Cyclical – Techical – Fundamental Analysis
QUESTION: Mr. Armstrong; Is it really possible to combine all three forms of analysis in a coherent manner that is consistent?
ANSWER: No. Anyone claiming this can be achieved really has no experience and is more likely than not a snake-oil salesman. The vast array of fundamentals that are taking place simultaneously can never be sorted out by any human being. That is just impossible. Furthermore, they are more-likely-than-not no different from the press who are picking and choosing what to fit to explain the latest move. That defeats forecasting to start with. It also provides the problem of domestic focus compared to international. What is happening in Russia impacts everyone in Europe, Asia, and the USA.
This is primarily why we developed a model that monitored everything. No human being can do this and then it is impossible to sort out the fundamentals. Technical Analysis is far too often not rule based and subject to human interpretation into patterns just as Elliot Wave and two people using the same analysis arrive at different conclusions.
Cyclical Analysis must also incorporate physics to achieve accuracy. Otherwise, someone who then identifies some cycle of 25 units and says see, it worked 5 times in a row, will lose the house for that relationship will change. There are so many layers to price activity each displaying a unique frequency, once again it comes down to human interpretation. Our arrays are the best shot at accurate cyclical forecasting and there are 72 models inside that. It is the computer that projects the outcome, not any human interpretation. Then you have to have a database that is unprecedented to back-test the entire analysis. It is a huge time-consuming task that costs countless millions of dollars to achieve.
There is so much order that exists, but you cannot filter it through human interpretation. The Uncertainty Principle, also called the Heisenberg Uncertainty Principle, articulated by the German physicist Werner Heisenberg (1901-1976), that the position and the velocity of an object cannot both be measured exactly at the same time, even in theory. The very concepts of exact position and exact velocity together, in fact, have no meaning in nature. Effectively, the observer alters the object’s behavior by observing it. This becomes true in analysis. For the interpretation becomes the human element that is imperfect and introduces uncertainty. Then the result is reinterpreted by the reader and a debate may unfold about what was even said. In this respect, sorry, computers are key.
Fundamental analysis can ONLY be used to explain AFTER the fact – not to forecast the future.
Human Nature & The Economic Trends
Human nature tends to create followers as a whole because of confidence. Financial Panics unfold because the whole is in a state of panic. This is why paper-shorts are so essential to stabilizing the markets. When everyone is in a state of panic, only a mad man would buy. The short player is critical for he is the lone soul to step up and buy when everyone is in a panic. This is human nature.
There are food panic in Ukraine right now. People have seen their currency drop and food rise 300% in price. People are stockpiling whatever they can get now because they ASSUME it will cost more later. This is a panic to the upside.
People also will want whatever they could not have before. This is why gold became precious. At first it was only fit for kings. As gold became more common, the aristocrats were allowed to use it. Then as massive finds of gold appeared in Turkey, it became available to the commoner and then it had the support within the broad-base of society and migrated to coinage.
Look at all the Russian women who have migrated around the world. Under communism, they were stripped of all wealth. Now, Russian women are the best dressed and would never be caught in t-shirt and jeans food shopping. They are always the best dressed because they were not allowed such luxuries.
These are basic traits of human nature that are behind the market trends. This is what government tries to influence and constantly take polls.
Consumer Credit Moving Higher into 2015.75
Subprime consumer borrowing — encompassing auto loans, credit card loans and personal loans — climbed to $189 billion in the first 11 months last year, the highest total since 2007, according to a study compiled for The Wall Street Journal by Equifax. This is precisely what I mean about living with the cycle. People will spend when they SEE everyone else spending. This provides the foundation to consumer confidence. This is why the rich are important. If they are driving around in flashy cars and going out to dinner, not only are they spending, they are creating the impression everything is OK and this becomes the contagion that spreads as consumer confidence. If they spend nothing and save, the rest of society will follow. It is an interesting leadership role.
This is right on time. We should see the peak in debt on a private level whereas when the economy turns down, governments will be desperately trying to borrow more and more.
US & Britain Still Trying to Take Russia out of Swift System
The Austrian ECB member Ewald Nowotny warns to kick Russia out of the international payment system. SWIFT is a neutral service and not a political instrument. Great Britain and the United States have called this step several times in the past. The people in the USA and Britain who even suggest this are trying to create a revolution inside Russia. This is their goal. They should look well after their own backyard for when the economy turns down and they are caught again coddling bankers and taking bribes to stay in power for life as pretended elected officials, they may see significant civil unrest at home.
Putin Fears Civil Unrest in Russia?
Russian President Vladimir Putin wants to guard against possible uprisings.He said extremism will be used as a geopolitical means to destabilize States.Putin fears without express that foreign intelligence agencies could use the critical economic situation of the Russian people to overthrow the government. Our Cycle of War will be updated for the Solution Conference. Civil Unrest is indeed likely everywhere, including in Russia.
Politicians are even using WICKR for Secret Messaging
WICKR is a messaging app that was designed to defeat the NSA. It is using encryption for text messages, photos and videos to be sent anonymously internationally. The app allows messages to self-destruct within a time set by the sender, and strips messages of all metadata, leaving no traceable evidence. Messages are deleted from Wickr’s server on delivery. It is rather cool technology showing that necessity is truly the mother of invention.
Cycles Inspiring Music
Hi Mr. Armstrong. My name is Azar and I much appreciate your insight on your blogs especially for the concept of combining history with the cyclical nature of phenomenon. … We have recently coincidentally revived a song made a video that captures the cyclical nature of empires along with the arrogance that they take on, especially during their last oscillations. You are welcome to post it to your blog.
Thanks for what you do.
Azar
The Fed & Manipulation
QUESTION: Do you believe the Federal Reserve, or any such system as it, is the cause for such extreme boom bust cycles or are those cycles inevitable even if the Fed did not exist?, or perhaps if it did not exist the amplitude of the swings would at least be lessened
Do you agree the Fed should be audited?
ANSWER: To be accurate, the Fed is NOT the source of all our problems. To be objective and fair, the central bank has been manipulated by Congress. The assumption has been based on the faulty idea that inflation is linked to the quantity of money. It is really linked to the CONFIDENCE in government. But that aside, Congress has accepted this assumption and sold it to the public. Therefore, like blaming deficits and tax increases on the rich for not paying their fair share instead of Congress spending without limit is reflected in the same idea that the Fed is the source of the problem.
If you assume inflation is created by the expansion in money supply, then the Fed has the ability to create elastic money and hence they must be the culprit. This suits the politicians nicely for it misdirects the blame for economic instability to the Fed deflecting any fiscal irresponsibility from them to the bankers.
Now, let us introduce the next fallacy. BEFORE 1971, it was assumed that if you borrowed rather than printed money, then it would be less inflationary. That made sense when you could not BORROW on US Treasury notes, bills, and bonds. Then 1971 changed everything moving to a floating exchange rate system. Suddenly you could trade futures by putting up collateral using US TBills. This altered the entire assumption that has not been considered by those who focus only on the Fed. The Fed cannot be the sole source of inflation for the Treasury issues the debt according to what Congress has spent. That is now money that pays interest.
Since 40% of the US National debt is used to park cash, the elastic creation of money by the Fed is but a tiny fraction. The Fed can control ONLY monetary policy but it cannot control the fiscal policy. The bulk of the money is created not by the Fed, but by the Treasury in the form of bonds, notes, and bills. The actual amount of money in circulation in the form of printed notes has been declining sharply over the years.They use to print $10,000 bills in 1934. Today $100 is the biggest.
Should the Fed be audited? Of course. But so should every branch and department. The banks have manipulated the Fed and lied to them on so many occasions. Right now, the Fed pays interest on excess reserves. The banks argued that the Fed was buying back 30 year bonds so they had no place to park money. That is over $2 trillion and that facility negated in part the entire purpose of QE1-3. That should be ended immediately. It is deflationary, not inflationary, for it created an incentive for banks not to lend and supported the transactional evolution of the banks ending the era of relationship banking.
The Office of Inspector General should be separated from the Department of Justice and be given the real power of a Roman Tribune to charge and prosecute members of government. That should be an elected official in 2 year terms. Then and only then will we ever get some transparency.
The entire premises of Marxism is that government can control the economy. They never get it right and all they do is increase the volatility. They are incapable of altering the business cycle as the ECM has continued to work before and after the creation of the New Deal. If they could manipulate the economy or any market perpetually, then the ECM should have failed.