MARTIN ARMSTRONG'S LATEST BLOG POSTS

The False Move

Posted on August 1, 2013 by Martin Armstrong

Just as they say there is the calm before the storm, there is always the false move before the breakout. As we approach the midpoint on the Economic Confidence Model August 7th, which is curiously 31.4 days from the low, we should keep in mind that this is the midpoint and not the climax peak. Resistance still stands at the 16000 level. The Dow has been crawling sideways buying time.

The timing arrays are also now lining up with August 7th. This is independent of the ECM and is the collection of 72 models. Thus, as we move close to this target, we also see a Panic Cycle and volatility rising the week after.

Capital will begin to shift and start to make its decision. If we see a high on the 7th in the Dow, we may see the classic False Move to the downside for the typical time period of 1 to three units. This is what we may see. A brief correction with all the bears yelling I told you so, then followed by a rally that wipes them out. This market has not peaked yet and it is destined for much higher prices ahead going into 2015.75.

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Fed Double Talk or Cryptic Reality

Posted on August 1, 2013 by Martin Armstrong

QUESTION: “…the best way to get interest rates up is to have low interest rates” —Fed Chairman Bernanke responding to a Congressional testimony question (not today)
And today:
FED SAYS IT IS PREPARED TO INCREASE OR REDUCE THE PACE OF PURCHASES.
So what about this double talk?
What are they trying to do?
Where do they want to go?
Regards.

ANSWER: Bernanke is actually speaking the truth. The best way to get interest rates to go up, is to have pushed them lower. The Fed bought back the long-term and shifted the debt short-term. This increases the potential volatility. Then we have the insolvency of pension funds and others who cannot deal with the earning nothing on money offered by the bankers – 0.5% for 3 years. This forces capital to shift and invest which is why the Dow has done so well. That is why the best way to send interest rates high is to suppress them forcing the supply to shift. The Fed could not do that by itself.

By saying it remains nimble ready to increase or decrease interest purchases is a reflection of what he see in this shift in capital. We may see the Dow make a sharp brief correction, then swing to new highs in a phase transition. The classic false move before the breakout.

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Tangible v Intangible Money – Why Times Have Changed

Posted on August 1, 2013 by Martin Armstrong

The mantra of Goldbugs has been that paper money is worthless and only gold is money. That is pretty much like saying the earth is still flat. Money has historically been many things and gold is only one of them. The issue is always the fact that money (regardless of what it is) rises and falls and everyone since the time of Hammurabi have been trying to create the perfect world where assets rise and you make money, yet at the same time money does not decline in purchasing power. This is just impossible and the problem is the fool who is too scared to invest so he wants to hold only cash and then complains where it buys less and says that is evil and not fair.

Gold is a commodity and resides on the asset side of the balance sheet. The Goldbugs tout the German Hyperinflation and somehow pretend that only gold survived when in fact it was all assets. Indeed, the replacement currency that stopped the hyperinflation was backed by real estate – not gold. Understanding what we face is the real key. Owning real estate, stocks, and gold is a diversified portfolio. They all rise against the decline in purchasing power of money regardless what it is. When gold was money, it then declined against real estate and stocks. WHATEVER is money moves opposite of assets.

Up to now, gold has been the WORST performing asset within that class. Just to match the 1980 high adjusted for inflation gold needs to be $2300. The Dow Jones was 1,000 and today we are approaching 16,000. If gold has performed in the same manner it should have reach $14,000. Gold will rally sharply as a hedge against government. We are not headed into hyperinflation – we are headed into a very dangerous black hole where government destroys the entire economy in pursuit of taxes.

In the USA there are 609.8 million credit cards that have been issued with about $800 billion in outstanding debt on average. A total of 78% of all American have a credit card and 80% have a debt card. But the real statistic is demonstrating the evolution of money that I have been writing about. We are approaching the 50% level where Americans have gone a full week without ever handling money in paper or coin form (latest number was 43%). The younger generations go into Starbucks and hand their phone to pay by Google Wallets. They prefer texting to phone calls. Things are a changing. It helps to stick you head out the window when you drive like a dog – it is a lot different out there than it use to be.

Money as we know it is becoming electronic. The good news is in doing so, this is really one giant step for society. Taxes were necessary when money was tangible. The king needed to get some back in order to pay his bills. Now that money is electronic, everything has changed and tangible forms of money are vanishing heading off into the same place vacuum tubes, 45 records, and 8-Track tapes went. I am an old 4-speed stick-driver. I like the control. You have to order stick in many cars today and they quickly ask – gee you know how to drive one? When I go to a parking garage, not everyone can take your car. It is amazing.

As we approach this shift in trends within the global economy, stop being so prejudice. Grasp the understanding between assets and money. Why should you care in what you make the most money. The object here is to survive. Open your mind and see the world for what it is – a giant melting pot of assets v money everywhere.

Tangible assets survive because they are revalued in terms of the coming new currency. Our problem is not WHAT IS MONEY, but it is the DEBT. Once upon a time, it was less inflationary to borrow than print because you could not use the bonds as collateral for loans. Thus, they did not expand the money supply. Once we allowed T-Bills and bonds to be collateral, then we entered the realm where bonds and bills became money that simply paid interest. Money began paying interest with the Civil War to entice people to accept it. We have come full circle. The dollar is the reserve currency because it pays interest to hold it and the supply is deep enough for the world to use unlike the yen or the euro.

We are in the middle of a collapse in the economic structure upon which society was formed post-war. Marxism has combined with debt and this has produced a lethal dose that has poisoned the well. All governments are collapsing. They are fighting as nasty as they can desperately trying to hold on to their fleeting power. But the economic system is unsustainable as communism. This is the world we face. Wake up and smell the roses before the coffin closes.

SNOWDEN'S DAD CONFRONTS TYRANNICAL OBAMA

July 26, 2013
President Barack Obama
The White House
1600 Pennsylvania Avenue, N.W.
Washington, D.C. 20500

Re: Civil Disobedience, Edward J. Snowden, and the Constitution

Dear Mr. President:

You are acutely aware that the history of liberty is a history of civil disobedience to unjust laws or practices. As Edmund Burke sermonized, “All that is necessary for the triumph of evil is that good men do nothing.”

Civil disobedience is not the first, but the last option. Henry David Thoreau wrote with profound restraint in Civil Disobedience: “If the injustice is part of the necessary friction of the machine of government, let it go, let it go: perchance it will wear smooth certainly the machine will wear out. If the injustice has a spring, or a pulley, or a rope, or a crank, exclusively for itself, then perhaps you may consider whether the remedy will not be worse than the evil; but if it is of such a nature that it requires you to be the agent of injustice to another, then, I say, break the law. Let your life be a counter friction to stop the machine.”

Thoreau’s moral philosophy found expression during the Nuremburg trials in which “following orders” was rejected as a defense. Indeed, military law requires disobedience to clearly illegal orders.

A dark chapter in America’s World War II history would not have been written if the then United States Attorney General had resigned rather than participate in racist concentration camps imprisoning 120,000 Japanese American citizens and resident aliens.

Civil disobedience to the Fugitive Slave Act and Jim Crow laws provoked the end of slavery and the modern civil rights revolution.

We submit that Edward J. Snowden’s disclosures of dragnet surveillance of Americans under § 215 of the Patriot Act, § 702 of the Foreign Intelligence Surveillance Act Amendments, or otherwise were sanctioned by Thoreau’s time-honored moral philosophy and justifications for civil disobedience. Since 2005, Mr. Snowden had been employed by the intelligence community. He found himself complicit in secret, indiscriminate spying on millions of innocent citizens contrary to the spirit if not the letter of the First and Fourth Amendments and the transparency indispensable to self-government. Members of Congress entrusted with oversight remained silent or Delphic. Mr. Snowden confronted a choice between civic duty and passivity. He may have recalled the injunction of Martin Luther King, Jr.: “He who passively accepts evil is as much involved in it as he who helps to perpetrate it.” Mr. Snowden chose duty. Your administration vindictively responded with a criminal complaint alleging violations of the Espionage Act.

From the commencement of your administration, your secrecy of the National Security Agency’s Orwellian surveillance programs had frustrated a national conversation over their legality, necessity, or morality. That secrecy (combined with congressional nonfeasance) provoked Edward’s disclosures, which sparked a national conversation which you have belatedly and cynically embraced. Legislation has been introduced in both the House of Representatives and Senate to curtail or terminate the NSA’s programs, and the American people are being educated to the public policy choices at hand. A commanding majority now voice concerns over the dragnet surveillance of Americans that Edward exposed and you concealed. It seems mystifying to us that you are prosecuting Edward for accomplishing what you have said urgently needed to be done!

The right to be left alone from government snooping–the most cherished right among civilized people—is the cornerstone of liberty. Supreme Court Justice Robert Jackson served as Chief Prosecutor at Nuremburg. He came to learn of the dynamics of the Third Reich that crushed a free society, and which have lessons for the United States today.

Writing in Brinegar v. United States, Justice Jackson elaborated:

The Fourth Amendment states: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

These, I protest, are not mere second-class rights but belong in the catalog of indispensable freedoms. Among deprivations of rights, none is so effective in cowing a population, crushing the spirit of the individual and putting terror in every heart. Uncontrolled search and seizure is one of the first and most effective weapons in the arsenal of every arbitrary government. And one need only briefly to have dwelt and worked among a people possessed of many admirable qualities but deprived of these rights to know that the human personality deteriorates and dignity and self-reliance disappear where homes, persons and possessions are subject at any hour to unheralded search and seizure by the police.

We thus find your administration’s zeal to punish Mr. Snowden’s discharge of civic duty to protect democratic processes and to safeguard liberty to be unconscionable and indefensible.

We are also appalled at your administration’s scorn for due process, the rule of law, fairness, and the presumption of innocence as regards Edward.

On June 27, 2013, Mr. Fein wrote a letter to the Attorney General stating that Edward’s father was substantially convinced that he would return to the United States to confront the charges that have been lodged against him if three cornerstones of due process were guaranteed. The letter was not an ultimatum, but an invitation to discuss fair trial imperatives. The Attorney General has sneered at the overture with studied silence.

We thus suspect your administration wishes to avoid a trial because of constitutional doubts about application of the Espionage Act in these circumstances, and obligations to disclose to the public potentially embarrassing classified information under the Classified Information Procedures Act.

Your decision to force down a civilian airliner carrying Bolivian President Eva Morales in hopes of kidnapping Edward also does not inspire confidence that you are committed to providing him a fair trial. Neither does your refusal to remind the American people and prominent Democrats and Republicans in the House and Senate like House Speaker John Boehner, Congresswoman Nancy Pelosi, Congresswoman Michele Bachmann,and Senator Dianne Feinstein that Edward enjoys a presumption of innocence. He should not be convicted before trial. Yet Speaker Boehner has denounced Edward as a “traitor.”

Ms. Pelosi has pontificated that Edward “did violate the law in terms of releasing those documents.” Ms. Bachmann has pronounced that, “This was not the act of a patriot; this was an act of a traitor.” And Ms. Feinstein has decreed that Edward was guilty of “treason,” which is defined in Article III of the Constitution as “levying war” against the United States, “or in adhering to their enemies, giving them aid and comfort.”

You have let those quadruple affronts to due process pass unrebuked, while you have disparaged Edward as a “hacker” to cast aspersion on his motivations and talents. Have you forgotten the Supreme Court’s gospel in Berger v. United States that the interests of the government “in a criminal prosecution is not that it shall win a case, but that justice shall be done?”

We also find reprehensible your administration’s Espionage Act prosecution of Edward for disclosures indistinguishable from those which routinely find their way into the public domain via your high level appointees for partisan political advantage. Classified details of your predator drone protocols, for instance, were shared with the New York Times with impunity to bolster your national security credentials. Justice Jackson observed in Railway Express Agency, Inc. v. New York: “The framers of the Constitution knew, and we should not forget today, that there is no more effective practical guaranty against arbitrary and unreasonable government than to require that the principles of law which officials would impose upon a minority must be imposed generally.”

In light of the circumstances amplified above, we urge you to order the Attorney General to move to dismiss the outstanding criminal complaint against Edward, and to support legislation to remedy the NSA surveillance abuses he revealed. Such presidential directives would mark your finest constitutional and moral hour.

Sincerely,
Bruce Fein
Counsel for Lon Snowden
Lon Snowden

Jacob G. Hornberger: THE REAL CRIMINALS UNDER OUR NATIONAL-SECURITY STATE SYSTEM

http://fff.org/2013/07/31/the-real-criminals-under-our-national-security-state-system/?utm_source=rss&utm_medium=rss&utm_campaign=the-real-criminals-under-our-national-security-state-system

Let’s recap the situation regarding criminal conduct within the U.S. national-security state, just to see how the national-security state has succeeded in corrupting the morals and values of our nation.

People Who Are Considered Heroes by the National-Security State

1. The officials who devised the scheme that plunged America into the illegal world of torture.

2. The officials who actually committed the crime of torture.

3. The officials who induced private telecommunication firms to engage in illegal monitoring of their customer’s telephone calls.

4. The officials who devised the scheme that plunged America into the illegal world of assassination.

5. The officials who have actually committed the assassinations.

6. The officials who devised the scheme to establish a Constitution-free torture and indefinite-incarceration zone at Guantanamo Bay.

7. The officials who have actually supervised and operated the torture and indefinite-incarceration zone at Guantanamo Bay.

8. The officials who devised the illegal scheme to kidnap a man on the streets of Milan, Italy, and transport him to the Egypt for the purpose of having him brutally tortured by the U.S.- supported Egyptian military dictatorship.

9. The officials who actually kidnapped a man on the streets of Milan, Italy, drugged him, and then transported him to Egypt, for the purpose of having him brutally tortured by the U.S.-supported Egyptian military dictatorship.

10. The officials who have harbored the CIA officials who have been convicted by an Italian court for the illegal kidnapping in Milan and who have refused to extradite these convicted felons to Italy to face justice.

11. The officials who kidnapped an innocent man at Dulles Airport who was on his way home to Canada and transferred him to the dictatorship in Syria, where he was brutally tortured for about a year before finally being released without charges.

12. The officials who have supported, worked with, and trained brutal foreign dictatorships, such as those in Iran, Iraq, Jordan, Tunisia, Egypt, Chile, Guatemala, and many others.

13. The officials who have harbored a CIA operative who is accused of having committed the terrorist downing of a Cuban civilian airliner, killing dozens of innocent people, and who have steadfastly refused to honor an extradition request from Venezuela, where the crime took place.

14. The officials who have imposed and enforced brutal sanctions and embargoes against foreign regimes, which have succeeded in causing untold suffering, including death, for the people of the targeted countries.

15. The officials whose dirty wars have killed countless women and children and other innocent people.

16. Director of National Intelligence James R. Clapper’s perjury before Congress regarding the NSA’s super-secret surveillance scheme on the American people and the people of the world.

  People Who Are Considered Criminals by the National Security State

1. Daniel Ellsberg, who revealed the national-security state’s lies and crimes arising out of the Vietnam War.

2. Jesselyn Radack, who revealed the national-security state’s brutal and illegal treatment of John Walker Lindh.

3. Bradley Manning, who revealed the national-security state’s lies and crimes arising out of its wars in Iraq and Afghanistan.

4. Julian Assange, whose organization WikiLeaks published the information revealed to the world by Bradley Manning.

5. Edward Snowden, who revealed the national-security state’s massive secret surveillance scheme on the American people and the people of the world.

6. Every other government official or government contractor, and possibly also journalists and others, who reveal or publish the national-security state’s crimes to the people of the world.

Russia Grants Snowden 1-Year Asylum

BREAKING NEWS Thursday, August 1, 2013 8:59 AM EDT

Russia Grants Snowden 1-Year Asylum After a month holed up in the transit zone of Moscow’s Sheremetyevo airport, Edward J. Snowden, the former intelligence contractor wanted by the United States for leaking details of surveillance programs, has received temporary refugee status in Russia and left the airport, his lawyer said Thursday. The movement from the airport’s international transit zone marked a significant change in Mr. Snowden’s status for the first time since he left the United States and began leaking details of the National Security Agency’s surveillance. The refugee status in Russia marks the first formal support from another government for the 30-year-old leaker, and seems likely to elicit strong objections from the United States. READ MORE » http://www.nytimes.com/2013/08/02/world/europe/edward-snowden-russia.html?emc=edit_na_20130801

ARTHUR SILBER: On Survival

http://powerofnarrative.blogspot.com/2013/07/on-survival.html

How does a decent human being, a person who understands the precious, irreplaceable value of a single life, live in a world like ours? But, you see, the State doesn't care if such people live. Ultimately, the State would prefer that such people cease to trouble it, that they don't exist at all -- that is, that they die. That is the final meaning of our State and its actions. If you won't obey, the State wants you to die.

That is what people desperately need to understand. When enough people finally understand it, then we can talk about resistance that will make a difference. Until that day arrives, we aren't living, not in anything close to the fullest sense in which I use that word. We are surviving, which is not at all the same.

Trader Dan's Market Views

Wednesday, July 31, 2013

Gold Chart via ADX by request

Here is a look at the daily chart of gold as it stands after the dust has had a chance to settle from the commotion resulting from the FOMC statement of today.

Here is my take on the metal as of now:
it has made a nice recovery off of the low just below $1200. It is stalling out however at the resistance zone noted on the chart. That comes in near $1350 and extends towards $1360.

Bulls will need to push past this region soon or gold does run the risk of seeing some stale long liquidation which would have the potential to drop the metal back down towards $1280. Based on what I am seeing of this chart, if they do clear through $1360 there does not appear to be much in the way of overhead chart resistance until near $1390.

This particular indicator, which I detailed a while back on the site here is showing that the downtrend has definitely stopped. That is evidenced by the continued downward progress of the ADX line (dark purple) which is heading lower from a lofty 47 reading. Remember, a rising ADX indicates the presence of a trending market, either up or down is immaterial.

As far as the two directional indicators go, the red line or -DMI remains above the blue line or +DXI using this particular time frame for reference. This tells me that for right now the bears are still in control of this market and the downtrend has the potential to resume if any downside support levels give way.

If however the bulls can power through that overhead resistance, this indicator would more than likely generate a buy signal.

Other indicators are in a buy mode already but they too are showing signs of a stalling in upside momentum.

Gold had a strange and somewhat convoluted reaction to the Fed minutes as if it was unsure of what to do. First it moved a bit higher, then sold off strongly as players focused in on the statement dealing with the lack of inflation. Then later in the afternoon, the metal gathered strength moving back higher again as the focus shifted to the more dovish tone of the FOMC statement. 

Confirmation of that was provided by the rally in the long end of the curve as bonds came well off their worse levels of the session and actually moved into positive territory about the same time as gold broke higher. Evidently, both the bond market and the gold market are now expecting no curtailment of the Fed bond buying program.

We may have to wait until FRiday to see if anything changes that current sentiment.

August Gold enters its Delivery Period

With all the chatter out there about shortages of gold, Comex warehouse stocks drawdowns, etc., the delivery process for August gold could be interesting.

I must say that given all the recent fanfare, to see Deutsche Bank being a large issuer on the first delivery day seems to take the steam out of this talk. They are delivering 1,103 contracts worth of gold at 100 ounces each.

JP Morgan was the largest stopper with 847 contracts picked up for the house and 200 for their clients.

Remember when we had all that talk that Deutsche was taking delivery of Comex gold in order to return it to Germany.... Well...

The truth is that the gold delivery process has always been and will remain opaque. Firms may stop in previous months only to show up as big sellers in subsequent months. We simply have no way of knowing why they are buying or selling because we are not insiders working within their firms.

That is why, while the process is always interesting to observe, drawing conclusions from it can be rather risky.

A better gauge of the demand for gold is merely watching the price action. That will tell you what you need to know and eliminate all the worry and fuss over trying to figure out who is doing what behind the scenes in the gold market. If elephants are walking through a plot of ground, they always leave big footprints that are difficult to not see! Remember that.

FOMC - Worried about a Lack of Inflation

That is the big thing to take away from today's FOMC statement in my opinion. 

Here are the two key excerpts in my view:

"Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable."

"The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back towards its objective over the medium term."

If anything, the Fed became more "dovish" if you ask me as they are back to talking about deflation concerns. This translates to no let up for the foreseeable future ( to use Bernanke's words from his recent Congressional testimony) for the bond buying program referred to as QE.

One would expect this to weaken the Dollar against some of the majors, as is currently taking place, and by default help to shore up the gold price. However, it is this concern about the lack of inflation that should get the attention of gold traders. They are focusing more on that than they are on the weakness in the US Dollar.

However, and I think this is important, their statement just further underscores the fact that all future Fed actions in regards to the QE program are going to continue to be heavily reliant on future economic data. If the data shows steady improvement, talk about tapering will increase. If the data shows weak or lackluster growth, tapering talk will be put off. In other words, traders/investors are on the same exact page with the Fed in that we are all going to be sitting around looking at each piece of economic data as it is released and attempting to view it in the light of potential Federal Reserve action based upon it.

An example - if we get a strong payrolls number in the upcoming jobs report, tapering talk will pick up, the Dollar will rise, gold will sell off and the bond yields will rise. If the number is anemic, the opposite will occur. As you can see, we are effectively right back to where we were before today's FOMC statement was released.

Isn't it peachy that our markets have degenerated into entrail reading of the FOMC?

Copper nearing Chart Support - At Key Level

More and more copper is taking its cues from economic data and developments out of China. I can well remember the days when the US was king as far as Copper prices went. If the US economy was humming along and if housing was strong, it was a fairly simple bet that copper prices were going to move higher or stay firm.

Nowadays it is China that is the primary driver of copper prices. Last week's announcement that the authorities over there were ordering production cutbacks in order to deal with what they consider to be a surplus of goods, sent base metal prices on a downward spiral. Copper dropped hard, pure and simple.

However, there is still a US influence on the market and today's GDP number seems to have breathed enough life into the red metal that it has thus far been able to hold above what I consider to be a key technical support level on its price chart, namely the $3.00 zone.

Dr. Copper, as it is affectionately known in trading circles on account of its excellent predictive capacity when it comes to diagnosing the health of the global economy, is signaling a period of relatively flat, decidedly unimpressive growth. 

As you can plainly see from the chart pattern, there is nothing bullish about the metal whatsoever. The one redeeming factor has been its refusal to break below the $3.00 level. If, and this is another one of those big "IF's", copper were to collapse through that level, it would signal another slowdown coming our way. My hunch is that the Central Banks of the developed world will more than likely maintain enough monetary stimulus to try to prevent this from happening however.

That should translate into a further continuation of the sideways pattern on the chart with the metal attracting enough buying to keep it limping along above the $3.00 level. It will take some pretty strong economic news to push it up and away from the top of the pattern, but especially above that downtrending 50 week moving average.

What this translates too is that as far as inflation signals go, the red metal is certainly not generating any at this time. That takes away one plank from gold if the industrial metals are generally weak.

Moving over to crude oil and the energy sector... Crude has dropped off its best levels and unleaded gasoline prices are back under the $3.00 level (barely). Thus the energy sector has seemingly run out of upside steam for the moment. That is not to say that it is about to fall apart; what it is saying is that the recent strong drive upward has stalled out. 

Couple that with what is expected to be a very large corn crop and soybean crop, and there is not any help for the inflation boogie man coming from the food sector either. 

In other words, we are continuing to see the absence of any strong, sustained upward move across the broader commodity complex. With the job market here in the US remaining subdued, it is difficult for me to see, at this time, where the inflation pressures are going to come from, particularly if WAGES REMAIN FLAT.

I should also note here that the yield on the Ten Year Treasury Note briefly popped above the 2.7% level this morning before retreating slightly. keep in mind that the last time it moved above that level, Fed Chairman Ben Bernanke changed his somewhat hawkish stance displayed in June to that of a SUPER DOVE in July when he uttered those now famous words about QE continuing "for the foreseeable future". That sent the yield crashing lower but once again, it has quietly snuck back up again. HMMM... wonder what the FOMC statement will therefore give us this afternoon???? Maybe they will have to sent more Fed governors back out to disavow what they might have written for us.

Either way, it looks as if gold is going to continue being held hostage to the vagaries and whims of the Central Bankers, as is the entire economy for that matter.

I will leave you with this chart of the Australian Dollar for now. The Aussie is particularly sensitive to the commodity cycle as the economy down under is heavily dependent on the production of raw materials, a large chunk of which end up being sold to China. As you can see, it is sinking and sinking heavily. This does not bode well for strength across the commodity sector.