Tag Archives: Understanding cycles

Apr 21 2023

March Housing Sales Drop 2.4%, Year Over Year Decline of 22% From March 2022


Posted originally on the CTH on April 20, 2023 | Sundance

As higher interest rates continue to put pressure on borrowers, the ability of the average person to afford a mortgage diminishes.  Higher mortgage rates lead to downward pressure on residential home values as fewer borrowers can afford higher payments.  Simultaneously, commercial real estate is dropping in value as vacancies continue increasing.

Put both of these issues together and already tenuous banks holding mortgage bonds as assets can become more unstable.

This dynamic creates the continual tremors in the background of an economy already suffering from high inflation and low consumer purchasing of durable goods.

A perfect storm starts to realize.

(Wall Street Journal) U.S. existing-home sales decreased 2.4% in March from the prior month to a seasonally adjusted annual rate of 4.44 million, the National Association of Realtors said Thursday. March sales fell 22% from a year earlier.

March marked the 13th time in the previous 14 months that sales have slowed. The housing market had a surprisingly strong February, when sales rose a revised 13.75% from the previous month. But after mortgage rates ticked higher, March sales resumed the extended period of declines.

The housing market’s slowdown is now starting to weigh on prices, which have fallen on an annual basis for two consecutive months for the first time in 11 years. The national median existing-home price decline of 0.9% in March from a year earlier to $375,700 was the biggest year-over-year price drop since January 2012, NAR said.

Median prices, which aren’t seasonally adjusted, were down 9.2% from a record $413,800 in June. Home prices in the western half of the U.S. experienced some of the biggest gains for many years but are now falling the fastest.

[…] Housing starts, a measure of U.S. home-building, fell 0.8% in March from February, the Commerce Department said this week. Residential permits, which can be a bellwether for future home construction, dropped 8.8%.

The housing market slowdown shows one of the main ways that the Fed’s aggressive interest-rate increases are rippling through the economy. Housing is one of the most rate-sensitive economic sectors, and high housing costs have been a big contributor to inflation. (read more)

Before looking at today’s graph showing median existing home values, remember me saying this in 2021?:

“I said in June, at a macro level home prices had reached their peak (last two weeks of May, first two weeks of June was apex).  Obviously, there are some geographic home value increases still happening as COVID related regional issues and work opportunities are shifting populations.  There is also a lag and ripple effect that takes time to work through the economy.  The macro-apex will not be visible until next year.”

When I said that in 2021, people said I was wrong.   Well, with hindsight now visible within the data as it is reflected, look at the result:

May and June 2021 was the peak of year-over-year percent of change in median home value increases.

So, what was going on?

As CTH outlined in 2022:  If you look closely at the timing (keep in mind the data reporting lag) what you will notice is that financial institutions began a big surge in purchasing hard assets, specifically real estate, as soon as Joe Biden took office (Jan ’21), and the economic policy became evident.   Intangible financial instruments became an immediate risk as the professional financial control groups recognized energy policy would drive inflation (supply side) and devalued money would fuel it (demand side).

As an offset to predictable inflationary policy (the insiders’ game), institutional money (Blackrock, Vanguard etc) was moved into hard assets with tangible value.

This shift in asset allocation, institutional sales, helped fuel a false surge in home prices and their valuations.  CTH was writing about this in 2021, and sounding alarms as it took place.  25% of all real estate purchases were being made by institutional investors.

We The People got screwed. 

The dynamic was predictable.  The Biden administration economic policy, energy policy and monetary policy, was going to cause massive inflation.  CTH was shouting about it in early 2021 and warning everyone to prepare for waves of price increases that would naturally surface first on high-turn consumable goods, and then embed into longer-term durable goods.

Despite claims to the contrary, this 2021 inflationary explosion had nothing to do with the pandemic or supply chain shortages.  It is entirely self-created by western governmental policy; the collective ‘Build Back Better’ agenda.  You can see now from the background moves within the financial sectors, they too knew the reality and their money shifts reflected that despite their ‘transitory’ pretending they were mitigating their own exposure.

We the People were yet again going to be victims of specifically intended monetary, regulatory, energy and economic policy.

The investment class rulers of the WEF assembly shifted assets to avoid the pain that we would feel.   We “would own nothing and be happy,” and their shifts would position them to own everything and be in control.

Overall govt spending and regulatory controls drove inflation for these past two years.  The ‘demand side’ was blamed, despite the lack of demand. I will be proven right when history is concluded with this.  Interest rates were raised by central banks in an effort to support the policies that are driving ‘supply side’ inflation, not demand side.

Energy policy was/is crushing the consumer by driving up the cost of all goods and services.  To support the overall goal of changing global energy resource and development (a false and controlled global operation), central banks raised interest rates.  Various western economies, including our own, have been pushed deeper into a state of contraction by central banks crushing consumer demand, and eliminating investment via increased borrowing costs.

In short, the goal was/is to lower energy consumption by shrinking the economic activity.  This, according to the BBB plan, was needed at the same time as energy development was reduced.  These economic outcomes are not organic, they are all being controlled by collective western government agreement.

Within this control dynamic, there was always going to be a point where the reaction of the people to their economic reality means the financial control elements need to shift direction.  They will always maximize profit and minimized risk, while knowing what the larger objective remains.

Just like every other durable good, housing demand contracts as prices and costs become unaffordable.  The loss of equity within your home is damaging to your own value or ability to borrow against it.

From the perspective of an institutional asset, that same equity drop is an investment loss.  However, the investment loss is not materialized until the sale of the lower valued asset is completed.  Retaining declining real estate on investment books, creates an artificially high appearance of the investment result; unless and until the real estate is sold at a diminished value.

As mortgage rates rise, just as a consumer would pull back from the housing market, so too will institutional investment groups now control the slow dumping of the asset to remove the equity they pumped into it.  Much of the investment housing will be retained as rental housing, with the monthly rents being part of the returns on the investments.    However, as this dynamic unfolds further investment purchases of houses stop, because the asset overall is declining in value.  This halt of investment activity also worsens a steeper drop in home values.

Notice this line within today’s WSJ article: “The housing market had a surprisingly strong February, when sales rose a revised 13.75% from the previous month.”

What happened in February?  The BIG CLUB [Blackrock, Vanguard, Citadel, etc.] moved liquid assets out of banks into hard assets (real estate), to avoid a predictable banking issue which surfaced a month later in March.  They knew what was going to happen in banking, they moved their own assets to avoid it.

Apr 18 2023

Why Does the ECM Work On So Many Things?


Armstrong Economics Blog/Uncategorized Re-Posted Apr 17, 2023 by Martin Armstrong

COMMENT #1: Hi Martin, corn also turned nicely on the ECM:

JB

COMMENT #2: Hello Marty, I just want to point out that the Japanese yen broke really hard on the 10th. Not sure if this will prove to be a precursor of what is to come.

Thanks from Tokyo, your old home ground.

AS

COMMENT #3: Well the ECM also marked the reversal in trend in the 30-year bond. It peaked at 134 and fell to 130 by the end of the week. That was just remarkable.

Colin

COMMENT #4: Martin; is this chart real that people are sending around claiming it was Benner’s work?

Mat

ANSWER: As far as this chart of Brenner’s Cycle being real, the answer is no Someone has made it up and signed his name. They have at least extended his cycle correctly. The last time someone tried that they skewed the cycle to make it look like it forecast the Depression 1932 low.

When the WSJ published it, it showed 1932 instead of 1931. Brenner did not extend this out in this manner. What is important to understand is that Brenner was a farmer and farmers understand the cycles in nature. Economists and governments pretend they can smooth out the cycle and eliminate the booms and busts.

The business cycle always wins as both former chairmen of the Federal Reserve conceded – Arthur Burns and Paul Volcker.

Back during the 19th century when Brenner was observing the business cycle, it was still based on commodities. Kondratieff took the same data. I believe the reason WHY the Economic Confidence Model has been so accurate is that it was based on a list of Panics – not one sector of the economy. Therefore, the ECM incorporates weather as Brenner and Kondratieff did by using the commodity sector. Yet just that the ECM was derived from financial panics, it was not based on any one specific type so it strangely seems to have incorporated the whole gambit.

Furthermore, all previous cyclical analysis was based on just a single market like stocks. They have failed because they could not account for the external influence of a contagion. The fact that this list began with the Turks’ siege of Vienna, means that the list was also influenced by war and from an international perspective.

This is a fascinating subject that I will explore in far more detail in my coming book.

Apr 17 2023

Sources


Armstrong Economics Blog/Opinion Re-Posted Apr 16, 2023 by Martin Armstrong

QUESTION: Mr. Armstrong, You are renowned for your sources. You said the IMF was planning to replace the dollar with its own international digital currency. You targeted Ukraine a year before anyone heard of the country. You said Ukraine was losing the war and they had lost 100,000 troops when people said that was Russian propaganda. That turned out to be classified as Ukrainian information. These Pentagon papers confirm everything you have said a year ago. Israel was reluctant to send anything to Ukraine when everyone said Zelensky was Jewish. The list goes on and on.

My question is, why do you have information from around the world before anyone else?

HP

ANSWER: That is hard to say. I think what has emerged over the decades is that people are sharing information from all over to get a true picture of what is honestly happening. People come to me because I put out the truth. Back when they were forming the Euro, it has come out that the Bundesbank was against it. They were providing all the notes and discussions going on because they also know we have the largest institutional audience of anyone. It is never my opinion. Everyone has opinions and that means nothing. We are well read because it is not my personal opinion. I really cannot address this subject any more than that.

Apr 15 2023

Gold & the Dow Rally Together? OMG


Armstrong Economics Blog/Dow Jones Re-Posted Apr 14, 2023 by Martin Armstrong

COMMENT: Well, the goldbugs are wrong again. This claim that the stock market must crash and only gold will rise is as you say sophistry. It looks like gold and the Dow are rallying together. I can see how they are just promoting a cult-like agenda.

Thanks for being objective

MH

REPLY: We became the biggest institutional adviser because there was never an agenda. Everything goes up, and everything comes down. There is an old saying among actual traders – NEVER marry the trade. I buy gold personally. I just bought a hoard of $20 gold pieces all uncirculated and all dated 1924. I do not regard it as a trade, just a stash for the long-term. It will go up and go down. Do not pretend that something only goes in one direction.

Here is a chart from Socrates on the Quarterly Level of the Dow/Gold Ratio. Anyone who only forecasts a single direction is NOT an analyst – they are a promoter like a used car salesman. No matter what we look at, there is a time to buy and a time to sell. EVERY market functions that was.

Here is an advertisement from April 9th, 1930 pitching Bank Stocks. Brokers were telling people to buy all the way down, average in, but it took 26 years for the Dow to reach the 1929 high again. Anyone selling any product will ALWAYS tell you to BUY. That is their business. It is up to you to come to terms with how ALL markets really move. Hence, there is always a TIME TO BUY just as there is a TIME TO SELL.

Apr 4 2023

The 6th Wave – Do We Ever Learn?


Armstrong Economics Blog/ECM Re-Posted Apr 4, 2023 by Martin Armstrong

QUESTION:
Hi,

Have you come across a period in history that at the end of the sixth wave, after the political system dies, during the next six waves, human mankind learned from its past errors and corrected it?

ANSWER: Actually, the answer is NO. The fall of the Minoan Civilization brought in a dark age with the invasion of the Sea Peoples from the North who were driven south by climate and conquered all the civilizations during the Bronze Age except for Egypt. Reliefs show the Egyptians in heated battles against the Sea Peoples.

Everything in this universe is fractal. It is a repetitive pattern of self-referral. You have children and they are a blend of both parents’ DNA – self-referral. Thus, what makes 2032 extremely important, is that it is the Sixth Wave since the last upheaval of the overthrow of the Monarchy.

The Roman Empire peaked with the reign of Marcus Aurelius (161-180AD). We know from Chinese documents that he had even sent an ambassador to China which was the first contact.

However, 6 of the 51.6 waves (which are 6 of the 8.6-year) in turn build in a fractal manner into a 309.6-year wave and then we have 6 waves of that which form 1857.6.  There are then 6 waves of that building into 11,145.6-year waves. About 11,600 years ago (9,600 BC)  was an abrupt period of global warming which accelerated the glacial retreat that was the beginning of the Holocene geological epoch. That is when we begin to find the domestication of sheep and evidence of settlements such as Jericho dating back to 9,600 BC.  That wave was the Mesolithic era which refers to the final period of hunter-gatherer cultures in Europe and Western Asia. This was between the end of the Last Glacial Maximum and the Neolithic Revolution. This is also why in back-testing the ECM, it became very clear that it incorporates nature and the swings back and forth on climate change.

There is the period of the Megalithic Monuments in Europe. We do not know why these Neolithic and Copper Age creators were motivated to expend such energy in their creation. Some of these structures appear to have been graves. The sheer weight of the stones shows a very determined culture whose motives are lost to the haze of the period we refer to as prehistory.

Recent studies have implied that these megalithic monuments across Europe originated in northwest France, and the practice of building them spread along the continent’s coastlines in several migratory waves. They first appeared during the second half of the fifth millennium BC. That was about 4300 years before the invention of coinage.

The oldest known city dates back to 6700BC, Catal Huyuk, located in modern Turkey. I have studied the economy of this period. It has all the trappings of modern-day civilization. There are houses with murals on the walls. This confirmed that there was an artist trade. There were a lot of female deities found so there was some artistic trade that carved these out of marble as well as clay. There was no indication of money being used so it was most likely a barter-based society with some people making tools and others growing crops.

Food was money in the shape of olives, dates, seeds, or animals and we also know that financing, lending for interest, dates back to c. 5000 BC, if not even earlier. The fall of Rome prompted the return of the Sin of Usury – denial of interest. Much of the blame for the fall of Rome was attributed to corruption of that sort. Capitalism is born with the Protestant Reformation which allowed Christians to earn money from interest. Martin Luther was funded by Christians who wanted to get into the banking field which had been restricted to the Jews.

What we do see at these events is typically it is a knee-jerk reaction to whatever was in place, the reaction is in the opposite direction. We have gone through a revolution against Monarchy. That led to Republicanism. This time perhaps we move toward Democracy. We should have the right to vote  – do we go to war – Yes or No! Some Neocons should not make that decision and then we are imprisoned and called a traitor if you do not die on some battlefield that they decide should take place. This is not any different than Monarchy where King Louis XIV (1643-1715) lamented on his deathbed – “I have been too fond of war.” These people play a sport with the common people as the pawns on the chessboard.

Mar 26 2023

Interview: The Perfect Storm


Armstrong Economic Blog/Armstrong in the Media Re-Posted Mar 26, 2023 by Martin Armstrong

To Check out the video click here to view my most recent interview with Outer Limits: “The Perfect Storm.”

Commentary from Ryan McCormick:

Legendary economic forecaster and pro-freedom advocate Martin Armstrong once again appears on the Outer Limits of Inner Truth Podcast to discuss: The neoconservative agenda and the likelihood for war with Russia, Political corruption in Ukraine and the impact on global perception of the United States, And why the 2023 Financial Crisis is colliding with important cyclical targets regarding war, which may result in a two-prong panic of unprecedented significance. Marin also shares his perspective on Alan Turing's groundbreaking work on the mathematical order behind Morphogenesis and offers an updated outlook on how the US will breakup.
Mar 18 2023

Chaos & the Secret Order to Everything


Armstrong Economics Blog/ECM Re-Posted Mar 18, 2023 by Martin Armstrong

Economics is the ONLY field where cycles are denied. Moreover, people do not even comprehend how COMPLEXITY emerges. Alan Turing was a brilliant mathematician who is probably the father of computers for he built the really first computer to break the German Enigma Machine. The man was Alan Turing. He invented the computer and broke the German Enigma Code. You can watch the movie The Imitation Game to get a general idea of his achievement.

But Turing did something even far more astonishing. He had a theory that within nature, what appears to be chaos was just a mask that hides a natural order. He was the first to think that there might be a mathematical order that defines nature. There is a mysterious aspect of Morphogenesis. All the cells in an embryo are identical. Then the cells begin to clump together and actually become different from each other. The mystery was how identical cells know to form different things such as skin, eyes, brain, or bone. There is no central command center.

Turing 1952 Morphogenesis

The phenomenon of Morphogenesis is what is the essence of mystery. This process becomes self-organization. Before Turning, absolutely nobody had any idea of how this process even worked. It was also a great mystery of life itself. It was Turning who published on March 15th, 1952, the Ides of March 3.14, his mathematical explanation of Morphogenesis. Turning’s formula was revealing for it uncovered a secret order behind the mask of chaos. Despite being one of the most brilliant minds ever and all his contributions even breaking the German code, because he was a homosexual, a judge order him to prison or subject him to hormone injections to cure him. He committed suicide on June 7th, 1954 because of the abuse of the government which ignored all his contributions.

What Turning discovered in nature, was that there is a hidden order in which identical cells then change and become specific parts of the end result without any specific coding. What would appear to be simplistic formulas, suddenly emerged into a complexity that baffled the human mind. This is what I discovered in economics. A secret cycle that defines the complexity which we also cannot see with the naked eye.

This is why different cycles unfold in all the sectors such as metals, commodities, share markets, currency, bonds, etc, and when they align that is when we get the superposition events. I will explain more in my forthcoming book on the Economic Confidence Model. One bubble will be in the real estate markets, such as 1792 and 2007-2009. Other bubbles took place in commodities such as in 1919. Still, others took place in currency markets and capital concentration such as the 1989 peak in the Nikkei in Japan or the 1929 bubble in the USA.

In 2020, we warned that this cycle would be a debt crisis wave, but also a commodity wave with rising inflation and interest rates into 2024. We must understand that each bubble is different for it all depends upon the cyclical aspect of that particular sector and does that line up with others to produce a super-wave that becomes the bubble.

Right now, we have a crisis in banking because far too many banks have just listened to the mainstream media and failed to understand that interest rates would be rising – not declining. Since 2020 we have been warning that interest rates were at a 5,000-year low. A simple bounce to just 5% would be devastating. Many banks attend our conferences because they are sophisticated and do not make hedging decisions based on the latest headline on MSNBC.

I am working hard on having Socrates articulate the complexity. I hope to roll this out this year – ASAP. My personal interpretation is generally on point, but not always. What looked to be dominated by geopolitical events in April, appears to be combined with the banking crisis, and in all honestly, I could not imagine that the FDIC even considered not covering 85% of the deposits. I should not have had to even explain that doing that would mean that small businesses have systemic risk in all banks. I actually had to explain there would be a major banking crisis in April that would make the Great Depression appear like a dress rehearsal.

As such, this banking crisis does not appear to be finished. It will still move into April 10th or so. Then the ICC issued a criminal indictment for Putin when they have no such jurisdiction by their own authority. They have become yet another political tool of the Neocons determined to create World War III.

We have entered the period of COMPLEXITY where we are not looking at a single sector in a bubble. We are looking at a really dangerous contagion of COMPLEXITY and the Neocons could care less about the economics. They have control of the White House and this is their chance and they are NOT backing down.

God help humanity!

Mar 13 2023

The Myth of Fair Value


Armstrong Economics Blog/Understanding Cycles Re-Posted Mar 13, 2023 by Martin Armstrong

QUESTION: If the metals are not trading at a fair value relative to everything else, then does that not prove they are manipulated?

SN

ANSWER: Your problem is the assumption that everything must be trading at some fair value. That is up there with the theory of random walks.  ALL markets trade for periods where they remain well below fair value. That was the entire takeover boom of the 1980s which they also blamed on me because I was advising many of the takeover players. I simply showed these charts back then which show in terms of book value, the Dow Jones bottomed in 1977. The market was grossly undervalued because you could buy a company, sell all its tangible assets, and double or triple your money. Michael Douglas’ famous speech in that movie about “greed” would not even be possible if everything always trade like some mythical robot at fair value. Everything overshoots and undershoots.

The metals are NO DIFFERENT. Every market swings between grossly UNDERVALUED and then grossly OVERVALUED. This is part of the business cycle. If there were no periods of gross undervaluations, there would not be a sudden boom either.

This is what you have to come to grips with. There is such a thing and the business cycle. Our cyclical analysis would not be possible if everything was trading at a flat line of fair value. This nonsense in metals is made up of people who have been wrong, and need to blame someone else. It is like blaming climate cycles on CO2. This notion of fair value is rooted, I hate to tell you, in Marxism, because he too did not understand  the business cycle.

Mar 1 2023

Markets & Starlings


Armstrong Economics Blog/Understanding Cycles Re-Posted Mar 1, 2023 by Martin Armstrong

COMMENT: Hi Martin,

Your blog, “Model & the 1991 Collapse of the USSR” for me was a major thought process change. I believed in the Random Walk down Wallstreet, not any more.

The chaos model example of the Dow Jones reminds me of the migration of the starlings – link attached.

I had a pet Starling, a very smart bird, who loved my computer and even pecked on my keyboard and accidentally sent an email one time.

I have even observed butterflies flying against the wind on a windy day by navigating within the calm currents of the wind.

Thank you for showing the pattern of the market.

Ernie

REPLY:  It is truly amazing but there are so many aspects within nature that confirm NOTHING is random – there is a cyclical nature to everything thing. Here are the five Brain Wave patterns. If there is no cycle in your brain – you are dead. So I am always astonished by people who do not believe in cycles and think there really is such a thing as random walks. We need those people because they are the fools who are easier to separate from their money. They love to buy the high and sell the low. Thank you very much. Keep believing it’s random and the government is really Santa Claus.

And for those flat-word folks who didn’t believe that the earth actually was in a cyclical orbit around the sun, how absurd, don’t forget to put a mask on when you drive alone or when you sleep alone make sure you also put on a condom just to be really safe.