The Dow was doing well with the prospect of a rate hike until the Jobs Report. While on the one hand it appears that the Dow has declined because the Fed failed to raise rates, there is something else lurking behind the curtain. The Reversals are working perfectly defining where trends breakout and where they do not. In the case of the Dow, it rallied but stopped dead with the Weekly Bullish Reversal at 17800. This was a warning that we would drop to retest support as BREXIT begins to come into focus.

This uncertainty concerning Europe was reflected in gold, which first crashed but held our critical Bearish Reversal at 1206 and bounced. Gold and the Dow performed strikingly, playing in line with our Reversal system, and clearly marking the outer boundaries. Gold exceeded last year’s high but has not breached the major resistance just as the Dow has not breached critical support.

June remains in a Directional Change and September will be the next big target.

(Gold video for gold subscribers is being posted today.)

Private Blog Gold Update

COMMENT:

I am an attorney in Texas. We have been advising clients NOT to use safe deposit boxes for years. Examples are:

We had a client involved in a multiparty suit. I got a court order and sent somebody over to a decedent’s safe deposit box with witnesses and a video camera. The bottom of the box was covered in diamonds. It was closed and locked. When the suit settled, an attorney for the lead clients didn’t think to repeat this process when an opposing party, the sole holder of a key and legal access to the box, turned over the key. This individual was an international jewelry company employee who retired early, the week of the settlement.

The box had no diamonds. Not one. The bank’s log book was missing pages for the relevant dates. The bank was immune from suit under federal law. The key holder walked after expensive litigation. Insufficient evidence. So you are largely out of luck, if your box turns up empty.

Then there was the S&L crisis. One closed branch had a security guard, by bankruptcy court order, who let people into their boxes 5 days a week. But the security alarm company had turned off the alarms. One Monday, the guard showed up and there was water trickling out of the vault door. Sprinklers had been running all weekend, filling the vault and the boxes. Again, the box holders were out of luck. Gold and jewels were fine, but legal documents, paintings, photos, watches, electronics, collectables made of paper or other water sensitive materials, etc. were damaged or destroyed. No recourse. I hope nobody had an original copy of the Declaration of Independence there.

In the 1930s, boxes were systematically drilled by government officials looking for illegal gold. No warrants, as we understand them. Countless claims of government agent looted boxes were ignored. How do you prove what was in it? Recall, we had a video of the contents of a box, and only one person could legally access it, and there was always a security guard to stop unlawful access and the lead litigants still lost.

Finally there is a splendid movie called the Bank Job. It portrays a true story about a bank in London which had its safe deposit vault breached. Really incredible, true story, but one takeaway was that hundreds of box holders refused to identify what had been stolen from their boxes, or reclaim their treasures that were recovered.

So the government suspicions about illegal storage of ill gotten gains are obviously often true. We tell our clients not to use storage controlled by government regulated financial institutions and instead to find private, secure, fireproof and waterproof means of storing things of value. This is probably the same story as the buried Roman coin stories. Every government becomes organized crime, eventually, if they didn’t start that way in the first place.

BTW, a fireproof safe is of little value if it has perishable items and fire suppression, or flood, or plumbing leak water gets into it. And a second safe with some valuables is useful for home invasion purposes. Faux jewelry, some cash, gold coins and convincing some copies of things like wills and insurance policies are good. If they hold a gun to your family’s head and demand that you open your safe, having an offsite second one is handy. BTW, the Russians are returning to typewriters without computers for their most sensitive operations. Stealing filing cabinets full of paper is much harder than filling a flash drive, as Snowden has demonstrated.

It is truly amazing how biased socialists are to the point that they just want to rob anyone who has more than they do and rewrite history to further their political agenda. Wayne Swan, former deputy prime minister of Australia, wrote a political piece for the Guardian that is total rubbish with the heading: “Cutting corporate tax won’t create jobs. It’s yesterday’s solution to our problems.” Swan boldly proclaims that the tax reductions of Reagan and Thatcher did nothing.

Here is the real economic growth of the USA since 1960. You will notice a sharp rally when Reagan cut the taxes. In fact, Reagan created more jobs and revenue by lowering taxes. The pretend “trickle-down economics” these people hate so much actually worked. Obama raised taxes, and he will go down in history for having the lowest economic growth rate of any American president.

Facts and evidence do not matter to socialists. They always support their ideas with fiction to justify robbing other people’s money.

A lot of people have asked what my platform would be if I ran for president. Aside from eliminating the income tax and imposing term limits upon Congress (one time and you are out), I would champion the Accountability Act.

The Inspector General’s report clearly shows Hillary should be charged under 18 U.S. Code § 2071, which states that the concealment, removal, or mutilation of government documents carries a three-year term of imprisonment and/or fine. Section B also states anyone found guilty “shall forfeit his office and be disqualified from holding any office under the United States.” This wording is very clear, but the executive claims “discretion” to charge whomever they desire. If it were Trump they would charge him, but Hillary gets a free walk.

I would create the Accountability Act where anyone who misleads or lies to government in any way forfeits all pensions and must leave all government jobs, even as a dog catcher.

I would spin off the Office of Inspector General from the executive branch and restore them as a Roman Tribune, which would mean they could prosecute anyone in government without president approval since that would include him.

The Federal Reserve pushed back plans to raise its benchmark short-term interest rate, which was widely expected following the Jobs Report. Yet, this was not a credible day for the Fed in the least as they are starting to appear confused and schizophrenic. Fed credibility is beginning to create a crisis behind the scenes that is generating doubts about monetary policy moving forward. The Fed’s monetary policy appears to be aimlessly wondering and trying to figure out what to do with conflicting problems on both sides of the dividing line. It’s not clear if the Fed has a grip on any theory and this is revealing that those at the top, who are perceived with so much power, are helplessly a drift in a ship without sails, rigging, a rudder, or an engine.

Consequently, after a two-day policy meeting, the Federal Open Market Committee emerged unanimously, voting to hold the federal funds rate between 0.25% and 0.50%, and they are paying banks to hoard cash in excessive reserves. They are in bed with the bankers who tell them they need a place to park money without risk.

The entire idea of quantitative easing was to inject cash to “stimulate” the economy, but that policy never achieved its goal and the US economy bounced back, but it was a dead-cat bounce. This has been the worst recovery in post-Depression history because they have paid bankers not to lend money. Paying bankers .50% to hoard money has caused the velocity of money to collapse altogether. European banks are shipping cash to the States and parking it at the Fed to achieve that same riskless trade.

The Fed cannot break free of the bankers to see that what they are actually doing is not stimulating the economy, but causing it to contract.

Here we have the Dow electing our Daily Bearish Reversal and gold electing a Daily Bullish Reversal all because they FAILED to show the world that they have this under control. Yet, this reaction from the markets is terribly interesting. The Dow declined because the Fed did not raise rates, and gold rallied for the same reason. This is counter-trend to the general “fundamental” expectations. The Dow was doing well with the prospect of a rate hike until the Jobs Report, and it rallied but stopped dead with the Weekly Bullish Reversal at 17800. Gold crashed but held our critical Bearish Reversal at 1206 and bounced. While the gold crowd thinks a rally is good because the market will crash, at the same time we have the Dow declining with lower rates instead of higher rates. These trends are showing extreme stress in the financial markets overall.

It just felt like most of the day today was waiting around for the FED meeting this evening and I am sure tomorrow we will be saying the same about BREXIT next week! For Asia, the initial concern was that China did not make the MSCI Index. However, all fears were rejected after the first hours of trading as this proved to be the days low and we moved from strength to strength. When you consider BREXIT, Central Bank meetings, and the ongoing global uncertainty, a little slow-down because of the delay in the Index inclusion really didn’t seem that bad! The PBOC fixed the Yuan at 6.600 against the USD which is its lowest level in a few years. The JPY remained bid despite a small bounce (+0.4%) in the Nikkei. At one stage we saw the Yen breach yesterday’s 105.50 level; an indication investors remain concerned and so buy the safe-havens still. In late trading, the selling has returned all core Asian Indices around 0.3% lower following the FED announcement.

Europe maintained the sentiment from Asia resulting in 1% gains for FTSE, DAX, and CAC whilst IBEX returned 1.5%. Yes, Europe had one eye on the FED but has the other (along with everything else) firmly fixed on BREXIT. Today was a relief rally given that Retailers numbers were better than expected, Unemployment surprised and the Rate stands at the lowest (5%) in over 10 years all set the backdrop for a little light relief. The afternoon was much spent waiting for the FED’s announcement and even that just woke the Bond buyers.

Having seen the FED stocks displayed their disappointment into the close losing all the days gains and closing in negative territory. FED Chair Yellen noted in her remarks that BREXIT is a concern but this remains an unknown for all markets. However, gold and bonds liked the news as stocks retreated.

US 10yrs gained momentum closing sub 1.60% to close 1.57%. 2’s gained 5bp (price) after the unchanged to close at 0.67%; closing 2/10 curve at +90bp. German 10yr closed -0.01% closing the Bund/US spread at 158bp. Italy 1.49%, Greece 7.99%, Turkey 9.50%, Portugal 3.32% and UK at 1.12%.

Russia has reportedly hacked Hillary’s server. The energy magazine Oilprice.com reported that Russian intelligence informed Western intelligence agencies that the government in Moscow is now planning to publish the emails from Hillary Clinton. If this proves to be true, then this will confirm that she placed national security second to her personal self-interest.

The emails are widely expected to reveal how Hillary was shaking down foreign governments to donate to her private “charity” in return for favors. This is calling into question what Hillary would sell if president.

A close look at the Clinton scandals shows a clear pattern. The sex scandals were all Bill while the money scandals were all Hillary. No first lady in history was ever embroiled in financial scandals one after the other.

The Democrats are now saying that the Russian government hacked its servers and are in possession of the dossier, which they created on Donald Trump.

The U.S. Department of Labor, acting on a directive of President Obama issued back in March 2014, has announced changes in the Fair Labor Standards Act (FLSA). Beginning this fall, the act will basically double the amount of money workers must make to be exempt from federal overtime pay requirements. Essentially, employees with gross salaries under $45,000 who work more than 40 hours a week must be paid overtime.

Obama could not increase the minimum wage rate through Congress, so he instructed the Labor Department to do it through the backdoor. This will definitely kill jobs and cut hours to ensure employees do not exceed 40 hours. A $15 an hour job for 40 hours comes in at $31,200 annually. By raising the threshold, Obama has more likely than not created an incentive not to hire full-time workers. This is what we get when someone has no idea of how the real world works.

QUESTION: Martin,

In your June 6, 2016 Blog about a Fed rate hike you said “… the decision will cause the stock market to take off ….” I understand but do you speculate the market will initially pull back in shock from a rate increase or start to jump up?

Regards,

DR

ANSWER: Over the past two weeks, the consensus called for a June rate hike. If we look at the Dow over these past two weeks, we can see that the market held and rallied. The overwhelming view remains bearish among analysts to various degrees. However, this is rather bullish because the market is in no way overbought despite its high level. The market has been consolidating because the shorts continually have to buy back.

Going into the major peak on the Economic Confidence Model back in 1981, the markets declined with each rate hike. The final rate hike took place on May 5, 1981. The actual precise day for the high in the ECM was May 7. So the Fed reached the high two days before the ECM turned, which marked the peak in the Public Wave and the start of the deflationary spiral.

Here are the charts showing the price action on that very day. All the way up, with each rate hike, the reaction lessened. When the final rate hike took place, the markets shook it off. I will never forget that. The same fundamental had a gradually declining impact. What we have just witnessed was the Dow shaking off the idea of a rate hike. We are preparing to flip the fundamentals.