The Fire is Burning – We Need More Fuel
QUESTION: “Hi Mr. Armstrong,
I am curious. I take it that you feel the DOW may double into 2015. Yet the SPX looks like it may roll over and crash. Does what you say about the DJIA equate equally with the S&P 500, or are they going to diverge and one goes up, while the other crashes?
thanks,”
ANSWER: Do not confuse long-term and short-term. The market was due for a correction and that may continue into September. The depth of the decline is important. That will determine what we get into 2015.75.
The Dow has the possibility to double into that target. However, to see that, we have to see capital concentrate in the US both from Europe and Asia. Capital is pouring out of the emerging markets. Brazil, India, and China that looked so good are now moving opposite. The Bail-In policy in Europe could send a massive tidal Wave of capital into US equities. If that happens, the Fed will raise interest rates attracting more capital to the dollar and the bonds crash with the budget deficit rising. That will set the tone for a dramatic expansion in debt and that is the catalyst for the Sovereign Debt Crisis. This is a game of dominoes. One is necessary to push the over the next one.
Those talking about hyperinflation are missing the point that with taxes rising, low interest rates and the deficit declining, where is this wave of massive spending coming from? We need to send the system into its debt spiral for as that happens then the unfunded liability will get bigger. This is a fire burning. It need some more fuel. Then you will see the commodity rally. But right now, the decline in commodity prices shuts down supply. That is necessary to create the next rally – it is called shortage.
Switzerland is beautiful – But the banks are not safe I think anywhere you go these days
QUESTION: Dear Martin, Thanks for the education, I read every article you post.
As a European ex-pat long based in S.E. Asia, I agree that Switzerland is probably one of the safest places to store wealth. However recently, the Swiss enacted a Bail-in law, whats more my 200+ yr old Swiss bank plans to change its structure from a private partnership (with unlimited liability for the partners) to a Corporate partnership (with limited liability for the partners) that I presume allows them to Bail-In their depositors(?).
Is no institution safe? Should I be worried and re-look at how my wealth is stored?
Best regards,
CO
ANSWER: Yes. Switzerland is beautiful. This is a picture from my window. But the banks are not safe I think anywhere you go these days. I am in discussion with several people looking to create a real private bank for simply storage of wealth like it used to be.I have advised on structure. No lending out money. You pay a fee for the account. You decide if you want interest or not and select how to earn it. It will take delivery of share certificates. We need to somehow return to the way banks began – a place to store your money not lend it out or speculate with it. These are troubling times.
When Robert Rubin of Goldman Sachs became Treasury Secretary and orchestrated the removal of Glass-Steagall so banks could start speculating wildly, they also used the US to change the international rules through the WTO to allow banks to speculate with derivative products and sell them internationally. This was a major takeover of government and then they used the power of the USA to force their agenda upon Europe and Asia. That is how they blew them up in 2007. It took them less than 10 years to totally screw the world financial system. This has disgraced not just New York, but the entire nation as the world looked to Obama and he did nothing making the banks the Untouchables. This led to the new strategy Bail-In because the politicians will not stop the banks from trading with other people’s money. Absolutely outrageous.
Relationships Are Never Constant – Everything Fluctuates
COMMENT: “You go on and on, in article after article, saying money is not tangible and never has been. Then, you say in some kind of Mad Max world, gold will be worthless — Rice/food will be money! Rice is not tangible????? Your ideas may be good, but your explanations are convoluted, contradictory and often incoherent.
JC”
REPLY: Because you expect a single explanation for some relationship that is fix. Nothing but nothing is ever a fixed entity. You say rice is “tangible”. But rice has no value unless it is cultivated. The ONLY medium of exchange is labor. You will pay me to do something. The medium of exchange is whatever object of desire but at the root of this derivative is still labor. The first is always food. As society emerges, it then becomes useful objects. In the third stage it becomes luxury goods such as gold, art, or even clothing. Before, gold was viewed as the tears of the sun. It was fit only for kings and served no purpose whatsoever in commerce. ONLY as supply increased (Say’s Law) did it become COMMON enough to be a medium of exchange.
Warehouse receipts were money in Egypt until Alexander the Great conquered them and introduced coins in 334BC. They had the earliest form of paper money long before the Chinese. That was “representative” of food in storage whose value was based upon labor. Karl Marx understood this aspect but tried to flat-line the economy reducing it to just labor. Commodities have NO VALUE unless labor was involved. This is what inspired Marx but he ignored the fact that you can move from the essential elements of food and graduate to the land of luxury.
Even Aristotle wrote about the people who made money from money. He was complaining about a market economy that influenced Marx. Cicero warned Rome would go bankrupt because it was importing silks at tremendous export of gold and silver to China in 55BC.
So if you want to nitpick – at the root money is labor for gold has no value unless mined and the same can be said about the silk the Chinese sold to the Romans. And by the way, the term that a Roman Emperor assumed“the Purple” refers to the fact that the imported dye so impressed the emperor that he decreed no other person could wear purple except the emperor. In the Catholic Church during advent the priest wears to this day purple vestments.
So sorry if you see that the lack of a single fixed relationship that never changes is somehow incoherent. The same is true of the silver/gold ratio. That too cannot be constant. Everything fluctuates and no relationship is ever fixed.
Why Switzerland
QUESTION: “Martin; Isn’t it just as corrupt as the rest of them since UBS and CS bankrupted the economy? And of course the Swiss Central Bank pegged CHF to € which is further evidence they are coming into the banking cartel fold. And haven’t they acquiesced to US regulators? So, what’s so special about Switzerland apart from the clean air and good milk?”
ANSWER: It is simply out of the USA and EU. It is not perfect. No such place exists anymore. It is just the best of three evils right now. Personally, I would prefer to retire in Australia. But they are becoming way too socialistic.It’s a question of simply hiding right now and wait for the crash of a mushroom cloud on the horizon before coming out. They are now prosecuting people who stole names from the banks and handed them to Germany.
Can the Dow Rally with Declining Bank Stocks – ABSOLUTELY!
QUESTION: “how can you possibly align staying away from bank stocks at the same time thinking there is a possibility the dow doubles in the next 2 years….NO CHANCE both of those happen (in my humble opinion)…ZERO….would love a scenario laid out, however, that big banks would flounder while the rest of the markets rip to the upside…..would be interesting reading …thx.”
ANSWER: Just because the Dow rises, it does not mean that every sector rises. In 2000 it was the Dot.COM rally that was the focus. During 1907 it was the Railroad stocks. During 1929 it was the industrials led by Autos. Every rally is different despite the fact that the market rises overall. The bank stocks will NOT be the high flyers.
Look closely at the events during the 1929 bull market as the Dow was making new highs, some stocks were collapsing including all the commodities. Look at Homestake. It began to break out only in 1931 when things were crashing. Homestake was not making new highs with the market in 1929 because commodities peaked in 1919 and began a 13 year bear market. The Dow can rally like it did into 1929, but the bank stocks will not any more than the commodities did. Homestake rallied only when the 1931 Sovereign Debt Crisis began.
The bank stocks will NOT be seen as a safe alternative. That has nothing to do with the market overall nor will it prevent capital from shifting. Facts are facts. Opinions everybody has one. Big deal. My opinion; we will not reach the Mad Max event. But that is a personal hope. We may blow everybody up before then anyway.
Yes in a Mad Max Dark Age Not Even Gold Has Value
Some nasty comments immediately focus on that statement and as always only emerge from the gold fanatics who will never change their mind about anything no matter what the facts might be. Of course they are based upon a PRESUMPTION that gold always has value without any historic proof whatsoever. The only thing in a dark age that retains value is food –PERIOD! In Japan all money vanished for 600 years and rice became money. The government taxed in rice and didn’t bother issuing coins because nobody would accept them. After the fall of Rome, gold vanished from the money supply as well and did not reappear until the 1200s.
You cannot eat gold or anything else but food when society crumbles into dust. The assumption that gold will retain value in such circumstances is brain-dead. When you are starving, the most honest man will become a thief. What do you think feudalism was? People abandoned even their property because there was NO SECURITY. If there is no rule of law, nothing has value. People fled the cities and gave their labor to the landlord who had a castle and protected them when someone else came by. He provided what government use to – security and the rule of law. This is what has been abandoned in New York City. Corruption that has turned government into an highest bidder wins game is the downside of the Bell Curve. They undermine everything.
Wages vanished as well until the Black Death killed 50% of the population and then made labor scarce. That is when wages reappeared. You earned not even a bronze coin no less gold when there were no wages. Without the rule of law gold has no value. Someone just takes it from you. Who do you go to? There is no police. No government. It is a Mad Max event.
It is a bell curve. You go too far and everything is lost for it is anarchy – uncivilized survival of the fittest. Keep your gold – it will do you no good. Food will be worth far more. You eat or you die. Assuming gold willALWAYS have some value is absurd. Money is a medium of exchange but if there is no exchange you also do not need money. There is a point where nothing has value but food for there is no economy. There are just enclaves like tribes.
This is NOT opinion it is fact!
NSA & Microsoft – Going Down Together?
Steven Ballmer who took the reins of power from Bill Gates, is leaving Microsoft in terrible condition. He raised the price of software tremendously where previously you could install a program on 5 PCs, now it is the same price for just one. He allowed the company to get in bed with the NSA and that has ruined its reputation and trust factor internationally.
What he did with Windows 8 was simply over-the-top. Microsoft was losing market share to Apple and Google to begin with. Windows 8 was supposed to compete but it allowed the NSA to stick its hands in their pocket. Buying Skype and then changing it from a secure system to one that goes through their system allowing it to be recorded by the NSA was just too much. Anyone doing serious business cannot now use the system.
In July, it took a $900 million write off for its Surface units that have been a flop. Ballmer may have met Bill Gates back in school, but he blew it with the Vista operating system, missed the phone market predicting in 2007 that the Apple iPhone would fail, and now letting in the NSA that has led even NASA to dump windows.
Microsoft was once the target of being broken up as too big under the Anti-Trust laws. Today, it is in a downward spiral from which the NSA may prove to be its complete downfall. Congress is brain-dead and are still backing the NSA blind to the fact that they are destroying both freedom and the economy.