“British anti-terror police found a mini-arsenal of weapons when they raided a London mosque linked to a number of key terrorist suspects,” CNN reports. They discovered an arsenal of at least 100 weapons, including war-grade automatic firearms and a huge amount of ammunition. Similar caches linked to mosques are now suspected throughout Europe. This is starting to shape up as highly dangerous. The United States has placed all of Europe on a travel advisory list.

American tourists have been warned of possible terror attacks in Europe: “The large number of tourists visiting Europe in the summer months will present greater targets for terrorists planning attacks in public locations, especially at large events. This Travel Alert expires August 31, 2016.”

Happy 4th of July

The King is Dead – Long Live Career Politicians Also for Life

(Note: Not so sure we actually won something. Back to taxation with no representation)

The talk behind the curtain is that the fix with the Justice Department and Obama is in. Proof that the whole EMAIL scandal with Clinton is already fixed will be that the the FBI will clear her by the Democratic Convention the week of July 25th. Once that takes place, this will  confirm this is a political decision if the FBI times it with the convention. It is pretty obvious the whole thing is disgusting. You will also see a deal with Lynch remaining as Attorney General and that is not just a pay back, but it will cover herself by preventing any subsequent attorney general from investigating Lynch.

QUESTION: Dear Mr Armstrong.
I attended the Berlin conference and already enrolled for Orlando as well. I have a question regarding the EURO. It is obvious that the EU cannot be sustained as is. I think, so far, I do understand the decline of the EURO. We see it happen. But Germany and France are vigorously protecting their dream. However voices are louder for Italy to abandon the EURO, with probably more countries to follow and but with Germany and France clinging on. With weaker countries leaving, isn’t Euro starting to look more and more like a Deutsch Mark?
My question is; is the anticipated decline in the EURO to below par to the dollar the only scenario, or can the EURO recover once the weaker countries are out?
Thanks you for all you do.

FB

ANSWER: The Euro cannot become the Deutsche Mark for at the end of the day there are also conflicts between Germany and France. As I have stated before, the Federal Reserve was set up with each branch maintaining its own interest rate. That enabled a single currency to survive. The pressure was then contained in the interest rates. It was FDR who seized the Federal Reserve and imposed a single national interest rate. That was OK to work through World War II, but ever since, the pressures have not been offset in interest rates but in local economies. We always called it the New York/Texas arbitrage. The Fed would raise rate to fight speculation in stocks in NYC while putting farmers into bankruptcy. The original design was proper. What FDR created was merely copied by the EU. Hence, we see that the promises of the Euro creating one interest rates for all failed. The rates have been rising in the peripheral members.

The negative interest rates are undermining pensions throughout Europe. This will start to lead to failure in 2017. There is just no possible way these people even understand what they have done. For the Euro to survive, that would still mean the subordination of some economic conditions in one member for the benefit of another.

The pound has remained in a sideways band and is trading near the low of the decline. Our Weekly Bearish Reversals were 13540, 13507, 13340, and 13044.  After that, we have reversals in the 128-127 level, 125, and 120. We have elected the first three closing Friday at 132.75. Technically, we have support down below 130 for now. The pound should continue to press a bit lower this month.

Meanwhile, Germany proposes to allow Brits who want to leave the UK EU passports. This is one way Britain can reduce those who really think living in a non-democratic environment is preferred.

Austria’s Constitutional court has ordered that the May’s presidential election be completely annulled. A new election must be held because of “particularly serious cases” of voting fraud that was detected in the vote. If the election is not rigged, then we may have another country seek to exit the EU or give them a good scare.  There are some currents moving under the surface in the EU. The German Finance Minister Mr Schäuble really wants a treaty between the EU and the UK covering trading rules and other regulations that would restrict Britain from gaining access to the EU’s internal market. His hard-line approach is designed to deter other European countries from leaving the EU. His view, according to sources, he wants to punish Britain to ensure there are no incentives for other member states when renegotiating relations.

However, Mr Schauble also wants to use BREXIT to begin a reform process in the EU for he wants to change the structure for Germany. He too wants to eliminate the EU Commission and introduce a new structure that would then oversee debts, stability and growth of all members and would have greater control to step-in and reject member states’ budget plans. In reality, he was direct control, however, he seems to also want Germany to have some sort of final say on the financial plans of all countries within the Eurozone.

The future remains very much up in the air. The Constitutional Court overturning the Austrian Election may change the game.

The dishonesty never ends. The Attorney General Loretta Lynch has proven she is not trustworthy and playing games. She now says she will accept the recommendations of career prosecutors and the FBI director on whether to charge Hillary Clinton for mishandling emails. But the FBI director is also appointed by Obama and is subordinate to her. She did not say she would publish the FBI report, she simply claimed she would accept it. She refused to recuse herself from the investigation which is mandatory in any such setting. In my own case, when I made it to the Supreme Court, Justice Sonya Satomayor recused herself because she sat on the decision being appealed. It was her separate opinion disagreeing with Judge John Walker that helped to secure my entry to the Supreme Court. Any such connection requires recusal. The fact that Lynch will not recuse herself shows this is a rigged game when in fact she should resign.

She now hopes that if the Hillary wins, she retains her job. So her personal incentive is not to make sure Hillary wins or else she is out of a job.

Let’s make no mistake about this. There no possible way the Democratic Party would allow Hillary to go this far if they were NOT already given the wink and the mod from Obama. The fact that Lynch refuses to recuse proves that she will retain the last word to make sure Hillary is not indicted. This whole system in Washington has become just disgusting.

There should be an independent body to which any petitioner applies to recuse a judge or a government attorney. That should be a panel of 9 independent lawyers from the private sector and ALL lawyers must participate rotating that position. No judge should ever sit in judgment over his own conduct. It is a joke.

In my case, I confronted Judge Richard Owen about changing the transcripts in court inserting and removing words to alter the public record. This was a federal crime. He had to admit publicly to a crime but claimed he never changed anything material. Then he refused to recuse himself. Legally, I had the right to then cross-examine him to determine if what he changed was material. He said he did not, that was it, and refused to answer questions. I appealed to the Second Circuit Court of Appeals and they refused to even docket the appeal. These people can do whatever they want and nobody can do anything. Lynch is playing the same game. She refuses to recuse herself. How can anyone question her whatsoever. She can direct the FBI not to recommend indictment, say that was their conclusion, and never reveal the details.

It is a crime for a citizen to lie to government – just ask Martha Stewart. It is fair game for them to lie to us all the time.

The first day of the second half of 2016 and it starts with a whimper. Yes, The Nikkei and Shanghai were marginally better bid (China PMI marginally lower 50 v’s 50.1 previously) but with the Hang Seng closed there was really not that much to write home about. The Japanese data was a little better and we saw a small sell-off in JPY but despite a breach of the 103 handle it is late in US trading and the Yen has moved back to roughly where Tokyo left it (102.50). China300 and HSI have edged forward a touch (0.45%) but the Nikkei has returned the 0.5% made as the currency strengthens.

It was the BOE’s Mr Carney that woke markets yesterday and it was BREXIT and its continued fall-out that dominates headlines today. Still the Labour Party has a leadership battle but then so do the ruling Conservatives, it really should be no surprise that GBP is hit at every chance you get! Starling closing on its weakest level in over 30 years has dealers starting to agree our long term call of parity (and possibly beyond)!The Chancellor (George Osborne) finally announced the “plan” to balance the budget by 2020 has been abandoned. As GBP declines so FTSE climbs (actually, the highest closing level in almost six years) and was beaten only by IBEX (+1.29%); other core indices closed DAX +1% and CAC +0.89%.

US markets traded firm all day with many hoping, a happy sign to begin the second half of 2016. ISM helped sentiment along the way, printing 53.2 for June against a May 51.4. All indices finished the day better but only by a minimal amount. The DXY again soft as strength was seen in both the Euro and JPY. It appears the only currency under constant pressure (at the moment) is the GBP. DXY closed lower at 95.72 (-0.50%). Gold had a great start to the month as last seen almost 2% better at $1344. Oil also pushed ahead but remains under the $50 mark.

2/10 Treasuries returned to the flatten theme closing 85bp; with 10’s at 1.44%. In Europe the 10yr Bund -0.125% closing the US/Germany spread at +156.5bp. Italy 10yr closed 1.23% (-3bp), Greece 7.68% (-39bp), Turkey 8.83% (-19bp), Portugal 2.98% (+0.5bp) and UK Gilt 10yr closed 0.86% (-1bp).