How Stocks Rise in an Economic Decline
Japan is in another recession but the Nikkei continues to go up!!
I assume this is mainly because of the carry trade??
Your thought, please.
Regards,
RC
ANSWER:
This is the New Age of Economics. When you enter a Sovereign Debt
Crisis, people lose confidence in government. When that takes place,
capital moves to the private sector. Stocks will rise as a hedge against
government in such situations. Do not confuse this with rising stocks
in a speculative boom. This is the phase of trying to get off the grid.
Things act differently then. There is a different outcome than
hyperinflation, which has taken place in a peripheral economy but never
in a main economy from purely economics.
I have explained before, the collapse of Rome was NOT due to hyperinflation. It was FIRST due to the collapse in confidence when Valerian I
was captured by the Persians, turned into a slave, and stuffed when he
died as a trophy. When people no longer trust the state, the monetary
system collapses. It is never HYPERINFLATION first —
it’s the result of the collapse in confidence. That is what the goldbugs
never get and it is why they lose so much money waiting for inflation
to appear first. They simply do not understand how the real world
functions, no less the monetary system. They hang their entire thesis on
the German hyperinflation without understanding that it was a communist
revolution that disavowed the national debt of the previous government
by wiping out banks and savings as they invited the Russian communists
to take Germany. If you had any tangible wealth, you hoarded it; you
certainly did not have money on deposit in banks.
In the case of Japan, each emperor issued new coins and
devalued the outstanding money supply to 10% of his new coinage.
Eventually, people simply refused to accept Japanese coins, and as a
result, bags of rice became money and Japanese emperors LOST the
confidence of the people and could no longer issue coins for 600 years.
Welcome to the New Age Economy – Even Buffet Cannot Make the Transition
QUESTION: Mr. Armstrong, I diversified my money into a number of hedge funds and I lost on each and every one from gold, commodities, stocks that did not even match the S&P 500 to those who piled into oil. It seems 2015 has been a total wipe out for professionals. It would be great if you restarted your hedge fund. You won hedge fund manager of the year when everyone blew up on Lon-Term Capital Management. What will it take to get you back in the game?
PD
ANSWER: I understand. Sorry, I really do not want to get “back in the game.” It is a personal issue of time and quality of life rather than money. I could not spend it anyway. When you make billions, it becomes monopoly money for punts. It is way too much to alter your life. Go too far and the money owns you.
We are entertaining proposals to set up funds using our models. It is hard because you have to have the discipline to do whatever it says and sometimes its most fantastic calls even made me say, “OMG!” So if it made me question whether it would be right, I knew it would be because the majority must be wrong.
I understand this has been the worst year for professionals since the 2007-2009 crash. Even Warren Buffet’s Berkshire has been unable to match the returns on the S&P 500. Buffet’s traditional investment strategy is not cutting it for this New Age of Economics. Buffet has had a very bad year so far. The flavor of the year was to pour into debt, which has come back to haunt many hedge funds. Overall, this has been the worst year since 2007 for hedge funds. They had their head handed to them on oil stocks to say the least. This has led many to question if hedge funds have simply lost their way. Those funds that piled into commodities and gold have lost billions. One fund lost $830 million on a single Swiss franc trade.
This is a new era and if you do not comprehend what is going on — even if you are a professional — you will lose everything based upon what is coming. This is not going to be easy for anyone. What lies behind the curtain is far more complex than anyone realizes right now. The next couple of years will see some professionals completely blown out of the water. Traditional models will simply fail.
France Exempting Itself from all EU Rules
However, it now turns out that France cannot meet the EU criteria, as was the case for Greece. Therefore, the politicians in power want to extend the state of emergency because that exempts them from all EU economic criteria. Nothing but nothing can ever be just straight up. Increase your security, of course. That’s understandable. But to extend a state of emergency for political purposes seems to be a secret political bonus. The euro is doomed anyhow. This just illustrates that the second largest member is also in the same position as Greece. They are using the siege of Paris as their get out of responsibility card in this game of Monopoly.
Are Goldbugs Howling at the Moon with $100,000 Prices?
COMMENT: Marty, the goldbugs are like jihadists, they are now proclaiming China will buy all gold and make it $50,000 to $100,000 an ounce. When wrong, just raise the targets to even more insane levels. They really hate your guts and the closer gold comes to making new lows the personal attacks on you escalate. It is clear that they are deranged and think if they can slander you they will save gold. They also said your “big money” can park in gold if it is $50,000 to $100,000 and ounce. That would be fiat if government dictated such a price. They are out of their minds with this obsession.
This is becoming a pathetic display of insanity like getting 73 virgins if you sacrifice your savings. They are claiming you have been wrong on the stock market that it is flat and that proves you are wrong on gold. I suppose they missed the call where you said it would peak in May, drop into August and base this year below 18500. They twist and lie about everything. I am coming to the conclusion they are just lunatics who bark at the Moon for they are no financial analyst and certainly do not understand the economy.
Keep up the good work
REPLY: Well, the computer did a good job forecasting the U.S. share market. The goldbugs can howl at the moon all they want, but the markets are never wrong. The computer nailed the May high, called for a waterfall crash, and then picked the low. The facts are the facts, yet they are desperate to say otherwise in hopes of saving gold. The markets dictate the outcome — not their rantings.
Gold is a hedge against government and it will rally when the timing is right. We have stated when will be right and gave the benchmark dates. This is all about them being wrong, and like Marx, trying to deny that there is a business cycle. To them the entire world is wrong and only they are right.
From the global view, you can see why they have been wrong. They only look at the world in dollars. When we look at the Dow, the peak was 2000 in euros. That year produced the highest close. The 2007 rally in the U.S. share market was NOT the major high in terms of currencies. The 2009 low was the major low. In terms of currencies, we have only six years up. This warns that the Dow will rise further globally, meaning the dollar will move higher.
In terms of dollars, both the Dax (Germany) and CAC40 (France) share indexes reflect the same situation of the major high being 2000, not 2007 or currently.
Looking at the British FTSE reveals a flat top, which suggests that this will breakout to new highs. This is likely going to be capital shifting inside Europe to the pound to abandon the euro. If Britain FAILS to leave the EU, it will be dragged down the rabbit hole.
It is nonsense to think that gold will go up to $50,000 to $100,000 or that China will back its currency with gold at such levels. The world abandoned silver after the Prussian War. The silver miners convinced U.S. politicians to buy their silver and force the world to accept whatever ratio they dictated. Well, they bankrupted the USA because the silver/gold ratio that they fixed at 16:1 was 30:1 outside of the USA. That did not end very nicely, yet they think arbitrarily raising the price of gold to $100,000 will solve the problem. China has absolutely ZERO intention of such insanity.
They can rant against me all they want, but it will not make them right. Gold will not rally before its time. We have given the targets at the conference. The manipulators have it easy. Just rally gold $50 and they run out and buy more. Then it is taken back down and they do it again in three months. I seriously question why these so-called analysts are praised for cheerleading every rally yet never once say sell.
Origin of Dollar Sign
The British needed money badly, so they demanded any payment from the colonists was to be in silver and gold, but any payment to America was to be in copper. This resulted in AMERICA being starved of money to the point that they issued paper money. The standard coin used in America was the Spanish 8 reals, which became the dollar. A piece of eight was cutting this up like a pie. One eighth of a dollar or one silver real was one “bit”, so 2 bits was 25 cents, 4 bits was half a dollar, and 8 bits equaled a dollar.
Therefore,
the dollar sign “$” came from the Spanish 8 reals, not from some secret
banking cartel destined to rule the world. There is no secret hidden
image of meaning behind the symbol. It was merely taken from the Spanish
coins that were in circulation throughout the American colonies since
the British needed money and extracted everything from America, just as
governments are doing again today.
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