Market Recap For Friday 8-23-2013
Gold has rallied up to almost the 1399 level. We do have closing resistance at 1397.90 today and today would appear to be a high if it closes back below 1388.50. The key resistance is still at the 1421-1424 level and support lies at 1372.10 right now. A weekly closing back below 1336 will signal new lows in the future.
Silver needs to close ABOVE 2345 to see any follow-through. However, a closing below 2825 leaves this still in a vulnerable position long-term. A close below 2040 on a weekly basis will signal new lows ahead.
Dynamic Thinking
QUESTION: Marty, you have mentioned how everyone tends to reduce events to a single cause. Is this the problem you refer to as the lack of dynamic thinking? Is there a way to change this?
ANSWER: Yes. But it takes work on an individual basis. I studied not just my own thinking process in trying to create a computer program, but I dove into the depths of trying to comprehend the brain and its function. To be able to create a true thinking machine, I had to grasp how the brain functioned from the ground up. Artificial Intelligence offered by 99% of the people out there is simply imitating the brain with look-up tables. Real Artificial Intelligence has to reason on its own. That is what has to be achieved – not mimics.
What I came to understand was we learn from all our senses. In some people it is visual that is the dominate trait. This group of people cannot only see a face in a cloud and normally have the ability to paint or draw what they see. They become proficient at charting and pattern recognition in markets. They can see the dots and connect the picture. This is why I try to include images with whatever I write. If I write about someone, I try to always include their picture. This allows the reader to associate the content on two levels – meaning and visual.
Some people are most dominant with sound and would rather listen to a PodCast than read (which we will be introducing as well). They are typically great at music. Then there are those who can be sensitive to smell while others are qualified to be a wine taster. Each of us have one really dominant sense. Our learning will be enhanced by that sense when it encounters new data. If you went to dinner with a person your mind is recording everything from the music, the taste of the food, the visual aspects of the location. Years later, you can access that memory even randomly by any of the senses that recorded something unusual. That will bring up the entire event. Your brain is actually a super computer acting with massive storage with each event accessible from any sense.
School is generally a complete failure. It teaches classes, but it fails to bring the connections together. Hence, 65% of graduating students cannot find employment in the field they went to school for and I have met more engineers as CFOs than people with MBAs in business. The engineer is taught to think out of the box where the MBA is taught this is how the system works and stay in that box to get ahead.
You can exercise your brain like any muscle. There is a site utilizing some of these aspects Lumosity. It is free. Go ahead. Try it. You will see how it tries to exercise your brain in a dynamic manner some people call multitasking. French studies have show you keep learning as long as you use your brain. To stay young, use your mind. My father’s friends all died within 2 to 3 years after retirement. They lost the edge to keep going. As long as there is always something new, it keeps me active and always thinking. I recently saw an old friend after 18 years and he was shocked saying – you haven’t aged. Stay active mentally and it keeps you young.
Gold – The Coming Slingshot Move
QUESTION: You were correct and gold collapsed into June when the gold promoters kept saying buy. Was the low in June sufficient for the major low? Do we still need to see $950?
ANSWER: Markets must move to extremes on both sides to provide theENERGY for the move in the opposite direction. The further gold would decline, the further it will rally. This is what creates the energy. The MINIMUMtargets I provided were 1) mid $1100 range and 2) June 2013. We have met that criteria.
So does this mean gold will rally from here? No, The biggest target in time is January 2014. If January were a high at the $1421 level, then we are probably looking for that final low in the months beyond. A January 2014 high would warn that we could see the worse case scenario being the $950 with the furthest time target December 2015/January 2016. A January 2014 new low would have the potential for the final low. However, you must understand that capital is nearsighted. It focuses largely on one thing at a time. You cannot look at just gold for the answer. This is a dynamic collective economy and everything must be lined up.
Please understand. This is not my OPINION nor is it based upon what I“think” will happen. That is really irrelevant. We all have “opinions”. The important aspect is that you understand HOW markets move so you participate in everything instead of waiting for just a single event. There are no singeltons in life. It is what it is – never what it might have been, could have been, or should have been.
The bubble top in the Nikkei for 1989 began from this same turning point 1987.8 and culminated in 1989.95. You see the sharp crash there in late 1987.The Nikkei about doubles in this short period of time. So what we are looking at here with a possible capital concentration in the US share market that could double by 2015.75 is not unusual. This can push the dollar higher and that will be negative for gold. Private assets rise and gold will follow the Dow Jones when capital is fleeing domestically from the Public to the Private sector, That is the pattern in the Germany hyperinflation period as well – all tangible assets rise. Those preaching the Dow will collapse by 90% and gold will rise do not even understand history. That is possible when gold is the official money but money rises when their is a lack of confidence in the Private sector – not the Public as we have with the Sovereign Debt Crisis. If stocks collapsed, then the bonds will rally. That is the Great Depression and the fundamentals were different. That is was gave birth to socialism. Today it is the socialism that is collapsing. Those who claim there will be hyperinflation and the Dow will crash are insane. If that were the case with hyperinflation, everything rises stocks, real estate, and commodities.
These analysts are fixed on one relationship and the markets are dynamic. They do not follow one relationship perpetually. Domestically capital flows between Public and Private and within the Private from sector to sector. Internationally, Capital flows can be measured by taking the Capital Account and subtracting the Current Account. If the capital is pouring into the USA from 1) emerging markets, 2) Japan, and 3) Europe, then we end up with the same conditions for a bubble top in the USA going into 2015.75.
Swinging a market to the extreme in one direction will then swing it further in the opposite direction. That creates the energy and it is why the majority must always be WRONG! Then if we have the failure for the FLIGHT TO QUALITYwith capital rushing into government paper, that is the condition necessary to send gold up and through the $2300 level that is the 1980 high adjusted for inflation.
Those preaching the collapse in the Dow now to 10 cents on the dollar are insane. To do that now send bonds up when there is no widespread sovereign debt crisis that the public sees. Such a pattern simply cannot happen without everything lined up.
Microsoft Chairman Resigning
The notorious Microsoft Corp Chief Executive Officer Steve Ballmer will now “retire” within the next 12 months. This is interesting for it is a code word forget the hell out of here. The shares rallied almost 9 percent on hopes that someone new will change the course of the company. But Microsoft is going to need to show publicly that it is a real viable company instead of a NSA cronie. The infection of Microsoft goes beyond a CEO. The NSA is deeply embedded in the company. It is now the right time for a non-American firm to compete with Microsoft offering full security and no NSA infiltration. I would even be glad to join the board of such a company OUTSIDE the USA. The world needs to be free of government if it kills it.
Unless Microsoft publicly files something in court at least for show stating it will not provide access for the NSA any longer, there is no viable future for a company that cannot be trusted and even NASA has dumped its products because they are not safe. With Germany now warning its citizens about WINDOWS 8, that is the kiss of death. The NSA was also in bed with the Germans so this announcement is based upon real inside information that they too are not fully revealing. As long as you leave secret doors open for the NSA, hackers will also find those doors and use them. That is why NASA dumped windows.
Any new computer you get install Windows 7. Do not use WINDOWS 8 under any circumstances for anything on which you have personal financial information.
The European Debt Bomb – Unbelievable
The solution we have been working on is rapidly becoming the only way out. The amount of debt keeps growing and there is just no way to resolve this mess. Either we go into a massive default wiping out all pensions, or we keep raising taxes and destroying the economy wiping out the youth and destroying job creation. It is time we get rid of the corruption and the lawyers perpetuating this mess.
Below is a translation of the German report on the fact that about 50% of all European municipalities are broke, will be raising taxes, and their debts keep going as the economy fails to keep pace.
Almost every other municipality has posted a budget deficit in 2012. For the current year, the Institute of Economics, Ernst & Young expects in a recent message to the fact that 59 percent have higher expenditures than revenue. Overall, the debt of all municipalities is 135 billion euros.
Many communities can not repay their debts on their own. Ernst & Young estimates that the shortfall will be allocated in the near future to the taxpayer:
“Given the desperate financial situation of many municipalities comes another wave of power cuts and tax increases on the citizens: three-quarters of local authorities want to increase 2013/2014 taxes and fees. And 37 percent plan to reduce or discontinue services, such as street lighting in the area or in child and eldercare. ”
For the study, 300 German municipalities were interviewed. In addition, the budgets of municipalities was analyzed with at least 20,000 inhabitants.
There is a gap between the low and the heavily indebted local governments. Thus, the municipalities were having a per capita debt of less than 1,000 euros easily improve their situation. Such communities whose per capita debt is over € 2,000, get more and more into debt.
The growing social and personal spending rose by three to four percent in the past year. Investments for the clammy municipalities have less money (-11%). The disability and the provision in old age has been the federal government finance and relieve the municipalities. An assumption of the costs for the integration subsidy for persons with disabilities is also planned.
Sustained federal support is not for the municipalities. According to the Treasurer, the share of municipalities that can not submit a balanced budget will rise from 40 to 53 percent within three years. These communities have also increasingly the federal bailout of the states as well. In return for such grants, the local authorities to undertake consolidation measures.
“End of the road”
For fiscal consolidation and the increase in fees for daycare helps to be increased in 30 percent of all municipalities. The property tax should be raised to 28 percent of all municipalities.
“The fees screw is tightened further, the citizens have to adjust to a new wave of tax and fee increases – after it already in the past few years across the board increases were,” said Hans-Peter Busson, a partner at Ernst & Young.
It is assumed that the youth and senior citizens fall by twelve percent. The street lighting is limited to ten percent. Seven percent of the indoor and outdoor poolsare closed. The possibilities are limited: “In many administrations, there is hardly voluntary benefits that reduced, or charges which may be further increased – as has now reached the end of the story,” Busson said.
The “time bomb” ticking
The debt ceiling to force the states to cut off the municipalities of additional resources. This will strengthen the financial problems yet. ”In fact, many German municipalities are already bankrupt,” Busson said. ”The debts are a time bomb of the moment no one knows how they can be mitigated.”
One potential solution looks Busson in privatization and the sale of real estate. In addition, the consolidation of smaller municipalities should not be taboo.
To profound structural changes is no way around.
No SIngle Investment will Ever be Perpetual – It all changes
QUESTION: You compare gold and the Dow in 1980 and today. Are you saying stocks are better or are you referring to the difference in timing?
ANSWER: There are cyclical periods for each and every aspect of investment. I talk about the gold promoters because they mislead people and tell them only gold will survive. That is not true. Capital moves from sector to sector. The Panic of 1907 was focused on the Railroads. Then the Panic of 1919 was commodities, which was followed by the Industrials for the Panic of 1929.
Silver peaked in 1919 and then fell into 1932 – 13 year decline. The commodities ended up bottoming with the stock market in 1932 for the Great Depression. Then the rally move into the bond market as we entered a Public Wave.
The next Crash was that of 1937, which was only 12 months, but it was scary. Most people assumed it would be a repeat of the Great Depression.
The bonds peaked in 1950 and then began a 31.4 year decline into 1981. This led to the rise in the dollar as capital was buying US debt at insane levels of interest rates. The British pound fell to $1.03 in 1985.
The commodities began to rise from the 1932 low. Guess what? Adding the Pi Cycle of 31.4 years brings us to the last year silver appeared in coinage – 1964.
The 1966 Crash was focused in the mutual fund sector because funds at that time were listed and people bid them up far beyond their asset worth.
Nixon closed the Gold window giving birth to the floating exchange rate system on August 15th, 1971. That was. 37.104 years after the dollar devaluation and confiscation of gold in 1934 (8.615 * 4.307)..
Then we have the Crash of 1974. This unfolded when foreign capital began to sell the dollar fearing it would collapse. This came 37 years after the 1937 event (8.6 * 4.3).
1980 we have the peak in commodities. 1981 we have the low in bonds peak in rates. 1985 we have Plaza Accord. 1987 the Crash dollar driven event that sent the dollar down 40% and capital fleeing into Japan creating the 1989 Bubble Top. As Japan peaked, capital then fled to South East Asia where it peaked in 1994 with the simultaneous low in the US Dow Jones. That lead to a tempt high July 20th 1998 in US stocks and the 1998 the peak in Russia and the collapse of Long-term Capital Management creating the first Fed bailout of a hedge fund to save the banks. Capital then flees into the US .COM stocks creating the Bubble in 2000 with the low in 2003. Then we rally into 2007 with the Mortgage Bubble and the collapse into 2008-2009. Then we have the rally to new highs in the US share market that nobody believes. The list goes on and on.
The key here is that this is like lightening. It never strikes twice in the same place. Each bubble involves something different. Therefore, preaching any single investment is the alpha-omega is wrong, can cost a fortune, and in the end you may lose your shirt. One thing you can bank on – when any market reaches a bubble, move on for that is what capital will do. Never stay there expecting new highs. Sorry. It is over. You have to wait for the next cycle.
So my only problem with the gold promoters is that they are no different than a bond salesman. Each have their pitch but downgrade any alternative. There is no single investment that will ever perpetually rise. Gold will rise, but only when the timing is correct. Gold rallied for 13 years. It was time for a correction. Sorry – that is the way markets trade. Live and learn – or die waiting for the next cycle.