QUESTION: Mr Armstrong; I am witnessing everything you have warned was coming right down to the stock market rise with gold and the dollar. Nobody has put such a possibility even forward. The goldbugs only talk about how the stock market must crash with the dollar so buy gold. Even with gold rising they are still wrong. I take it your computer plots out relationships as well. So what next?

ANSWER: No relationship remains constant. Absolutely everything remains perpetually in a state of eternal flux. What is unfolding is following our capital flow analysis to the T. We are witnessing the demise of the EU, no matter how much they scream and become Draconian in an effort to retain power. We are also in a generational shift where the under-45 are far more independent and are not voting simply because they are Democrat, Labour, Conservative, or Republican. The establishment does not want to face this, but the political end is very near. As this happens, capital takes flight. Some will buy gold, others stocks, while still others run into the dollar since the US government is still holding together for now.

Civil unrest is exploding. The biggest and most violent protest in Germany erupted in Berlin over the weekend, exactly with our models calling for an explosion in civil unrest. Some 1800 police were called in and at least 120 policemen were injured in what became a street battle. This has been the most aggressive and violent protest in Germany in the past five years. Protesters were throwing bottles, cobblestones, and fireworks, and they destroyed cars in addition to attacking police officers. It appears at least 3,500 rioters took part in the uprising.

The protest is against police operations and mostly involves young people who have risen up against the police operations in the Riga street area. Protesters wore black hoods and carried banners with slogans like “Riga defend 94” and “Housing solidarity against state terror.” The demonstration went on with the crowd chanting repeatedly: “Bullenschweine get out of Riga!” Demonstrators threw firecrackers and police fired back with tear gas. The police also called in air support, employed helicopters, and called in for reinforcements from Bavaria, Brandenburg, Lower Saxony, Saxony, Saxony-Anhalt, Thuringia, and the Federal Police. Interior Senator Frank Henkel (CDU) announced after the demonstration that the police will now be present at night in an attempt to stop riots and arson attacks.

We are looking at the collapse of Europe unfold much faster than anyone suspected. I have been warning that the Continental EU banks are in serious trouble. The negative interest rates have devastated Europe. While trying to stimulate borrowers who are not interested without an opportunity to make money, the ECB has wiped out savers, pensions, and sent cash into hiding contracting the European economy – not stimulating it. I have also warned that it is the EURO which is in serious trouble and that BREXIT was the only way to save Britain from being dragged down under as the Euro sinks.

The Italian banks are collapsing and the crisis is now risking bringing down the Italian government. If they do not bailout the banks, the people will be in revolution. If they bailout the banks, they can only print Euros. The is starting to illustrate what I have been warning about. The EURO is in effect like a gold standard. When crisis hit, everyone had to suspend the gold standard for World Wars I and II and then upon the fall of Bretton Woods. The currencies were tied to gold which they could not increase its supply. This is the same crisis now with the EURO. Despite the EURO is really just electronic/paper, its quantity is still fixed by the EU membership. No single member state can just increase its supply unilaterally. That would be like trying to maintain a gold standard and one nation revalued its gold to three times that of what everyone else uses. That becomes impossible. The Silver Democrats nearly caused the bankruptcy of the USA for overvaluing silver relative to the world in the 19th century.

This is why the euro CANNOT SURVIVE. You have sovereign states with their own crisis and that demand measures separate and distinct from other members. This is how the euro system will break. It is extremely urgent that you understand the crisis ahead. This is what will send capital fleeing into the dollar. True, some will buy gold. That is generally retail investors. Pension funds and institutional investors will buy US government bonds, dollars and park them at the Fed, or jump in with both feet into the US stock market.

By the time this mess comes unraveled, we will see the world completely change. We are probably looking at a major world monetary reform come as early as 2018. The speed with which this is unfolding is rather incredible.

Despite the bears, the US share market continues to press against new highs. The Cash S&P 5oo closed at 212990 after reaching 213171 intraday. The record high remains the week of May 18, 2015, when it reached 213472 closing at 212606. The highest weekly closing was the week of July 13, 2015, at 212664.  Therefore, we have not made a new intraday high, but this was the highest weekly closing.

The Dow closed at 1814674 on Friday, which was neither a new high weekly closing nor a new intraday high. The highest weekly closing was the week of May 11, 2015, when the Dow closed at 1827256.

It appears we should see a turning point this week with high volatility returning the week of the 18th. We will explain more on the private blog tomorrow. So far, this has been following our capital flow models very nicely.

Despite the bears, the US share market continues to press against new highs. The Cash S&P5oo closed at 212990 after reaching 213171 intraday. The record high remains the week of May 18th, 2015 when it reached 213472 closing at 212606. The highest weekly closing was the week of July 13th, 2015 at 212664.  Therefore, we have not made a new intraday high, but this was the highest weekly closing.

The Dow close at 1814674 on Friday, which was neither a new high weekly closing nor a new intraday high. The highest weekly closing was the week of May 11th, 2015 when the Dow closed at 1827256.

It appears we should see a turning point this week with high volatility returning the week of the 18th. We will explain more on the private blog tomorrow. So far, this has been following our capital flow models very nicely.

The State Department blew everyone away after admitting that they officially and intentionally deleted several minutes of video footage from a 2013 press briefing to mislead the press over the Iranian nuclear deal.  Those in power are all about just them. They are constantly showing that they cannot be trusted on anything. Yet, we are risking the lives of our children with wars that are manufactured for political gain all so they can in their mind rule the world.

In school, we were taught that the Germans ruthlessly sunk a passenger ship, the Lusitania, to justify World War I. The problem was that the US was secretly putting arms shipments in passenger boats to get them to Europe. So they lied about that as well. However, Germany actually took out an advertisement in the New York Times to warn people not to travel on the Lusitania, but that was omitted from history books.

They knew about the pending attack by the Japanese on Pearl Harbor. They moved the big ships out and allowed the attack to happen so they could get into the war.

With Vietnam, Lyndon Johnson admitted that perhaps the sailors were shooting at whales. The Vietnamese never attacked the US navy in the Tonkin Gulf incident.

There were no weapons of mass destruction to invade Iraq.

The government proposed Operation Northwoods to justify an invasion of Cuba whereby they would kill Americans and call it a terrorist attack. This was later rejected by President Kennedy.

Why does anyone believe government about anything?

The politicians in Australia know how to shove a tax through that they can flip on anyone who opposes it. Australia is now implementing a “domestic violence tax” whereby they will charge every household $30 annually to create a fund to help victims of domestic violence.

There were about 124.6 million households in the United States in 2015 according to the U.S. Bureau of the Census (a household consists of all the people who occupy a housing unit). According to the Department of Justice, there are about 960,000 domestic violence incidents annually. That means that on a household basis, the percentage is 0.77%. It is curious that you would propose a tax of $30 per household to claim you are helping less than 1% of households. They then say if you oppose this tax, you must support domestic violence. This would raise taxes in the States by $3.7 billion. Very clever. One must wonder how much would really trickle down to help victims.

Edited Version

When it comes to taxes, just shut up and pay. It does not matter what the “intent” is — just pay. The German High Court upheld a broadcasting tax that requires everyone to pay for TV and radio. It seemed logical to question why someone should pay the tax if they do not own a TV or radio. Makes sense, but not to the German High Court. Everyone has to pay the tax even if you protest, do not own a TV or radio, and get everything from the internet. Hey, who ever said taxes were logical?

Of course, this brings to mind the words of Benjamin Franklin that the two things which are always certain are death and taxes.

The continued decline in the price of oil, US markets having turned mid-session and you have the makings of confidence deficiency – which is exactly what we saw for Asia. By the open dealers were looking for the bid and that never really changed. Nervousness for the US data so it was absolute certainty that the markets were looking for an impressive print in order to stand a chance of turning sentiment. Japan’s May C/A (current account) fell 3.7% from previous month which aided but not much the strong JPY.

Having suffered a rough week it was a little book-squaring ahead of the US numbers, so markets were better bid ahead of the numbers. DAX, CAC, IBEX and were all trading around 0.75% better as we approached release. Expectations were for around 175k so a 287k and a rise in the (from 4.8 to 4.9%) saw encouraging moves all around. The DXY (USD Index), Stock market, Oil and even the US treasury market all rallied after the release. DAX, CAC, and IBEX all closed around 2% better whilst the FTSE managed just 0.9%. BREXIT still weighs on the UK and even while we awaits the new Conservative leader announcement, GBP takes the zest out of the balance.

US Futures were pricing in a better Friday trade but the added support of the BLS data supplied the boost that enabled the markets to attain new highs. The DOW traded over 250 points with the S+P saw intraday all-time highs and trading on good volume. VIX traded off to 13.8%, with Treasuries playing near record low yields. With all core indices closing around 1.5% chances for setting new highs next week look extremely likely. Many dealers are claiming one number does not dictate a trend but it does open the debate for a July hike possibility.

More curve flattening this afternoon with 2/10’s closing at +75bp (10’s at 1.36%). In Europe, we again heard more talk of ECB expanding QE (at the request of the IMF) – if inflation is not forthcoming! 10yr German Bund closed -0.19% (-2bp) closing the US/Bund spread at +155bp. Italy 10yr closed 1.19% (-5bp), Greece 7.76%, Turkey 8.95% (+7bp), Portugal 3.05% (+1bp), and UK Gilts 0.73% (-4bp).