The most hated stock market rally still has room left to become truly despised, according to Martin Armstrong.

Armstrong is an economic forecaster, former hedge fund manager, monetary and foreign exchange currency expert and a deep student of history. He has advised central banks, powerful political leaders, and has testified before Congressional committees on economic cycles and monetary and currency issues.

At present, he’s extremely concerned about the gross distortions central bank policies have had on the global economy. Excess liquidity has caused asset prices to become recklessly inflated while enabling otherwise-doomed companies to persist by feeding off of the cheap and plentiful capital.

But while Armstrong predicts this “one giant mess” “is not going to end nicely”, he warns that things may get a lot more deformed, especially in the US, before the break point is reached.

With so much of the rest of the world beginning to succumb to the arriving global recession, capital is fleeing towards the relative safety and positive returns offered by America’s financial markets. As a result, Armstrong sees the US stock market continuing to power higher from here, with the Dow Jones Industrial Average potentially tagging 35,000 by 2021:

It’s on a greater global scale now. The US economy is doing OK, for now, but the rest of the world is imploding.

If you look at the capital flows, everything’s been moving into the United States.

If you just look at France and Germany’s stock markets, where were the peaks? Back in 2000. They still have not exceeded their 2000 Dotcom bubble highs. The markets are telling you something.

It’s more than people really understand. The capital flows have been moving into the United States from Europe dramatically and also from China. I mean, that was the whole issue behind bitcoin. More than 80 percent of the volume was all coming out of China because the Chinese figured out “OK, fine, there are currency restraints,. So if I can’t get my cash out of the country, I’ll buy bitcoin and then I’ll sell it in on another terminal outside of China, probably in the US, and I get my money. That’s what’s been going on.

The whole thing is just one giant mess. And this is not going to end nicely. The stock markets are moving up because it’s the only place to put money. I mean, yes, you can buy gold, but that’s for the retail person. I mean, when you’re talking about the sizable money of pension funds and institutional buyers, the stock market’s the only place to go.

So that’s why the market has been constantly knocking on heaven’s doors. I don’t see the Dow going anywhere but up. I mean, we’re probably looking at least 35,000 or so by 2021. If not higher.

Click the play button below to listen to Chris’ interview with Martin Armstrong (59m:43s).

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Transcript

Chris Martenson:    Welcome, everyone, to this Featured Voices podcast. I am your host, Chris Martenson. And it is July 11, 2019.

Today, we are going to be discussing economics, macroeconomics, monetary policies and the future. Just yesterday, the Chairman of the Federal Reserve, Jerome Powell, spoke in front of the House Financial Services Committee and all but promised a rate cut, or maybe two. Financial assets, stocks and bonds did what they were supposed to do; they rose in price. Made the wealth gap a little bit wider, a side feature of current monetary policy that Mr. Powell disavows. He waffled about that when asked directly, denied it and went on from there.

Today, we have a very special guest that many of our listeners have been asking for and whom we've been seeking to get on the program for a while. Martin Armstrong is an economic forecaster, former hedge fund manager, monetary and foreign exchange currency expert and a deep student of history. He's advised central banks, powerful political leaders, and testified before Congressional Committees on economic cycles, monetary issues, currency issues, things like that.

Mr. Martin Armstrong is the developer of the Armstrong Economic Confidence Model, which we're going to talk to him about. Best known, perhaps, for calling the crash of 1987 to the very day. The model then went on to do a lot of great things, including pegging the June 13 – 14, 2011 moment as the start of a long term upward trend in the market. The market obliged by notching its very first weekly rise right after that. And, hey, here we are many years later.

He's had remarkable success at calling major turning points in his model and ability to communicate really clearly in writing and in person has brought him world renowned. Mr. Martin Armstrong, welcome to the program

Martin Armstrong:    Well, thank you for inviting me.

Chris Martenson:    Martin, let's give our listeners a solid grounding for the rest of the interview. Could you please explain for us what the Economic Confidence Model is and how its output might be interpreted and used?

Martin Armstrong:    It's really a worldwide business cycle. And effectively, what really happens is behind the curtain. Everybody knows that it's confidence to buy things. So you can every crash, for example, 1929, Hubert Hover comes out and says, "Oh, everything's fundamentally sound." Reagan said the same thing. They always do. Why? Because, can you imagine if the President came out and said, "Oh, you know, this thing is really going to crash. It's going to go down 90 percent. Hide underneath your bed." I mean, everybody would just absolutely panic.

So, it's always a confidence situation where they are trying to get everybody to believe that something's going to happen. This is really the way central banks operate. They know it's really a confidence issue. So that's why I named it the Economic Confidence Model because that's really what happens.

As a trader my whole life, I mean, everybody's always said you buy the rumor and you sell the news. It doesn't really matter what even the fundamentals are.

I was called into the '87 crash into the Brady Commission, et cetera. They always start with the same thing. They say, "Oh, we're going to find the guy that shorted this market." And I just looked at them and I said, "Do you realize that every investigation has begun that way since 1907? And nobody's ever found that mythical fixture of a player." And he looks at me and he says, you know, this is a professor who taught at Harvard at the time, and he says, "Well," you know. I said, "Let's put the accolades aside. What is the issue? How is somebody going to overpower the market" He says, "Well, I borrow a stock from this guy and I sell it to this guy." I said, "Correct. So the first guy's the long and now the second guy's long. So how can somebody outnumber the longs?" And he just looks at me, you know, and I said, "Take the future's market. Every contract's got to be matched." And he just looks and he says, "What makes it go down?" I said, "Very simple, you’ve never traded, have you?"

Really what happens is the majority of the people are long. Something happens, it scares them, they try to sell and what happens? We call it no bid. And that's what you get these huge gaps for. And, unfortunately, people in government and academics, they have never traded. They don’t know what this is about, yet they stand up and make regulations, et cetera. It's just absurd.

The '87 crash, I mean, I really didn’t even want to get involved, but friends were saying you got to go, otherwise they're going to take our computers away. They were blaming computer trading. And the investigation, what it revealed, was that yes, a lot of people were starting to use computer models, and the computers were correct – they said sell. But the traders, they're looking at this, they say, "Well, the Dow's already down 500 points. I can't sell – there'll be a bounce off of a bounce." And they did not believe the computers and they unplugged them. The market crashed.

And so, it wasn’t the computer trading. It's the simple fact that if everybody's wrong and they're trying to sell, and nobody has the courage to step up and buy a falling knife, to catch a knife, unless you are short. So, effectively, you have all these governments; they always want to outlaw short selling because that's what makes the market go down, but they're the only people that buy during the crash. So, you have all that, and it gets worse.

The Great Depression, basically what was happening, the Senate had investigations. They were calling everybody up to testify before Congress, you know, from Rockefeller on down. "Are you sure you do this?" They turned it almost into as if you were a trader. So the market sells 90 percent because nobody was short. If you shorted you were afraid you were going to be called into the Senate and, "Why did you sell against the country?" It's just absurd.

But you have Europe doing the same things right now, all short selling on bond unless you actually have the bonds you can't do anything. They think this is what supports the market, and it doesn't. It destroys free markets, and it makes Europe absolutely a disaster.

Chris Martenson:    Well, let's talk about the free market. You have a lot of great points in here, and I want to get to the computerized trading, also, what we think of that word markets now and whether it deserves one or maybe two sets of quote marks around it given all that's happened monetarily.

But your economic confidence model, then, is looking for cycles, and you said fundamentals don’t really matter. If I interpret that correctly, is that because your study of history and what the model has projecting is that there are cycles that are going to come and go regardless of things like fundamentals or even monetary policy?

Martin Armstrong:    Yeah. Look, people act in anticipation. So what happens is – it's very interesting – is that if you think the stock market is going to go up 20 percent, you'll borrow and you'll pay five, maybe even ten. If you think the stock market's not going to go up even one percent, you will not borrow at one percent.

We've done studies on this. The stock market has never peaked with the same level of interest rates twice because markets trade in anticipation. And that's what I mean that with the '87 crash. One of the things that was found – the market's down – the worst possible thing happened, even professionally, they called the broker on the floor and they said, "What is going on? " And the broker said, "I have no idea."

When there's no information, now basically everything that you could ever possibly imagine runs through everybody's minds. I mean, there were rumors that the President was shot with a bullet dipped in cyanide. That Russia just invaded Europe with a news blackout but somebody understood. So, when you get these kind of crazy things then what's a professional going to do. If he has no idea what's happening, the conservative thing is you get out.

If the Fed raises interest rates, lowers interest rates, as a professional, okay, fine, there'll be a kneejerk reaction. Nobody panics. But markets always trade in anticipation. If you think there's going to be – take the dot.com bubble. "Oh, this is going to be the greatest thing ever since." And you get the cryptocurrency thing and the bitcoin. People buy on anticipation, not the fundamental. I mean, if you look at the fundamentals in both cases, they're kind of crazy. dot.com back then, they were anticipating profits coming for the next 20 years, not correctly. So that's what people don’t understand.

But markets run on anticipation. So, if you – it's a confidence issue. If you believe in the future, you will buy. If you do not, you will not. So this is why quantitative easing has completely failed. For ten years they’ve lowered interest rates. They tried to punish people going negative, et cetera. It has not worked. Why? Because they don't believe in the future.

Taxes in Europe are way too high. I go to Europe often. I go to Zurich and I buy a Starbucks. It cost me $10. The same thing in the United States costs me $5. You've got a 20 percent sales tax on everything, and that's minimum. I mean, it's just crazy. There's studies out not that show the Germans, yes, Germany's the strongest economy - the German citizen has less net worth than an Italian because the taxes are so high.

Chris Martenson:    Let me ask you a market structure question then. I do have a lot of trading in my background. And I discovered sometime around 2007 or 2008, these trading strategies that I learned very carefully were getting blown to pieces. And it took me a little while to figure out that I was trying to trade against computers that had much better access to information and obviously a much faster execution speed. So things became untenable. I couldn’t quite work it out, and I had to back away.

So, my theory is that market prices today are really principally the output of computer algorithms, not humans. Greed and fear mostly replaced today by statistically driven, risk adjusted and essentially emotionless, programmatic lines of code. What do you make of the idea that markets today area not really subject maybe to the same forces as in times past? In other words, are prices today delivering maybe less useful information than they have in the past?

Martin Armstrong:    No. I mean, in fact, it might sound a bit strange, but this type of intraday trading back and forth, it actually increases the risk of a crash. Because what happens is, yes, they can outperform you on the trading back and forth, but they don’t hold positions. So, the real danger here is that they're in and out, correct; however, if they get trapped, they are not position oriented.

So, what will happen is that these algorithms will suddenly leave these people long or short in the middle of a complete crisis and they can't get out. So, it all depends. You know, if you're looking at intraday trading and these types of algorithms that are simply looking at scalping back and forth, that's very nice, it will add some liquidity to the market, but it will not change trends because they're not position trades.

So if you're looking at a major crash type thing, they really increase the risk because they can get trapped. And the computer is not – those types of programs are not oriented to actual position trading. So that's a different type of thing.

The biggest problem we have is that the liquidity has been shrinking. So you have a lot of the banks having curtailing proprietary trading. So that's been shrinking dramatically, like Deutsche Bank, for example. And then you have the whole situation of – you know, you have all these people constantly saying, "Oh, the stock market's going to crash," all this, and they’ve been utterly, completely wrong. Why?

Mainly, if you look at it, the retail participation in the stock market is still about 50 to 60 percent of what it was in 2007. So the retail market is still not back in this thing yet. Now we believe the rally, the vast majority kept – every new high, oh that's it, it's going to crash any day. And they have not understood what this market's about.

Chris Martenson:    Well, what is this market about?

Martin Armstrong:    It's much more on a global scale now. You take what Powell said – you have really understand what he said yesterday. He emphasized not that the US economy is in trouble. Yes, unemployment, things of this – and the economy is still strong. Why? Because the rest of the world is imploding.

So, if you look at the capital flows, everything's been moving into the United States. If you just look at France, take Germany, those two stock markets, where were the peaks? 2000. They still have not exceeded the 200 dot.com bubble high. You know, the markets are telling you something.

The same thing over in Greece and Italy, et cetera. That they have been bashing, basically, the free markets all along. You have people saying, "Oh, well Trump's creating a trade war, et cetera." Not really. It's right he has been trying to negotiate. He negotiated with France. He says, "All right, fine, I'll tell you what," with all of Europe, "I'll drop all tariffs. You do the same." France immediately said no way.

It's more than people really understand. I mean, the capital flows have been moving into the United States from Europe dramatically, and also from China. I mean, that was the whole issue behind bitcoin. The Chinese government, more than 80 percent of the volume was all coming out of China because the Chinese figured out, hey, okay, fine, there are currency restraints, I can't get my money out of the country so I'll buy bitcoin, and then I'll sell in on another terminal outside the United States and voila. Or outside of China, and I got my money. That's what's been going on.

Chris Martenson:    Let's talk about the global flows for a second. So we had the December lows, and Powell did his famous double cave, right, both on the balance sheet and also the interest rates. But let's look at this from a global standpoint. I look at that, and today we have people saying, "Oh, my God. Bonds are saying this, stocks are saying that," and what they're talking about is an inverted yield curve in the United States. They're talking about 13 trillion dollars of negative yielding debt, most of it sovereigns across the world and saying, "Look at that, that's pointing to weakness." But I say, look, we saw stocks and bonds go up. I'm detecting lots of financial easing and new liquidity. I think that's what I'm seeing in this. And then it sloshes around the globe a bit.

But I don’t think that's possible – here's my theory – I don’t think it's possible unless there was significant new liquidity added to the marketplaces by the central banks. Is that a plausible idea, or do stocks or bonds have it wrong there?

Martin Armstrong:    No. What's happening is it's a shift. And the real serious money is beginning to realize, hey, there is a major problem here. The central banks are trapped. You see, the Fed was yelling at Draghi and saying, "We have to raise interest rates." And Draghi, "No, no, no, no," et cetera. And so the US is the only one to raise interest rates, and they're getting bashed by the IMF, by everybody, "Oh, you're pushing everybody outside."

Draghi took interest  rates down for more than ten years and nothing has happened. You would think that somebody would, at some point, wake up and say, hello, maybe this doesn’t work.

What has happened? The ECB now owns 40 percent plus of the national debts  of Europe. They have also come out and said, "Oh, gee. Ok, fine." Unlike the Fed, which said they're going to allow whatever they bought to mature or just expire; the ECB realizes it can't do that. If it were to do that, interest rates would rise dramatically. So, whatever they have already bought they have to continue to roll.

And then, to try and stimulate, what are they doing? All they're doing is buying government debt. So, they have successfully managed to keep the governments on life support, but it's not filtering off into the economy.

At the same time, you have the fiscal side saying, "Oh, well, gee, you know, we have to – disparity between the rich and poor. And oh, we have to raise more taxes." Well, it's very nice, but it's also the rich who create the jobs through investment. And then you take the pension funds in Europe, that's even worse. Some of them have restraints where they must invest 80 percent in government bonds. And the pension crisis that’s coming is just off the charts. I mean, look at Illinois. California. CalPERS used to be the largest and most profitable pension fund in the United States. It's been losing money.

You have a serious problem here where the government has done nothing but stimulate by buying its own stuff. So, you have to really just look around. What's been going on? You have pension funds that have been going out and buying farmland. Why? Because they're renting it out and getting five percent. They need to make money.

Another crisis that's waiting to happen is they needed yield so they were running into emerging markets, and they only got scared after Turkey.

The whole thing is just one giant mess. And this is not going to end nicely. The stock markets are moving up because it's the only place to put money. I mean, yes, you can buy gold, but that's for the retail person. I mean, you're talking about sizable money of pension funds and institutional. The stock market's the only place to go.

So that's why the market has been constantly knocking on heaven's doors. Look, the Dow, I don’t see it going anywhere but up. I mean, we're probably looking at least 35,000 or so, maybe by 2021 and if not higher. I mean, it's a difference at this point between public and private. The Central Banks can't raise interest rates. If they raise interest rates, they actually start going belly- up.

Now, people don’t realize because they always think – they judge everybody by the Federal Reserve. The Federal Reserve is completely structured differently. The ECB has to go back and get permission to increase debt, et cetera. It's got all kinds of rules, whereas the Fed does not. So it's a different structure completely. And the ECB can actually go bankrupt. If the politicians can't agree to increase its budgets, there you go.

Chris Martenson:    Well, in the EBC, too, if they have a capital call, it's got to go out to other countries like Greece and Italy, right? So that would be like how do you get money from a place that's broke to fund a place that's broke doesn't – it's kind of tricky.

Martin Armstrong:    Well, it's also, I mean, I was actually one of the people involved and called in when they were forming the Euro. And I can tell you, they attended all our world economic conferences in London, et cetera. And I sat down with them and I said, "Okay, fine. If you want to create a single currency, you have to consolidate the debt. Then the Euro will be able to compete against the dollar." Why is the dollar the reserve currency? Simply because this institution can call them up and say okay, fine, buy me two billion dollars' worth of treasuries. No problem.

How can they do that in Europe? They can't. "Oh, well, let me see. Let me look at Germany." Every country, although it's a single currency, every country has its own credit risk. The same thing as we have 50 states here. Yes, we have a dollar, but that doesn’t mean that every state is equal and equivalent to each other. And that's the problem in Europe.

They would not consolidate the debts. And on top on top of that, that's why you had bail-ins. Because suddenly Germany said, "Oh, gee, we can't – we're not going to put in money to bail out Italian banks." So, they wouldn’t consolidate the debts. They want to pretend they're one happy big family, but they're not. The don’t trust each other. So, they won't put in any money if the Italian banks go down.

So what do they do? They come up with the new policy, oh, bail-ins, that's a good idea.

Chris Martenson:    Well, we'll see how that works now.

Martin, a view I have is that markets do need price discovery, price discovery needs markets; two sides of a coin. Therefore, if you destroy price discovery, you’ve kind of messed with the markets. So talking about the $13 trillion of negative yielding bonds, but more specifically, let's make this – that's a big number – nobody understands $13 trillion, right.

In Europe, we have the stunning fact that there are now, at last count, fourteen junk rated companies whose bonds are trading with a negative yield. And there's only one interpretation for that, right? If you hold that to maturity, guaranteed loss. If the company goes belly up, guaranteed loss. The only way you can come out ahead on that is to sell it to somebody else at an even more negative yield in the future.

So it seems to me that when you talk about the expectations and the confidence, the fact that there are junk rated companies in Europe with a negative yield tells me that there are people out there with a lot of confidence that the Central Bank of Europe is going to be able to continue to do what's it's been doing, which is to continue to drive yields more deeply negative. Is that a fair interpretation, and what happens next?

Martin Armstrong:    No. There's another twist to this. And the thing is that virtually every government has defaulted and their debt is worthless. And that goes back to Babylonian days. So the problem is that a government defaults, you get nothing. Absolutely zero. You can't go running down the national gallery and start lifting out Picasso's or something like that. That's it.

Private debt, however, is substantially different. And if you bought General Motors and their profits are absolutely negative, et cetera, if they go bust it goes into bankruptcy, you get some of your money back. You're buying tangible assets. This is what the takeover boom was in the '80s. It was another thing they were blaming me for, but effectively, we had charts – you can find them on our website – we showed that the book value of the Dow bottomed in 1977. And if you could buy a company, sell its assets and double your money or more, how could the market possibly be overvalued?

And that's what the 1980s was all about. People were suddenly realizing, wait a minute, the book value of these companies is more than what it's actually trading at. So you had the Dow go from 1,000 to 6,000 within a matter of a few years. We're back at that point in time where the private assets, even if the company is negative, et cetera, not doing so well, what's its book value?

If you actually look – you can go to our site as well – we've published the PE ratio, the S&P back to inception. Where is the high? The high's actually at the bottom of the market in 2009. Why? Because at that point in time, people don’t trust the banks, the don’t necessarily trust the government. I'll buy equities. I'm not expecting to make five percent on my equities; I just want my money back.

So, you get at those points in time, and this is what's happening now with the equity side. It's not necessarily economic growth or what they expect in profits, et cetera. It's where can I put my money that I think I'm at least going to get the majority of it back?

Europe is in serious, serious trouble. Italy is kind of like moving toward creating a two-tier monetary system. This is what happens historically. Great Depression, there were over 200 cities in the US that issued their own currency. They did the same thing called notgeld in Germany during the hyperinflation period. Companies were issuing their own currency. They always go for premium versus the government.

And if you look at what survived the hyperinflation of Germany, it was real estate and corporate assets. When they came out with the new currency in 1925, it was backed by real estate. So you reach these points where it's tangible assets versus anything on the public side. And I strongly advise everybody, do not own any municipal bonds, state bonds. The Fed US treasuries are probably good still for another two to three years. After that, forget it.

Because what will happen is that you start getting a couple municipal defaults and then it spreads like a contagion. They start looking around and say, "Oh, gee, who's next?" This is what happened with Greece. And soon as Greece got in trouble back in 2010, the markets made a lot of money. Traders, okay, fine. Then they looked around and said, "Hm, that's interesting. Who's next on the list? Oh, Portugal, yeah. Then Spain and Italy." Then they even went after France. That's how capital moves. It's a contagion.

And you're going to read 1931 chapter, Hubert Hover Memoirs. He explain the same exact thing. He says, "Capital acted like a loose cannon on the deck of a ship in the middle of a hurricane." He said, "Shooting off in every which direction so fast they couldn't even form a committee to figure out what was going on." Once Austria defaulted, that's it. Germany was next. Everybody ends up defaulting. Even Britain went into a moratorium. So, it's a contagion.

So once you get that first crack, that's it. The only thing that's going to up are private assets.

Chris Martenson:    And let's explore that a little bit. So obviously, we had a long up-cycle here and I'm wondering – first question is where are we in that cycle in terms of your Economic Confidence Model? And second, when it does finally turn the corner, something you said earlier – let me see if can phrase it correctly. The central banks might be able to wiggle things around at the margin but they can't change the trend. So when this trend changes, you're saying here that private assets are going to be a better place to be than public assets, not state, not muni, things like that. Maybe treasuries but maybe not Euro area sovereign debt, things like that, if I've captured all that right.

So when this turns, what do you think this looks like?

Martin Armstrong:    It looks like we're heading – that the next business cycle on the Economic Confidence Model bottoms in January. So the next wave is basically in a six year wave. So this one has been deflationary, which is why the quantitative easing has failed, et cetera. The next one will be inflationary.

So this is what the markets are starting to show you. Gold has kind of poked its head up, finally. But unlike the gold bugs, I mean, just listen to what they say, "Oh, everything's going to crash and only gold's going to up." Sorry, the stock market has been making new highs with gold.

If you look historically, it's the private versus the public. So gold will only move opposite of private assets when you're on a gold standard. When you're not on a gold standard, gold will move with the rest of the private assets, and both are moving up.

So the next wave, they're showing you what's coming. And then next wave is going to be an inflationary one, and that's probably going to run off into a peak around 2024. But we have serious problems heading in here. I would say you have a major crisis coming on monetary side. We'll probably see something similar to like an international meeting of Bretton Woods, et cetera, most likely by 2021 to 2022, not that you're going back to gold standard or something.

But just that we are in a situation where the philosophy of currency is different between the United States and Europe. US always wants a cheaper dollar because they look at, okay, the dollars down, we can basically sell more goods. So the two times the dollar went up dramatically was during the Great Depression because everybody else was defaulting, and that's where FDR ends up devaluing the dollar.

All right, when is the second time? 1985. And what did they do then? They created the G-5 at the Plaza Accord. They lowered the value of the dollar by 40 percent. US always wants a cheaper dollar. Europe always wants a stronger currency. It's a philosophy that has emerged since World War II.

When we were going to first open our offices in Europe back in '85, I went to lunch with a friend of mine who was head of one of the major Swiss banks. And I said, "Okay, fine. Here's a bunch of names that we need to come up with Europe advisor or something like that," because I assumed  there was still a lot of anti-Americanism in Europe. And he looked at me and he says, "Name one European analyst." And I was very embarrassed because I couldn’t. I'm thinking, here I am an arrogant American or something. I said, "Look, I'm sure there is. I just know of anybody." And he laughed and he says, "There are none." And I said, "What? Why?" He says, "The reason everybody uses you is because you don’t care if the dollar goes up or down." He says, "If he's French it's via la franc. If it's British, it's God Save the Queen." And he was right.

Then I started paying attention that because all the currencies went to zero, the politicians in Europe said vote for me, the deutschmark is up two cents against the dollar. They used the currency as justification politically. Whereas, in the United States, nobody could run and say vote for me because the dollar is up against the Mexican peso. Everybody would go, "Yeah, what are you talking about?"

In Europe, it was always a political issue. And even in 2007 when the euros going to crash, et cetera, they put an economist in prison for a few months because he came out and said it was going to go down. The euro – you know, I get emails all the time from guys that work in the top banks in Europe and they all say the same thing, "God, I wish I could say what you say." But they have to sign confidentiality agreements. They can't come out and say, "You know, the euro's really screwed. It's going to go down really big." The ECB would be on the phone to that bank and fire that guy.

So you never looked at any kind of real analysis out of any of the major institutions because they're not allowed to.

Chris Martenson:    Well, now, Martin, when you said a major crisis, a monetary crisis maybe sometime 2021 – 2022, somewhere in there, what are you speaking of? Are you speaking of a collapse of the euro? Maybe the yen? What does that look like to you? What do you mean by that?

Martin Armstrong:    It's mostly both. And the only time you get a major crisis, as a said, like 1934 or 1985, is the dollar going up. When the dollar is pushed up, and that's when the US government is going to come in, "Look. We can't take this. We have to manipulate the currency, got to do something."

You got the similar situation problem with Hong Kong because they pegged it to the dollar. If the dollar goes up they get deflation contrary to everybody else in Asia. It's a real issue. And they don’t understand what this is, and that's the real problem.

The capital flows are moving into this country, and this is what Powell was talking about. The Fed is trapped between domestic policy objective versus international. The US, he should not be lowering interest rates. Economy is doing well. Stock markets up at highs. Why would you be lowering interest rates at this point in time? Makes no sense.

The only reason he's saying this is because the rest of the world is imploding. And everybody else is out here screaming, "You got to lower interest rates. Your killing us." That's what's going on. So it's a major international crisis, and the dollar is going to be pushed up because the more these people refuse to reform, the capital just leaves.

And I go to Brussels, I meet with probably more governments than anybody in the world. And I just sit there sometimes in amazement. It's like Europe wants to take the trading of the euro away from Britain. Oh, we can't allow that to be…I said, "So, you're going to take it away from New York, Chicago, Tokyo, Hong Kong and Shanghai?" And they look at me and they go, "Well, no, just Britain."

What are you trying to do here? Are you trying to turn the euro into the new ruble or something that it's constantly the same price and can't trade against you? This is what they – when you mix politicians with economics you get an absolute disaster.

Chris Martenson:    That makes sense. Now, you said earlier that your cycle – you called a bottom in January; that was a deflationary cycle. Next eight plus years, 8.4 I think, is an inflationary cycle. When I'm looking over at my indicators, my macro indicators here, I'm looking at a global economic slowdown at this point. And I'm measuring that with the Hong Kong air freight shipments, European banking, autos all across Europe, South Korea's exports, chips, China's PMIs.

When I read those signal right now, I'm seeing a big slowdown. What are you seeing?

Martin Armstrong:    Yes. That's going straight into January of 2020. That's when the model bottoms at that point in time. And that's what I mean that you have an implosion outside this country. But the inflationary type of cycle we see coming is different. This is not necessarily a demand driven thing but more of a cost-push type of inflation.

And you have serious weather conditions which are basically going to be pushing up more on the food side. But you have a lot of capital shifting. And like I say, it's not a question of where it is before, "Gee, I can make five percent in gold versus only one percent over here." It's irrelevant. It's more or less once you have the confidence shifts, and we're at that point in time, where we push this cycle as far as we can possibly go.

What are you going to do? Lower interest rates to minus 20 percent? Already you have people calling for the elimination of cash. Lagarde is calling for that because they realize they can't lower interest rates negative because people then take their money out of the banks and they store it at home. Sales of safes in Europe have been tremendous.

But this is what's taking place. So instead of looking at their policies, it's like, well, okay, fine, we have failed because people can withdraw their money from the bank rather than spend it. And you can't force people to spend money. If they have no confidence in the future, they're not going to spend it. Period.

So you're looking at people just taking – if you eliminate cash then they will go out and they will start buying anything else that they can just to get money in a situation where the assets will be off the grid.

Chris Martenson:    It would be a great time to hold all sorts of hard assets. If you told me I was facing minus ten percent losses on my bank holdings I'd want anything. I'd hold real estate even if I had predatory real estate taxation at that point, I would still judge that to be possibly a better deal.

Now, here's the thing that I think central bankers, this where I think they whiff big time is they think in terms of all their models, and they’ve got a lot of fancy calculus and good stuff like that. Japan's theory was, hey, if we lower interest rates far enough, what we're going to is we're going to encourage spending. And what they actually encouraged was savings.

Is there a point at which – let me ask it this way. Aren't interest rates already at a bound where if you push them lower you just don’t get more of the behavior you're wanting, you might get the opposite behaviors?

Martin Armstrong:    Yeah, I mean, Japan is an example. When they put in the sales tax, suddenly the economy looked like it was booming for about 60 days before because everybody knew if they were to buy anything it was going to cost 7.0% more. So they ran out and bought whatever they did. You got a nice little knee jerk reaction, and then the economy went straight down. People are not stupid.

It's the same thing with real estate and interest rates. I warned that okay, fine, that real estate would start going up only when you saw the interest rates going up. They said, "Oh, that's impossible," blah, blah, blah. Look, the average person is not stupid. Why should he go out and buy real estate as long as he sees the mortgage rates keep going down? As soon as he was the first uptick, "O better rush and go get that place now before it's too late."

You know, I don't know who makes up these theories, but they certainly had never walked out on the street and just talk to people.

Chris Martenson:    If we look at where we are in this macrocycle right now, how do you place gold in this? I know you said, "Okay, it's going up." Maybe that the markets and gold are starting to sniff out the next leg, which is an inflationary cycle. Gold to me has a little bit of a correlation with inflation, but it seems to be really a safety valve against systemic crisis, things like that. How do you view gold? Is this really an inflation hedge to you or is there a role for it as…?

Martin Armstrong:    No. Gold has got really nothing to do with inflation. That's just been the biggest propaganda story I think I have ever heard. Gold went down for nineteen years and inflation went up. during the same period, the Dow went from a thousand to twenty-some thousand. Come on. I don't know where these people come up with these things that they keep saying the same thing over and over and over again. There is no such thing as a correlation to inflation. That's just completely wrong.

The inflation – there's many different types. There is a cost-push inflation, which we called stagflation in the '70s. It was not that demand was going up, it was just that because of OPEC and everything that had anything to do with plastics suddenly rose in price. So it wasn’t rising because of a demand; it was rising because of a cost. There are many different types. It's not always the same thing.

And you go into 1980 when gold first hit $875, it was not the only thing. People were hoarding toilet paper back then. It was anything that they could buy, they were buying. And they felt that the dollar was going to be worth less. So that's largely what you get into. And I think that's the type of cycle we're heading back into.

The cost of all this is really quite dramatic. Most of it, the deflation has been very prominent mainly because of the rise of taxation. And people often don’t look at that, but if I give you $100 and I say, "Look I need $80 back in taxes," did I give you $100 or did I give $20?

And this is what's going on. What's the net take-home? And if you look at – women have basically lost the right to stay home and take care of the family. In the 30s, a family could be supported basically with one income. There wasn't an income tax. Now, everybody pays about 50 percent in income taxes between the sales tax and the state tax, et cetera. So now it takes two incomes, basically, to earn what one used to in the 30s.

So now the guy's got to make a lot of money for his wife to actually stay home and just take care of the kids. That's a luxury. It's no longer the way it was before. It's quite different. So, we don’t look at this.

And they keep talking about oh, the difference between the rich and the poor and the gap is rising. Look, I was also working in Congress to revise the Social Security System. I spent a lot of time on it to turn it into a national wealth fund back in the 90s. And I went through this, I said, "Okay, fine, this is what we do. This is how we get people's track records and we allocate money based upon that."

Democrats would not vote for it because they said, "Oh, gee, if they came in, they wanted to change the fund managers." I said, "Look, this has got nothing to do with who the guy voted for. Whoever has the best track record wins, okay?" It's all political down there. So they would never vote for it.

And people say, "Oh, well, the rich make it and the poor don’t." How did the rich make money? By investing. All right. Social Security is 100 percent invested in government bonds. Invest it just in the Dow. And when I was working on this the Dow was 1,000. Social Security would not be a problem today.

But this is it. We deprive the average person from investing. We got all these nice regulations, et cetera, for pensions, et cetera, and then, "Oh, no, no. It's risky being in equities. Government bonds."

We have one major client, it's a big pension fund, and they listen to us. They sold all their government bonds. S&P went into [unintelligible], they said, "Oh, you're taking on more risk." I said, "Look." I showed them our study. And they said, "We did our own." They did their own due diligence. The said, "You're absolutely right. We have less risk with private than we do with government. We're being much more conservative." S&P didn’t know what to say; they walked out and left their rating alone.

This is it. Why is government debt Triple A? No government ever paid.

Chris Martenson:    Interesting. That's just fascinating. This idea of cost-push inflation showing up in your models, it aligns with my own work which is – I do a lot in oil and gas, but mostly oil, oil being the prime lubricant of thee globalized economy. And you look at the – there's about $1.4 trillion missing dollars of upstream oil and gas exploration because the price of oil plummeted in 2014 below the cost of exploration, supporting exploration. So guess what? We didn’t invest. There's a lag. It's not like farming; it's farming with a five to seven year lag, so you push those time frames out a little bit and you discover that unless the worlds in some kind of major demand destroying depression/recession, there's going to be a real oil shortage showing up at some point right around 2021-22, somewhere in that zone.

And there's not a lot we can do about it. It takes a long time to get those FIDs up and out, and there's tens of billions if not hundreds of billions involved. So it just takes time. It takes a lot of money. It's just both of those things have been missing in action for a while.

So I'm wondering are you looking at all to commodities, in particular, oil. How do those factor into your cost-push analysis?

Martin Armstrong:    Most of them are in that same position, same thing with agricultural. I mean, just look at Alberta. Alberta, you have a rising situation there of separating from Canada because they had been bashed and ground into the ground basically by all the environmentalists who have done everything possible to stop any kind of energy output out there.

Canadian oil goes so cheap because it's got to be trucked out of there. And the cost of trucking everything out rather than a pipeline, that's the problem. And you have a lot of these – the same things in Europe. I mean, you have moved to basically eliminate all short terms flights. The whole thing is just really, really crazy. Europe, whatever it can possibly do to destroy its own economy, it is doing very cleverly and right on time.

Chris Martenson:    All right. As we look forward into the future, I'm sure a lot of this for you is part of what you offer at your World Economic Conference. I understand there's one coming up in Orlando, Florida. Last one, I think, before that was where? That was in Rome?

Martin Armstrong:    Yes. In fact, Nigel Farage from Britain came and he was our guest speaker over there. It was quite interesting and he stood up and he says, "Of course, I've got to come here," he says, "You guys are the alternative to Davos," he called us.

Chris Martenson:    I like it, alternative to Davos. So this one in Orlando, Florida, October 25-26. And I see here that if people go to armstrongeconomics.com, go the events page, there's a link there for tickets. We'll put on link to it as well under this podcast. So tell people what they will find there and what they'll get from it.

Martin Armstrong:    Basically, these are literally international events. Generally we have between 30 to 40 different countries people attending. We cover the entire world to basically show what the world is actually doing and so you can see what the trends are.

The biggest problem with, I think, analysis in general is that these people that predominantly put things out, they live in a cocoon. They don’t even look at what's happening outside the United States. And so everything is relevant. The reason the US economy is doing well is because Europe is an absolute basket case. So, capital has been moving over in this direction. You can just look at, like I said, a yearly chart of the French stock market. The peak's in 2000. The market should tell you something is seriously wrong in Europe. And that's what's going on.

We basically show the entire world, so you can actually see what the capital flows are all about, where it's going. Look, there's generally, probably about three trillion dollars sitting in the room. We have pension funds from around the world. We have a cocktail party that we do generally on to midnight. And then everybody – people have been attending these things since 1985. So, it's quite interesting. It's an interesting place to meet a lot of people and connections. It's almost like an alumni, really. But you get to see the world capital flows right there in the room.

I remember even back in 1985, we had a delegation from Saudi Arabia there, and they were saying they wanted to invest in Canada. And the guy from Canada stands up, he says, "What do we have that you would want to invest in?" He says, "You got all the water." You get to see how everybody looks at things, the grass is always greener someplace else.

Chris Martenson:    All right. How many people are typically in attendance? You said 40 countries. Is this an intimate or fairly large event?

Martin Armstrong:    No, it's usually around 600 to 800. We try not to go beyond that because then it gets a little too big. Our overseas ones aren’t quite as large. They're generally around between 300 to 400. Not everybody wants to fly into the United States these days. They're good events. You get to meet a lot of people from around the world.

Chris Martenson:    All right. Well, excellent. It sounds like a really great time. I've never had the great fortune of attending one yet, but I'll correct that at some point in the future. And if anybody's interested, you'll find that again at armstrongeconomics.com. And Martin, is there any other way that people can or should be following your work?

Martin Armstrong:    No. Just basically just go to the website. That's pretty much it. The main thing that we basically do is we have an artificial intelligence computer system which actually writes all the reports. It produces forecasting reports on over a thousand instruments every day from around the world. We cover everything from Romania to everywhere around the world. And the computer writes everything. It's the only fully artificial intelligence system in the world.

Chris Martenson:    Fantastic. Very interesting. Well, Martin, this website, fascinating. Interview, fascinating. So thank you very much for that. Thank you for your time, and I hope we can do it again at some point in the future.

AM    Thank you for inviting me.

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35 Comments

  • Tue, Jul 16, 2019 - 7:36pm

    #1
    GerryOz

    GerryOz

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    Should we give this felon the time of day?

    He has a long history of conning people…… just sayin’.
    https://en.wikipedia.org/wiki/Martin_A._Armstrong

    Plus he’s a climate denier, usually the sign of low intelligence.

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  • Tue, Jul 16, 2019 - 8:52pm

    Reply to #1

    davefairtex

    Status Diamond Member (Offline)

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    Posts: 3218

    9+

    ad-hom on Martin Armstrong

    To me, these sorts of attacks lend a bit of extra credibility to what he says.  Someone cares enough to run around hosing him.   And a bunch of ad-hom stuff too.  Nothing about the substance of what he actually talks about.  “Oh my gosh he’s a felon.”  Gasp.

    So is the future head of the ECB.  Nobody has said a thing about that.

    Sheryl Atkisson had a recent piece on the weaponization of Wikipedia.

    https://sharylattkisson.com/2019/06/the-weaponization-of-wikipedia/

    PP has had a lot of podcast guests over the years.  Can anyone remember the lead comment being an ad-hom attack?  Its pretty rare.

    Just saying.

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  • Tue, Jul 16, 2019 - 9:20pm

    #2

    davefairtex

    Status Diamond Member (Offline)

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    Posts: 3218

    5+

    rising DJIA

    I’m also going to point out Armstrong is practically the only person out there calling for a rally in equities.  He has been doing so for years – based on his “public to private” wave cycle theory.

    I’m guessing that our friends in the “public” sector doesn’t want anyone to pay attention to what he says.  They are afraid that if people listen, and think “gosh, the ECB really is trapped”, then people will actually follow what he says and flee EU-nation bonds.

    Just like he says in the podcast, suppression of his voice (which is what intrepid “Gerry” here is trying to do) won’t achieve anything.  Once confidence snaps, the rush for the exits will be similar to what happened after Credit Anstalt in 1931.

    (and if you need to panic out of your positions – its probably best to panic before the general mass of people decide to flee)

    Again, our friends running the public sector are perfectly fine putting a felon in charge of the ECB when it suits their purposes.  But if a private citizen appears to be able to predict the major cycles, well then, we sure shouldn’t listen to him if he is saying that something unpleasant is going to happen because…of course…”he’s a felon.”

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  • Wed, Jul 17, 2019 - 3:21am

    #3

    sand_puppy

    Status Platinum Member (Offline)

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    Posts: 1961

    3+

    Wikipedia evolved from public encyclopedia to propaganda platform

    The video below shows bands of idealistic, but very ethnocentric, youth attempting to sell the world a “pro-our-group” viewpoint.  Governments have embraced the role of leading this effort and coordinate efforts of the worldwide faithful in located in multiple nations.

    Wikipedia is one of the front-lines.  Seminars to train everyday citizens to police and edit Wikipedia are taught by both government offices and NGOs too its passionate citizens.

    Bypassing defenses

    When we watch a “commercial” on TV, we know that we are being sold something and to take everything with a grain of salt.  But when we are watching a “news program” or reading “reference material” from an encyclopedia our defenses are lower.  We accept the words as true more easily.  Authoritative sources are most effective.

    https://www.youtube.com/watch?v=TAzBsVzYH1o&feature=youtu.be&has_verified=1

    RuTube Video of same: can be found here (in case the above is removed)

    http://thesaker.is/how-israel-censors-the-internet/

     

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  • Wed, Jul 17, 2019 - 3:38am

    #4

    Michael_Rudmin

    Status Gold Member (Offline)

    Joined: Jun 25 2014

    Posts: 877

    Bypassed defenses

    SandPuppy, what you say may be true about Wikipedia; but that isn’t the right use of an encyclopedia. The encyclopedia is best used to learn or refresh the basics; after that, if you need better, you research it.

     

    Of a much greater threat  is when books (including the Congressional Register) have had entire sections replaced under the Document Reclassification act; the unavailability of research materrials without paying compilation industries like El Sevier huge sums of money (though if you can get to a university library, you currently can read the material there); the destruction of books in libraries across the US due to a  lack of interest by video-feed-citizens.

     

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  • Wed, Jul 17, 2019 - 3:49am

    #5

    Michael_Rudmin

    Status Gold Member (Offline)

    Joined: Jun 25 2014

    Posts: 877

    Here's an Ad hom for Armstrong

    I have invested several times in the stock market, and immediately been badly burned each time, each time by actions that either were criminal, or should be criminal.

    Point being, I do not trust myself to be able to successfully invest in the stock market; so Armstrong’s 35k is useless to a hominus such as me.

    As for the first post, I wouldn’t worry about that. The guy seems to have only five posts total, which would make it look like he’s a self-appointed albatross around Armstrong’s neck.

     

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  • Wed, Jul 17, 2019 - 3:49am

    #6

    Snydeman

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    The fallacy of perfection

    Well, beyond the ad hominem, I find it unwise to discount what someone says on one issue just because they may not be “correct” on another issue; especially if the former is within their wheelhouse, while the latter is outside their area of expertise. I’ve learned to listen and give credence mostly to the things a person knows best, while allowing that they do not know all. Armstrong understands the dynamics of the market better than I do, and several people I know who work in climate-related fields know better than he does on that subject. So I don’t listen to what Armstrong says on a subject he doesn’t actually know intimately. That’s like criticizing Art Bergman for thinking free agency in basketball is a good thing; who cares?! He’s an oil geologist, not sportster.

     

    Life is so much less frustrating now that I have embraced the glorious and inevitable imperfection of every person I meet, including first and foremost the one I see in the mirror every day.

     

     

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  • Wed, Jul 17, 2019 - 6:37am

    #7

    sand_puppy

    Status Platinum Member (Offline)

    Joined: Apr 13 2011

    Posts: 1961

    Fouling "he Commons"

    I so agree Michael that systematically slewing “the commons” of an encyclopedia is most certainly not its function.  By relentlessly policing and editing Wikipedia to one specific self centered viewpoint, they spread their viewpoint (short term effect) and destroy this medium of group sharing of information (long term).

    The even longer term effect is the damaging of trust across the ethnic group boundary.

     

     

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  • Wed, Jul 17, 2019 - 7:29am

    #8

    Eannao

    Status Bronze Member (Offline)

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    Posts: 153

    2+

    My greatest fear

    My greatest financial fear is that we will go straight into a crack-up boom.

    If this happens, the prudent people of Peak Prosperity will do okay (if they have gold and silver), but it will the indebted people who will do the best. Those who have levered-up to buy their homes or investment real estate will be laughing. How frustrating will it be to have been prudent, and saved, and waited for prices to return to ‘normal’, only to see prices of property take off and those who took out the mortgages making out like bandits? It would make me bitter.

    I’m thinking perhaps I should do as the governments are doing and lever-up rather than save. Why fight the governments and central banks? Why not join ’em in debt? One thing for sure is that they are going to print their way out of this, so why not have that printing benefiting me?

    I’ve been waiting to buy a home that also makes sense as an investment property, as it’s likely I’ll be moving on in a few years, but it’s very hard to find anything that’s cash flow positive. But maybe I should forget about that criterion and just buy something anyway, knowing that my debts will be wiped out when the big inflation comes?

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  • Wed, Jul 17, 2019 - 7:41am

    Reply to #8

    davefairtex

    Status Diamond Member (Offline)

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    inflationary outcome

    E-

    You could always do what the big guys do.  As I understand it, they form an LLC, borrow money from the bank to buy a big property, and if things go south, the LLC goes BK, and the bank gets the collateral (they have to sell the property) and the big guy walks away, no fuss, no muss.  And if inflation hits and prices scream higher, the big guy benefits from the leverage of using OPM.  10% gain on a 10%-down property = 100% net income.

    I think Trump might have done that particular maneuver before.

    Not financial advice, etc, etc.

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  • Wed, Jul 17, 2019 - 8:06am

    Reply to #1

    Pipyman

    Status Member (Online)

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    Posts: 77

    Yes

    Mr Oz = raised eyebrow

     

    pattern detected….

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  • Wed, Jul 17, 2019 - 8:38am

    #9
    Thetallestmanonearth

    Thetallestmanonearth

    Status Bronze Member (Offline)

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    Posts: 313

    3+

    Real Estate

    So to expand on Eannao’s comment above, Armstrong’s model is bullish for real estate, yes?  I have a home on 15 acres.  We have greenhouses and our home on about half of that land and the rest has zero top soil…..not great for farming and I don’t have the time resources or interest to develop it for such.  If I sold half the land today I expect I would net roughly 1/3 of our outstanding mortgage putting the target of owning our home outright within the next ~5 years within reach.  I’ve been saying we’re at a top in housing since 2014 and I’ve clearly been wrong the whole time, but unless incomes go up, I don’t see how it can move much higher….not a lot of room in interest rates left when you can get a 30 year at sub 4%.  But maybe capital inflows offset stagnant incomes and bottomed out interest rates?  If so, maybe I should hold for another couple of years.  Or, go all in on debt and develop the land myself to hold as rentals?  My inclination is to be proactive and conservative, but that strategy has caused me to miss out on a lot of the ill-gotten gains of the last decade…is this what it feels like to be the last bear to capitulate?

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  • Wed, Jul 17, 2019 - 9:42am

    #10
    Jeffleonard90@gmail.com

    [email protected]

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    3+

    My Key Take Aways

    Here is what I got from this interview:

    As far as the Future:

    1. Strong Dollar

    2. Dow to 35000+

    3. Weak Global Economy

    4. No Interest Rate Hikes/further cuts for no apparent reason.

    Will be interesting to see how this plays out.   Thanks for the Interview Chris

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  • Wed, Jul 17, 2019 - 12:06pm

    Reply to #6

    Mark_BC

    Status Bronze Member (Offline)

    Joined: Apr 30 2010

    Posts: 311

    4+

    I agree Snydeman. Everyone has their areas of expertise and non expertise. Just because someone isn’t an expert in everything doesn’t mean they dont have valuable insight to provide in other areas. For me personally, my area of expertise is ecology, energy and the physical infrastructure supporting the economy because that’s what I’ve studied and immersed myself in for the last 30 years. Its second nature and I have a hard time sometimes grasping how clueless so many people are to this. My background isnt finance and I always knew my shortcomings so whenever I read something that didn’t make sense I tended to focus on that. Dig into it like cleaning out a tooth cavity, until I do understand it (still a long way to go for finance stuff)

    The human mind works by creating logical stories that present a complete picture of how all things are interrelated. Since no one can know everything, our brains fill in the gaps of knowledge, building bridges between the topics we do understand. That trait of our brain functioning is both good and bad because it enables us to function without understanding how everything works (how could we?), but it means that our brains are liable to build incorrect bridges between our areas of knowledge. I see this everywhere with basically everyone, especially financial and economic commentators. Again, thats simply a function of how our brains work. It explains why our economic leaders can develop and implement such backwards policies that cause so much irrepairable damage to the world. Because they are based on flawed understandings of how the physical world works. As far as I understand, economics students arent required to take a single science or engineering course, which boggles my mind.

    My quest has been to bring together science and finance. Many try to do this but we all have our flaws. My greatest respect goes towards those who understand this aspect of how our brains work and openly admit to their shortcomings.

    A few years ago J M Greer and his blog was pretty popular in his community. He made some fascinating insights into society and human behavior. But at times he ventured too far in trying to create the “complete picture” and clearly extended himself too far. It’s obvious he was BS’ing at times because he just didn’t understand a particular thing he was including in his discussion. My respect for his writing went down a bit because you then wonder what you can actually trust to get reliable insight based on real knowledge. But that doesnt mean he doesnt have a lot to offer in other areas.

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  • Wed, Jul 17, 2019 - 12:56pm

    #11

    Chris Martenson

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    10+

    A simple summary

    I didn’t ask Armstrong about resources because that’s not his area.  Or climate change.

    I tend to stick to people’s areas of expertise when interviewing.

    A simple summary of Armstrong’s position might be this:

    1) Things move in cycles

    2) Those cycles have various periodicities.  For stocks that is 8.4 years.

    3) There’s a crap-ton of money sloshing around the globe, always in search of a better home.

    4) A lot of that money is in gigantic piles, such as at sovereign wealth funds, and other mega-concentrations.

    5) Tracking where that money is either about to move next, or is in the process of moving provides some trading advantage.

    6) The next big pivot is January 2020, just six months from now.  It will be a huge swing from deflationary to inflationary with a hefty dose of cost-push inflation.

    That last point coincide nicely with my own views on the oil investment deficit hitting sometime between now and 2022.  Can’t pump what you didn’t find or re-invest in.

    If or when oil really spikes in price, a lot of things will spike along with that, especially the sorts of things that the Fed and BLS like to micro focus on as being “inflation” such as food, gasoline, clothes and the like.

     

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  • Wed, Jul 17, 2019 - 3:58pm

    #12
    Lions

    Lions

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    Dow 35000

    After listening to this tape, we should all jump into the stock market right now and get on the train to the Dow 35000

    He never said anything about the numerous Black Swan events sitar in the background or could conceivably come up. It gets to a point of analysis paralysis and I think he even he may be surprised at what happens

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  • Wed, Jul 17, 2019 - 8:20pm

    Reply to #12

    davefairtex

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    correction coming

    I’m not sure if he said it to us here – or if it was over at USA Watchdog – but Armstrong did mention that there was (most likely) going to be a correction in both gold and SPX in the fall.  I know you were being snarky, but I figured that the information might still be useful.

    Again, the larger trend is all about money having to hide somewhere.  You tell me: if sovereign debt is no good, where does the big money go?  Gold?  Gold is tiny.  The bond market is 3 times the size of the equity market.  When a nation goes BK, there is no “bankruptcy” process where the assets are sold and the creditors get paid, unlike private debt.  If a sovereign stops paying, you end up with nothing.

    With private debt, if a company goes under, you still get something after bankruptcy; assets get sold, and the creditors get to split the proceeds.  Armstrong is suggesting (based on historical observation) that once the first sovereign default occurs, money will flee the remaining sovereign debt issues en masse in anticipation of further default events.  “Money flees in anticipation of events.”

    This happened in 1931.  The Great Depression was not due to the stock market crash in 1929.  It was due to a bond market crash that happened 2 years later.  Again, bond market = 3x the size of the stock market.

    As long as confidence in sovereign governments remains intact, money will hide in bonds when bad things happen – when those “black swans” show up.  Once confidence in the sovereign fails, Armstrong says, money will run to hide in private assets.

    He says that US sovereign debt should be good through 2021/2022.

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  • Wed, Jul 17, 2019 - 8:21pm

    Reply to #12
    GerryOz

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    After listening to this tape, we should all jump into the stock market right now and get on the train to the Dow 35000

    Ray Dalio is saying the exact opposite and encouraging people to buy gold. He’s a much more credible figure than Armstrong.

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  • Thu, Jul 18, 2019 - 2:23am

    #13
    CrLaan

    CrLaan

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    fofoa

    http://fofoa.blogspot.com/2011/09/once-upon-time.html?m=1

    future podcast? About freegold.

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  • Thu, Jul 18, 2019 - 2:46am

    Reply to #12
    CrLaan

    CrLaan

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    but Lagarde’s ECB keeps buying.

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  • Thu, Jul 18, 2019 - 4:31am

    #14
    AaronMcKeon

    AaronMcKeon

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    Public vs Private, and Armstrong's Thoughts on Gold

    Thanks, Chris, for this interview.  I know folks have mixed opinions on Armstrong in this community, but I was actually very excited when I saw you were interviewing him.  I really do think there is something very legitimate to the whole topic of public vs private.  In fact, if I had to boil many of the trends of today to one unifying topic, I might say it is a trend of decentralization.  You see this in businesses (i.e. Uber), cryptocurrencies, and most notably in election results – to name a few.  There seems to be a sentiment of increasing distrust in centralized institutions, especially governments.  I also think it’s not so far-fetched to believe capital is flowing into the US because it’s the cleanest dirty laundry in the bin and, as a result, asset classes are getting pumped up.  Where he lost me a bit in this particular interview is when he says things like fundamentals don’t matter.  I disagree with this, but think the fundamentals around sovereign debt levels will be exactly what pushes the very switch from public to private he’s projecting.  I think the general thought at PP is that unsustainable sovereign debt will eventually lead to a currency crisis of some sort, which seems to fit with what Armstrong is saying.  The only difference is what happens in between now and then.

    On gold, I was a little disappointed that he never really answered Chris’s question on the future of gold.  I don’t think it was intentional –  I think he went off on a tangent – but I would have liked to hear him complete his thoughts on this.  What I took away was that gold does not correlate to inflation, but that it doesn’t necessary mean it always moves in opposite directions.  If I could infer where he might have gone, I suspect it would have been to say that if/when there is a currency crisis, gold will do very well but that it wouldn’t be tracking inflation because it’s correlated to inflation but because it’s a vehicle to ride through a crisis.

    Anyways, just some thoughts.  Thanks for the interview.

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  • Thu, Jul 18, 2019 - 5:04am

    Reply to #14
    CrLaan

    CrLaan

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    I read his typewritings in 2008/9 when he was still in custody. After his release he’s very careful about his words.

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  • Thu, Jul 18, 2019 - 12:26pm

    Reply to #12
    Nate

    Nate

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    Dalio on gold

    So, the big question worth pondering at this time is which investments will perform well in a reflationary environment accompanied by large liabilities coming due and with significant internal conflict between capitalists and socialists, as well as external conflicts. It is also a good time to ask what will be the next-best currency or storehold of wealth to have when most reserve currency central bankers want to devalue their currencies in a fiat currency system.

    Most people now believe the best “risky investments” will continue to be equity and equity-like investments, such as leveraged private equity, leveraged real estate, and venture capital, and this is especially true when central banks are reflating. As a result, the world is leveraged long, holding assets that have low real and nominal expected returns that are also providing historically low returns relative to cash returns (because of the enormous amount of money that has been pumped into the hands of investors by central banks and because of other economic forces that are making companies flush with cash). I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold. Additionally, for reasons I will explain in the near future, most investors are underweighted in such assets, meaning that if they just wanted to have a better balanced portfolio to reduce risk, they would have more of this sort of asset. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. I will soon send out an explanation of why I believe that gold is an effective portfolio diversifier.

    https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/?published=t

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  • Fri, Jul 19, 2019 - 11:57am

    Reply to #14

    Montana Native

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    Typed convos

    Pretty sure they used to be published on Jim Sinclair’s Mineset site….

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  • Fri, Jul 19, 2019 - 11:59am

    #15
    kmaher

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    Great understanding of markets but blind to some some issues

    Martin Armstrong clearly has tremendous insight into markets.  His thoughts on the importance of capital flows provide a very useful lens through which to consider events.  Based on some exposure to his work he has some important blind spots that lessen the strength of his outlook in my opinion.

    From my exposure to his work, he seems to be an absolute believer in the power and wisdom of unfettered markets.  In general, I agree.  However, when markets have important factors omitted from their calculus, such as the externalities of environmental degradation, they will be vulnerable when those externalities diminish the ability of markets and societies to function.

    Also, my impression is that oil/energy in his view is simply another commodity.  Not accounting for the fundamental importance of energy reduces the value of his perspective.  That wouldn’t be apparent to him looking back through history as humans have consistently moved towards more energy dense resources.  Our current trajectory will challenge that and hit our “markets” with some nasty surprises.

    I find his public/private lense very useful.  However, current equity markets seem to be different in some fundamental ways.  Certainly in the past I can see how equity markets provided more protection for assets when fear of defaults etc. rise.  What is the book value of current equity markets though?  What’s the book value of Facebook, Google , Apple or any of the other tech companies that represent such a substantial portion of our equity markets?

    His point about the gold market being tiny in comparison to large pools of capital is true.  My view though is that those pools of capital, largely representing financial assets that have been inflated without any restrictions based on physical constraints will not simply slosh around the world to find safety.  Actually, I do expect a lot of sloshing, I just don’t think they’ll find safety.  Most likely we’ll find much of this wealth that sits in financial assets is more imaginary than real and it will go simply disappear.

    Kevin

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  • Sun, Jul 21, 2019 - 3:44am

    #16
    derelict

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    Ship of fools

    So you get a negative first post about the interviewee and PP rallies to his defense, including calling into question wikipedia, links to a vid on Israel disinformation, and arguments that two wrongs make a right: it’s all good there are felons everywhere!

    No one and I mean no one deals with any of the actual behaviour of Armstrong, the charges – multiple charges over a long period of financial advisor malfeisance. This isn’t stuff planted by Gerry in Oz. Really ? Someone registered at PP 3 months in advance just so they could post a quick negative on an interviewee? Dave, your CT slip is showing.

    Wiki is a compendium of sources which are all footnoted at the bottom of an entry. Did anyone care to read the many articles at Bloomberg, WSJ, NYTimes, the Guardian, and elsewhere? Were these all Israeli disinformation also? LOL LOL LOL

    I don’t doubt that Armstrong might have some particular insights into the way financial advisors raise funds, invest them, report to both the investors and the authorities. Someone doesn’t have to have a clean record to be interesting, that’s for sure. He could start by telling us a lot about what NOT to do. Chris should lead off with that, setting the stage for just who is being interviewed here. Instead not a word…crickets. And that’s not right.

     

     

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  • Sun, Jul 21, 2019 - 9:01am

    Reply to #1
    grochef

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    Well, Armstrong is a criminal and a sociopath.  Aside from that, his inability to take raw facts and correlate them is proof enough that he is not someone whose opinion is more than the ramblings of a lunatic.

    Many smart people have been saying, for nearly a decade, that there is an economic crash looming just around the corner and that gold and silver will be rocketing to unseen heights.  Still, most economic indicators have continued to improve while gold and silver have lost more than 50% of their value since 2011 and show no inclination toward changing that trend any time soon.   Armstrong’s opinion means nothing compared to those of Martenson, Maloney or my cat.

    Armstrong shows his true arrogance with his inability to take centuries of data showing that, since the Industrial Revolution, humans have been steadily burning more fossil fuels while atmospheric CO2 and global temperatures climb at the same rate.  Armstrong uses his own “analysis” to “prove” that climate change is fake news.  His complete inability to make a simple correlation (and that he is a criminal) place him in a basket with a big sign that says, “Do not listen to the ramblings of this guy.”

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  • Mon, Jul 22, 2019 - 6:06am

    #17

    sand_puppy

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    Armstrong on the Silence Surrounding Epstein Incident

    Martin points out several aspects of the Epstein affair that sound right to me:

    1.  Big Media is very quiet on two aspects of the Epstein case:   a)  the network of coercion/blackmail and a)  the breadth involved participants.  As a diversion, attention is focused on sordid stories of Epstein’s individual depravity.  (the “lone deranged pedophile”).

    2.  Prosecutors collected video and pictures of hundreds of underage girls from Epstein’s properties, most of which should be identified or identifiable.  Who do they say they were “servicing?”

    3.   Epstein has been at this for 30 years.  He been protected by the legal system enabling ongoing abuse of young people.  What changed now?   One explanation is that Trump was NOT a sex patron and that many wealthy Dems WERE–i,e.–and that leaking this story is just politics as usual in the USA.  (If the dems can “find” a “grab ’em by the pussy” audio tape 12 years later and surface it just before the election then the repubs can find a pedo scandal that includes dem leadership and supporters.)

    4.  The battle for control is again being waged by destroying the legitimacy of the opposition (similar to some comments on this thread).

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  • Mon, Jul 22, 2019 - 6:45am

    #18

    Chris Martenson

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    Very odd timing by Trump

     One explanation is that Trump was NOT a sex patron and that many wealthy Dems WERE

    Obviously a lot of very wealthy and otherwise politically powerful people were regular patrons of Epstein’s parlors, planes and palaces.  Dems, Repubs, both…this isn’t a left v. right kind of thing, but rather a right v wrong kind of thing.

    I found today’s release of this by the White House to be rather odd in terms of timing:

    There’s been a huge (for the US) connecting of the dots and the Israeli connection to Epstein is as obvious as can possibly be.

    So…all of a sudden the White House is concerned about Anti-Semitism?

    This is the usual ploy when Israel gets caught doing something bad.  Connect anything that the state of Israel does to Anti-Semitism.  Blur the lines.  Mix them up good and solid to the point that the Overton window for such conversations gets slammed good and tight.

    The problem with such an approach is that if/when the mood shifts, and you’ve left people with no choice but to either be Anti-Semitic and have the freedom to be critical of Israel’s tactics, or to remain silent, then many people will choose their freedom.

    It’s an awkward choice to be sure, and one that should never have to be made.

    To be clear, I am 99.995% certain that the CIA and MI6 are up to their ears in this mess too.  It’s just that nobody is (yet) saying that looking too closely at Epstein is an act of Anti-Americanism.

     

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  • Mon, Jul 22, 2019 - 7:07am

    Reply to #18

    pyranablade

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    Why now?

    I think it is because a Muslim Congresswoman tweeted some things or said some things that were anti-Israel or even anti-Semitic altogether. Trump is doing this to put more pressure on “the squad.”

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  • Mon, Jul 22, 2019 - 7:36am

    Reply to #18

    Chris Martenson

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    Re: Why now?

    I think it is because a Muslim Congresswoman tweeted some things or said some things that were anti-Israel or even anti-Semitic altogether. Trump is doing this to put more pressure on “the squad.”

    Maybe.  But the optics are not good.

    Meanwhile, the US’s electrical infrastructure proved not up to the task of keeping people cool this past heatwave.

    ConEd let down 80,000 customers in the NYC region, and Madison Wisc looked like an absolute war zone at one point when two separate substations blew up.

    Maybe it’s time to stop waging endless wars in the Middle East and spend some time and money rebuilding an obviously decaying US empire?

    That’s a big part of what ‘the squad’ is talking about and Trump’s efforts to marginalize them as Anti-Semitic are quite off-putting to me.

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  • Mon, Jul 22, 2019 - 8:57am

    Reply to #16

    davefairtex

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    unequal before the law

    So you get a negative first post about the interviewee and PP rallies to his defense, including calling into question wikipedia, links to a vid on Israel disinformation, and arguments that two wrongs make a right: it’s all good there are felons everywhere!

    No one and I mean no one deals with any of the actual behaviour of Armstrong, the charges – multiple charges over a long period of financial advisor malfeisance. This isn’t stuff planted by Gerry in Oz. Really ? Someone registered at PP 3 months in advance just so they could post a quick negative on an interviewee? Dave, your CT slip is showing.

    Those whom the power structure doesn’t like, gets hosed.  That’s just how things work.  Anyone with a functioning memory, and the ability to add small single-digit numbers will quickly figure this out for themselves.

    Armstrong got tossed in prison for 7 years on just “contempt of court” – I think he got the longest contempt citation of anyone in history.  Pretty clearly “the system” had a hard-on for making his life unpleasant.  This, while other financial criminals at the mainstream banks just get fined.  The injustice is really striking to anyone who is even slightly observant.

    Was it accidental?  I don’t think so.  To me, this lends Armstrong extra credibility.  If The System wanted to hose him this badly, then by definition he’s got something interesting to say.

    The government is doing the same thing to Bradley/Chelsea Manning – in jail on “contempt” charges – because s/he refuses to testify against Assange – someone else who has really interesting things to say.  Just another case of The State hosing someone they don’t like.  Flynn, Page: tossed in jail on “lying to the FBI” charges (they are “felons” now – they can’t run the register at McDonalds, but that slot running the ECB is still open), while Clinton’s staff all got immunity deals.  If you’re a corrupt tool, you and your staff get a pass.  If you are a fly in the State’s ointment, you and anyone associated with you gets a ton of bricks dropped on your head

    As for my Conspiracy Theory “slip” – you must not have read my other posts.  I love exploring conspiracy theories, such as:  Operation Northwoods.  Babies in Incubators.  Bomber Gap.  Missile Gap.  WMD in Iraq.  And of course the latest one: Crossfire Hurricane.

    Thanks for providing more reinforcement that Armstrong actually has something important to say.

    http://www.gata.org/node/4892

    [I do think he’s not up on “energy” nor “climate” – but to paraphrase Chris and other posters here, we can always choose to focus on the donut rather than on the hole]

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  • Tue, Jul 23, 2019 - 8:06am

    #19

    sand_puppy

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    The Elite in Prison Jumpsuits

    Continuing with DaveF’s theme of “unequal under the law,”  Charles Hugh Smith yesterday offers a very incisive comment on how bad it is.

    Our Ruling Elites Have No Idea How Much We Want to See Them All in Prison Jumpsuits

    Divide-and-Conquer has been the absurdly easy strategy of the Ruling Elites to fragment and disempower the citizenry. It’s child’s play for the Ruling Elites to ceaselessly promote a baker’s dozen of divisive issues via the corporate media, and then watch the resulting conflicts split the citizenry into fragmented camps which subdivide further with every new toxic injection.

    Prayer in schools, kneeling during the national anthem, burning the flag, “send them back”, abortion, cartoons about the Prophet, painting over a George Washington mural, etc. etc.  Hot button topics that the elite could care less about.  But:  these issues set the conservatives and liberals at each other’s throats.

    As thc0655 says they are playing the game “Lets you and him fight.”

    Or as Catherine Austin Fitts says:  “While we fight, they take the money.”

    The one issue that could unite the fragmented citizenry is moral revulsion: As the Epstein case promises to reveal, there is literally no limit on the excesses and exploitations of the privileged few in America, no limit on what our Ruling Elites can do with absolute impunity. … It is painfully obvious that there are two sets of laws in America: bankers can rip off billions and never serve time, and members of the Protected Class who sexually exploit children get a wrist-slap, if that…..   There’s always a way to lawyer-up and plea-bargain for a wrist-slap, a way to bend another “patriot” (barf), a way to offer a bribe cloaked as a plum position in a philanthro-capitalist NGO (non-governmental organization), and so on.

    Here’s the sad reality: everybody in the Ruling Elites looked the other way: all the self-described “patriots” in the Intelligence services, all the technocrats in the Departments of Justice, State, etc., the Pentagon, and on and on. Everybody with any power knows the whole class of Ruling Elites is completely corrupt….

    Charles captures my fury also.

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  • Thu, Jul 25, 2019 - 5:16pm

    Reply to #1
    GerryOz

    GerryOz

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    More about Armstrong....

    http:///www.armstrongecmscam.blogspot.com

    Nuff said?

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  • Fri, Jul 26, 2019 - 3:32am

    Reply to #1

    davefairtex

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    bad cert

    Amusingly, your link kicked off an error: “SSL_ERROR_BAD_CERT_DOMAIN”

    Whatever further bad things you have to say about Armstrong remains hidden behind a bad SSL certificate.

    You might want to run off and fix it and then tell us when your site is ready for prime time.

    https://www.armstrongecmscam.blogspot.com/

    Unable to communicate securely with peer: requested domain name does not match the server’s certificate.

    HTTP Strict Transport Security: false
    HTTP Public Key Pinning: true

    Certificate chain:

    —–BEGIN CERTIFICATE—–
    MIIMETCCCvmgAwIBAgIQCLG1GZj81WYCAAAAADjY8DANBgkqhkiG9w


    —–END CERTIFICATE—–

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