Tag Archives: Rule #1 Never Marry The Trade

Sep 4 2018

Cryptocurrency Scam?


Armstrong Economics Blog/Cryptocurrency

Re-Posted Sep 4, 2018 by Martin Armstrong

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!

Sep 3 2018

Trump Tries to Deal with the Pension Crisis


Armstrong Economics Blog/Pension Crisis

Re-Posted Sep 3, 2018 by Martin Armstrong

 

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

Sep 1 2018

Tampa v St. Petersburg for Migration


Armstrong Economics Blog/Real Estate

Posted Sep 1, 2018 by Martin Armstrong

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.

Sep 1 2018

Cyclical Synchronization & the Global Economy Make Manipulation Impossible


Armstrong Economics Blog/Understanding Cycles

Re-Posted Sep 1, 2018 by Martin Armstrong

 

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.
Aug 31 2018

The US Share Market Reality Exposed


Armstrong Economics Blog/Dow Jones

Re-Posted Aug 31, 2018 by Martin Armstrong

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 says. The 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.

Aug 31 2018

The Significance of the Velocity of Money


Armstrong Economics Blog/Economics

Re-Posted Aug 31, 2018 by Martin Armstrong

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.

Aug 30 2018

Why are Robots Changing the Future?


Armstrong Economics Blog/Economics

Re-Posted Aug 30, 2018 by Martin Armstrong

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.

Aug 30 2018

The Rumors are that Turkey Will Default


Armstrong Economics Blog/Uncategorized

Re-Posted Aug 30, 2018 by Martin Armstrong

The rumors running around is that Turkey will default as Erdogan decides to move to align with Iran and Russia and leave the West behind. While there have been speculative attacks on the Turkish economy and US tariffs and sanctions have been detrimental, the initial causes of this growing monetary problem are really all internal. Erdogan’s management of the economy has been a disaster. He has pretended to borrow too much money from foreign investors to stimulate the economy. It is true that the total debt rose to over $450 billion, about half of GDP. Turkish exports and the current account deficit rose to $50 billion. This has led to rapid inflation that has been at least an annual rate of nearly 7% on average during the last ten years. In truth, Erdogan was really trying to build the economy to fulfill his dream of reestablishing the Ottoman Empire and emerge as at least the dominant power over the Middle East.

Unfortunately, Erdogan is stubborn and he really has no way out. He wants his cake and consumes it all at the same time. The rumors running around the trading desks is that he will pull the plug and turn his back on the West. By doing so, he can then justify defaulting on the debt of the “corrupt” West who wants to subjugate Turkey will be the justification spin of things. It looks like this will remain volatile into October.

Aug 28 2018

Zimbabwe – New President is Sworn In


Armstrong Economics Blog/Politics

RE-Posted Aug 28, 2018 by Martin Armstrong

QUESTION: Dear Mr. Armstrong,
Zimbabwe is just coming out of a very hard time. Their currency is not (at least to my knowledge) recognised internationally. What advice would you give to the Government as they try to sort out this situation? Would you consider advising them on the way forward so that they do not make any fundamental errors in the beginning. It is a lovely place, I can assure you, if you do go.
Best regards,
CH

ANSWER: I am aware of the hope which has taken hold there in Zimbabwe with the tens of thousands of people celebrating the victory of President Emmerson Mnangagwa yesterday. He really needs to restore world confidence and that is possible. He finished out Mugabe’s term but almost 20% of the white population fled and Mugabe was a Marxist. It will take some political guidance, but if he would really listen, he could actually transform your country into a powerhouse. The first and primary directive is always the rule of law. If a property can be taken, then capital will never trust such a nation. It falls into the category of Country Risk.

Overall, the economy of Zimbabwe was quite strong. From 1991 to 1996, the Zimbabwean Zanu-PF government, which was in power since independence, and its President Robert Mugabe adopted an Economic Structural Adjustment Programme (ESAP) that was really insane and we see similar policies rising in South Africa. Mugabe created an extremely serious economic change that was not unlike the drastic approach of Maximinus I of Rome. Maximinus effectively attacked the rich and paid informants who reported anyone with hidden wealth. Commerce began to collapse and it was his actions that really began the decline and fall of Rome into 268AD.

We have to be honest here that Mugabe created the hyperinflation in Zimbabwe that began in the late 1990s because of his Marxist philosophy shortly after the confiscation of private farms from white landowners towards the end of Zimbabwean involvement in the Second Congo War. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe’s hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. However, Zimbabwe’s peak month of inflation is estimated at 79.6 billion percent in mid-November 2008.

We would provide a set of proposals, but it would have to be confidential. If President Mnangagwa agreed, then and only then could we make them public. The risk of creating false hope in markets is not wise.

Aug 27 2018

The Fight Behind the Curtain inside the EU


Armstrong Economics Blog/European Union

Re-Posted Aug 27, 2018 by Martin Armstrong

Italy is the third largest economy in Europe just behind France, but it is number two insofar as industrial production is concerned. The French manufacture three main brands, Peugeot, Citroen, and Renault, in the world of automobiles which are not very popular in the USA. The Italians, however, have the more recognized brands worldwide such as Ferrari, Maserati, Lamborghini, Alfa Romeo, Fiat, and Lancia. The sports car enthusiast is always torn between a Ferrari and a Lamborghini while you are beginning to see Maserati’s everywhere in the standard high-end marketplace.

From the manufacturing perspective, the Italians have been able to compete producing cars in Euro for their reputation in car production carries the day. The crisis for Italy with respect to the Euro has been the conversion of their past debt to Euro which altered the standard depreciation of debt whereby you are paying back with cheaper currency.

The idea that was floated as an alternative to leaving the Euro calling for a referendum on the country’s EU membership was the proposal which called for the introduction of so-called mini-bots – government guaranteed bills. The catch was that they were to be restricted only to Italy and can be used to pay taxes. This idea does not seem to be moving anywhere close to reality. However, it recognized that there was a problem with its debt.

Instead, the proposals have turned on reforming the ECB. There are people in the Italian government who want to alter the ECB as a direct result of Draghi’s policy of Quantitative Easing which has destroyed the European Bond Market. The Italian proposal call for the ECB’s statutes should be changed to allow the central bank to act as a lender of last resort and acquire Italian government bonds not only on the secondary market by QE, but also on the primary market buying them directly from the Italian government. In reality, this would be a direct assault on the German philosophy of austerity. There would be nothing against higher inflation if it would create more jobs. Italy is making it clear that they would prefer 7% inflation and an unemployment rate of 2% rather than 2% inflation and an unemployment rate of 7%. In reality, Italy is arguing for the same policies that were adopted by Roosevelt to end the Great Depression.

This is becoming a battle behind the curtain between austerity and reality. The question to emerge is what happens if Germany refuses to yield? Are we looking at the very issue that brings down the entire EU house of cards?