COMMENT: Marty; You have beaten Soros. Don’t know if you have seen this, but they now report “George Soros finishes his crash bets against the US stock market. The investor legend seems to have lost its way and acts with little fortune. Now he has to reveal himself.”

PC

REPLY: Interesting. Soros became famous with the bet against the pound. But let’s make this very clear. That was a “riskless” trade betting against the break of a peg. If you are wrong, the peg holds and you get your money back. If you are right, you make a fortune. Everyone was betting against the pound. That was the coup against Margaret Thatcher who really wanted to take Britain into the euro. They forced the pound into the Exchange Rate Mechanism (ERM)  and placed it at a high rate became Europeans still think the higher the currency the stronger the economy, which results in deflation. That was an easy trade. It is no different from going to a casino and betting or red or black and when you lose, they give your money back until you win.

Soros is old school. He still believes in the Quantity Theory of Money and has been a punter short-term, but when it comes to long-term strategy, sorry, I do not believe he actually grasps the entire picture.

Anyone who has been bearish on the US stock market since 2010 constantly calling every new high the final high, is attempting to forecast with personal opinion. That will not survive the type of move we have been in since the 2009 low. Even Barron’s laughed at out forecast that the Dow would make new highs back in June 2011. All of these people (MAJORITY) totally misconstrue even how the economy really functions because they are still influenced by the theories that were indoctrinated into in school after the 1930s. They obviously lacked the curiosity to challenge what was being taught and look with open eyes and mind and simply ask – Did it work?

The Royal Bank of Canada (RPC) has been added to the list of the top 30 banks posing the greatest risk. The top US bank is JP Morgan which is now the only bank required to hold an extra 2.5% of common equity after its US peer Citigroup moved down a tier required to hold 2% extra.

All of this is very nice, but also misleading. The Stress Tests by no means are realistic. It is assuming a single failure and certainly does not even take into consideration a CONTAGION, which nobody understands and there have been no models that will even simulate such events outside of what we have specialized in. The CONTAGION is what created the Great Depression and Herbert Hoover in his memoirs explain how capital acted “like a loose cannon on the deck of the world in a tempest-tossed ers.” Even the CONTAGION that hit in 2010 when Greece petitioned the IMF for a loan and traders immediately looked to see which country would be next, people do not understand that once blood is drawn, capital responds rapidly in the entire spectrum.

Even during the Long-Term Capital Management debacle in 1998, the crisis was in Russia. That sets off a need for liquidity and then all other markets are liquidated trying to raise cash. This is how a CONTAGION unfolds overpowering the fundamental analysis entirely.

Economics to this day still does not comprehend the CONTAGION that hit in 1931. It is the CONTAGION that presents the most significant clear and present danger to society as a whole. This is what reshapes countries and politics. We saw in 1933 Hitler, Mao, and FDR all come to power.

The high-end market in Connecticut is starting to decline. The hedge fund manager Stanley Druckenmiller bought his estate in 2004 for $23 million. He had it on the market for $31.5 million. The best offer he got was $25 million. He took the money and ran. Smart move! With a real estate tax of about $154,000 annually, looks like a break-even deal after 13 years.

The high-end real estate boom is now turning sour. We are looking at property values declining in London, Australia, New Zealand, Hong Kong, New York, and even Miami. The shift will now turn toward MOVABLE assets as capital departs from the fixed asset class.

The Canadian Finance Minister Bill Morneau is refusing to say whether he sold millions of dollars worth of company stock just days before introducing tax changes that may have caused share prices to drop. This type of insider-trading is what politicians always manage to get away with no matter what the country. This dispute is rather interesting. Here the opposition is accusing him of selling the stock because he knew that raising taxes would cause the stock to drop. This is showing that the politicians were well aware of raising taxes would be bearish for the Canadian economy. That’s just OK as long as they get theirs.

Morneau has admitted selling the shares. What he is disputing is why he sold them. “I’m hearing that shares that I sold after I got into office, around the time I got into office, was somehow something inappropriate.

COMMENT: Mr. Armstrong; Your warning about the European Banks has come to a head today. Société Générale has announced it is closing 300 branches and firing 3450 staff. Everything you have been saying is proving to be correct when nobody else seems to even discuss the matter.

I hope you come back to Paris. A conference here would be very well attended.

PGS

REPLY: Yes, the French bank Société Générale announced a massive staff reduction jobs. The chairman of the board Frederic Oudea, said that the entire banking industry in Europe is facing serious cuts and the withdrawal of Société Générale is preparing for turbulent times that await us beginning in 2018. It is closing about 15% of its branches. It is also selling off individual business units. He was quoted by the London Financial Times:

“I am convinced that the European banking sector is going through a kind of new industrial revolution that is likely to extend over the next decade.”

What we are being called in about by major banks is far more than simply consulting/forecasting. We are dealing with LEGAL issues that will be unfolding with the coming monetary crisis. More and more major concerns need us to address the restructuring of the monetary system they can see is coming.

The tide is turning and it is a hard turn. There is now appearing a German documentary making its debut concerning the mysterious death David Rossi back on March 6th, 2013, who was the communications chief of the Monte dei Paschi di Siena bank. He fell out of his office window and died. His death has never been truly explained whether it was a suicide or a murder. This film exposes his death within the context of the tense situation within the bank and financial system in Europe.

Politicians have been finagling banks for a long time trying to hide the truth about the failed Euro. The filmmakers were interviewed by Deutsche Wirtschafts Nachrichten in which they report that the 2009 takeover of Banca Antonveneta by Monte dei Paschi at an insane price was under the supervision of the Banca d’Italia. The state they have a document with the signature of Mario Draghi at the time approving the deal at an extremely high price. The argument is basically that the absorption of  Banca Antonveneta was similar to the bailout of a failed bank which started the 1931 Banking Crisis.

What you must understand is that to sustain the Euro, which is all about keeping the power in Brussels, there have been massive transfers from the north to the south of Europe. This includes Greece, Italy, and Spain. The entire crisis has been the conversions of their previous national debts to Euro. Then the Euro doubled in values. Southern Europe has paid a vast price that has decimated their economies and driven the unemployment of the youth to as high as 60% in regions. This is the LOST GENERATION all to support the power base in Brussels.

The EU and the ECB have completely failed. This is the entire issue. The bailouts of Southern Europe have created a permanent Euro rescue scheme that has completely failed to help anyone. Greece is the poster-child of the Euro. It is impossible for Greece to ever repay the debts. Italy is still in crisis and Spain is on the verge of watching its budget blow-up starting in 2018.

Europe has entered a phase where it is no longer about trying to create jobs and a sustainable economic growth. This is now all about holding on to power in Brussels. Nobody will address the issues in advance. Thus, we are being called in by banks who see the handwriting on the wall and want to survive the chaos. This is more of a LEGAL restructuring than just consulting.