Tag Archives: Rule #1 Never Marry The Trade

Feb 27 2018

Bonds Coming Under Pressure


Armstrong Economics Blog/Bonds

Re-Posted Feb 27, 2018 by Martin Armstrong

We are beginning to observe institutional investors withdrawing from bonds issued by companies whose credit ratings are in question. Many are also selling off other classes of bonds in anticipation of higher rates. The trend toward investing in high yielding debt mainly by pension funds has begun to reverse albeit gradually.

Because of the low yields, pension funds, in particular, have been forced to run into high-yield bonds accepting a higher risk of default of the debtors. Much of this has been into emerging markets, but also questionable corporate debt.

Many corporates have issued a lot of new debt in recent months trying to lock in the lower yields before everything moves up. With the European Central Bank (ECB) looking to end quantitative easing, the Bank of England looking to raise rates as well as the United States, it does not take a genius to figure out this is not the time to buy bonds.

Feb 27 2018

Should Hospitals be NATIONALIZED?


Armstrong Economics Blog/Disease

Re-Posted Feb 27, 2018 by Martin Armstrong

The symbol of medicine comes from a small town located on the Peloponnese in Greece known as Epidaurus. People would travel there to pray for their health to Asclepius (Greek: Ἀσκληπιός) who was the god of medicine in ancient Greek religion and mythology. Asclepius represented the healing aspect of the medical arts. They would pray to his daughter Hygieia who was the goddess of the community and was the personification of health, cleanliness, and sanitation. The symbol of the staff and the serpent held by Asclepius became the medical symbol we still use today and his daughter’s name lives on as maintaining good hygiene.

Yet something is seriously wrong in medicine today. Hospitals as more interested in making money than helping people. My mother had an issue with her back last year. The hospital released her to rehab. At rehab, the doctor changed all her medicine without asking and created all sorts of problems. When we tried to take her out, they said we could not or else Medicare would not pay.

This time, we rejected rehab and the hospital refused to release her because there was no money in that. The social worker came and tried to push us into that and my sister asks her if she were your mother, would you do that? The social worker did not say anything but shook her head no. Again, the hospital refused to release her claiming they found something else endlessly. When she entered, she could walk. After four weeks of keeping her in bed and on her back, she became weaker and weaker all because they gave her the wrong antibiotic, to begin with, The refused to let her go unless we agreed to something.

Medicine has degenerated into a business. Hospitals are desperate to put private practice out of business and absorb all the money for themselves. The Democrats keep pushing for universal healthcare without addressing the very reasons this entire system is out of control and the cost of healthcare is the fastest rising sector of the economy for the past two decades. My insurance doubled after Obamacare. I had to pay for little children I did not have. Obamacare has been a complete disaster reflecting that the cost of healthcare has continued to rise faster than inflation.

Bernie Sander’s proposals were really absurd. Even Hillary Clinton dismissed Bernie’s push of “Medicare for All” as politically unrealistic. Now the Democrats have silently admitted that Obamacare is a disaster. Privately, they say the experience of trying to make private markets work in ObamaCare and its complete failure has changed their perspective completely realizing that the likelihood of achieving universal coverage is far more difficult.

The Democrats are now backing the Center for American Progress (CAP) plan, which they call Medicare Extra for All. This is now a proposed government-run health insurance for everyone. They will allow people to still have the option of obtaining coverage from an employer.

This new government system is being backed by the three main probably candidates for the 2020 Presidential Election – Senators. Kamala Harris (D-Calif.), Cory Booker (D-N.J.), and Elizabeth Warren (D-Mass.). All three are back this new push Medicare for All bill by Bernie Sanders.

While this all sounds very nice, many doctors refuse to take Medicare patients because of the reduced fees and wait long periods to get paid. The only possible way to address the problem is to nationalize hospitals. All the other nations who have free healthcare as in Britain, overlook the fact that the hospitals are NOT private. As long as hospitals get paid whatever they demand and there are no checks and balances even as we have on Utilities, then any attempt to create universal healthcare will fail.

Either the government NATIONALIZES all hospitals or it treats them as monopolies and they must be regulated and no prices may be increased without proving just cause the same as utilities.

Feb 26 2018

Cryptocurrency – Is There a Total Risk of Loss?


Armstrong Economics Blog/Cryptocurrency

RE-Posted Feb 26, 2018 by Martin Armstrong

Source: Wikipedia

QUESTION: Vitalik Buterin, the co-founder of Ethereum and a co-founder of Bitcoin Magazine, said on Twitter. “Reminder: cryptocurrencies are still a new and hyper-volatile asset class, and could drop to near-zero at any time.” He said: “Don’t put in more money than you can afford to lose.

Do you agree with him? It seems like you do.

LM

ANSWER: Absolutely! None of these currencies will ever make it to be a viable real-world currency. Anyone wh0 thinks that these will be safer than an official currency is not thinking clearly. We are moving toward an electronic currency since today only about 4% of transactions take place in and paper money. Nevertheless, those who think that this circumvents central banks etc and this is the future are really out there in the unrealistic world.

A currency has to be LEGAL TENDER as long as we have governments. This cryptocurrency is not really a currency at all. It is simply a speculative investment. To be a real currency it must be used within society to conduct commerce. We cannot accept it for by the time we would go to convert it, who knows what the value would be. It is far too volatile.

Feb 26 2018

Turkey – Default or War?


Armstrong Economics Blog/Turkey

Re-Posted Feb 26, 2018 by Martin Armstrong

QUESTION: Mr. Armstrong, My father was ______ the banker who commissioned you to do the Turkish lira hedging project in 1983. He passed away as you know. I found this material in his files on Turkey that you apparently published back in 1985. Some articles are saying that Turkey is the epic center of debt. I do not get that sense here and I figured you were really the authority my father always quoted. Can you shed some light on this subject?

Thank you

__

ANSWER: Yes, I remember your father well. You have my sincere condolences. I remember that project for it was very challenging. I had to create a hedging model for the Turkish lira when nobody would make a market. That was one of my earliest synthetic creations.

The Turkish lira continues to move into hyperinflation and it has nothing to do with the fiscal policies of the government. Plain and simple – even its own people do not trust the government nor the currency. Hyperinflation takes place not because of the quantity of money, but because of the collapse in public confidence.

Turkey is BY NO MEANS the epic center of the debt crisis. That is really an absurd statement. Turkey has sold Dollar-denominated foreign debt like all other questionable emerging market countries. That is how they all have sold debt by taking the currency risk on to themselves.

I have been warning that as the US rates rise, this puts pressure on the $9 trillion of emerging market debt issued in dollars. The risk of a major debt crisis starting in Turkey is a very myopic view as we are facing a contagion of a Sovereign Debt Crisis among all emerging markets.

Turkish President Recep Tayyip Erdoğan is an autocratic strongman. The far greater risk is his rising threats against Greece and others to start a war. He has threatened the Kurds with war as well as Greece. He has threatened to extend the Afrin military operation to Manbij.

Yes, it is true that Turkey owes foreign creditors $ 450 billion, of which $ 276 billion is denominated in dollars and euros. The Turkish private sector has about 36% foreign-currency based debt. Because of the decline in the lira, interest rates on domestic loans has risen from 6% to 12%.

The lira has depreciated against the dollar dramatically since August 1970. It was trading at 9 to the dollar back in 1960 according to our database.

1960 — 1 U.S. dollar = 9 lira (TL)
1980 — 1 U.S. dollar = 0.0001 lira (YTL)
1988 — 1 U.S. dollar = 0.0018 lira (YTL)
1995 — 1 U.S. dollar = 0.0611 lira (YTL)
1996 — 1 U.S. dollar = 0.1075 lira (YTL)
2001 — 1 U.S. dollar = 1.4396 lira (YTL)
2004 — 1 U.S. dollar = 1.3421 lira (YTL)
2008 — 1 U.S. dollar = 1.21 lira (YTL)
2009 — 1 U.S. dollar = 1.6 lira (YTL)

2012 — 1 U.S. dollar = 1.81 lira (YTL)
2016 — 1 U.S. dollar = 2.94 lira (YTL)
2017 — 1 U.S. dollar = 3.77 lira (YTL)
2018 — 1 U.S. dollar = 3.75 lira (YTL)

As interest rates rise, Turkey will certainly find itself in trouble. However, to say that Turkey will just default is one thing. The real risk is that Turkey will start a war to maintain its dignity and suspend all debt payments overseas both public and private.

Our models tend to reflect that Turkey will see a complete monetary collapse during the 2021/2022 period.

The people do not trust the Turkish lira. They are hoarding currency of just about any other country but their own.

Feb 25 2018

Perspective is Everything


Armstrong EconomicsBlog/Understanding Cycles

RE-Posted Feb 25, 2018 by Martin Armstrong

We must always remember that one person’s perspective results in them looking at a decline as a buying opportunity and another looks at it as a time to sell. Perspective is everything and there will never be a 100% accord.

Feb 24 2018

Fraudster Tries to Sell $20 trillion of Bitcoin


Armstrong Economics Blog/Cryptocurrency

Re-Posted Feb 24, 2018 by Martin Armstrong

The Japanese cryptocurrency exchange Zaif has come out and admitted that a “system error” allowed customers to “buy” trillions of bitcoin for free. The Japanese newspaper, Asahi Shimbun, reported that Zaif informed users of the error in a post on their website. They explained that users could inadvertently “trade” the yen for virtual currency at an exchange rate of 0 yen per bitcoin.

Asahi Shimbun reported that seven users were able to obtain crypto for “free,” but the exchange managed to cancel all illegally acquired transactions.

Nonetheless, one fraudster who was bought Bitcoin at a zero rate then tried to sell 2,200 trillion yen (about $ 20 trillion) in bitcoin before the problem was solved. Zaif has been under scrutiny for its 530-million-dollar hacking of the Coincheck, the Japanese crypto exchange in January.

Feb 23 2018

Canada Also Adopted the BAIL-IN moving from Socialism to Tyranny


Armstrong Economics Blog/Banking Crisis

Re-Posted Feb 23, 2018 by Martin Armstrong

Yes – Canada has also adopted the BAIL-IN abandoning the socialist BAILOUT so banks can take depositors money legally. This is how we move from Capitalism to Socialism to Tyranny,

 

Feb 23 2018

Britain’s New Law UNEXPLAINED WEALTH ORDERS Targeting the Rich


Armstrong Economics Blog/BRITAIN

Re-Posted Feb 23, 2018 by Martin Armstrong

From January 31st, 2018, the UK authorities have a new power. They can now use new and expansive investigative authority to require both individuals and corporate bodies to provide information as to how they acquired property. Known as Unexplained Wealth Orders (“UWOs”), which is another step toward tyranny all because governments are totally incapable of managing their own finances. They line their own pockets with promises of pensions for government workers and when they need to be paid their attitude is simply that the people are like an apple orchard – just go pick some more apples when you get hungry.

The new UWO imposes obligations to disclose information with respect to property anywhere in the world and can even be served on persons living outside the UK. Britain is taking a step closer toward imposing worldwide taxation for it is now requiring even non-resident to divulge information that historically was not taxable. The legal framework behind UWOs, and their interaction with other criminal and civil statutes, as well as the implications for individuals, institutions, and trustees are serious issues.

What has taken place is rather stark and we can expect that other countries will file Britain’s lead. This new law has turned the entire legal system on its head. We have always believed that we were supposed to be innocent until proven guilty. That has been completely eradicated from the law. The UWOs now presume guilty and it becomes your burden to prove you are innocent.

The Legal background

Sections 1 to 9 of the Criminal Finances Act 2017 (“CFA”) have now amended section 362 of the Proceeds of Crime Act 2002 (“POCA”), This has created a whole new regime of UWOs. As of January 31st, 2018, several of the UK authorities have new powers including the National Crime Agency, Serious Fraud Office, Financial Conduct Authority and HM Revenue & Customs. All of these agencies are now able to require both individuals and corporate bodies to explain how they obtained an interest in a specified property.

The Court may now also engage in a UWO requirement where the following four conditions are satisfied:

Condition 1: There are reasonable grounds to believe that the person holds the asset(s).

Condition 2: There are reasonable grounds to believe that the cumulative value of the asset(s) is greater than £50,000.

Condition 3: There are reasonable grounds for suspecting that the known source of the person’s lawfully obtained income would have been insufficient for the purposes of obtaining the property – for these purposes, the Court will consider any mortgage or other security that it is reasonable to assume was or may have been available and assume that the person obtained the property for market value.

Condition 4: The person falls into one of the following categories –

· The person is a “Politically Exposed Person” (“PEP”) i.e. someone entrusted with prominent public functions by an international organisation or any country other than the United Kingdom or another EEA state;
· The person is a family member, a close associate or a connected person of a PEP;
· There are reasonable grounds for suspecting that the person is, or has been, involved in serious crime (either in the UK or elsewhere) (“a suspected criminal”) – serious crime will include fraud, money laundering, tax evasion, sanctions offences, and bribery and corruption; or
· The person is connected with a suspected criminal.

UWOs must be served in accordance with the usual Civil Procedure Rules. So in other words, we are looking at a whole new type of power. You are now GUILTY and you must prove your INNOCENCE.  I have explained that I was held in prison for “Civil Contempt” not CRIMINAL. The difference is one I was being “coerced” and the other is you are being “punished” so only then are you entitled to a real trial by jury.

Here we have the same pretense. The burden and standard of proof regarding UWOs fall under the civil investigative tools and as such they do not form part of the UK’s criminal law regime. Therefore, as long as it is civil, you can be stripped of all rights and any imprisonment is “coercive” so you are not being punished. Consequently, the UK authorities can engage in full-blown tyranny applying for a UWO they will only need to show “reasonable grounds” for their suspicions. This is a much lighter legal standard than the “realistic prospect of conviction” standard required in order to bring criminal prosecutions what is call in America “probable cause”.

The real danger her is there is no practical limitation on the scope. That means the UK is applying the scope to worldwide turning its citizens and corporations as well as trusts into tax slaves. Laws are normally limited to TERRITORIAL JURISDICTION meaning if you killed someone in Paris, you stand trial in Paris not in Hong Kong or wherever you are a citizen. Hence, here the scope of UWOs can be made in respect of any property, regardless of where in the world it is located converting everyone to a tax slave. This applies to any individual or corporate, whatever their place of residence, business or incorporation (there is no requirement to demonstrate a nexus to the UK). This is really tyranny for the way the code is written, they could bring this to anyone even if not British. UWOs can be made in respect of any property, including property acquired before January 31st, 2018, as well as property held by more than one person meaning partnerships and trusts. Laws have traditionally been regarded as tyranny if they are applied retroactively, known as Ex Post Facto. Here, because this is “civil” in pretense, they are circumventing all the historic safeguards against legal persecutions by writing a law after the fact to make something criminal.

The penalties of a failure to respond to the UWO within the prescribed time without reasonable excuse will give rise to a presumption that the property specified in the UWO is recoverable for the purposes of a civil recovery order (“CRO”) which means the property will be presumed to be ill-gotten gains and seized by the government. You then will have the burden to prove you are innocent and you are presumed to be guilty. If you refuse to answer, they can throw you in prison until you die as they did with me using the contempt of court powers. If you lie in any statement in response to a UWO, now this becomes criminal and punishable by a prison sentence of up to two years and/or a fine.

You will be deemed guilty unless you have “reasonable excuse” to have failed to comply with the terms of the UWO, yet what constitutes a “reasonable excuse” is not actually defined. In the States, a mother was required to pay her son’s student loan even though he had been killed and the court held that was not a “reasonable excuse” so this becomes a pure tyranny.

The UWO also allows in the legislative changes a new Interim Freezing Order (“IFO”). So, the government can freeze your assets until you comply. The High Court may grant a IFO to prohibit a respondent to a UWO (and any other person with an interest in the property) from dealing with the property specified in the UWO. If the court issues an IFO, the agency bringing the action must determine whether or not to instigate proceedings within 60 days. If it fails to do so, the IFO will expire, however, the relevant authority is still free to determine what proceedings it may take against the respondent “at any time” in the future without any statute of limitations – another tyranny under the law.

magna_carta_signing

The DANGER in this legislation is simple. It is pure and unadulterated tyranny for it removes ALL protections of law and shreds the English Bill of Rights no less the Magna Carta.  Then King John also derived income from fines, court fees, and the sale of charters and other privileges. Fines were called “amercements” and at the time, it was said that there was hardly an Englishman of substance who had not been amerced at least once a year. Magna Carta introduced the right to trial by jury, where the people decide if someone is guilty and what the fine should be. This drastically curtailed the king’s abuse of the legal system at that time. King John was very unpopular, for he had intensified his efforts to maximize all possible sources of income to regain Normandy. Contemporary commentators describe him as “Avaricious, miserly, extortionate and money minded.”

The entire right to trial by jury was to stop the king and his corrupt courts from fining people to raise money. This law has shredded the Magna Carta and has restored all the former tyranny of the King once again to raise money. In 2015, that marked the 800th year following the signing of Magna Carta.

Feb 22 2018

The Coming Banking Crisis & The End of Bailouts


Armstrong Economics Blog/Banking Crisis

Re-Posted Feb 21, 2018 by Martin Armstrong

Behind the curtain, there is a growing concern about a serious banking crisis beginning once again in Europe. Many governments are talking about the crisis behind-the-curtain and we are now beginning to see steps that are being taken to end the TO-BIG-TO-FAIL policies that dominated the 2007-2009 Crash.

The United States is looking at a new radical bank rescue policy where the government is proposing to revise a central pillar of the idea of bailing out banks creating new financial regulation with a new Chapter 14 bankruptcy procedure. They are looking at eliminating the risk of taxpayers’ costs to bail out banks. They are investigating the means for an orderly resolution so that the taxpayers do not have to bail out the banks. This development is causing some concern among the high-flying Wall Street banks, for if that is the case, then another crisis as 2007-2009 will result in even Goldman Sachs closing. The proposal looks to shift the burden to the shareholders and creditors of that bank. This means depositors who are thus creditors.

In Australia, we see similar legislation being proposed. This is the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017. This also authorizes bail-ins bringing an end to the bailout.

 

Feb 22 2018

Rising Interest Rates


Armstrong Economics Blog/Interest Rates

Re-Posted Feb 22, 2018 by Martin Armstrong

While the stock market crashed as the pundit looked in their bag to try to come up with an excuse, they blamed rising inflation and interest rates. Yet, nobody is really paying attention to the underlying trend. The cost of carrying debt has been rising gradually and there are noticeable measurable impacts that the pundits are of course oblivious to since they have to explain every day’s movements and not the real trend.

Already, the 10-year rate is piercing above the 2.6% area. There is an impact on the currency once people begin to comprehend the trend. The 10-year German bond rate is 0.70%, and this has been maintained by the ECB buying 40% of European government debt to no avail for nearly 10 years.

The real crisis comes when they realize that the ECB will not be there to buy government debt. The bidders will demand a higher yield so rates will rise very rapidly.

Meanwhile, the Fed will pursue higher interest rates as they need to be normalized to help pensions funds that are rapidly collapsing. This idea of a lower dollar will raise the price of imports and with tariffs, inflation in consumer products will rise.

Mueller is still not ending his investigation. Why should he? He would have to go get a real job in the private sector. Keep the investigation alive to pay the light bills. He shows no sign of embracing unemployment. His pretend indictment is dancing between raindrops, indicting people in Russia knowingly there will never be a trial. We cannot count him out yet as a factor that will undermine the economic confidence.

So we stand at the threshold of rising rates that will then feed into the market and create a bid for the dollar it appears after March.