Tag Archives: Rule #1 Never Marry The Trade

May 25 2018

Roman Tax on Estate Auctions was the Outrageous Level of 1%


Armstrong Economics Blog/The Hunt for Taxes

Re-Posted May 25, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; You recently showed a coin of the emperor Hadrian burning tax records. Was there a tendency to always raise taxes as we have today to extreme levels? It seems that our government here in BC just assumes everything you have belongs to them. We should be grateful for what they allow us to retain. That is really the attitude here in Canada. Has this been the norm for governments in general?

KV

ANSWER: Actually no. This attitude toward tax level over 10% is the product of Socialism. Even the notorious Emperor Caligula abolished taxes placed on auctions. This was the norm was that estates were liquidated and the proceeds went to the family. Augustus put in this auction tax which was effectively like an Inheritance Tax. It caused a lot of tax protests. The tax level was the outrageous level of 1%. The next emperor Tiberius bowed to the pressure and cut the tax in half to just 0.5%. Then Caligula followed Tiberius and he issued this coin announcing that the abolished the auction tax altogether. Note that the coin has SC meaning it was sanctioned by the Senate.

Overall, Rome did not have any direct taxation on income and this was the model for the Founding Fathers of the United States where the Constitution forbid direct taxation. The Roman Empire only imposed indirect taxes. It was Augustus who added to the taxes on harbors and manumission the centesima rerum venalium.  Augustus imposed the 1% tax on the price of articles sold at auctions. There was the quinta et vicesima mancipiorum, or 4% tax on the price of every slave purchased but a 5% if you freed a slave. Then there was the vicesima hereditatum et legatorum, of 5% on all inheritances above 100,000 sesterces, which did not fall to the nearest blood-relations, and on all legacies. The freedom of the citizens from direct taxation following the victory of the Punic Wars continued unimpaired. Emperor Caracalla in 212 AD granted to all free subjects of the Empire the right of citizenship, but it did not abolish taxation as was the case for those in Italy. The customs tax was 2.5% and there was a religious tax on Jews of an extra two denarii a year for not supporting the temples. Diocletian (284-305AD) removed the last distinctions between the inhabitants of Italy and of other parts of the Empire by introducing into Italy the same taxation as obtained in the provinces.

I think we all would prefer an Emperor with low taxation than career politicians who never leave office either and want everything we earn.

May 25 2018

The 8.6-Year Frequency is Within Nature


Armstrong Economics Blog/Nature

Re-Posted May 25, 2018 by Martin Armstrong

QUESTION: You have noticed that the 8.6-year frequency even allowed you to see that volcanic eruptions would begin in 2018. Are there other examples from history where you have found this to also be true or was Hawaii just unique?

PK

ANSWER: Oh, there are plenty of examples. Let’s take one of the most famous volcanic eruptions in history – Vesusius. Everybody has heard of Pompeii which was destroyed by the eruption of August 24th, 79AD. That eruption was so violent, it hurled stone and ash 20,000 meters (65,000+ feet) into the sky which then came down and buried Pompeii and Herculaneum. There is even a current song out on the destruction of Pompeii by Bastille.

However, there was a major earthquake 17.2 years before (2 x 8.6) which took place in 62AD which was devastating and also produced a tsunami. On February 5th, 62 AD a powerful earthquake that was probably a 7.5+ in magnitude occurred, with the epicenter at Pompeii. The Latin adviser to Emperor Nero (54-68AD) Seneca the Younger wrote a description of the event. Sheep died from falling rocks and statues were toppled. He even said some people lost their minds and wandered around in their madness.

This earthquake was as significant and 1906 San Francisco earthquake which destroyed much of the city. Like the 1906 San Francisco Earthquake led to the Financial Panic of 1907, which inspired the creation of the Federal Reserve by 1913, almost 8 years following that disaster, we see similar reforms in Rome which also included a monetary system reform. Pompeii at the time had a population of at least 20,000 and was a tightly packed city which was not particularly favorable for surviving earthquakes. Much of the city was constructed from bricks which then to crumble easily. Seneca reported that while Pompeii was severely damaged, Herculaneum had far less damage while Naples was barely touched. He described the earthquake in vivid terms:

What hiding-place will creatures find, where will they flee in their anxiety, if fear arises from below and is drawn from the depths of the earth? There is panic on the part of all when buildings creak and give signs of falling. Then everybody hurls himself headlong outside, abandons his household possessions, and trusts to his luck in the outdoors. What hiding-place do we look to, what help, if the earth itself is causing the ruin, if what protects us, upholds us, on which cities are built, which some speak of as a kind of foundation of the universe, separates and reels?

The sixth book of his Naturales quaestiones entitled De Terrae Motu (Concerning Earthquakes)

February 5th, 62AD a tsunami or tidal wave hit Ostia, the port of Rome. Whatever could go wrong for Nero would go wrong until he was forced to commit suicide in 68AD. At that moment in history, there were perhaps 300-grain ships in the harbor waiting to unload. These ships would arrive from Alexandria and Carthage once a year and had the vital grain supplies for Rome for the entire year. All of them were engulfed by the tsunami and their cargoes lost. This natural disaster created rioting in Rome for the people feared they would starve and the bankers were in a state of panic down the Via Sacra, the Roman version of Wall Street. Nero was forced to respond taking a political action that began his downfall in popularity. Nero in 62AD rationed the stored grain supplies to the people of Rome. He issued this coin in 64AD, two years later, announcing that the damage to the port had been repaired.

 

Back at Pompeii, the earthquake affected the demographics of the city. The rich patricians who used Pompeii as a summer resort decided to move elsewhere and a new class of merchants and traders took their place and rebuilt the city. Dedicatory plaque at the Temple of Isis. This plaque declares that Numerius Popidus Celsinus provided the money to rebuild the Temple of Isis after the earthquake. Indeed, the process of repair was slow and extensive. We can still see the repair work in the ruins today. There were projects such as the embellishment of the Forum and repairing the city’s water supply which was also destroyed. Nero also had to contribute funds for the rebuilding of Pompeii. Perhaps, his second wife, Poppaea Sabina was Pompeian and that is where her family was located. The Villa Poppaea is an ancient Roman seaside villa located between Naples and Sorrento. The villa itself is quite a large structure situated in the ancient Roman town of Oplontis which most of it also remains about 35 feet below current ground level under modern Torre Annunziata.  Evidence suggests that it was owned by Emperor Nero, and it is believed to have been used by his second wife, Poppaea Sabina (30-65AD), as her main residence when she was not in Rome.

Then on the night of July 19th, 64 AD, a fire broke out among the shops lining the Circus Maximus. In a city of two million, was suffering under a very hot summer. Despite the claims that Nero started the fire, he himself was miles away in the cooler coastal resort of Antium. The ruins of the Villa Nero are to be found on the sea about 35 miles north of Rome in the modern town of Anzio.

Nevertheless, the Great Fire of Rome was no ordinary fire. The flames raged for six days before coming under control; then the fire reignited and burned for another three days. When the smoke cleared, 10 of Rome’s 14 districts were in ruin. The 800-year-old Temple of Jupiter Stator and the Atrium Vestae, the hearth of the Vestal Virgins, were gone. Two-thirds of Rome had been destroyed.

Nero returned to Rome to organize a relief effort, which he paid for from his own funds. Nero’s contributions to the relief extended to personally taking part in the search for and rescue of victims of the blaze, spending days searching the debris without even his bodyguards. These are not actions of a man who would have deliberately torched the city. Even after the fire, Nero opened the royal palace to provide shelter for the homeless and arranged for food supplies to be delivered in order to prevent starvation among the survivors.

Tacitus, in one of the earliest non-Christian references to the origins of Christianity, notes that the population searched for a scapegoat and rumors held Nero responsible. To deflect blame, perhaps Nero or someone in the administration targeted Christians. He ordered Christians to be thrown to dogs, while others were crucified and burned. But the citizens of Rome did not believe that the Christians had anything to do with the affair and preferred the political forces in play used this to blame Nero claiming he was trying to deflect blame. What we must understand of this period is that everything was seen as a sign or action of the gods. Indeed, the Rev Jerry Falwell and Pat Robertson both said on national television that the terrorist attack of 911 on the World Trade Center was the act of an angry God who allowed the terrorists to succeed in their deadly mission because the United States had become a nation of abortion, homosexuality, secular schools and courts, and the American civil liberties union. Back then, this was seen as the gods were angry with Nero for killing his mother Agrippina and Claudius’s son Britannicus.

 

Therefore, with the Pompeii Earthquake of 62, the tsunami that destroyed the food supply, and then the Great Fire of Rome all within a 2-year period, the people turned against Nero who they saw was the reason the gods were angry. It was Nero who began the first debasement of the Roman silver coinage. We do not know the exact date, but we can reach an approximate date being late 63 AD to the very worst 64AD. Therefore, it clearly appears that Nero increased the money supply post-Pompeii Earthquake of 62AD. Then the Great Fine his by July 64 AD and the amount of coinage increased output by Nero more than doubled.

Meanwhile, a continued period of seismic activity began over the course of 17 years (two 8.6-year cycles) right up until 79 AD when Mt. Vesuvius erupted destroying the towns was dangerous. However, the small tremors were only seen as signs from the gods, and the eruption in 79 of Mt. Vesuvius was largely unexpected.

May 25 2018

Yes even Sports Comply with Cycles


Armstrong Economics Blog/Understanding Cycles

Re-Posted May 25, 2018 by Martin Armstrong

COMMENT: Mr. Armstrong; I have a friend in the management of the NFL. I sent him your piece on the decline of their industry and how the protests we really turning people off. Well, they have now banned protests during the game. They revised their policy mandating that players and team personnel present on the sideline “shall stand and show respect for the flag and the Anthem.”

Just letting you know.

P

football

REPLAY: Yes, the viewership for the Superbowl peaked with the Economic Confidence Model in 2015 and then it began a three-year decline so far into 2018 it has reached a new 9-year low. This has been 3 years down since the major peak in 2015. Players have no right to protest when they are being paid for a job. No employee can say I am not coming to work because I want to protest Trump but you still have to pay me anyway. Personal time is personal. When you are on the clock, you are being paid for a specific job. We have simply put everything into the computer. Sports also peak with the economy and before it turns down hard.

Here is the attendance of the New York Yankees from 1913 (not TV viewership). We can see that attendance declined during the Great Depression, bounced after the war, dropped into 1972 following the collapse of Bretton Woods in 1971, and then began a broader rally that lasted 36 years until 2008. Baseball was also a leading indicator for the decline in viewership for the NFL. The decline post-2008 is mirroring the decline in liquidity in markets as well.

May 24 2018

Jesse Livermore – Greatest Trader of All Time?


Armstrong Economics Blog/America’s Economic History

Re-Posted May 24, 2018 by Martin Armstrong

QUESTION: Dear Mr. Armstrong:

Thanks for your soon reply. I ask you:

1. Why do you consider Jesse Livermore the greatest investor of all time?. 2. Which are the main reasons?.

I look forward to hearing from you as soon as possible.

Sincerely,

JEMV

ANSWER: Jesse Livermore (1877 – November 28, 1940), was a famed American investor and security analyst who was not always right. He was famous for making and losing several multi-million dollar fortunes and renowned for his short selling during the stock market crashes in 1907 and 1929. I would not necessarily say he was the all-time BEST trader in history. He has often been regarded as such. Jesse was very good. He could have been a bit more disciplined, but perhaps that applies to us all. Just as I may regard Jesse as one of the best, Jesse Livermore called James R. Keene (1838-1913) the “greatest of them all” with no hesitation. I, however, disagree. There is a difference between a perpetual bull and someone who can play the short-side. It takes a “nose” to be the latter.

Keene also made and lost fortunes many times over. He made his first fortune in California trading stock in mining companies. He rose to the top and even became the present of the San Francisco Stock Exchange. In 1876, he moved to New York City where the big money traded. He began investing heavily in race horses. Then in 1884, he suffered tremendous losses in the Chicago grain market, which wiped him completely out. It was this loss that made me lose respect for him. He was betting on the long-side, not the short-side. He simply bought and held. That is not a “trader” in my book.

Yet, James began a remarkable comeback after he was hired by Wall Street investor William Havemeyer to manage a stock fund. His reputation grew and he was very good at market manipulation. He was then hired by J.P. Morgan and William Rockefeller to manage their funds. Keene knew how to “manipulate” markets to make money, but on the long-side. That is not a trader to me. Yes, he had a talent for marketing something to make a profit. But anyone can get rich with a buy and hold strategy. If they are completely wiped out in a crash, that proves they do not have a “nose” for trading. They are just the standard buy and hold variety.

Therefore, what I will say is this with respect to WHY I rank Jesse above Keene. Jesse began trading at the young age of fourteen, and I understand this because I began at the age of thirteen. Jesse ran away from home because his father wanted him to be a farmer. I did not run away from home, but my father wanted me to be a lawyer. What I can say from my personal experience is that some of us are just born with a “nose” for some talent. You see kids with amazing talents who sing or play a piano. Who knows where it comes from. All I can say is nobody taught me how to trade — I just did it. I suspect that Jesse was the same. He was born with a talent to see patterns within patterns and developed a “nose” for trading.

I too could smell the blood come from the tape of quotes and somehow had an instinctive “feel” for how a market would crash. I was named Hedge Fund Manager of the year back in 1998 because I made so much money shorting the markets for the Long-Term Capital Management Crash keying off of the Economic Confidence Model. But there was something in the air. I could smell it. Can’t really describe it. You feel it in your bones like a storm approaching. You just know. Jesse clearly possessed that same instinct. It was obvious from his trading. But Jesse may have made more money on the short-side, but that is because you just make far more money on a short in a crash compared to a long which is often like watching grass grow because it takes time. Jesse could see BOTH sides of a market. I have called bull markets and bear markets. That is a trader — not someone who is only a long-player. That is an investor and by no means a trader.

Jesse Livermore began his career by posting stock quotes at the Paine Webber brokerage in Boston. While working with the data, Jesse most likely saw the ebb and flow of the markets and the patterns within patterns. He would write down certain calculations he had about future market prices and then later check to see if he was correct. Some friend convinced him to put actual money on the market by making a bet at a bucket shop. By the age of fifteen, Jesse had made over $1,000 which was about an annual salary at that time. Because Jesse was a consistent winner, he was banned from most bucket shops from trading as they liked people who lost. This is probably why he left town and moved to New York City where he devoted all his energies to trading in the big markets.

Jesse did not always trade by his rules. He was famous for playing his gut feelings, selling Union Pacific Railroad short right before the 1906 San Francisco earthquake. The key to being a good trader, believe it or not, is never think about the money. If you think about the money, you freeze and cannot trade. I fully agree with Jesse’s comment after taking a loss:

“The loss of the money didn’t bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.” 

I have personally said many times that one should appreciate victories but cherish losses. It is ONLY from losses that we learn HOW to trade!

Many people criticized Jesse’s famous trade going short at the top of Union Pacific. Many claimed it was just luck and judged him based upon the fundamentals since he sold it before the April 18, 1906, San Francisco earthquake. With hindsight, the California earthquake of 1906 ranks as one of the most significant earthquakes of all time. However, the market peaked in January 1906 so it was not a tricky trade simply because the earthquake after he went short. I gathered the data to see IF I would have taken that trade personally. I must confess, I would have shorted that stock at the same time. Why? Let’s look closely and I will explain this as a trader who always had a good “nose” for trends myself.

As the story goes, one day in early 1906, Jesse stopped into a brokerage office where he was vacationing. Some said it was the Breakers Hotel Palm Beach in Florida which had opened up in 1896, and others said it was Atlantic City. Both were “the place” to go back then to get some sun. I would assume in January to March he would have gone to Florida and not New Jersey.

Livermore sold short Union Pacific, which was THE railroad giant and this one share accounted for around 50%+ of the trading volume back then. Jesse picked up a pad and wrote an order to sell a thousand shares of Union Pacific. The broker thought it was a mistake. Surely, he would not short a stock that always went up. After the first sell, Livermore began to press the market selling 2,000 shares short. He did these trades while on vacation. Jesse then cut his vacation short and quickly jumped on the train and returned to New York City. He added to his position again and the next day the San Andreas Fault ruptured at 5:13 a.m. on April 18, 1906.

The Dow Jones Railroad Index had just been split off when the index began in 1885, tracking 14 shared composed of 12 railroads and two industrials. Because of mergers, the following year saw the index composed of 12 shares of which 10 were railroads and two industrials. In 1889, the index was now changed to 20 shares composed of 18 railroads and two industrials. Because of the Industrial Revolution was just starting, the index was split in 1897 into the industrials and the railroads. But it was the railroad stocks that were dominant until the Panic of 1907.

The Panic of 1901 is not high on the list of memories but it was an important event which actually resulted in the peak in most railroad shares. The Panic was in part caused by a manipulation on the New York Stock Exchange as the struggle between E. H. Harriman, Jacob Schiff, and J. P. Morgan/James J. Hill fought for the financial control of the Northern Pacific Railway, which has been the major focus of Jay Cooke back in the day of the Panic of 1873. As the market crashed, a compromise was finally reached and the players agreed to form the Northern Securities Company. Then in 1904, the Supreme Court ruled against them that it was a monopoly in Northern Securities Co. v. United States, 193 U.S. 197 (1904).

The market peaked on January 22, 1906, closing at 138.36 on the Dow Railroad Index. The night before the earthquake the index closed at 132.66. After the news hit New York and the full extent of the damage to the railroad was known, the traders panicked and Livermore sold even more shares short. When the market fell for 10 days straight, closing at 121.89 on April 28, Jesse brought back all of the shares and racked up a profit of a quarter of a million dollars on one trade.

When we look objectively at the position of the market, it is clear what Jesse saw. The railroad stocks overall had really peaked during 1901 and were devastated during that Panic. Then there was the Rich Man’s Panic of 1903 where the final low unfolded. The Panic of 1903 reached its nadir in the Industrial Index on November 9, 1903, while the railroads bottomed nearly two months before on September 28, 1903. Industrials were just getting started and were seen as the more risky market to play. John Gates (1855-1911), otherwise known as Bet-A-Million Gates because he was a huge gambler on horses, was considered one of the leaders of Wall Street. Gates was an industrialist who made his fortune by promoting of barbed wire. Gates went on a European business trip and vacation during 1902 and returned just in time for the 1903 panic. He was met at the dock by the press who wanted to hear his comments on the crash. He said:

“I am surprised at the condition of the stock market,” he told reporters who met his ship. “It is not natural. The causes are purely artificial, and they rest on a false basis. I do not believe there was ever a better time to invest in reasonable securities. I have come back stripped for the fray, and I am going down into Wall Street.”

Gates immediately formed a bull syndicate to buy up shares he believed were underpriced and of good value. Nevertheless, the market continued to trade against him during the spring of 1903 and then it resumed the decline during early summer.

The market really did not stabilize until late August when J.P. Morgan returned from his annual European art-collecting expedition. The mere presence of Morgan would calm markets. By October, the low was firmly in place with the railroad, but the industrials would have to wait for November before prices were on the way up.

The Rich Man’s Panic was the test before the rally into 1906. The little investor was out after 1901 and no longer trusted the market. Thus the recovery was in the hands of the investment bankers.

 

In 1923, the Wall Street Journal falsely accused Jesse Livermore of turning bullish on the market because he was friends with the president. The Journal accused him of trying to influence the presidential election. When the market broke out and rallied, all the other publications took swipes at the WSJ saying everyone reported Jesse’s comments “except” the WSJ. Livermore suffered at the hands of some in the press.

One of the primary reasons I would rank Livermore is the best trader is because he would take both sides of a market. By the end of the Panic of 1907, Jesse was worth at least $3 million and probably peaked at $100 million after the 1929 market crash. If we adjust this number for inflation, by 1932, Jesse was worth probably $1 billion in 2017 dollars. He subsequently lost that fortuned on the rally out of 1932. Livermore would add to positions as the market moved in his direction. Nevertheless, Livermore sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.

Jesse would lose money in the flat markets from 1908–1912. He was $1 million in debt and declared bankruptcy because of his poor trading, always looking for the big move. He proceeded to regain his fortune and repay his creditors during the World War I bull market after going into bankruptcy. Livermore owned a series of mansions around the world, each fully staffed with servants, a fleet of limousines, and a steel-hulled yacht for trips to Europe. He made money in bull markets and bear markets and lost in sideways markets.

Jesse appears to have misjudged the political change in 1932, and on March 7, 1934, Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929. Many have debated that perhaps Livermore turned prematurely bullish and bought stocks and commodities long before the 1932 low. Other assume he failed to read the low. It is more likely that the Senate hearings into the short selling of the stock market weighed heavily on Jesse’s mind and he could no longer trade as he once used to.

 

So why did Jesse Livermore commit suicide? The most likely answer was the birth of the SEC. The sudden change in the atmosphere of trading would be fatal. Jesse Livermore had famously returned to the stock market twice before after going broke. However, the creation of the SEC contributed greatly to his loss of confidence and motivation that had been at the core of his character.

Nevertheless, on November 28, 1940, Jesse Livermore shot and killed himself in the cloakroom of the Sherry Netherland Hotel in Manhattan (lobby pictured above). The police revealed to the New York Tribune on November 30 that there was a suicide note of eight small handwritten pages in Livermore’s personal notebook. The police revealed a part of what it said:

My dear Nina,

Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me.

Love,

Laurie

He left his family over $5 million in trusts. He is said to have suffered from depression in his final years. His oldest son, Paul, went on to become an actor

May 22 2018

Understanding TIME is the Key to How the World Works


Armstrong Economics Blog/Training Tools

Re-Posted May 22, 2018 by Martin Armstrong

COMMENT: I fully agree with the comment on the different time levels. I encountered a critic who said you were wrong on the euro. When I said I made money using your model and followed the buy signals he looked at me as if I was lying. They judge you like everyone else in this one-dimensional way. They either lack the intelligence to grasp what your model does or they are too lazy to even look at the market watch. So it is easier to say you are wrong so they do not have to admit they are incapable of understanding how the world works.

Thank you so much for opening my mind

Cheers

REPLY: Those type of people cannot be helped. They will never advance because they are not interested in observing. This is the same problem in analysis. People begin with a predetermined conclusion and then they look for facts that support it. Comprehending TIME is incredibly important. The WEC events are all about trying to reveal the world and once you see the interconnections, you can trade with confidence rather than ignorance.

If you are not truly curious about what makes the world tick, then you will never discover how it works and remains in a one-dimensional world incapable of distinguishing the counter-trend moves from a real change in trend, which is more likely going to wipe you out

May 22 2018

The Hong Kong Peg under Attack


Armstrong Economics Blog/Hong Kong

Re-Posted May 22, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong; The Hong Peg is under fierce attack. You said at the Hong Kong WEC that the peg would break but not before 2018. Are we getting close?

See you in Singapore

PB

ANSWER: Yes. They are spending almost $2.5 billion per week to defend the currency. No peg will stand. This is a Monetary Crisis Cycle. We will be looking at this issue in Singapore. Welcome to the Monetary Crisis Cycle which is beginning right on schedule. Trading against peg can be the best-guaranteed trade of all. We will go over this for the attendees

May 21 2018

Understanding the Fractal Nature of TIME


Armstrong Economics Blog/Training Tools

Re-Posted May 21, 2018 by Martin Armstrong

COMMENT: I attended your 2015 WEC where you laid out the future for the euro. I was skeptical, to say the least. All these people constantly focus on the dollar. Then your model gave buy signals on the euro and you said it would then rally into 2018 and that could form the slingshot down. It came close to your target and now here in France, the government has warned of a euro crisis blaming Italy. I attended your euro conference in Frankfurt and again you explained why the euro would decline.

I have come to understand that your model is really split into timing levels. I think you need to explain that better because the rest of us are used to what you would call I guess a flat forecast that is not relevant to the time. Just a suggestion. But a lot of people do not catch on that you can forecast the long-term yet also provide the forecast for the short term counter-trend moves.

I can’t make Singapore but will be there in Orlando.

merci et bonne chance

PV

REPLY: Thank you for the perspective. You are probably correct. The very reason why we are one of the largest institutional advisers in the world is because we can forecast not just time, but distinguish the short-term from the long-term. I suppose it can get confusing when the long-term warns the euro is crashing and yet you have a 13-month rally which is also necessary to create the energy for the resumption of the decline. This is how the energy in a market is created for the opposite direction.

It is always the false counter-trend move that creates the energy to swing back the other way. We did elect a Quarterly Bearish Reversal at the end of the 1st quarter 2018. That confirmed the counter-trend rally was over. On the weekly level, it was 57 weeks up to the February high.  There we were electing Weekly Bullish.

Take gold. Here too the line the model drew was 1362 on a monthly level and 1341 on a quarterly. Gold would crash at the end of every quarter to avoid a buy signal. Likewise, it just could not get through the 1362 number. This also confirmed the position with the dollar that was reflected in the Euro.

You are correct that 99.9% of forecasts are flat one-dimensional. Our model enables big players to sort out the small counter-trend moves from the point where you have to flip a major portfolio in the billions. How you trade personally and for huge size is totally different. OPINION will not cut it. It has to be black and white. We must reduce it to a specific number and then the targets in time.

I suppose you are correct. I do not explain this difference between our forecast and everyone else in sufficient detail over the course of events.

May 20 2018

What Fields Will Survive Going Forward?


Armstrong Economics Blog/Economics

Re-Posted May 20, 2018 by Martin Armstrong

QUESTION: Hi Martin,

You are a clever man and all the best to you.  I am a 43 yr old man that is still looking for his way in life.  In short, knowing what you know, what business would you strive to get into?

I am purely looking for some sound advice as everyone is busy doing what they are doing.  Basically, any knowledge you would part with would be excellent, as I have no father figure to turn to.

Confused, is the word.

I know you are not a counselor, however, what advice would you give to your kids etc?

All the best,

Charlie

ANSWER: First of all, you have to pick a field that interests you. If you enjoy what you do, you will be good at it. If you are asking what business to start, you have to pick a field that is new or has little competition. You obviously would not try to start a smartphone company when you have giants who dominate the field. If you have a revolutionary idea, then you can start that and look to be taken over by one of the big boys.

It is all about what you enjoy. The economy is turning toward technology. Learning skills in programming will be the leading industry for the decades ahead. Fields that a labor-intensive will survive. such a construction. However, services, in general, can suffer where computers can replace that sort of employment. Keep in mind that as governments raise taxes, they put the lower levels out of employment. This trend has also tended to hit the very high end as well.

As technology advances, it will always displace sectors of employment. The combustion engine led to tractors and farm equipment so employment fell from 41% of the civil work force in 1900 to just 3% by 1980. Service jobs are being replaced by the internet every day.

May 20 2018

As long as Cryptocurrencies remain Assets – Then they will Survive a Monetary Crisis.


Armstrong Economics Blog/Cryptocurrency

Re-Posted May 20, 2018 by Martin Armstrong

 

QUESTION: You originally said back at the 2015 WEC the first window for the monetary crisis and the collapse of the Euro could arrive by 2018 and then the cycle was extended into 2021 when the Euro finally elected a weekly bullish. So it appears correct that 2018 is the start as the Euro never reached your target but came close and the EU seems to be coming apart at the seams. Gold could never get through your 1362 number either so that too seems to have confirmed a false move extending your cycle into 2021. I understand that cryptocurrencies are really an asset class and not really a currency. Nevertheless, do you think that cryptocurrencies can survive a monetary crisis?

WN

ANSWER: The year 2018 was the start of the Monetary Crisis. We had a shot that this could all come undone in 2018. However, you are correct. All we achieved was a false rally with the Euro stopping just shy of our number and gold struggled admirably but could not get through 1362. There were many other markets also confirming that we are dealing with only the beginning of the crisis here in 2018 rather than the conclusion including the consolidation in the stock market without election any monthly bearish reversals. The monetary reset can arrive during the next window in time come 2021 if we get the dollar at new highs. Then the monetary system will crack. However, this could drag out to the third window which is of course 2032. That appears to be more the shift of the Financial Capital of the World to China at that time.

These are the turning points. The Reversals are the key which confirms or denies the trend. My opinion as to the future is still an opinion. I will say this. As long as cryptocurrencies are an asset class, then they will survive a monetary crisis along with all other assets. Assets are the ONLY thing that survives the collapse of a currency. So be careful of what you wish for.

The new currency issued after the German Hyperinflation, Rentenmark, was backed by real estate. Tangible assets are on the opposite side of whatever the currency is in use. When the stock market rises, the purchasing power of the currency declines. When the stock market crashes, then the purchasing power of the currency rises. They are on OPPOSITE sides. Do you really want a cryptocurrency to be a currency or asset? Most people pitching them are really explaining an alternative asset – not a currency.

Cryptocurrencies are a new asset class. Just look at them from that perspective. You are asking a lot if we are talking about replacing the monetary system with private money. That is just not likely in the cards. Nonetheless, we will probably end up with a new RESERVE currency used among nations. That is still unlikely going to be a world currency used by the people in every country. What we use for currency can be cryptocurrencies of some sort ONLY if we see the political powers crumble and fall.

None of the big IT companies are doing anything with Blockchain. That may change in the future and it may even be replaced by something even better. I draw the line between an asset class and a replacement currency for the dollar with a very thick marker. You would have to completely destroy the system as is for that to even come into play. Is that what people are praying for? All pensions gone, banks destroyed and you think this cryptocurrency will be the only thing to survive? You go that far the ONLY money becomes FOOD! We are still in mid-game and we are not yet close to the end-zone.

For now, cryptocurrencies are not a currency at all, they are a new asset class. Just because they are called “currency” does not make them an actual currency. If they are not widely accepted in payment as legal tender, then they are not yet ready for prime time. When you go online to buy anything, they display the standard payment methods – not BitCoin.

You buy insurance for healthcare, fire, accident, but when it comes to death insurance, they flipped the name to life insurance. They could not sell “Death Insurance” for people would respond that they were not ready to die and it was seen as bad luck to buy death insurance because you may invite such an event.  To sell “Death Insurance” they called it “Life Insurance” and then everyone would buy it and brag how much they had. Calling BitCoin a “currency” does not make it one. It is still an asset class and for it to be a currency, it would have to respond OPPOSITE of assets, not trade with them.

Cryptocurrencies are an ASSET CLASS for trading. Do not marry the trade. Treat them as any stock and you will be fine.

May 20 2018

How Linear Thinking that has blinded most People


Armstrong Economics Blog/Basic Concepts

Re-Posted May 20, 2018 by Martin Armstrong

COMMENT: I think I now see the light. It has been my linear thinking that has blinded me. Gold rallied and failed as was the case with the euro, British pound and so on. Putting them all together is why who said that the euro would rally because they all were indicating a pause in the trend of the dollar. If they all crash together, I can see the dollar rally easier for they are all lined up the same way on your model looking at the reversals. I hope you elaborate on this in Singapore.

SHV

REPLY: Yes you are starting to see the light. You cannot have just one market rallying beyond the reversals without the others. Everything is linked. You have to begin to look at the world as a hedge fund manager to see what others cannot. You did not elect a key Monthly Bullish in any of these markets. That is the key. The same model allows us to see the critical point across the financial spectrum and in that instant we can listen to the markets telling us the future.

Opinion means nothing, including mine. ONLY the model allows us to see everything in a black & white manner without prejudice. This is how we avoid Marrying the Trade!

Yes, at the Singapore WEC I will cover this interlinking process so the future is revealed by the markets, not my opinion.