Another weak session for the Nikkei despite a brief run at the psychological 17k mark just ahead of lunch. However, it wasn’t to be and the sentiment from a weak US session finally penetrated what euphoria there was and eventually saw the Nikkei close around 1% lower on the day. In mainland China the Peoples Bank of China set the Yuan rate at 6.7258 as the trend continues to play out and the Shanghai index closed with a marginal loss (-0.2%). HSI closed weaker (-0.6%) as US and European futures were indicating weaker openings.

European indices fell on the back of oil and bond price declines as markets await the FED minutes. Core eventually closed down around 0.5% (DAX, CAC and FTSE, whilst the Spanish IBEX finished just 0.1% lower). One of the main talking point throughout both European and Asian trading sessions was the rally seen in GBP after Theresa May stressed the UK would seek maximum opportunities towards trading with the EU. Cable saw an immediate bounce to mid 1.23’s from the 1.21 lows but did see the selling return as we approached the end of the days trading in the US. The DXY was last seen trading at 98.00 up 0.4% as the GBP bounce was balanced by the EURO and JPY weakness.

Most of the US trading session was spent waiting for the FED minutes and the implications surrounding them. So, upon release the market now talks December the trigger month which was obviously acceptable as far as the markets are concerned since we rallied back into positive territory. One market that is sure in which direction it wants to go and that is the Treasury market. The US curve steepened in todays trading with 2’s closing 0.86% but watched 10’s fall to 1.77% (2/10’s at 91bp). In Europe, still concerns around possible ECB tapering weighs on the market but more because its not working and especially if you start to see the FED increasing rates at a time when the EURO and GBP are also losing ground. 10yr Bund closed this evening at 0.065% closing the 10/10’s spread at +170.5bp. Italy closed 1.42% (+4bp), Greece 8.15% (+2bp), Turkey 9.69% (+7bp), Portugal 3.38% (+3bp) and UK Gilts at 1.04% (+4bp).

Wikileaks has produced an email that shows Hillary Clinton routinely discussed things that should have been on a secure server. Hillary sent an email to her campaign chairman John Podesta back in 2014, who was then-counselor to President Barack Obama. In this email, she said Saudi Arabia and Qatar were both giving financial and logistical support to the Islamic State and other extremist Sunni groups demonstrating that indeed this has been a civil war between Sunni and Shia. This email, dated August 17, 2014, was an eight-point plan to defeat ISIS in Iraq and Syria. Clinton’s email said that the United States should support Kurdish forces on the ground with U.S. military advisers and avoid the use of a conventional ground operation. She said we needed to bring pressure on the governments of “Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region.” 

The differences between Shia and Sunni is to be found in their interpretation of the hadiths and sharia law on how Muslims should define and govern themselves. But for the most part, the religious differences are really superficial for the conflict and violence is truly driven by political power, which intertwines with theology. There have been protests in Saudi Arabia following execution of Shia there. This is the nature of the civil war which is brewing (see War Cycle Part II).

This really raises serious questions when in fact Saudi Arabia is one of the countries donating large amounts to the Clinton Foundation.

COMMENT:  Mr.Armstrong,
I am wondering why you haven’t commented on the recent Trump scandal about the video with Billy Bush? Constantly seeing articles on how corrupt Hillary is but obviously you are biased towards Trump winning for not making a statement about his misogynist comments about women!
Sincerely,
PH

REPLY: There is a huge difference concerning statements from more than a decade ago and the countless financial frauds of Hillary. But Hillary is not the only “evil” person in Washington. A tape was given weeks in advance to Paul Ryan and elite Republicans and he never told Trump. This is part of the conspiracy between career politicians of both parties. I wrote: “Trump having a vulgar discussion about a number of women is indeed over the top and something you would expect from a locker-room banter.” That is far different from the rest on Capitol Hill who just line their pockets and you are their target. Yes, a tape that involved Billy Bush means he is being fired from the Today Show for banter more than a decade ago. However, other tapes show it was more the nature of Billy on a regular basis. This is what society has become.

Today. there is ZERO TOLERANCE for anything and the problem is that the human race is anything but perfect. Anyone who says they have never done or said anything wrong ever, is an absolute liar. The polls do show that even the majority of Republicans do not think tapes from more than a decade ago are relevant. Who hasn’t changed their mind from their youth or was Trump responding to a macho attitude of Billy Bush? Who knows? The Secret Service have revealed Hillary’s gutter mouth, violent temper, and she even called one agent “you Jew bastard”.

What either one has said is not really the issue. Will this be about ending corruption or furthering it? Emails have surfaced showing Hillary gave preference to Bill’s friends trying to get a piece of the action in Haiti. We already know that the donations to Haiti were ripped off.  Nevertheless, if you want to vote for Hillary because of this single incident, have a nice day. This is the Political Year From Hell. It will all be down hill from here into the future. Just send Hillary more money and whatever you would have left any kids in the future while your at it. The next trade you lose, consider that a donation to the New York bankers as well. Since they own Capitol Hill, it should be considered a donation for tax purposes. After all, the poor bankers have to eat too.

There is far more out there about the Clintons I do not rehash and I don’t bother to comment on. However, I also warned: “It will NEVER be the same after this election.” What you fail to grasp here is President Kennedy was notorious for having affairs. However, the Press did not cross that line between personal and criminal. Nixon was driven from office for having tapes and trying to cover up, which is exactly what Hillary has done. By equating personal issues and banter with criminal activity means that nobody in their right mind would run for office who is even qualified. Who wants to subject themselves to that? If you told some former lover something and they then call you a rapist piece of shit, unless you are Bill Clinton with white shining armor, good luck.

Is Trump the knight in shining armor? Of course not. This election is by no means Republican v Democrat or even Trump v Hillary. Those days are gone and strangely enough, most people are oblivious to the change in trend here. This is the peak in government and the total collapse is unfolding right before our eyes. Trump cannot reverse that trend. He might slow it down a bit if he was even allowed to take office, which I seriously doubt. They are conniving every possible scheme to ensure he does not win, and if he does, they will blame it on Russia and deny him the position. The Republican elite are dead against Trump.

This battle is really the PEOPLE v CAPITOL HILL. It is a shame it has to be Trump leading the charge. Hillary has raised $516.6M with almost 30% coming from Super Pacs. Trump has raised only $168.2M with only 1% from Super Pacs. About 99% of donations to Trump come from small people. Hillary has the bankers, lobbyists, and hedge funds. Don’t you even bother to ask why? The world behind the curtain is an all out war against Trump. Even the top three media outlets have instructed their employees to “destroy” Trump. This is also the end of the press. They have lost all credibility. It’s over! We should just turn out the light!

If you want to say I am biased, fine. But not for Trump as a personal candidate in the traditional Marxist contest. I am biased against the system for it is corrupt, disgusting, and hopelessly beyond repair and that includes Republicans and Democrats. This is what our computer is projecting and it has no personal bias. It simply says we have to crash and burn and then just maybe, if there is the slightest glimmer of hope, perhaps, we can rise from the ashes like the phoenix and redesign this mess all over again to leave our children something better than we inherited.

Otherwise, quite frankly, I have no personal desire to live in a world that is this far gone. I am glad I have seen the majority of my life pass me by. That is my personal selfish view.

Like Star Trek, P-L-E-A-S-E! “Scottie, beam me up!” I have seen way too much thank you.

What I do, I am compelled to do, but not for me; for who I leave behind.

The choice for president has never been so bad. The latest polls show 63% of voters said Clinton is overly secretive, 55% said she was corrupt, and 52% said she was “extremely liberal.” This is very interesting since the only presidents since 1900 to be elected with greater than 60% of the popular vote were Lyndon Johnson in 1964  after the Kennedy Assassination,  61.05%,  Franklin Roosevelt in 1936 with 60.80%, Richard Nixon in 1972 with 60.67%, and Warren Harding in 1920 with 60.32%. Therefore, Hillary beats everyone with the highest rating of distrust.

The polls are being rigged as they were in Britain for BREXIT. But plan B is clearly being put into play already preparing the public for the accusation that should Trump win, the election will be called a fraud because of Russian hackers. The Washington Post, a big Democratic Party mouth piece, ran the story that Russian hackers target the Arizona primary. CNBC is carrying the story that Russia will hack the elections. Obama has outright accused Russia of targeting the Democratic National Party (DNC) claiming two Russian hackers were discovered. This is the story being carried even by the BBC, yet the specialist called in was Shawn Henry, the chief security officer at company called in Crowdstrike, who is himself a former executive assistant director of the FBI.  It was even bantered about in the second debate between Hillary and Trump. The New York Times is jumping in also carrying the story. Reuters is now reporting that there is no question that Russia was behind the hacker at the DNC.

Democrats are now warning foreign governments and hackers that cyber attacks against the U.S. will be treated like any other, even if it leads to war. DNS hijacking or DNS redirection is a common practice. This amounts to subverting the resolution of Domain Name System (DNS) queries. This can be achieved by malware that overrides a computer’s TCP/IP configuration to point at a rogue DNS server under the control of an attacker. It can even modify the behavior of a trusted DNS server so that it does not comply with internet standards. However, the hardest problem in finding the source of these attacks is really attribution. Each data packet sent over the Internet contains information about its source and its destination. Yet the source field can be changed [spoofed] by an attacker to make it appear as if  it is coming from someplace it’s not. This is standard operational procedure. Consequently, I serious doubt that a professional hacker would have left a trace.

I cannot stress strong enough that there is no way they will allow Trump to enter the White House. It appears that should he win, like BREXIT against the odds and the polls, Obama will not leave and the election will be declared a fraud. Obama will most likely step down and hand it to Joe Biden. Our models are showing November as a rather important turning point and this seems unusual insofar as that it would be limited to merely an election. Something else may be in the wind.

Japan finished on a strong note but it was a disastrous opening (following oil) that it had to spend the rest of the day recovering from but a near 1% better close certainly helped confidence into European trading. Shanghai opened well and continued strongly, eventually closing +1,4% firmer. However, the Hang Seng was anything but strong reflecting a lot of the KOSPI weakness following the Samsung Galaxy 7 recall. Traders talk in Singapore concentrated around the Malaysian 1MDB fund and the Swiss wealth management “Falcon Private Banks” involvement, especially following the BSI shutdown earlier this year.

Despite earlier intraday attempts breaking new highs (FTSE) not one of the core European indices could close in the positive. All finished around 0.5% lower on the day and that as German Business Confidence increased, an early rise in oil prices and a strong opening for US futures. This was not to last however, and late in European trading hours the Trader Talk was mostly around President Putin cancelling a trip to Paris as tensions continue to grow with the west.

The USD continues to be the main talking point not just for the US but all over the world. Today we saw large moves again for GBP but accompanying that today was JPY and the EURO. The DXY was last seen trading 97.75 (+0.9%) which is a large move for an index but is important as the reserve currency of the world. All commodities are traded in USD and if water were a tradable commodity that too would be priced in USD. The problem arises when emerging market currencies fall against the USD as crops become even more expensive.

More concerns around the FED minutes and a subsequent sell-off in bond prices. US 10’s closed this evening at 1.76% with German Bunds closing at 0.02%; closing the spread at +174bp. Italy closed 1.37% (-2bp), Greece 8.13% (+2bp), Turkey 9.62% (+10bp), Portugal 3.34% (-6bp) and UK Gilts at 0.98%.

If there was ever any question that this is a bond bubble with a 5,000-year low in interest rates, the final bit of insanity just took place. Italy managed to sell its first 50-year bond last week as investors were betting that the European Central Bank might soon add ultra-long debt to its asset-purchase stimulus scheme. Draghi has said he would do whatever it takes to stimulate inflation. Hence, speculators are betting they can sell these 50-year Italian bonds to the ECB for a profit.

The speculation was so great that about 16.5 billion euros in orders were received for a bond issue that was about 20% of that amount. They are not considering the risk that the upcoming referendum might overthrow Italy’s prime minister. This is speculation gone completely mad. These insane speculators have already bought 50-year bonds from Belgium, France, and Spain as well. Many of these same speculators have also signed up for Ireland’s 100-year bond in March.

All indications are now pointing to war between the USA and Russia. It appears the powers that be in Washington fear a Trump victory and he would end nation building. The military needs to start a war now because if Trump were elected, he would not go along with this mess. Even Russian TV is talking about war in the aftermath of the collapse of cease-fire efforts in Syria. As the Obama Administration and Russia accused each other of sinking diplomacy, and Moscow is now increasing its military presence on all fronts moving nuclear weapons to the border with Poland and throughout the Baltic regions as well as in the in the Mediterranean, All nuclear agreements have been suspended for which Obama won the Noble Peace Prize if you really believe that BS for his nuclear non-proliferation treaty. Russian prime-time news is warning that the U.S. wants to provoke a conflict. I cannot say Russia is wrong. It is indeed the Obama Administration that appears hell-bent on starting war.

The cold war is back and ever since our War Cycle turned up in 2014, the escalation of a collapse in the relationship forged by Reagan began with the crisis over Ukraine in 2014 precisely on target. Russia invaded Syria also precisely on the very day of our turning point in the Economic Confidence Model, October 1st, 2015 (2015.75), which warned that this would be the primary focus for this current wave in the ECM going into 2020. At first, there appears to be some easing in the sanction imposed by Obama on Russia intended to compel the people to overthrow Putin. That stupid policy only emboldened Putin domestically raising his approval rating. Whatever hopes that the cold war would warm up is clearly delusional at best.

The Obama administration has suggested that further Russian actions in Syria could amount to war crimes and it is clearly setting the stage for a Trump victory to be called a fraud and blame shifted to Putin for disrupting the U.S. election. Cyber Attacks have now been listed as an act of war both in the USA and in NATO in an effort to justify military action. Mikhail Gorbachev  has even come out of retirement and stated publicly: “The world has got to a dangerous phase,” in an interview with state news service RIA Novosti on Monday.

This gives me no pleasure to see this model performing with this degree of accuracy. Obviously, a war with Russia will impact European currencies and send capital fleeing to the dollar fulfilling yet another model.

The 2014 Cycle of War Report $75

The resistance to the refugees in Germany keeps rising. German mayor Joachim Kebschull of Oersdorf had to be hospitalized after he was severely beaten after expressing support for asylum seekers. He was attacked from behind as he walked to a planning meeting on Thursday night. Michael Richter, the head of a party on the town council of Freital, on the outskirts of Dresden in Saxony, had death threats and his car was blown up outside his home. A report was written a few days before Cologne mayoral candidate Henriette Reker was stabbed in the neck. That report warned of a rise in violence in Germany that would be directed against the pro-refugee politicians. Protests have been rising in Germany since January when more than 200 protesters were arrested.

Asia started poorly on the back of a weaker oil market until Russia announced it would be willing to cutback its oil production in respect of the OPEC decisions. Oil bounced over 3% on the Asian day reversing the mornings losses. In Japan the Nikkei traded heavy most of the day but recovered off of its lows by the close. In China the PBOC set the Yuan rate at 6.7008 its weakest level in over six years. The Shanghai exchange traded better as the day went on eventually countering the weaker currency with a 1.45% higher close.

Europe never has a day where people are not talking about Deutsche Bank and today was much the same. The lack of announcement over the weekend concerning the DOJ pressured DB shares from the opening and by mid-morning shares were down around 3%. There were also early rumours that the Qatar investor was thinking of liquidating; a rumour that was quashed by late US trading with the announcement that the investor could possibly ADD to their position rather than liquidate, taking their shares from 6.1% to possibly 10%! The shares rallied and were last seen actually up 3%. All core European indices closed up around 1% from FTSE at 0.75% to DAX at 1.25%.

It was a fairly quiet day for US stacks after the second presidential debate despite Europe setting the stage for a friendly market. We did see a strong opening with the DOW up around 200 points but this strength was not to last. Still most indices closed with 0.5% gains the better levels just could not be maintained but the NASDAQ did return the best at 0.75%. The strength in the US Dollar took a lot of the shine off earlier stock performance with the DXY again flirting with two month highs at the 97 level.

US treasuries closed 10’s at 1.72% with German 10yr Bunds at +0.055% closing that spread into +166.5bp. Most of that weakness has come from the Bund sell-off with Treasuries close to unchanged. Italy closed 1.39% (+1bp), Greece 8.11% (-3bp), Turkey 9.52% (+7bp), Portugal 3.41% (-14bp) and UK Gilt at 1.02% (+5bp) – The sell-off in Gilts continues in anticipation of additional supply.