Saturday, December 19, 2015


Romanian Private Debt Crisis Erupting

COMMENT: Dear Mr. Armstrong,
Dear Mr. Armstrong,
What you wrote concerning the possible repeated start of the banks collapse from Austria, once again, is right. The biggest lenders in Romania are some Austrian banks, among some Greek ones which are already in a coma.
A new law has been passed and violent attack started from banks, including the National Bank of Romania. Today, 4 European mother-banks having subsidiary in Romania appealed an threaten with lawsuits in a letter addressed to the Romanian President, asking/demanding him not to endorse this law. My guess is they are Erste, Raiffeisen, Societe Generale (French) and either Alpha Bank (Greek) or UniCredit.
One IMF Director met one week ago with the Romanian President but agenda was not disclosed – guess what…
Pressure and lobby is huge. If this law is promoulged, banks are quite in shit, cause the estimated no of families who’ll give back homes to banks is 30 -100 000.
If not, President’s career and image goes in the toilet – so it comes political instability and next year are scheduled local and general elections.
Best Regards,
REPLY: The crisis throughout Eastern Europe has been selling mortgages in Swiss francs without disclosing the currency risk. This law, passed by the Romanian Parliament, is actually fair. The banks would have to take back the property and end the debt. That is how Caesar resolved the debt crisis, for then too the bankers would not accept property and would take the borrower’s children and sell them into slavery to pay off the debt.
Romania’s National Bank (BNR) has asked President Klaus Iohannis to send back to the Parliament the recently approved law, which defines making payment on a mortgage by allowing the mortgage debtors to hand back to banks the mortgaged assets to terminate the debt. The bankers want no risk and will screw the people every time. This law is fair as the banks sold mortgages without guidance.
The bankers are demanding that Parliament amend the bill based on a financial, legal, and ethical perspective to their benefit without acknowledging the issue. What is not understood here is that at the moment a loan is given, the bank values the property to be in balance with the value of money. When the value of money rises (DEFLATION) then assets decline. The same amount of money might even buy two houses. This is an economic gain for the lender and a loss for the debtor.
The bankers warn that this will affect even local banks’ financial stability. Local bankers say that the law violates the constitution and that it will bring them big losses and limit access to financing. The rumor is that Parliament will review the law and limit it to loans under €250,000, according to political sources.
This is the paradox of the business cycle. It needs to be examined and understood for this has often resulted in civil unrest and revolution.

Commodity-Based Countries to Liquidate Wealth Funds & Gold

QUESTION: Marty, at the Berlin cocktail party you said we may yet see gold sales from oil producing countries if oil breaks your yearly number of $35 for year end and gold closes below 1044 or so I think. You said gold could then reach that $——- level you mentioned in the conference. It looks like that is happening. Socrates on the monthly level is now warning of a possible Waterfall Event in gold. Are we seeing the risk of official gold sales from Russia, Norway and Saudi Arabia?
Thanks for a spectacular conference.
ANSWER: Yes. We got the rate hike. A stronger dollar is still on the agenda, and yes, I warned we could get that waterfall in commodities for the first quarter, particularly in oil. The continuing collapse of oil prices under $35 for year-end will bring tremendous distress to several countries. Cash-strapped governments are looking at substantially lower revenue from oil and they are likely to liquidate positions in gold and in their sovereign wealth funds. They will draw down cash from gold and a portion of their funds to close budget gaps.
Gold produces zero income and costs money to store while the yields on wealth funds currently produce way too little to compensate for the deficits. This crisis, in turn, could cause several nations to liquidate portions of their funds to sell off gold to raise cash. It would appear that the selling will be in debt markets more so than stocks. They will focus on declining asset values like gold and bonds more so than U.S. equities. When they get into a real jam, it becomes whatever they can sell to raise cash irrespective of the fundamentals.

Dow Looking Into 2016-2017

Year-End 2015-2016
QUESTION: Mr. Armstrong, at the conference you said the US share market would continue to move sideways and there will be no breakout to the upside until 2016. After Fridays action I assume this is still on target. Where is support this time?
DJIND-W 12-19-2015
ANSWER: The key support lies down at 16887. We need a weekly closing below that to retest the last major low. I will be doing a short video on each main market for year-end for the attendees starting next week which will be part of the Year-End Report we provided. We have generated two minor Weekly Bearish from the high on this rally which took place intraday the week of November 2nd.
DJFOR-Y 12-19-2015
Looking at the yearly level, right now our closing support for the U.S. share market based on the Dow Jones Industrials lies at 17608 and 16590 for the 2015 close. A year-end closing above both will keep the market in a bullish posture. Target resistance for 2016 stands at 19922, 23378, and 26292. If we look ahead into 2017, these levels will rise to 20830, 23287, and 27200. There are only TWO possibilities which will be determined from the closings. Either we see a 2017 high in a Phase Transition now, which typically will not last beyond 13 months, or we continue to base into 2017 and then we completely invert meaning the high is pushed off into 2019/2020 with the bottom of the ECM.
DM-HyperinflationEventually, what has to happen is this shift fromPUBLIC to PRIVATEwhereby the flight to quality is to private assets and not government bonds. Those who keep arguing for hyperinflation do not understand how the economy functions. I have stated that such events take place only in the peripheral economies like Germany following the 1918 Communist Revolution where they invited Russia to take Germany after World War I. The confidence in the government completely collapsed and the currency became worthless. Of course the goldbugs twist this story into the mere fact that paper money existed and the quantity increased and that was the cause of the event. They ignore the fact that this was a communist revolution and people hoarded their money and used the money of neighboring states. They also ignore the fact that the new Revolutionary Government DEFAULTED on all government debt. These are fact they omit.

The German Hyperinflation was by no means CAUSED by printing money. That was the symptom which resulted. It was caused by a Revolutionary Government disavowing all government debt of the previous government which wiped out banks and much of the “rich” The new currency which replaced the hyperinflation issues restoring order was still paper but it was backed by REAL ESTATE. This was a classic PUBLIC v PRIVATEshift. We are in a debt crisis and civil unrest will rise increasing the risk of separatist movements and debt defaults by countries.
As this cycle materializes, we get the classic shift from PUBLIC to PRIVATE assets. During the German Hyperinflation, ALL tangible assets rise from real estate, stocks, to gold. It is not EXCLUSIVELY gold. The propaganda these people have filled the heads of the media and ruined so many novice investors is truly criminal. They have distorted events to suit their exclusive purpose to promote gold sales and some argue for money must be tangible and want to embrace a gold standard as if this has EVER worked even one time confusing people using gold coins with a fiat-type declaration that gold is worth $100,000 and ounce. Just pure insanity and so far off the mark it is beyond description. They should be handing out flowers in airports while chanting.
We face a very serious situation and to survive this, we must consult history, not propaganda. This is the PUBLIC to PRIVATE shift which historically takes place with the collapse in ALL governments. The question that surfaces: where does cash flee to? Government debt? This is the problem with models or personal opinion that lack the historical perspective and constantly see the same result time and time again. Markets are far more complicated than just that. This will take a computer to track all economies and trends moving simultaneously.
The markets will give us the timing. They always choreographs the coming move if you pay attention. This is even what the Global Market Watch says on the yearly level PAY ATTENTION. Either we get the sling-shot move, fake everyone out to the downside as rates are forced higher at first, and then as they see the world coming to an end, the flight to private assets unfolds between 2017-2020 when the War Cycle also turns up rather aggressively. We have 2017 as a Watershed Year for this will be perhaps more like 1933 when FDR, Hitler, and Mao all came to power. We have the US elections in 2016 with the president taking power in 2017, we have many of the leader in Europe finally up for election such as Hollande in France and Merkel, then we have G20 shutting down the entire global economy requiring full cross-border reporting of all money flow for taxes. Several countries will have moved to electronic money by then as well. So we can see that instead of a high, 2017 could be a low and this whole mess is extended for that becomes the starting point rather than the end.
So PAY ATTENTION. Such trend can be see coming well in advance. The year 2015 was a key yearly target and it is 13 years up from the 2002 low in the markets following the Dot.COM Bubble which remains the real high in international value terms in many respects.
DJIND-M 12-17-2015

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