QUESTION: Powell is from the Carlyle Group which people say you advised. Do you know Powell? What do you think of his agenda? Will you be advising him?

PD

ANSWER: No, I never met Jerome Powell. Our contacts with the Carlyle Group I am not at liberty to confirm or deny with regard to any client. I can say I have never been called to a board meeting at the Carlyle Group and keep in mind it was formed only in 1987. It is more of a politically connected private equity fund. If Powell and I met that may have been at some political event in Washington but I was always introduced to countless people at such events. So if we did shake hands, neither of us probably remembers. I remember meeting Paul Volcker at such an event, but he towers over everyone at 6’7″. You can’t miss him.

Now to move beyond the rumors, the Senate voted 84-13 to approve Jerome Powell who is a 64-year-old lawyer to make him the Chair of the Fed for the next four years beginning early next month. What is significant here is the vote was better than Yellen received. She was appointed with a vote of 56-26 in 2013, and it was a 70-30 vote when Ben Bernanke was named to a second term. So Powell has captured the most support recently. As stipulated in the Banking Act of 1935, the Chairman and Vice Chairman of the Board are chosen by the President from among the sitting Governors and must be confirmed by the Senate. So there was no possibility of an outsider coming in. William Martin was the longest serving chair, holding the position from 1951 to 1970.

According to the U.S. Senate Historical Office,  the first Senate confirmation vote on a Fed nominee was back in 1978 for G. William Miller which was by unanimous consent. The 1983 confirmation vote on Paul Volcker was 84-16, when he had the most “no” votes ever recorded against a Fed chairman up to that time.

1. G. William Miller  1978 unanimous consent
2. Paul C. Volcker 1979 98-0
3. Paul C. Volcker  1983 84-16
4. Alan Greenspan 1987 91-2
5. Alan Greenspan 1992 unanimous consent
6. Alan Greenspan 1996 91-7
7. Alan Greenspan 2000 89-4
8. Alan Greenspan  2004 voice vote
9. Ben Bernanke 2006 voice vote
10. Ben Bernanke 2010 70-30
11. Janet Yellen 2014 56-26
12. Jerome Powell 2018 84-13

Powell has been regarded as conservative and central in his economic beliefs. Powell will move the Fed down a steady course toward gradually higher interest rates and a smaller balance sheet. This was already set in motion by Yellen. My sources do express that there has been internal questioning at the Fed whether Trump’s tax cuts will impact inflation given they do expect this to be more of an economic stimulus than any central bank to date has been able to create with Quantitative easing.

The real issue is how far will Powell go to accommodate the Trump administration to roll back some post-crisis financial regulations. Keep in mind that Goldman Sachs has three strategic people now in place controlling the agenda.

The potential for financial deregulation advocated by the Goldman Sachs controlled Trump administration dominated the opposition to Powell. While Powell was a former executive at the Carlyle Group, his credentials for a Fed chair position are rooted in his understanding of markets despite being a lawyer by training. Those that say Powell is not qualified because he was not an economist by training are off the mark. A trained economist deals in theory, not reality. Just look at Larry Summers became a professor of economics at Harvard University in 1983. He is the father of negative interest rates and supported the repeal of Glass Stegall. Summers was directly responsible for the 2007-2009 crash for the whole mortgage-backed securities scam would not have been possible without the repeal of Glass Steagall. Summers is also going to be blamed for the Pension Crisis thanks to his negative interest rate theory which after 10 years has left Europe still in deflation. So thank God Powell is not an economist.

Senator Elizabeth Warren, the extreme leftist crazy person who does not understand what she thinks she does, voted against Powell saying: “We need a Fed chair who can stand up to Wall Street … That person is not Governor Powell.” Of course, California’s Democratic Senator Dianne Feinstein also joined the no vote. That should be no surprise.

The 12 votes against Powell included both Democrats and some conservative Republicans. While Powell was largely uncontroversial pick given his monetary policy views were closely aligned with Yellen‘s, his service on the Fed’s board since 2012 has shown he is supportive of the consensus forged by Yellen for gradual interest rate increases and reducing the balance sheet holding of debt.

Powell has never dissented on a monetary policy decision during his nearly six years at the Fed. Nevertheless, the recently released transcripts of the Fed’s deliberations during 2012 revealed that he was not comfortable at the time with the Fed’s massive bond-buying program. Indeed, even in the USA, interest rates remain very low closer to a 5,000-year low in the context of a 4.1% unemployment rate, with the inflation-adjusted basis of the economy as it is still lingering around zero proving the whole QE really failed and Summer’s negative rates have merely set the stage for the next crisis.

The Fed raised interest rates three times last year and they have implied that they will probably raise them three times more this year. That may be too slow, but we will see. The government debts will explode and that will be the next crisis.

The three major distinctions in following what we do boils down to Multidimensional analysis merged with TIME and then PRICE. The Arrays give us a good sense of TIME where thing come into the window of possibility. Understanding that we are dealing with TURNING POINTS and not specific events is critical. For example, the three major turning points we had in the Dow were November, January, and March. Under normal conditions, each should produce the opposite event of the previous. However, in VERTICAL MARKETS, one of the characteristics is the process of a cycle inversion whereby you exceed the November high and then you should rally into the next one instead of decline as just took place in the Dow.

Our price objectives are fairly easy to understand such as the 25000-28000 level on the Dow given back in 2014. They become more important when the price reaches such a level ONLY when the TIME is correct.

This brings us to the Multidimensional analysis. Virtually every model out there is a flat model. They attempt to forecast the future using typical a daily level of activity to generate buys and sells. The problem this introduces is the fact that they cannot forecast the big events because they cannot see them coming. To do that, we need a database and we need levels of TIME.

Here is the British pound back to the birth of the dollar. How can you even forecast BREXIT without a clear picture of the historical trend?

Around the globe, we are approaching a monumental awakening as municipal governments see their borrowing costs rise dramatically with rising interest rates. This is unfolding in Europe, the USA, Canada, South America, Middle East, and Asia. In fact, S&P is predicting the first-ever default by a Chinese local government financing vehicle this year as LGFV borrowing costs rise onshore. Forecasters never predict the change in trend and also see next year as pretty much the same as the last. Yet we have been at a 5,000 year low in interest rates and that speaks volumes of risks ahead.

Across the board, our reversal system in interest rates is poised with sharp gaps. This is warning that an uptick in rates will lead to an explosive rally in overall rates and then we will see the costs of funding explode. So buckle up – we are headed to the other side of the storm. We have been in the eye where it is calm but now we are preparing to come out and rates will move upward faster than before.

Anyone who has floating rate mortgages may now want to look at locking it in at a fixed rate before rates rise too fast.

COMMENT: OK Mr. Armstrong. Looks like the government was right. You come out and said the Dow reached a turning point and it crashes. You posted: “In the US Share Market, this is now a turning point we have reached. I have warned for months that exceeding the November high would lead to a January high.” You are too influential.

REPLY: Or perhaps our models are correct. This nonsense that people can move the market is absurd. Governments have spent trillions and failed. Why is it I am the only person who can move the world? Does a tree make a sound when it falls in a forest even when nobody is there to listen? They tried to silence me yet it still did not matter. Here is the internal 37.33-week cycle within the Economic Confidence Model. The target date 2007.86 was November 9th/10th. It was November 9th, 2007 that all four Daily Bearish Reversals were elected from the major high. Why do things take place precisely to the day even when I do not announce them?

So far, we have elected the first Daily Bearish Reversal. There are three more to go before we can say we are headed into a March low. Time will tell. It should be choppy for the next couple of weeks. When you gap lower like this, you normally will bounce and eventually fill that gap. So caution is always advisable.

The first high was the precise day that the Real Estate market peaked in 2007. They called that Armstrong’s Revenge on the trading floor that day since it was again to the day. That was precisely to the day of which the same calculation produced the very day of the low during the 1987 Crash. Markets peak and bottom in sync with our models around the world even when I do not mention them. Even Greece petitioned the IMF for help precisely on the turning point. Then on the very day, Russia entered Syria on 2015.75. These events are all the same model and the calculations are cast in stone.

Sorry – there is just something beyond the surface that warrants our attention. These dates are not random. They cannot be fudged. You can blame me, but they have existed before my time and will continue beyond my lifetime.

The Commodity Futures Trading Commission announced that it has brought a case in conjunction with the Department of Justice and Federal Bureau of Investigation’s Criminal Investigative Division, charging criminal and civil enforcement actions against three banks and six individuals involved in commodities fraud and spoofing schemes, which they define as bidding or offering with the intent to cancel before execution. The problem with now claiming to spoof is a crime, they are dangerously destroying how markets have traded from the beginning and this is only reducing the liquidity. That means in the years ahead, during a crisis, there will be fewer and fewer big players left in the markets and that will become dangerous. The government tries to spoof itself during a panic and always comes out and says the market is fundamentally sound to try to stop a panic. They simply write a rule and it becomes a crime that is contrary to a Democratic form of government. Any crime should ONLY be authored by Congress – not agencies.

We use to call that “flash” bids or offers. It was simply a way of trading that was often mandatory. Of course, there was the risk that you could be tagged. I was short one time in gold about 5,000 lots and it was a turning point so I wanted to cover and flip to a long position. There was a large local trader in the pit. His style was to do these flash offers or bids to try to push the market to the next level. I instructed my guy on the floor to just wait for him and as soon as he would flash offer a thousand lots, buy them. He flashed 1,000 and I said done. He then flashed 1,000 again and I said done. He tried a third time 1,000 and I said done. Gold then rallied. It is one thing to bid or offer and you are not willing to take that position. I seriously doubt that anyone in their right mind would do that. If you are going to flash bids or offers, you can also be tagged and you have to be good for the trade.

The CFTC is totally destroying the market and liquidity. They filed charges and settled charges against Deutsche Bank AG (DB AG) and Deutsche Bank Securities Inc. (DBSI) (collectively, DB), requiring DB to pay a $30 million civil monetary penalty and to undertake remedial relief. The trades were between February 2008 and continuing through at least September 2014, in precious metals. They call this a scheme to manipulate the price of precious metals futures contracts by utilizing a variety of manual spoofing techniques with respect to precious metals futures contracts traded on COMEX, and by trading in a manner to trigger customer stop-loss orders. This is how the markets have traded since inception.

The CFTC also charged and settled against UBS AG(UBS), requiring UBS to pay a $15 million civil monetary penalty and to undertake remedial relief.  Again, this was concerning precious metals futures contracts traded on COMEX.

The third charge was an Order filing and settling charges against HSBC Securities (USA) Inc. (HSBC) for engaging in numerous acts of spoofing with respect to certain futures products in gold and other precious metals traded on COMEX. HSBC was ordered to pay a civil monetary penalty of $1.6 million.

The CFTC Division of Enforcement Director James McDonald said:

“Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology.  The technological developments that enabled electronic and algorithmic trading have created new opportunities in our markets.  At the CFTC, we are committed to facilitating these market-enhancing developments.  But at the same time, we recognize that these new developments also present new opportunities for bad actors.  We are equally committed to identifying and punishing these bad actors.  The CFTC’s enforcement program is built around the twin goals of holding wrongdoers accountable and deterring future misconduct.  We believe these goals are best achieved when we hold accountable not just companies, but also the individuals involved.  As these cases show, we will work hard to identify and prosecute the individual traders who engage in spoofing, but we will also seek to find and hold accountable those who teach others how to spoof, who build the tools designed to spoof, or who otherwise aid and abet the wrongdoing.  These cases should send a strong signal that we at the CFTC are committed to identifying individuals responsible for unlawful activity and holding them accountable.”