The ECM & Who to Blame


COMMENT: You are dangerous. The stock market peaked on your model again but nobody’s models work like that so it is just more proof you don’t advertise because you are way too influential. So what are you up to now? You are against the progressive movement and you will undermine what we work for to unseat people like you.

SB

REPLY: Well I was in contempt when the 2007 target hit. They called it Armstrong’s Revenge. Granted, it was even the very day that Goldman Sachs sold their notorious portfolio right at the top for which they were charged with fraud. Did they use the model or did the model forecast when they would sell?

Sure, people like you can always blame me, but just perhaps this is a model that exposes the hidden order in the appearance of chaos. You can choose to dismiss it and claim it is all just me and my influence. No matter what they have done to me, the model still worked even when I never said a word.

That’s your loss. Your closed mind prevents you from ever seeing the real world. Keep believing you can suppress the rest of us because you want a life where everything comes free. Sorry, the government is not your parent. I have no problem moving to Asia and let you and your friends tax each other until death.

Don’t worry, when I am dead, the model will keep going. Even Athens fell in 404BC to Sparta right on time. I don’t think I was around then to influence that, or the climates changes, or the rise and fall of just about every empire throughout history.

So blame me if that really makes you feel better. But there is something much more important influencing everything besides me

Davos Today


QUESTION: Marty, you are not in Davos?

KS

ANSWER: No, too cold right now. I have people there who provide anything critical from behind the curtain. There is nothing I can say that would be important that anyone would actually do more than listen. I have said many times, there is NOTHING we can do to prevent what is coming. World leaders will ONLY take action when the economy begins to Crash & Burn. The climate activists there will ensure they will destroy the economy and they are socialists who want people to be punished for driving cars and heating their homes.

Here is the face of Global Warming in Newfoundland. Just a small snowstorm.

Agriculture Yield Elected Yearly Bearish Reversal


At the end of 2019, we obtained Yearly Bearish Reversals on crop production in many areas. This is lining up with the ECM and it is warning that weather is turning against us for food production. The market tends to focus only on year/year numbers and ignore the trend on a broader perspective.

The USDA 2019 corn harvest had a total production of 13.692 billion bushels, with average yields of 168.0 bushels per acre across 81.5 million acres. This was slightly higher than analysts expected which was about 13.513 billion bushels, based on average yields of 166.2 bushels per acre across 81.350 million harvested acres. USDA’s prior tally was for 13.661 billion bushels, based on yields of 167.0 billion bushels across 81.815 million acres. Nevertheless, the broader trend elected a Yearly Bearish Reversal warning that we may indeed see lower yielding crops as we head into this new Solar Cycle which begins here in 2020 and appears to be poised to be the lowest sun cycle in more than 200 years.

We never elected a Yearly Bearish Reversal in wheat prices. Nevertheless, from the 2016 low, we have elected two Yearly Bullish Reversals. This perspective combined with our models on weather are pointing to higher prices in the years ahead

ECM & the Rise in Intensity into 2032


COMMENT: A suggestion.
I really think the annual Lobby Day in Virginia, scheduled for January 20, should be considered when discussing the turning point in the ECM. The potential for confrontational violence between the state of Virginia and the federal government on one side, and the Second Amendment supporters on the other, is high. This could be bigger than Charlottesville.

JV

REPLY: A lot of people have written in about Virginia and West Virginia has invited the regions in Virginia to separate and join West Virginia. This clash over gun rights as well as the rising separatist movement to join West Virginia is also taking place on the ECM. There appears to be a tremendous issue involving political change coming due all aligned with this ECM turning point, not the least is the Trump Impeachment. Then we have the Russian constitutional crisis. On top of that, we have bubble tops forming in many different markets.

We are experiencing as we move closer to the peak of this 51.6-year wave in 2032, the number of events that are taking place on these turning points will increase. The 1968 turning point marked the second crash in the stock market from the 1000 level in the Dow and the break in the Bretton Woods where they moved to a two-tier gold market – official v free market as gold began trading in London.

The 1972.75 turning point, which was the equivalent to the peak of the next 8.6-year wave in 2024 marked the political turning point in the career of Richard Nixon. The Watergate break-in took place on June 17, 1972, and Woodward first spoke to his contact who became known as Deep Throat the following day – FBI Associate Director Mark Felt.

Felt had been providing leaks from the FBI to Woodward concerning the assassination event of George Wallace running for President in May 1972. The turning point also marked the infamous re-election of Richard Nixon on November 7, 1972. Of course, halfway into that cycle came the impeachment proceedings against Nixon followed by his resignation.

 

January 1977 marked the inauguration of Jimmy Carter which set the stage for the political reaction that led to the entire rise of “Conservatism” in politics that resulted in Ronald Reagan’s landslide victory in 1980. But 1977 also marked the low in the stock market in terms of book value from the previous wave which had peaked in 1929. It was because of this 1977 change in trend that our computer began to project that Dow would rise to 6,000 in just a few years which became the Takeover Boom.

It was also on that turning point in January 1977 when there was the coldest weather which dipped so far south it remains the only recorded snowfall in Miami Florida. That resulted also in the presumption that there was significant climate change unfolding. But the experts warned we were headed into an Ice Age, not global warming.

The peak of that wave was 1981.35 which market the high in interest rates. Thereafter, rates declined into 1985 but the capital inflows to the dollar sent it to record highs driving even the British pound down to $1.03. That led to the Plaza Accord to try to manipulate the dollar down after it had been driven up by interest rates.

 

ECM Day is Here


 

The Economic Confidence Model has marked specific highs and lows in markets to the very day at times depending upon the shifts in capital flows. Why has the business cycle been masked in complexity that has prevented many from comprehending how it functions? I believe this is the result of the average person always attempts to reduce everything to a single cause and effect. What they fail to grasp is the level of complexity involved which incorporates weather, war, innovation, population changes, the migration of people and economies over the face of the earth.

Many people who are against cycles fail to even comprehend that the rise and fall of civilizations have followed the business cycle itself for thousands of years. We are not all-powerful and cannot by our sheer will create a utopia and a perfect future.

The financial capital of the world has migrated which is why all empires, nations, and city-states are buried in a common grave. We all may believe that we are the exception to history, but human nature ensures that corruption will always rise and defeat the best-laid plans of any group.

Even the 911 famous attack on the World Trade Center took place on the specific turning point in 2001.695 to the very day. Not all wars begin precisely on this model, it may reflect when the combination of trends forms to create the decision to go to war which may predate the event by months or years. It is difficult to determine that instant of a decision, but clearly war unfolds as the result of some trend set in motion previously.

The very day that Greece applied to the IMF beginning the European debt crisis took place on a precise day in the ECM. This was the very same position one which the 911 attack took place which resulted in not only the invasion of Iraq, but it altered our way of life forever having to be X-rayed to get on a plane.

The turning point in 1934.05 marked the confiscation of gold whereas the 1985 turning point marked the birth of the G5 and the organized attempt to manipulate the dollar lower. We have the last three waves of that 51.6-year sequences mark the new adoption of socialism following Karl Marx in the USA. This was the beginning of the “progressive” movement which led to the birth of the income tax by 1913.

For example, the Economic Confidence Model also marked the very day of the high on July 20th, 1998 in the US share market from which the Long-Term Capital Management crash began in September. The 1987 turning point picked the very day of the crash and confirmed the low and the capital flow shift which resulted in selling US assets repatriating cash to Japan creating the Bubble on the peak of that wave in 1989.95.

However, sometimes these turning points have been the opposite whereas the geopolitical or economic event comes first and the markets respond secondly to those events in the aftermath.

There have been many events both economically and geopolitically which have aligned with the Economic Confidence Model. There are people who just hate it and try desperately to dismiss this model out of hand because it confirms that any attempt to manipulate the economy by socialists will always fail.

Anyone who attempts to argue against the existence of any business cycle is typically someone who supports the government against the people in true Marxist fashion. Even Paul Volcker’s rare book from 1977 entitled The Rediscovery of the Business Cycle bluntly confirmed that Keynesian economics failed because it was supposed to eliminate recessions and depressions.

While the peak of the wave 2015.75 marked the peak in government and the start of Big Bang, that was certainly reflected by the peak in bond markets and the start of negative interest rates. It marked the very day of Russia troops arriving in Syria which began the refugee crisis into Europe. Merkel’s unilateral decision to allow in the refugees set in motion the rising separatist movements in Europe. The Washington Times wrote on September 10, 2015, “Angela Merkel welcomes refugees to Germany despite rising anti-immigrant movement.” Her decision illustrated that a single leader could alter the course of Europe denying everyone else the right to even vote on her policy.

Then the following year 2016 brought BREXIT and the election of Donald Trump which most people still fail to understand why he was elected. Trump beat all career politicians fulfilling what our model projected back in 1985 that the 2016 election would be the first time a potential third party would take the White House.

We have witnessed the sovereign debt crisis infect states and set in motion the great migration from the highest taxed states to the states with no income taxes like Texas and Florida.

The pension crisis has undermined Illinois and this has spread everywhere. Even in Europe, about 50% of municipalities are in need of bailouts from the federal government. Pensions for government employees have generally been just grants which never required them to contribute anything.

We have witnessed the healthcare costs rise astronomically with Obamacare and Clinton’s handing student to the bankers excluding them from the bankruptcy laws that have devastated the long-term economic prospects as this debt-burdened generation are living with parents into their 30s and are unable to qualify to even buy a home.

Now we head into the bottom of this ECM wave and incredible we see the Trump Impeachment trial begin on the turning point and a constitutional crisis in Russia that will allow Putin to stay in office indefinitely.

We have watched the US stock market rise as the Euro has declined since its 2008 high and capital flows had turned to the dollar.

The questions we must now address are has the stock market reached a temporary high? Will we face the abolishment of money in favor of electronic to prevent bank runs? Will governments seize cryptocurrencies and force the money to be transferred to their own cryptocurrency?

Will climate now turn bittering cold as the next solar cycle which also begins here in 2020 results in food shortages and a rise in commodities?

Welcome to ECM Wave #935. We should expect a very important turning point in 2022 which will market a serious Monetary Crisis. From here on out, the confrontation in government between left and right will intensify and the violence will rise with the rhetoric. Any hope of a responsible government is now extinguished.

The Democrats are facing the collapse of their party. They know they really cannot beat Trump in a fair election, so they have adopted the policy that if you cannot beat him, impeach him. Yet there may be another conspiracy they are up to behind the curtain, and that is to prolong the Impeachment Trial to force the competition against Biden to remain in the Senate for months. There may be an even darker plot at work involving Hillary.

US Banks v Foreign Branches of US Banks


QUESTION: Marty, finally we decided to open a bank account in the USA which is not part of the CRS. But now we do not know which US-bank is safe enough and where to go! You mentioned that Goldmann Sachs, Citigroup, Morgan Stanley, Bank of America and JP Morgan Chase have derivative exposure linked back to Deutsche Bank. So those banks are not safe enough. The can fail in a contagion. You said also that Wells Fargo has the least derivative exposure.

In another article you said that the BANK of NEW YORK would be good as a custodian. Would the Bank of New York be safe enough in a contagion? The Bank of New York has a branch in Frankfurt. Could we open an USD-account in Frankfurt and still be outside the CRS? Or would this be a major fault.

Would you please give us a hint how to proceed as this choice is way over our head. Which bank is safe and outside of the CRS at the same time.

Thank you very much for sharing your experience and knowledge with us!
GB

ANSWER: Wells Fargo is a bank that is perhaps more accessible. Bank of New York has a big custodian business. Wells Fargo does not have offices outside of the US that provide services to retail or small business customers. Remember that any branches of US banks outside the United States are not part of the Fed system and are not FDIC insured. If you want a retail type of arrangement then Wells Fargo may be better. Bank of America has probably the best facilities for wiring money internationally online.

If you are dealing with a US branch of any bank, it must be FDIC insured and that is per person, not per account or banks. You do not want any account with a US bank’s branch outside the USA for they would be under the control of the local central bank.


NOTE: I do not receive any referral fees from either Wells Fargo or Bank of New York. We do notaccept any commission from banks or brokers for any referrals whatsoever. We maintain our strict policy of no conflicts or interest.

Banks – Interest Rates – Mortgages


COMMENT: Martin, as an avid follower, I took your advice to heart to try to fix our interest rate for the loan we have on our house. This was the answer I got from our direct advisor: “Have looked at your file, you can still enjoy your low-interest rate until 01/12/2020, in other words refinancing is only recommended at the earliest in November 2020. Your capital will then fall to 37,000 euros outstanding, the interest may already rise to 3 % (then you still benefit in November compared to refinance now!) ? Repocrisis is in the USA, Europe is supported by the ECB, which keeps interest rates low? Or am i wrong?” Isn’t this the perfect example of how well people are informed, even those working at the banks? Or do we already see some intended lingering of banks, trying not to get caught on the wrong side of the risk? Thanks for answering or using this in your private blog as a perfect example…

BL

ANSWER: They may have been instructed from above to keep loans floating because the Repo Crisis is demonstrating that rates are under pressure to rise, not fall!

If you have a mortgage that is floating, lock it in with a fixed rate.

Those looking to buy have a dilemma. On the one hand, real estate prices are high in many regions and you can wait for prices to come down before buying. On the other hand, when prices start to tumble it will be the result of an inability to get long-term fixed loans so prices will fall to where people will be able to get loans or pay cash. The solution may be to buy when you can get a long-term fixed mortgage and then hedge it with eventually shorting rates where there will be a liquid marke

Could the Fed Ever Exit the Repo Market?


It is stunning how after more than three months, the analysis on the repo market is still nowhere close to reality. I believe that those in the trenches are, like me, afraid to really explain what is taking place for fear they will be blamed for creating a financial panic.

The popular explanation in September was repeated by the Wall Street Journal: “For one, Monday marked the deadline for companies to submit their quarterly federal tax payments.” This was standard analysis put out by the countless pundits the press rely upon and they have to come up with some explanation and quick. When analysts spout out their explanations to mainstream media it is because they are trying to get business. People have often asked me why I do not do mainstream media interviews. First, I do not need the business. Secondly, when you have real clients, they prefer to pay for information and do not want it on the front pages of newspapers for free. They appreciate analysis that is exclusive rather than as common as dirt. Hence, the analysis put out in the press about the Repo Crisis is coming from people who have no real clients in the area and lack the expertise in the field to start with.

Not even the central banks understood what was going on because even they tend to be domestically oriented. Despite the obvious fact that we live in a global economy, all the economic theories, analysis, and experience have been domestically focused. Unless someone has been in the trenches globally, they will never see the wildcard coming from external sources. Hence, we get the calls to explain things ONLY because they know all the other major institutions are also coming to us as some sort of the central point of reference.

The question that is now dominating everyone’s inquiries, can the Fed exit the repo market after being the dominant source of liquidity for more than three months? What will it take for the Federal Reserve to withdraw from its daily liquidity operations in this $2.2 trillion market for repurchase agreements (repos)?

All I am prepared to say publicly is that the solution is beyond the powers of all the central banks combined. The solution is not attainable without political concessions, which politically are just off the table. This is going to require a major reform that is unlikely to take place and will not even be recognized until the crisis erupts on a much larger scale

Pension Crisis – Congress is Unable to Act Because of Gridlock


Trump has called the Democrats the do-nothings. All they have been focused on is impeaching Trump for the polls they are looking at behind the curtain all show Trump will beat whoever they put up as their candidate. the motto has been – if you can’t beat him, impeach him. There is no other area where the Democrats have just failed to act with a major crisis looming in 2021 than the spreading of the Pension Crisis.

There are pensions that are multi-employer funds which are perhaps the first to fall in the private sector. The Republicans did slip a rescue package into the massive $1.4 trillion spending bill passed last month. That was all because the United Mine Workers of America pensions would have failed completely and the push from environmentalists against mining and energy only puts pensions in those areas at serious risk after 2020.

The Republicans, interestingly enough, have no problem with the bailout but want to raise premiums that employers must contribute. Conversely, the Democrats who have been backed by such unions have argued for low-interest loans and not to force higher premiums on employees or employers.

The Republicans and Democrats are so deeply divided on how to solve the broader pension crisis problem, that this immediate impasse illustrates what I have been warning about that government is just collapsing incapable of bipartisan solutions. The Democrats simply refuse to act for they fear that Trump would get the credit for solving the pension crisis among unions that traditionally have backed the Democrats.

This entire issue has become not about solving any crisis but who gets credit and thus we have a government incapable of acting for the benefit of the people. As I have said, this is how governments eventually collapse. They become so corrupt and divided, they are incapable of managing the state.

 

FOREX & the Wild West Days of the ’80s


QUESTION: Mr. Armstrong; I was told that you were indeed the largest forecaster in foreign exchange. The story in London is you advised nearly all the Middle East and were the most important adviser on currency to BCCI, the bank the governments took down back in 1991 along with Salomon Brothers. They made a movie about BCCI. Is it true that you were an adviser to BCCI?

HS

ANSWER: The ’80s were the wild west in finance. I have told the story of how many banks operated back then. I would be called in and told someone wanted to give me $1 billion to manage back then when $1 billion was a lot of money (now it’s trillions). I would go to various banks and there would be a curtain between me and the potential client. I was not allowed to know who they were. I was turning down that business because it was just too wild for me.

Yes, we were advising BCCI on foreign exchange. They were passing it on to specific clients who at the time I did not know. I became concerned when I accepted an account for who I believed was a Saudi individual. The account was opened at Rudolf Wolf in London and after a few months of tracing all the various layers of corporations, it turned out I was managing money for none other than Muammar Mohammed Abu Minyar al-Gaddafi. I closed the account and within a matter of weeks, he was back through a completely different channel.

Perhaps one day I will write a book about those days. I ended up managing money for even Mr. Khashoggi once owned one of the world’s largest yachts, the 86-meter Nabila, which appeared in the James Bond film “Never Say Never Again,” which was later bought by Donald Trump. On top of that, what I thought was a company turned out to be a secret partnership between Gaddafi, Khashoggi, and Ferdinand Marcus of the Philippines.

The Floating Foreign Exchange Rate system had just begun in 1971. This was not a subject you could go get a degree in. This was a field built from scratch and it took a trader’s understanding of the world economy to cope with the events of the 70s and 80s. I was the leading adviser in FX because there really were no others with any track record. When I say I was called into just about every crisis from 1973 onward, it is not an exaggeration.

I was advising BCCI on currency globally. I was advising a company called GRANEDEX which turned out to be a front for Russia. I could never tell who was who. I had even the counter-revolutionary army in Iran coming to me for they were trading to make money to overthrow the religious government in Iran. I would be on a phone call with a client from Saudi Arabia who asked about gold and I said it depended on what OPEC would say that day. He put me on hold and dialed into the OPEC meeting and they put me on speakerphone. Those days taught me about war and how capital flows could be used to forecast war and geopolitical events. It cut my teeth of those wild west days.

I have handled some of the biggest projects ever and advised globally. To this day, we have people attending the World Economic Conference from 137 different countries. Because the world was such a crazy wild west sort of atmosphere, I turned to be just an institutional adviser of public corporations because I gave up on trying to figure out who the clients really were at times.