscate our assets.

So, even if I know all that, I feel trap. With the increase in interest rate, the debt bubble, the increase of taxes on houses thank to the fund pension crisis plus the real estate cycle that go down until 2033, I am sure that real estate is not the good place to protect our money. Physical gold and cash will be probably be chased by gouvernement. The blue chips are a good choice only if your broker or your bank stay alive during this crisis. Like you see, we are trapped.

So my question is, what do you think about the rare collection items, like old coins, old sports cards, or other smalls things collection that have a big value and can be move easily to an other country, even by plane. Thank so much for what you do for people! You help me a lot to open my eyes and see the world like he is. I will always grateful for that.

See you in november at the WEC!

Thanks,

GL

 

China Cowry Shell Evolution

ANSWER: Collecting is instinctive within humanity. Everyone has formed a collection of something, no matter how small. From childhood, we all have accumulated objects in different categories, be it matchbox cars to collections of Barbie dolls. Their questionable usefulness is only second to the fascination of playing with them. The first coins used in China were cowrie shells. They were beautiful and rare since they could not be found everywhere. The first attempt to expand the money supply, and make bronze appealing and acceptable, involved making the money into the image of a cowrie shell.

Rembrandt father

I got the bug when I bought my first Roman coin for probably $5 when I was 10 to 12. I would recommend ancient coins, for their market is global. Canadian coins are salable in Canada just as the best market for the U.S. coins is in the United States. Yet, ancient coins cross all borders. The Chinese and Russians are big buyers these days. Cars are too hard to store. Fine art is also something I have collected over the years. I can more than quadruple my investment in things like Rembrandt etchings (the one pictured is of his father).

I have collections of rare books and autographs as well. There are collectors for every category of object. There was the Villa of the Papyri, a private house in the ancient Roman city of Herculaneum, who collected art and books. This tremendous collection has fascinated visitors beyond belief. Collectors have existed throughout history.

FDR Stamp CollectorHunt-Decadrahm

Franklin Roosevelt was a stamp collector, and Teddy Roosevelt was an ancient coin collector. Then there was the ancient coin collection of the Egyptian King Farouk. There was also the fabulous ancient coin collection of Nelson Bunker Hunt – yes, of the silver market.

Other famous coin collectors included Thomas Jefferson, John Quincy Adams, King George III and King Louis XIV. Pope Boniface VIII was also an ancient coin collector. The first major collector of ancient coins was the first Roman Emperor Augustus (27BC-14AD) according to Suetonius.

DBLEDIECollectibles are always a hedge against government. They survive the great monetary crash that sweeps through the world economy every so often. Money is ONLY a medium of exchange – it is NEVER the store of value. That is true even when gold is used as money for whatever might be used as money is then on the opposite side of everything else. So small collectibles are always a good bet. Keep in mind the scope. So ancient coins are salable worldwide while a 1955 Double Die penny will find its best market in the United States. Hence, you can hop on a plane with a Double Die with no problem. However, the sale value in a foreign land may be 20% less than in the States.

Jan 12 2017

Bonds v Shares


Armstrong Economics Blog/Interest Rates

Re-Posted Jan 12, 2017 by Martin Armstrong

Bonds v Stocks

QUESTION: Dear Mr. Armstrong
As a long time reader I rarely see you mention the possible long term benefits of also holding corporate bonds. I understand the obvious down side to government bonds and the reason for stocks to move higher, but since bond holders get paid before stock holders when things go bad would corporate bonds not be a lower risk investment.
Thanks for sharing your work.
TG

 

Corp-Treas%

ANSWER: Corporate bonds of blue-chip companies will eventually move to a premium over government. We can easily see that when government was the place to run, the premium shifted to governments and then declined after 1932. If you are looking at high grade corporate bonds, towards the end of this bull market in shares, you would shift to corporate bonds – not government.

Int%Sprd-MA

We can see historically, no relationship is ever solid or fixed. You can see that 90-day commercial paper was at a huge premium during the 1840s when banks were collapsing during the State Sovereign Debt Defaults.  Then during 1930s you see 90-day commercial paper drop below government. This particular cycle you want to avoid municipal, state, and federal debt issues.

Jan 11 2017

Bitcoin – Is it Sustainable?


Armstrong Economics Blog/Banking Crisis

Re-Posted Jan 11, 2017 by Martin Armstrong

bitcoin

QUESTION: Dear Mr. Armstrong: I have been to the Orlando conference and probably read every single one of your blogs since about a year ago and now wanted to ask you about Bitcoin and/or other alternative currencies. If I am not mistaken, this topic is not something that you have really touched upon. Recent spike in the price of Bitcoin appears to be, at least in part, to be driven by certain countries such as China and Venezuela where people use it to bypass their country’s currency restrictions. Would be it fair to say the more restrictions that we will see by various countries and governments the more Bitcoin or other alternative currencies will be poised to increase in price? Would it also be reasonable to expect this same result if, as you alluded to, governments around the world continue to limit and/or eliminate cash, similar to what we see in India? Your thoughts would be greatly appreciated!

I personally thank you for everything that you are doing!

ANSWER: We must be realistic. Governments are fighting for their very existence. The BREXIT and Trump elections are direct attacked upon government that are rising among the ranks of the silent majority. I do not believe that Bitcoin can survive against governments trying to shut down the flight of capital. Countries like Venezuela are in a state of chaos. China is something different. The flight of cap[ital out of China threatens the continued weakness of the yuan and Trump will misread that as a trade war.

Long-term, the safe haven may become stocks as was the case in Germany during the 1920s. Yes there were people who used the gold coins of foreign countries just as the Japanese turned to Chinese coins when they did not trust their government. But gold you cannot ship between countries without a trace and you cannot hop on a plane with a suitcase full of gold. What did survive were  things such as blue-chip shares and real estate. But the real estate is not movable.

As far as gold is concerned, I have recommended old common date coins rather than bars and bullion. I have recommended that because you can then claim it is a collection and historical rather than bullion that can be remelted. That worked before, but it may not in the future. You can mail it around with the country, but trying to send it to a foreign land is not so easy anymore.

The higher the price, the more likely government will look at Bitcoin. It is a very sharp doubled-edge sword. We have to be concerned that the government simple do not declare it illegal and all guilty of money-laundering. Then it could become worthless overnight. The whole reason for Bitcoin is the distrust of government. Why would you trust them to also turn a blind-eye to Bitcoin?

Jan 11 2017

Understanding Performance – Socrates v Medallion?


Armstrong Economics Blog/Basic Concepts

Re-Posted Jan 11, 2017 by Martin Armstrong

medallion

QUESTION: Marty; I invested in your Deutsche Bank hedge fund and the performance was about 3 times that of even the Renaissance’s Medallion fund. Your employees said for the public fund you closed positions early because you were making too much in 1998. Yet that was still about 3 times what Medallion produced in 1998. Medallion is closed since 2005 and nobody has been able to duplicate their returns no less your’s. You said at the WEC you had no interest in returning to managing funds. Why is it that the only two quantitative funds to be successful, you and Renaissance, do not take on more clients?

Thanks for a great conference. Will see you in Hong Kong

HS

 

1998-ltcm-contagion1998-yen-long-term-capital-management-crashANSWER: To set the record straight, yes I had to close out positions early in 1998 in the public fund because we made way too much money. That may sound nuts, but in a public open fund you cannot post gains in the hundreds or percent for a two months. It would upset the entire industry cause all sorts of problems even with regulators. The model correctly forecast the Long-Term Capital Management Crash. I sold $1 billion worth of Japanese yen at 147 against the Yearly Bullish Reversal in addition to numerous other markets. They began calling me Mr. Yen for that trade.

1998-sp500-july-20In the share markets, I had even sold the S&P500 on the very day of the Economic Confidence Model peak – July 20th, 1998, which was the precise high in that market. Getting so many markets precisely correct presents a problem because most people do not comprehend that markets are (1) interlinked, and (2) precise. They immediately want to say you manipulate markets since the vast majority do not understand how the world economy functions and go back to instantly assuming manipulation. I was accused of manipulating the world economy because that is easier to assume than perhaps things do not work the way people believed.

ft-1998

Add to all of the markets we traded precisely for that move, the fact that the London Financial Times put on the front page of the second section the story that we had forecast the Russia was about to collapse at our London World Economic Conference that summer brought in even the CIA. When they called, it was in the middle of the panic and wanted me to go to Washington to build this model for them.

case-shiller-20-city

The Case-Shiller real estate index peaked precisely to the day of the Economic Confidence Model in 2007. With the Economic Confidence Model peak in 2007.15 (February 26th, 2007), that turning point marked the very day of the high in the Case-Shiller Real Estate Index. However, it also marked the precise day of the infamous sale at the top of Goldman Sachs’ notorious ABACUS 2007-AC1 $2 billion Synthetic CDO, for which they were charged with fraud. How many times does this model have to pinpoint turns precisely to the day (even 1987 Crash), before people concede perhaps its works and it is not me waking up with a premonition. There are people who pour over everything I write desperately trying to prove me personally wrong rather than looking at the reality that maybe there is something very important lurking behind the appearance of randomness.

You have to understand that performance will decline with any fund the larger the fund grows. Yes our track record with Deutsche Bank outperformed the Medallion Fund back then. However, to be fair, the Medallion Fund began only in 1988 where as our model was already being used for more than 15 years before that so we had much more experience. Comparing one to another may be interesting, on the surface, but it really comes down to the scope of the trading. We used the entire world even during the 1980s. This is why we have created the Global Market Watch to reveal how everything is connected to help take that giant leap forward for humanity.

Strategy is very important in trading. This is the core purpose of the World Economic Conferences. It is not that you trade every specific market we cover. They key is you can see how the world is unfolding and then focus your attention on the market sector you prefer, yet draw confidence from watching the strategy from the whole. It is not that the strategy fails, but you cannot execute an unlimited amount of trades of the same position.

Performance will not remain the same by simply throwing limitless amounts of money at the same market. There is not enough depth to any market whereby it can absorb an endless supply of positions or even if it were confined to a limited group of markets. This is why Medallion is a closed fund. If they accepted more money, their performance would decline. It is not a one for one relationship. Yet it is also why I developed the Global Market Watch to expand the strategy to the entire world without limitations. This is also why we have had the largest and most diverse client base from around the entire world. We are not just forecasting the United States or a single market. Those who focus on just forecasting a single market, like gold, typically hate us and only try to disprove whatever we do because they have nothing else to offer.

The Medallion Fund is the ultimate black box. They really do not report what they made money on and they are also renown for having just quants and not fund managers from Wall Street. Why? Once you interject human reasoning, performance declines. Some will claim to be managing money based upon our model, but in reality they will fail because it is simply their interpretation and human emotion will intervene.

1987-Crash-D1

Funds have long tried to mimic myself as well as Medallion. They have never been able to because they are not really quantitative and human decisions, including emotions, override things. The Brady Commission investigated the 1987 Crash. They assumed at first it was computer trading. What surfaced was that most computer models said sell when our Double Weekly Bearish Reversals were elected. However, the fund managers did not sell because they did not believe their systems. When the market gaped down, panic set in and people sold BECAUSE they had no idea what was going on.

Personally, I have learned over the years that the very best trades are when the computer projects the outcome and it makes me feel like this has to be wrong. For example, BREXIT and Trump are examples of that situation. The computer will beat anyone – including me. We are all infected with emotions. They are the hardest thing to overcome.

The comparison is not whether Socrates would beat Renaissance Medallion, but why is it that the only two systems that are not based upon human decisions are at the top of the heap? How many times does the ECM alone have to work for decades before it is no longer a coincidence?