COMMENT: Marty; Your forecast at the last WEC that the pound would break the 1985 low seemed extreme. I have to say as I watch it this morning, your computer picks every trend around the world with remarkable precision. You are providing a unbelievable learning lesson teaching us how the world really works. I understand why the press never quote you. They cannot afford to reveal how accurate your computer really has been. You are changing the way analysis is even done.

Good on you. See you in Orlando

DB

REPLY: There is no such thing as random walk. Sure, analysts can be lucky and get a few calls right here and there. Nobody can forecast every market correctly from a personal gut feeling view. The collapse in gold is tied also to the dollar as just one factor. I hope people are starting to see that the world is all connected and NOTHING takes place in some random fictional bubble. This is not a drunk strolling through the park randomly so you cannot predict where his next step will take place be it left, right, or even backwards. Of course they will not quote me. Why? If everything is connected, then the bigger question becomes; How can politicians run promising anything? Hillary can no more deliver what she promises. It’s all a joke. If Trump cut corporate taxes to 15%, then companies would bring their cash home. I testified on that before Congress and explained they had to match the best tax rates of 15% as in Hong Kong and the corporations would all return. Just to be invited to testify before the Ways & Means Committee is credibility. You do not get asked just to speculate or say “I think”. We had over $3 trillion under contract globally for strategic advice. I think we had sufficient experience to testify how corporations would respond. Everything is connected. You cannot raise taxes with no regard for the competition. If one car dealer sells the same car at full sticker prices and one 5 miles away sells it for 5% less, people will move to the better deal. This is human nature and it is how the whole world functions. Only a fool would deny this fact.

We are getting that pop in the dollar now against the Euro, Yen, and Sterling. This has been what the Fed is frightened about. There is very little out there in terms of color for the immediate crash in the pound with the typical hard line BREXIT talk as if Europe can stand without Britain, and the excuse is razor thin liquidity combined with the the old “fat finger” explanation. But the smell of war is in the wind and the dollar always rises under such conditions. That is just one factor. Then we have the insanity of Draghi running the ECB and the French along with the German elections appear ready to toss out their politicians and make a hard turn right.

Mainstream media is still conspiring with the politicians against the people everywhere. They did so in Britain and they are doing it right here in the USA. Hillary has vast sums of money and that does NOT come from the little guy. Trump has raised more money from the little people than Hillary. That says it all. Yet the press is desperate to get Hillary in office for they are linked with the politicians to destroy our society out of their own greed. They are by no means independent.

We can see that the Break Line channel from the BREXIT move has been excellent of showing the resistance. Today, the bottom of the channel lies at the 1.19 level and we have seen the pound collapse to 1.1860 so far. It fell nicely to the technical support. The main support lies at the 1.05 level and it looks pretty solid that we will elect two yearly bearish reversals we will discuss at the WEC. As far as what Socrates has been writing on the long-term, the pound sterling simply has never elected any yearly buy signals after the 1985 low so it was only a reaction rally.

“Noticeably, my long-term view forecast recognizes that the major low in British Pound Spot took place back in 1985 completing a 39 year decline, but we have seen lower highs with each thrust upward leaving the major high intact as of 1959. We have not elected any Yearly Bullish Reversal from the major low of 1985 warning that we remain in a bearish long-term trend. Only an annual closing above 24280 would signal a change in long-term trend. There has been a post low rally after 1985 moving upward into a key high during 2007. Nonetheless, the market has undergone a reaction back to the downside for the past 8 years. This has warned that the overall trend of this market remains bearish since it has been unable to make higher highs. There remains a long-term risk of a decline extending into 2017 or as far out as 2020 in real terms adjusted for inflation. Unquestionably, there remains a risk that we could see a complete monetary reform as early as 2018 going into 2020 or the latest 2032 insofar as a change in the currency base system. This is likely to follow a Sovereign Debt Crisis which should begin to erupt by 2018.”

The Global Market Watch in 2012 warned that the “Rally will fail then sharp decline Possible”. Since the beginning of the first quarter 2015, the GMW has been warning “ABOUT TO CRASH” and then the second quarter this year it warned a “key high waterfall event” The whole picture has been bearish. This is what the GMW is all about. It is an objective warning system and when you see all levels screaming at you like this, only a foll would be on the long side.

QUESTION: Numerous people have asked:

Does the FED actually also see these trends coming (strong US dollar, bond crash) ?
K.

ANSWER: Yes. The Fed has sent people to the major banking houses and told them outright that their models are wrong. They have been telling them quietly that there may not be a rush to quality being bonds. Moreover, the selling of US Treasuries by some central banks has been an effort to try to prevent the dollar from rising. China’s holding of US Treasuries has declined to its lowest level in several years, but it is having little effect causing markets to simply coil.

QUESTION: Marty; You said at the Berlin Conference that failure is not the opposite of success. It is part of success. I found this intriguing. Is this part of the training sessions for this year’s WEC?

ANSWER: Yes. The way we learn is by making mistakes. If you claim to have never been wrong, then you have never learned anything. Mistakes are part of life as they are in trading. The trick is to survive your mistakes to make it to the next round. There is no such thing as failure — only learning lessons. This is why I also say we must crash and burn. It is impossible to argue to governments that they will fail as long as they have the power to try to defend themselves. Only a crash and burn provides an opportunity for change to emerge. This applies in politics as well as trading.

QUESTION: Hi Martin
I am a follower of your blog.
I have a question on your post “Financial Capital of the World & Its Migration” dated 30th sep 2016.
I was looking at the graph where Y-axis indicates the scale of Economic Progress (in terms of % of world GDP) against time on X-axis.
The decline of China and India have been like a jump off the cliff. Why is it that it is not so in case of Europe?
I am guessing some component of your model is able to hold it up .Could you pls explain.
Again many thanks for your education.
AB

ANSWER: The reason for this is that we have treated Europe as a whole. The devil is always in the detail. The beginnings of the Portuguese Empire can be traced to July 25, 1415, when the Portuguese Armada set sail for the rich Islamic trading center of Ceuta in North Africa. The economy of Portugal was centered in trade, raw materials, and related activities within its vast colonial possessions, mainly in Asia (spices, silk, dyes, porcelain and gems), Africa (ivory, timber, oil and diamonds), and South America (sugar cane, dyes, woods and gold). The country, with a transcontinental empire with plenty of natural resources and vast unexploited areas, was among the most powerful nations in the world. Spain really became a country only in 1492 with the merger of two crowns by the marriage of Ferdinand and Isabella.

From 1580 to 1640, the crown of Spain was also the ruler of the Portuguese Empire and its wealth. This was accomplished through a dynastic union referred to as the Iberian Union. The Iberian Union opened to both countries a worldwide span of control. Portugal dominated the African and Asian coasts surrounding the Indian Ocean, while Spain held the Pacific Ocean and both sides of Central and South America. Therefore, Spain then displaced Portugal as the financial capitol of the world.

The Spanish Inquisition led to the flight of the Jews to the Netherlands. They took with them the accounting and trading skills. This is why Amsterdam became the financial capitol of the world, equipped with the first bank as well as insurance. This is where the modern financial markets actually began to take shape.

The English Civil War and the hatred of the Pope and Catholics led them to invite William of Orange to become King of England. He brought the Dutch way of doing finance to Britain in 1688, and that began the process of shifting the capitol to London. That lasted until 1914, when it passed to the United States following World War I.

QUESTION: Hello Martin and thank you for all your fascinating and informative emails.
I’m probably naive and unrealistic (if everything goes in cycles maybe it’s just the way of the World) but I just read your email about Sears and felt pretty sad to see something that survived well for a long time and provided so many with jobs and goods for so long seem doomed.
Do you ever feel like that and can’t you help such companies? Would they even listen? Should you help them or is this just something we all have to accept is a natural demise?
Love to your mum too and a belated happy birthday to her. She is a star. It’s lovely to see you’re close and she looks so good. You must be taking good care of each other,

CP

ANSWER: I have been called into many board meetings over the years. I have watched this process first hand. Typically, companies must simply die just like any biological entity. I began my computer engineering training at RCA (Radio Corporation of America).

In 1901, the Victor Talking Machine Company was formed. In 1919, RCA was incorporated to control US patents of General Electric, AT&T, Westinghouse, United Fruit. The same year, David Sarnoff became the General Manager of RCA. In 1926, NBC established by RCA (50%), GE (30%), and Westinghouse (20%).

Meanwhile, the Victor Talking Machine Company of Japan, was founded in 1927, as a wholly owned subsidiary of the Victor Talking Machine Company of the the USA. Its purpose was to manufacture and market phonographs in Japan. The Japanese Victor Company (JVC) sold minority shareholdings to the Mitsubishi and Sumitomo financial groups. JVC was thereafter operated as a U.S.-Japanese joint venture. However, Victor was purchased in 1929 by the Radio Corporation of America and renamed RCA Victor. RCA bought Victor Talking Machine for US$154m going into the top of the bull market in 1929. As the Great Depression began, the government began anti-trust investigations of RCA during 1930, which was followed by General Electric and Westinghouse selling their stakes in RCA in 1932. Then in 1941, the Federal Communications Commission Report on Chain Broadcasting recommended that RCA dispose of one of its networks.

From 1965 onward, RCA sought to become a major conglomerate. In 1965, RCA bought Random House, and then two years later in 1967, RCA bought Hertz Rent-a-Car. Then in 1969, RCA bought Cushman & Wakefield followed by FM Stamper, renamed Banquet Foods, in 1970. Then in 1973, it purchased Ballantine Books, once again going into the peak of the market in 1974.

With the Crash of 1974 and the sharp economic decline into 1976, RCA sold in 1976 Cushman & Wakefield to Rockefeller Group. Its fortunes had peaked with the bottom in book value of the Dow Jones Industrials, which took place in 1977, which is precisely a 51.6-year cycle wave from its birth in 1926. In 1980, RCA then sold Random House to Advance and Banquet Foods to ConAgra and turned around and bought CIT financial group. Then in 1984, RCA sold CIT to Manufacturers Hanover Bank for US$1.5bn. Then in 1986 RCA-Victor (RCA’s music arm) was sold to Bertelsmann and the following year Thomson bought RCA’s consumer electronics operations. General Electric acquired RCA in 1986 since it owned NBC and it sold off all its remaining operations. Its total life from inception was 67 years. From its peak in 1977, the fall was just 8.6 years.

The life cycle of corporations are very much like a biological lifeform, as is the case with governments. The inventor has the creativity. That breathes life into the entity. When that person dies or is forced out, like Steve Jobs, the company tries to be “institutional” and proper. The board is then run by the lawyers and bean counters. They lack creativity. They will then move into the acquisition phase and buy startups and other companies to expand their business. They lack the genius of creativity. They will typically buy the high and sell the low like everyone else because they act based upon the immediate trend. This leads to over-expansion and then comes the decline and fall.

Can such companies be saved? Only if the board listens. They typically will not since they lack creativity and any comprehension of the business cycle. They can rarely make the leap forward for they are always chained to the past and what they think is the proper way to run a company, which is always wrong.

QUESTION: Marty; I won a bet against a goldbug. He bet gold would soar and the dollar would crash October 1st because of the SDR and said you would be exposed as a fraud. I won the $100 bet. I tried to bet an ounce of gold, but he would do that.

I too studied Latin. Remember Julius Caesar your favorite: Fere libenter homines, id quod volunt, credunt – People almost always willingly believe what you want (De Bello Gallico, III, 18). That is their whole problem. They want something so bad they are blind to everything around them. You can lead a horse to water, but you cannot make him drink.

With gold down at 1275, when is your next video update?

CB

ANSWER: Yes I admired Caesar. But he forgave his enemies and they killed him for his generosity.

You cannot enlighten certain people because they have too much invested in their beliefs. There are people who will vote for Hillary no matter what as there are people who will vote Republican no matter what. There is always those who just believe and never question.

I will update a video soon. The timing is not right for gold to break out. It failed to elect the Monthly Bullish and then failed to elect the Quarterly Bullish Reversal despite the fact it was much lower. Gold rallied right to that reversal and bounced off. That was the kiss of death.

People are still uncertain about the future. They have no idea which way to go with this year from Political Hell. Will do a Private Blog Update for tomorrow.

QUESTION: Hi,
I have two questions:
a) do you believe US dollar has been kept artificially lower than it should be (or at least in long range trading range) by at least two central banks lately? if so how long you think it would last, years?
b) you remind many times gold does not yield so investors should avoid it at any cost – as the most investors have done. benefits of stocks are clear but why many investors still buy / have bought bonds even with negative interests or buy fiat currencies with very low interest levels.
BR, J

ANSWER: Yes. The central banks have been trying to keep the dollar down because a rising dollar will undermine Europe exposing the ECB total failure, and then there is the risk of major sovereign defaults among emerging markets who issued their debt in dollars. The IMF has lobbied hard with the Fed pleading not to raise rates for this fear of capital pouring into the dollar. They do not appear to be able to sustain this policy beyond January.

Gold is not something to avoid. True, institutions cannot buy gold for they earn no income. Gold is really for the individual and it will eventually be the hedge against government and the change in the monetary system which could come as early as 2018 but by 2020 if on schedule.

Institutions buy bond because they simply go by the book. Then pension funds often have restraints requiring various portions MUST be in government debt to varying degrees. Social Security is only in US debt. Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity according to most people. The value of fiat money is supposed to be derived from the relationship between supply and demand rather than the value of the material that the money is made of. But throughout history, ALL money has always been fiat. Bretton Woods collapsed because they continued to print money and the claimed backing was not there. So even the pretend gold standard was fiat. When money was gold coins during the 19th century, it was legal tender, not backed but anything else, and yet it still rose and fell in purchasing power. There is no such period in monetary history of such a Utopia or money remaining steady and a constant purchasing power. It has never existed.

The Organization of Petroleum Exporting Countries’ (OPEC) agreement to cut production is supposed to end Saudi Arabia’s policy of the last to years to pump-at-will. This has sent Middle Eastern economies into a tail-spin and the glut of oil has meant rising taxes and selling bonds to raise capital. With this new claimed reversal of that pump-at-will policy, there are of course the optimists who say oil should now soar, yet they overlook some very critical points. OPEC deals have routinely failed, and there is a real glut of oil in inventories, not to mention the reduction in oil demand rising from electric cars.

The EU first introduced mandatory 2015 CO₂ standards for new passenger cars way back in 2009. Mandatory targets for light-commercial vehicles come into play in 2017, which was passed back in 2011. Then by the end of 2013, the EU reached an agreement that will implement mandatory 2020 CO₂ emission targets for new passenger cars and light-commercial vehicles. Europe is applying these standards for 95% of vehicles in 2020 with 100% compliance in 2021 and the light-commercial vehicle standards are are required for 2020. Electric cars are becoming commonplace in Europe. Charging stations are seen just about everywhere including in London. This is not the case in the United States. Clearly, demand will decline for oil moving forward.

The optimists also overlook the reality of the oil production countries. OPEC cannot control the 60% of world production outside its membership. The United States is the largest oil producer. In the top five oil producing countries, only Saudi Arabia makes that list as number two. Of the top 10 producing countries, only four are OPEC members. The bottom line; OPEC can not manipulate oil prices any more.
2014 Country Production (bbl/day)

1 United States 11,973,000
2 Saudi Arabia (OPEC) 11,624,000
3 Russia 10,853,000
4 China, People’s Republic of 4,572,000
5 Canada 4,383,000
6 United Arab Emirates (OPEC) 3,471,000
7 Iran (OPEC) 3,375,000
8 Iraq (OPEC) 3,371,000
9 Brazil 2,950,000
10 Mexico 2,812,000
11 Kuwait (OPEC) 2,767,000
12 Venezuela (OPEC) 2,689,000
13 Nigeria (OPEC) 2,427,000
14 Qatar (OPEC) 2,055,000
15 Norway 1,904,000
16 Angola (OPEC) 1,756,000
17 Algeria (OPEC) 1,721,000
18 Kazakhstan 1,719,000
19 Colombia 1,016,000
20 India 978,000
21 Oman 951,000
22 Indonesia (OPEC) 911,000
23 United Kingdom 906,000
24 Azerbaijan 856,000
25 Argentina 715,000
26 Malaysia 697,000
27 Egypt 667,000
29 Libya (OPEC) 516,000
30 Australia 478,000
31 Thailand 422,000
32 Vietnam 316,000
33 Turkmenistan 276,000
34 Equatorial Guinea 269,000
35 Sudan and South Sudan 262,000
36 Congo, Republic of the 259,000
37 Gabon 240,000
38 Peru 180,000
39 Denmark 171,000
40 Italy 169,000
41 Germany 160,000
41 South Africa, Republic of 160,000
43 Japan 137,000
44 Yemen 127,000
45 Brunei 124,000
46 Trinidad and Tobago 116,000
47 Ghana 106,000
48 Romania 104,000
49 Chad 103,000
50 Pakistan 98,000
51 Uzbekistan 85,000
52 Cameroon 81,000
53 South Korea 79,000
54 Timor-Leste 76,000
55 Bolivia 67,000
56 Ukraine 66,000
57 Bahrain 64,000
57 Netherlands 64,000
59 France 61,000
59 Turkey 61,000
61 Tunisia 59,000
62 New Zealand 50,000
63 Cuba 49,000
64 Spain 40,000
65 Poland 39,000
66 Ivory Coast 37,000
67 Papua New Guinea 34,000
68 Syria 33,000
69 Belarus 32,000
70 Austria 27,000
71 Philippines 26,000
72 Hungary 25,000
73 Taiwan 22,000
74 Albania 21,000
74 Myanmar 21,000
78 Congo, Democratic Republic of the 20,000
78 Niger 20,000
78 Singapore 20,000
81 Croatia 18,000
82 Chile 15,000
82 Virgin Islands, U.S. 15,000
84 Guatemala 14,000
84 Suriname 14,000
86 Belgium 13,000
86 Estonia 13,000
88 Sweden 12,000
89 Czech Republic 11,000
90 Finland 10,000
91 Lithuania 9,100
91 Slovakia 9,100
93 Greece 8,700
94 Portugal 7,100
95 Mauritania 6,000
96 Palestine 5,800
97 Morocco 5,100
98 Bangladesh 4,800
99 Switzerland 3,900
100 Bulgaria 3,400
101 Aruba 2,800
102 Jamaica 2,100
103 Paraguay 2,000
104 Belize 1,800
105 Netherlands Antilles 1,500
106 Uruguay 1,200
107 Barbados 1,000
107 Georgia 1,000
107 Latvia 1,000
110 Ireland, Republic of 900
111 Puerto Rico 700
112 Costa Rica 300
112 Slovenia 300
114 Jordan 200
114 Malawi 200
114 Tajikistan 200
114 Zambia 200
118 Ethiopia 100
118 Hong Kong 100
118 Zimbabwe 100