Last week I began a two part series on Martin Armstrong’s 2016 World Economic Conference. In Part One I reviewed the Technical Analysis portion of the conference as well as the Economic Confidence Model, or ECM, and then the Cycle of War and Political Change model. Today we will look to the future and what Martin expects to happen both domestically and internationally, but first I’d like to review a few important points from part one.
An emphasis of Martin’s is that subjectivity needs to be eliminated from analysis. Martin’s model is based upon historical data and mathematical formulas. The all important reversal points are calculated, not subjectively determined. This is the problem with most analytical tools promoted today, they are highly subjective. Different people will arrive at different conclusions using the same tools.
A concept that needs to be grasped is that the models and most things in this world are fractal, meaning events reoccur in a defined pattern. A fractal is a never-ending pattern. They are created by repeating a simple process over and over. In Martin’s ECM larger waves are composed of smaller waves which themselves are composed of still smaller waves. Each model has its own wave pattern.
Constructive interference occurs when two models align with each other. When this happens the waves of each combine to form a much largeR wave. The waves can be though of as change. As an example Martin separates his Cycles of War model into two separate models, one representing civil unrest and another representing international conflict. Of concern is the fact that these two individual models, although on different wave lengths, have aligned in 2014 building into 2020. With this alignment the potential for civil and international conflict increases.
Now lets look toward the future, and what may be in store.
In order to peer into the future we need to focus on confidence. Confidence will point the way. Think of confidence as magnetic north, this is where international capital will run to. Where capital flows assets will increase and where it leaves assets will decrease. Most analysts focus on domestic concerns only, ignoring the flow or potential flow of global capital assets.
Imagine yourself as an international investment firm, managing billions of dollars. Where do you invest or “park” these funds, attempting at the very least to protect your client’s assets let alone grow them? If you had invested in Euro denominated assets you would have taken over a 5% loss (10% from its peak this year) simply due to the rise in the Dollar versus the Euro, let alone on the value of the asset itself. This phenomenon is occurring all over the world and the dollar is continuing to strengthen. The Fed raised the interest rate this week one quarter percent and is set to raise it three times in 2017. This will further strengthen the dollar. International capital will continue to snowball to the US likely building to an avalanche.
The US will continue to be the destination of international capital, but which US assets will the capital flow to. US treasuries have been a favorite but what if confidence in government collapses? Then where will the capital flow? If not treasuries the last bastion that can handle such large sums will be US equities, especially large blue chip companies, such as represented by the Dow Jones Industrial Averages. This is the scenario that Martin espouses.
Just this past Wednesday Martin wrote:
We are pushing up against the next resistance level. We need to close above 19970 to imply we will break through the 20k level. It does not yet appear to be ready to burst through the 21K level. Nevertheless, the next main target is still in the 23k level. That is what we have to exceed to get the Phase Transition to 40k.
Historical valuation techniques, such as PE ratios, will essentially be meaningless, and perhaps already are. If options are limited global institutions will have no choice.
Back on December 19th, 2015 Martin wrote:
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.
Its now one year later and Martin’s projections appear to be taking shape.
What about Gold? Gold has been falling like a rock. The high this year was 1365 during the summer and as of today sits at 1134, that’s a 17 percent drop. Martin has been calling for this fall for some time, while the “gold diggers” keep claiming the DOW will crash will gold will rise. All kinds of excuses are offered for this not happening. One often promoted is that “they” are manipulating the markets, but evidence or proof are never offered, let alone identifying the “they”.
Martin expects gold to drop below 1000 before raising. This may be one of those generational investment opportunities.
On Feb 4, 2016 Martin Armstrong wrote in his blog
The REAL function of gold is to act as a hedge against government — not inflation. We do not find any correlation that is consistent to imply that increasing the money supply will make gold rise. When you put the theory aside and just look at the data, you will see that gold rises when CONFIDENCE in government declines. When gold hit $875 in 1980, the national debt of the U.S. reached $1 trillion. We are now approaching $20 trillion. Obviously, all the sales jobs they use to sell gold are fictional.
With time, I came to see that markets always made a FALSE MOVE in the opposite direction before a big move. You need this type of false flag move for it cleans out everyone.
Everything is still on target for the move under $1,000 into next year.
The dollar is on the rise after the victory of Donald Trump in the U.S. presidential election but the computer projected this long before Trump said he would run. Trump won be keeping one foot out of the party, the press, and the pollsters. Trump took it to the people the elite just assumed were sheep to be manipulated. Trump showed that the silent majority are starting to demand they be heard.
Investors are betting on an economic boom in the U.S. and rising U.S. interest rates that will attract even more capital to the dollar. This also weighs very heavily on emerging market currencies and commodities prices expressed in dollars. As the dollar rises, those commodities will decline unless there is a real shortage in supply that dips below demand. It is all coming together and you better understand the trend or you will not survive.
Indeed, all roads lead to the dollar. The biased socialist press who try to manipulate the sheep, will call this the Trump Rally and say it is to make him richer and his friends. They will do whatever it takes to destroy the country and promote Marxist socialism.
Two more quotes from his blog, the first dated November 21st this year:
George Washington became president on February 4th, 1789. The Decline & Fall of the United States actually began with the swearing in of Obama 224 years later – January 20th, 2013. The peak in government came with 2015.75 insofar as the visible “confidence” in government as evidence by the Trump Revolution remaking the Republican Party. The first opportunity where the United States will break apart at least into three parts if not four will be 23 years from 2013. That will will most likely be the Pi target from the 2032 high – 3.14 years later bringing us to 2036. That may sound nuts, but in 1985, restated against in 2011, that a third party could take the White House in 2016 which was perfect on a 51.6 year (8.6-year) ECM (Economic Confidence Model) Frequency.
We should then see the shift of the financial capital of the world to Asia with the rise of both India and China. The seed of this breakup are being planted right now by both Obama and Hillary. Their Marxist philosophies were what destroyed both China and Russia. They are directly responsible for the collapse in world GDP growth. The refugee invasion into Europe is akin to the invasion of the barbarians into the Roman Empire. Both groups had little respect for the culture and open contempt for much of it. They are not interested as a whole in adopting the European culture, they are intent upon imposing their own upon Europe. The great divide in the United States will get much worse and Hillary will be the spokesperson to lead the nation into socialist chaos.
We are standing on the edge of a cliff thanks to lawyers who want to be politicians who assume they can rule the world by just writing laws to benefit themselves and their friends. We are facing a collapse in the CONFIDENCE of government that first necessitates the FALSE MOVE to get everyone off-side, then we will swing in the opposite direction in what we call the SLINGSHOT move. This is driven by the fact that when people realize government has been incompetent, then capital will turn and begin to move to anything tangible. This is the lesson from history we must understand rather than getting caught up in the bullshit that is spewed out by the talking heads and gold promoters. So get ready. This is going to be the ride of your life, for indeed, getting this right may separate princes from paupers, besides being the time that tries men’s souls.
Next year and the years beyond will be both opportunistic and trying. Being on the right side will make many wealthy, and being on the wrong side will make many poor. Sitting on the sidelines is an option, but currently provides zero return. You can get nearly any opinion you choose to hear from today’s analysts and their subjective analysis. So far Martin has been right about many things, Brexit, the 2016 US Presidential Election, the price of gold continuing to fall till the time is right for a turnaround, and the DOW raising against all the television market gurus. Only time will tell, the decision is yours. I leave you with one scripture and thought to ponder.
Psalm 62:10 Do not trust in oppression And do not vainly hope in robbery; If riches increase, do not set your heart upon them.