QUESTION:

Mr Armstrong, thank you for all that you are doing. I was hoping to get your view on the Indian government banning large denomination bills. What do you think is the reason and why such a small window of time to get them turned in?
PB

ANSWER: Unfortunately, the theory is that cash prevents governments from maintaining negative interest rates. They want to “tax” the mere possession of money. Eliminate cash, and then they think they can stimulate the economy without creating inflation and they will be in total control. They view that the reason Marxist/Keynesian philosophy failed is because of cash. People can hoard money and thus exit the system. They cannot stop that unless they eliminate money.

This is what the NEW AGE of economics is all about. They next level of taxing you for merely having money. Indian Prime Minister Narendra Modi has announced that the 500 ($7.60) and 1,000 rupee banknotes will be withdrawn from the financial system overnight. This is all about taxes.

Everyone should pay attention here. Governments can simply cancel a currency overnight. The ECB wants to eliminate the 500 euro note and Larry Summers is arguing to end the $100 bill in the USA. These people want to tax everything and see that interest rates can be negative forever if they get rid of cash. They are totally insane.

One of the largest one day gains seen in the Nikkei with a rally of almost 7% on the day. Upon the open almost no trades were seen until the index was over 5% higher, comfortably taking out the 17k level again. However, the flip-side of this move was the JPY which traded from 101 up to 107. In late US trading the Nikkei futures trade around 1% higher into the close. In China the Shanghai also responded positively gaining 1.4% but also with the PBOC fixing the Yuan weaker at 6.7912 (which is interesting a 6yr low). The Hang Seng

Very interesting that much media coverage surrounding Europe today have claimed the Trump rally has faded already. Core European indices drifted into negative territory and closing -0.25% but the UK’s FTSE and Spain’s IBEX were both down around 1.4%. The market is reacting to the USD strength certainly against the Euro as we see the capital flows begin to increase.

The US markets continued yesterdays move opening over 200 points higher on the DOW whilst maintaining volume. What was encouraging was that having seen new highs the rest of the day remained in that area eventually closing a tad higher on the day. NASDAQ had a volatile day with some profit-taking in some expensive and more popular stocks which briefly took it down 2% in a move but managed to hold and even saw a small bounce. We continued to see previous safe-haven asset class positions be unwound with gold falling another $15 today closing around $1257.

Treasuries were sold yet again with US 10’s adding another 10bp to close 2.15%. 2’s were also weaker but only by 2bp with steepens the 2/10 curve by another 8bp today (closed +123bp). Italy 10’s closed 1.89% (+15bp expectations for the referendum), Greece 7.13% (-8bp), Turkey 10.34% (+8bp), Portugal 3.36% (+11bp) and finally UK Gilt 10yr 1.34% (+8bp).

There are reports of more and more incidents of Germans turning against the refugees with violence. A mob of about 50 youths went “hunting” for migrants in the eastern German city of Bautzen. They were throwing stones. This was by no means the first time in that city. This did not reach the 1700 people who protested in Cologne when riot police were called in last January after they raped some 2000 German girls on News Years Eve. The protests against the refugees have been rising and increasing. They have now been in the hundreds of thousands across the country.

Brussels refuses to acknowledge they have made a huge mistake. Allowing millions of refugees into the country with many young single men, many pretending to be less than 18, has taken its toll on everything and everyone. The refugees are occupying schools gyms throughout the country. Many students have lost their right to have sports. A school in Bavaria went as far as to send a letter home to parents warning them not to let their daughters wear revealing blouses or short skirts, because emergency accommodation for refugees has been set up next to the gym.

The refugee men know the game. They claim to be children under 18 traveling alone in get in. The Sun reported “[a]s third load of ‘child refugees’ arrives from Calais as official figures reveal TWO THIRDS of those who had ages assessed were found to be adults.” I am personally friends with a school teacher in Germany who explain she is often terrified because these are men who tower over the children in the class. I would not want my children going to schools with men pretending to be children. This is totally insane. Where is the common sense among politicians? This is the picture Saad Alsaud who claimed to be 14 years old in Sweden. I would not want my 14 year old daughter in the same class with this guy.

Protests have erupted against Trump from the people who have been brainwashed by the media and the Democratic machine. The deep divisions that this election has exposed within the nation and Clinton’s speech not to give up on their agenda invites nothing but violent and civil unrest looking ahead. Of course these very people who say Trump is not their President reveal that it’s their way or no way. They seek to suppress those who produce so they need not in the classic Ann Ryan context. So in other words, the others should be subjugated for their survival. Unfortunately, this is the fate we must comprehend when we are looking at the end of socialism.

Regardless of the candidate, whatever is said in an election is not what always unfolds. These people show their ignorance of the political system and their own hostility. They seek to maintain the deep divide in the nations and that is by no means a way to promote peace.

That was interesting! Obviously well trodden ground now but the DOW futures were around 800 points lower at the time the Asian cash markets closed. The Nikkei was down over 5% on the day and as result of market bouncing in early US trading the futures are up over 900 points (5.75%). The Yen traded from 105.50 down to 101.15 before bouncing again and as we closed US cash sees it trading close to 106. Volatility was wild but almost controlled when considering virtually the whole market was wrong-footed. Gold bounce $70 from $11270 to $1340 before closing back at almost unchanged. Large caps on the Hang Seng were also lower closing around 2% lower which influenced FTSE and its opening. The Shanghai held-in reasonably well with a decline of just 0.6% with the off-shore currency losing 0.3%. Also, the in vogue (Trump-hedge trade) PESO reversed recent gains and was last seen down around 9% on the day.

Europe was equally controlled crazy. What started with large money hitting bids due to the fear ended with cooler heads evaluating the situation especially having heard Trump’s humbled speech. It looked as though this was the moment the market accepted him and started to accept his infrastructure plans. We quickly saw all declines reversed and then make ground upon the realization that so many clients have been sitting on the side-lines with plenty of cash to spend! All eyes will be on the Italian vote next.

It was the US market that everyone was concentrating on from dusk until dusk! Many traders were at their desks for 24hours but with very good reason. Banks feared the volume would not match the volatility but there were records matched almost everywhere. The reversal we saw in the S+P was the largest since the 2008 crisis eventually closing 1% higher on the day.

Bonds have been heavy everywhere and it really should be no surprise to anyone. One dealer commented, “This is the end of QE”. How would it be possible to QE when the largest economy in the world is raising rates? If it did not hit your bond market it will have double the effect on your currency. So why would internationals wish to receive fixed if they expect a huge currency hit! US 2’s closed 0.89% (+3bp) but with 10’s at 2.06% (+21bp) +117bp, sees the 2/10 curve steepen the most (in a day) for over 7 years. Other than the Bunds the other European yields will be too low when compared to the US closes. Bunds were last seen 0.2% (+2bp), Italy 10’s closed 1.75% (+3bp), Greece 7.21% (+10bp), Turkey 10.26% (+19bp), Portugal 3.25% (+6bp) and UK Gilt 10’s at 1.25% (+2bp).

Today was always going to be about the election with all markets anxiously awaiting any headline. In China we saw a smaller than expected Trade number but really was nothing to write home about. Also, we heard that foreign exchange reserves fell by $45.7bln to $3.121 trillion which was one of the largest declines this year. The Nikkei opened strong but could not hold the gains and drifted back to close almost unchanged. We Yen continues to drift weaker and this evening in late US trading has broken above the $105 level as we await electoral headlines. In late US trading the Nikkei and HSI futures are both trading up around 0.8% on the day.

On the whole Europe also had a quiet session with only the UK offering a smidgen of interest after a 0.6% positive gain but could also be argued is the resulting balance of a falling currency. The large retailer Marks and Spencer reported a 90% fall in first half profits. As a result they plan to cut 60 stores across the country; their shares were off around 6%. Germany’s Trade Balance disappointed at €21.3bn against an estimated €23bn. Also, in Germany, we saw a slump in Industrial Output from the previous months 2.5% to todays -1.8% (expectations were for a -0.5% print). DAX, CAC and IBEX were all up around 0.3% on the day.

All core indices closed up around 0.4% following on from yesterdays strong gains. Obviously, all this is subject to headlines from now on and so all could change over the next twenty-four hours. Some individual stocks did warn of future earnings (Hertz, CVS and Valeant) but overall the market holds the gains.

Safe-haven bids were easing lower as stocks indicated market stability. Treasuries drifted as the day went on with 10’s closing 4bp weaker at 1.86% but saw 2’s lose 5bp closing the curve 1bp flatter at +99bp. In Europe Bunds lost 4bp to close 0.19%; closing the US/Germany spread at +167bp. Italy 10yr closed 1.72% (+2bp), Greece 7.10% (-13bp), Turkey 10.07% (-14bp), Portugal 3.19% (-1bp) and UK 10yr Gilts at 1.23% (+3bp).

The Euro soared to 113 and then crashed and burned to the 109 level. The Dow exceeded yesterday’s high but has not penetrated the previous day’s low. Gold had its reaction up to 1340 and fell back under 1300. Let’s get this much straight. Our computer is NOT showing a major change in trend because of the election. We have warned this is not the case and at the end of the day, fundamentally, Trump will be far more bullish for the US economy that war and more taxes from Hillary.

This is more of a Reagan Moment. Ronald Reagan was the outsider every and the “establishment” in Washington resisted him. This will play-out the same. So let everything calm down. There appears to be no major change in trend at hand. If Trump gets the 15% corporate tax rate in, then look for the dollar to soar and almost $3 trillion come homes.

This has been an INTERNET Revolution. The king is dead (establishment) long live the people. Socrates has done a fantastic job on these trends. It takes perhaps an unbiased computer to just see the trend and determine which way the people will go without having to call them up and ask. It keeps learning and it seems to be able to do what humans cannot on any consistent basis. This is not merely the death of politics as it was, it is the death of mainstream media who sold truth to the highest bidder.

Cyclically, 2016 was the watershed year that should have been the end of Socialism that has driven the world into a very unsafe place for the past 112 years. I wrote: “Here we are, 2016 is 112 years from the 1904 election. Cyclically, it should be the opposite trend meaning that Trump should win and Hillary’s socialist agenda should be defeated.”