A Houston school called the police after a little girl tried to buy her lunch with what was assumed to be a counterfeit bill. The teacher assumed it was counterfeit because she had never seen a $2 bill. The officer who arrived at the scene apparently was unfamiliar with the $2 bill as well and questioned the girl’s grandmother for more information. Upon learning that she received the suspicious currency at a nearby store, members of the police department traveled to the store, followed by the bank, before coming to the realization that the $2 bill is legal tender. They wasted time and falsely accused a child of a crime because the government employees involved never heard of a $2 bill.

It turns out, the police routinely prosecute children who may be using counterfeit bills, as if they were the person counterfeiting the note. If a child is charged with forging a note, they face 10 years in prison. A seventh-grade student was arrested for merely possessing a counterfeit $10 bill.  He was put in handcuffs, thrown into a squad car, the whole 9 yards. He was charged with a felony and sent to an alternative school before he was given a fair hearing or found guilty of anything.

From 1697 until 1832, the act of forgery or even the use of forged notes was punishable by DEATH. This satirical note was designed by 17th century cartoonist George Cruikshank in protest to the rising number of falsely accused forgers who were sentenced to death and hanged. Standard features of the Bank of England notes were replaced by gruesome ornaments such as skulls, a hangman’s noose, and ships for transportation to British colonial prisons in Australia. This surrounds the image of Britannia feeding on infants.

The crime was mere possession. If you accepted a note and did not know it was counterfeit, it was a death sentence. In Texas, police are charging children with felonies for the same mere possession of a counterfeit note.

The practice of hanging so many people finally led the Bank of England to offer the convicted the option of a “plea bargain” in the form of a guilty plea by a prisoner. So to avoid death, people would plead to a crime they did not commit, which is the same practice today as 98% of cases involve plea deals. In this case, you took the deal and received a sentence of 14 years for “transportation,” meaning the prisoner would be exiled to British colony prisons in America or later Australia. These were the first “slaves” bought by American plantation owners. It was later forbidden in the US Constitution under indentured servitude. Therefore, history repeats because the abuse of government never changes. Today, even the possession of a wad of cash is presumed to be guilty and subject to confiscation.

The LA Times is reporting that scientists are now coming out and saying that the San Andreas Fault System is “locked and loaded” ready for the big one. The last “big one” was 1857. Effectively, the north portion moves about 16 feet ANNUALLY. The southern portion is locked and has not moved to catch up. When this gives way, you get the big one. The history of big quakes in California are provided by the USGS.

1857 … 7.9
1872 … 7.4
1906 … 7.8
1927 … 7.1
1940 … 7.1
1952 … 7.3
1992 … 7.3
1999 … 7.1
2010 … 7.2

This is an entirely different perspective which we warned turned up beginning in March 2016. This chart shows, not the intensity of individual quakes, but total activity during that year. Above is a table of just the big quakes over 7.0. We can see that there are 9 major events within a 153-year period. The average cyclical frequency is very close to the 8.6 since this is one major event every 17 years (17.2). Yet they are dispersed according to intensity (volatility in market terms). When we plot the total activity on an accumulative annual basis, then we can begin to see the intensity. The peak in risk for intensity appears to be 2024-2025, the next peak in the Business Cycle. This is roughly 8.6 years from March 2016. Therefore, we should start to see a lot more activity building on the Ring of Fire from this period onward. I hope this answers all the questions coming in on this topic.

 
With Japan still closed the enthuses continues to concentrate on the US Dollars turnaround! The Australian ASX closed down 1.6% as BHP lost 6.5% on rumors of a large civil lawsuit in Brazil. Mainland China closed almost unchanged on the day whilst the Hang Seng lost 0.7% and these a direct result of a dollar about-turn we understand. Late US trading all core Asian indices around 0.85% lower.

It was a quiet yet mildly positive start to European equity markets at least, until EU Retail Sales numbers were released. Expecting a small pick-up from the previous 2.4% estimates were for a 2.5% print. However, this was not to be the case and a 2.1% disappointed not just equity markets but also FX, and commodities. GBP and some emerging market currencies came under pressure while the safe-haven bid for precious metals looks even less convincing this evening.

US equity markets started today’s session where yesterdays left-off and soon after the opening bell, bids were hit yet again. The steady decline continues to hit confidence and as the session progresses the selling pressure increased, volatility edged higher and the VIX closed up 2.5% around 16.5%. Again, it was the metals stocks that lead the market lower. Towards the close the news of leadership contest in Turkey hit the Turkish Lira late in the day and last trades seen were around 3.5% down on the day. The DOW managed to recover from the days lows but sentiment remains poor, we were told as the last comment. Given tonight’s close we are barely up on the year, currently +0.2% in the S+P.
Gold closed neutral today and silver still in a bearish position. Likewise, the Euro closed below yesterday’s low warning technically this is due for a pause.

Fixed-Income was under pressure for a lot of the day and without the Turkey news probably would have closed near I=the days lows. However, a little flight to quality at the close also saw Gold rally $9 from $1272 to $1281. US curve saw very small flattening 2/10 closing +104bp. 10’s closing 1.78% against the German Bund closing 0.205%; spread at +157.5bp. Italy 10’s closed 1.50% (+5bp), Greece 8.36% (+4.5bp), Turkey 9.37% (+12bp PRE the news breaking), Portugal 3.13% (+7bp) and UK Gilt 10yr closed 1.52% (u/c).

Many European markets closed tomorrow for national holidays, so light on data. All eyes will be on Non Farms Friday lunchtime… Expectations remain 200k and a 5% rate.

Bernie beat Hillary in Indiana. They are focusing on Trump beating Cruz, ignoring that Bernie beat Hillary. What this is revealing is that people are angry at government. Bernie and Trump have a lot more in common. In Spain, the king had to dissolve Parliament because the politicians could not win a majority or form a government. This is a worldwide phenomenon. This is NOT about Trump – this is about government as a whole.

COMMENT: Marty, your video on the Euro was amazing. What I have learned more from your site in 6 months than I did in college for 4 years. Why don’t you do a text book?

REPLY: I have been asked to do a course at one of the top 10 universities in the world. The problem is time. The field is not interested in learning how free markets function, rather they want to blame someone for manipulation while they themselves try to manipulate society. The Technical Analysis session at the conference will be a training session. I will try to make this really worthwhile for people. Additionally, if the software can handle it, we will try to introduce a payment schedule for the conference as we normally do. We did get a super price for the room accommodation around $150 at night. Mainly, we tend to fill the hotel with our attendees so we negotiated a huge discount for attendees this year.

To purchase a ticket, please visit our “conferences” section.

QUESTION: Mr. Armstrong; I found your comments and observation that there is nothing which acts in a pure state of randomness. Do you believe absolutely everything is predetermined?

ANSWER: DNA analysis can tell you what your traits are and what diseases you may develop. Everything is predetermined by a code within the fabric of the universe. Nothing can be purely random. If that were the case, then what is there to stop our planet from suddenly revolving around Jupiter?

The press fails to understand that the people are electing Trump and Bernie, not because of them personally, but because they are angry at the system. Why? Politicians have been mismanaging the government for 50 years.

Socialism has resulted in a declining living standard. At the beginning, women were more likely to be the stay-at-home-mom type. Yes, they won the right to work. Now, the tax rate requires two incomes to make ends meet. Women in the process lost the right to stay home. Hillary wants to demand equal pay for women and blames the private sector. However, she never addresses what has taken place in taxation. The press completely misses the point when they personalize things and attack Trump for something he has said. We are always distracted from the issue that is at the core. The years of lies and corruption have set the tone, and this pattern always leads to revolution. It is predetermined and NOT A SINGLE GOVERNMENT has ever beaten this cycle. It is just inevitable.

I have explained that markets rise and fall. This is the mechanism by which everything functions. When one side becomes dominant, it provides the fuel to the opposite direction and follows the same movement of a pendulum. They will demand it is a manipulation of some sort, which will result in investigations since the Panic of 1907 began on that same notion. Never in history have these witch hunts found that mythical short position that overpowered the markets. The assumption that even the banks can systemically suppress gold or silver to prevent it from ever rising implies that markets must be random, which is just not true. They confuse front-running and electing stops by bankers as systemic manipulation.

Their delusion puts them in the same camp as Marx and Keynes as they claim power exists to manipulate the entire world. This theory cannot be real, since, as they explain in physics class, there are laws and “God does not play dice with the universe,” as Einstein put it.  Pure randomness is IMPOSSIBLE. Anything someone may think is random can be observed, studied, and shown to be connected to everything else.

Obviously, Marxism and Keynesianism is based on the assumption that it is all random and can be manipulated at will. “Vote for me and I will tax the rich to make your life better” is the mantra of government. “Change” is always the favorite slogan, demonstrating that people are never actually happy. Why run to change if things are not broken? How can a politician run for office promising change when they cannot change anything that alters the trend?

The absence of total randomness = hidden order waiting to be discovered.

On Tuesday, Ted Cruz ended his campaign. His loss in Indiana extinguished any chance of denying Mr. Trump the nomination. Trump easily took Indiana, demonstrating that the people are simply angry at those in Washington. Trump said, “We’re going after Hillary Clinton.”  Our models have shown that the Republicans should win. Only one of our four models puts it neck and neck. As we move closer to November, the economy will likely get worse. We have the BREXIT vote as well come June. Between now and November is a lifetime in politics. Of course, he may wish Hillary wins. The danger if Trump wins will be that the “establishment” will blame him for their 50 years of mismanagement.

A morning where PMI’s (Purchasing Managers Index) continue to rule the markets. China’s reaction was somewhat muted after mainland index rallied to close with a strong 1.85% performance but that was countered by the Hang Seng dropping 1.8%. The RBA surprised the markets with a 25bp cut in rates to take key rates back to 1.75%. ASX liked the news though and rallied 2.1%. Tokyo cash market remains closed. In late US trading both the Nikkei and HSI futures contracts are around 0.9% lower.

Having seen a mixed Asian session most European indices were unsure in which direction to go and so we saw an unchanged opening across the board. However, it was not too long before bank earnings provided the answer. HSBC was the first releases – an 18% drop in pre-tax profits, shares down 1.8%. Commerzbank reported a €163mio profit for Q1 ‘16 (a drop of 52% YoY; shares closed -9.5%) and also UBS reported a  €1.4bn profit against a YoY comparison of €2.4bn (shares closed down 7.5%). Banks shares led most indices lower and so we saw DAX, CAC and IBEX all between 1.6 and 2.9% lower whilst FTSE closed 0.9% down.

Dow futures, on the back of weaker Europe, led the move lower prior to the cash opening. Soon after the opening we saw the DOW around 200 points off and what was very interesting, very high volume. It is always scary with triple digit moves if the volume is equally high. A healthy bounce around early afternoon managed to half the days losses but by the close of play the DOW finished around -140 points -0.8% lower.

Some of the key talking points today have been oil decline (-3%), bank stocks and the knock-on effect, the bond markets renewed vigour and the sudden turnaround in the USD rout. Oil was rumoured to still be concerned about the current glut and also the rumour Saudi is close to producing 10.5m bpd compared to its recent 10.15m bpd. Banks continue to suffer from the investment divisions. Market volatility and lack of market participants are beginning to have a real drag on profits. AIG mentioned today that they have requested Hedge Funds return some of their allocations (estimated $4.4bn) due to poor performances (AIG shares down 3.3% today). BNP Paribas results today were better than expected on and saw its shares initially buck the trend only to close the day -1.1%.

A very busy day in many markets with the USD making a much anticipated revival! The Euro was the talk of the town as many start to entertain the idea that the Eurozone could fail. After reaching 11615 it crashed falling at 11495 closing under 11500 for New York closing. Likewise, the precious metals fell out of bed as well Silver was the weakest and made another new low closing again beneath the previous day’s low. Gold firmed up more than silver in the morning session but could not make new highs falling back to 1284 and closing below the previous day’s low. With European bank shares dropping sharply, there seems to be little hope of saving Europe. Germany is also looking at departing from ECB policy which is wiping out pension funds making news headlines in Germany. Many are beginning to question what could possible reverse the trend on a sustainable basis against the dollar?

The fixed-income market also saw some action today with prices rallying as equities fell. The US 10yr dipped below 1.80% again only to close back at 1.8%, a decline of 8bp. 10’s outperformed 2’s by 5bp closing the curve at +105bp. In Europe the German Bund tightened 6bp to close at 0.20% closing the US/Germany 10yr spread at +160bp. Italy closed 1.45% (-1bp), Greece 8.32% (+8bp), Turkey 9.25% (+20bp), Portugal 3.06% (-2bp) and UK Gilt 10yr closed 1.53% (-6bp).

Update for Today on Euro – Gold – Silver on Private Blog

QUESTION: Mr. Armstrong; I have to admit after following you for almost 2 years now I am impressed. I was a buyer of your first gold report where you introduce me to the idea of different types of cycles from fixed to variable and your benchmarks. I have been amazed that gold bottomed to the week of the benchmark you gave in that report years in advance. How is it possible for someone to provide a date and it happens? Then you said gold would rally up to 1309. OK, it got to 1306 today. If it does not exceed that area you said it would fail. I will give you the $3. You said the Euro should rally back to 116 at the start of the year. What I am impressed with the most is that following the computer demonstrates that this has nothing to do with your personal opinion and bravado. You have dissected the markets revealing that these things move precisely to everyone’s disbelief. My question is essentially, do you think there is no randomness?

Thank you

PJK

ANSWER: When I was in school, the economics professor said that we should not even try to forecast because everything is random. In physics class, the professor said nothing was random. I came to the conclusion that in economics, there was a self-interest at stake. If nothing was random, then you could not manipulate the economy. That means Keynes and Marx were wrong. Why do we need economists?

Why do we need economists? Larry Summers admitted he cannot forecast the business cycle. Moreover, why do we need career politicians who promise they can change the course of the economy if you vote for them? The majority of people do not challenge ideas. Instead, they cling to a belief no matter what evidence you present. You cannot change the mind of someone who is incapable of escaping the cage they have built around their own mind where they feel comfortable. They will believe only what they want to believe. This is why people attack me personally because they are of this group who cannot change their minds thanks to their biases. This group represents the majority of the people who indeed prefer living in a lie than in reality. They can only attack me personally because they do not want to confront reality and they might be wrong about this claimed random walk theory.

This is why the government accused me of manipulating the world economy. It was far easier to assume I had too much influence than to accept that this is not random chaos. Saying I manipulated the world economy is within their sphere because this is what they try to do. If I did not manipulate the entire world economy, then that means this must be unfolding according to some hidden order. If that is true, then how do politicians run for office promising something that is impossible? So it was far easier to blame me as if this were some James Bond movie since that is what they are trying to do rather than admit the world economy does not function as some random walk theory of a drunk through a park. I personally am not infallible. Sometimes I think something might unfold by a specific time and it takes longer. The computer has no bias. It makes no judgment based emotions. It is far better than I since I am handicapped as a human.

Here is gold from the Global Market Watch on the yearly level. This model proves above all that NOTHING IS RANDOM. This system monitors the entire world and records patterns of everything that moves. You will note there is a number in the “comment” column to the right. That is the pattern number. It applies the same pattern recognition for all markets. This is not limited per market. It learns as it goes. If it finds a new pattern it has not encountered, it records it, assigns it a number, and then tests future patterns against it. If the markets were random, this would not work. The fact that it has worked, to varying degrees across markets, proves that there is hidden order. The problem is that this goes against the self-interest of the majority. We are still living in a primitive state, unwilling to take that next leap to a new level of understanding.

So people can yell and scream and hate me all they want because this challenges their self-interest. I need not speak a word. It really does not matter. This model will function beyond my lifespan. What will they do then when I am not here to blame? Will they finally admit this is not some random walk? Will they consider that there just may be laws on how everything in the universe was designed? The grand unified theory?