As expected, the Republican Party will not follow the candidate who the people select in the primaries. Rule 40(b), which requires a presidential candidate to win eight states to qualify for the nomination, has been scrapped for the upcoming convention in Cleveland. Rule 40(b) was a special rule to prevent Ron Paul’s name from being introduced. Under the present circumstances, the very rule used to put Mitt Romney in the candidate slot would prevent anyone but Trump from being the candidate.

Rule 40(b) only applied to the 2012 Republican Convention in Tampa, Florida, that nominated former Massachusetts Gov. Mitt Romney. The chairman is trying to pretend that the delegates pick the nominee, but if they can stop Trump on the first ballot then they are free to vote for whoever they want, which nullifies the entire primary process.

The ceiling will start to crumble when the American people see that their votes do not really count. The establishment picks the nominee — not the people. They will try to do their best to pretend this is a democratic process, but if anyone other than Trump becomes the candidate it will prove that the right to vote is meaningless.

Lauri Love is a computer scientist and political activist from Stradishall in the UK. The U.S. is seeking his extradition for allegedly hacking into U.S. government sites for information. His extradition hearing comes in June. If Love is extradited, there is absolutely ZERO chance that he will receive a fair trial in the U.S. federal court system. Other countries should recognize that the U.S. conviction rate is 93% nationally and 99% in New York, which has exceeded the notorious court of Adolf Hitler whose outrageous conviction rate was just 90%. There is no rule of law in the U.S. anymore and the object has become to further the career of prosecutors with an eye for rising in the food chain of politics.

QUESTION: Hello Marty,

What is your opinion on predictive policing? Have you been involved in this? I heard of a company selling software to police departments based on an algorithm. Would yours do better thanks to pi?

Thanks for your blog

SR

ANSWER: Predictive policing attempts to harness the power of information, geospatial technologies, and evidence-based intervention models under the pretense of reducing crime and improving public safety. I would NEVER assist the police in any way, shape, or form in such a project. They are not trustworthy and the type of people they hire now are not the way police were when I was a kid. Governments do not want the normal police officers or soldiers who has retained his humanity. This is becoming all about money. The attitude you encounter from them is just so nasty like you are the enemy. Today, they prefer to hire vets from war zones who have been conditioned and feel no remorse if they kill someone. Normal vets need not apply. Our local police have become militarized as if this is war. Governments deliberately seek ex-military from war zones who crossed the line and have lost all or most of the humanity. The last thing we need is a police force that tries to arrest people because they think they will do something. That takes this whole thing into the “Minority Report” zone.

I prefer to limit our forecasting to societal trends rather than trying to target specific groups. We will continue to see the rise in civil unrest, and, make no mistake about it, this is what has really been behind Trump and similar candidates in Britain, France, Germany, and Asia. This is the rising discontent with government as a whole and it is unfolding globally.

When a person from the London FT got into our London Conference in June 1998 and reported on the front page that we were forecasting the collapse of Russia, which became the Long-Term Capital Management debacle, that is when the CIA called. They realized that a model could project the rise and fall of a nation stemming from its economy. I offered to run whatever study they wanted, but they said no, they had to own it. Naturally, I said forget it. They would surely have tried to reverse engineer it to do the same thing and then convert it to a weapon to undermine countries. Whether that is possible, I seriously doubt for everything is connected. Nevertheless, I would never want to assist in such an operation of an offensive nature. I told the government after 9/11 that all they had to do was check to see who bought puts on airline stocks the day to week before and follow the trail. Now that’s what they are monitoring all the time.

When you drive past a police car, it is recording every license plate. The police will pull you over if your registration has expired or if there is an arrest warrant for you for anything. Their computers are tracking everything and telling the cops, “Here’s one!” This is why they want photo IDs. They can track your location and find you now with your cell phone. They can revoke your passport if they even think you owe them money and it becomes your burden to prove you do not. I am glad I am not 18. This is not a world that I would want to grow up in today.

Extremely poor data in Japan (Tankan est -0.7% actual -0.9% Previous +10.8) weighed heavily on stocks closing the Nikkei 3.55% lower and not a great start for the second quarter. Despite the better than expected Chinese Manufacturing report (49.7 versus estimate of 48.2) it was not enough to turn sentiment around in Asia. It did help the Shanghai Index to close higher on the day but by the time Europe had opened all dealers were talking about was Japan and lunchtimes employment report.
Asian concerns followed into Europe and ahead of the US numbers the we were looking at 2% declines across all core markets. NFP were better than expected (215k v’s est of 204k and a small jump in the rate from 4.9% to 5%). All-in-all, once the markets had settled into the trading day we saw buyers start to arrive and then a steady improvement across the screens. Oil continues to be the wildcard and especially after the Saudi comments from earlier in the day, but that did not damage the start for Q2. A reasonable Payrolls report will have a strong influence for consumers underlying the fact that more people are returning to the labour market. The DOW saw its lows early in the session and we saw triple digit gains by the close.

Oil lost ground after Saudi Arabia said that Iran should curtail production at the same time if others were expected to follow. Oil slipped on the news and by the close of the morning session was trading 2.5% lower. Concerns that the newspaper will be full of Saudi’s worry over Iran was a signal for oil traders to carry a flat book into the weekend. Further selling resulted in 4% declines on the day.

Gold remains heavy and especially as we started to see stocks improve mid-session. On the day we closed down 0.6% but was off over 1% mid afternoon trade. Silver did not benefit from the weekend rally and finally closed -2.7% on the day. Indeed, if silver break the 1470 level, we are looking for a serious thrust downward. Once we start to elect Weekly Bearish Reversals, the bull trap is confirmed.

GBP saw another weak day after Manufacturing PMI was released (51 from 50.8 but less than estimated 51.2) and on the heels of very poor Current Account deficit released by the ONS. Yesterday we saw the worst CA deficit in almost 70 years estimates of £-21.1bn the actual release was £-32.66bn and it really is not a surprise we see sterling lose an additional 1.1% against the USD today, closing at 1.4215. JPY saw a good day closing 0.9% higher on the day.

US Treasury market closed with very little change which is very unusual for a Payrolls Friday. 2/10 closed almost unchanged at +105bp with 10’s closing u/c at 1.77%. In Europe the German 10yr Bund closed 0.135% closing the spread at +163.5bp. 10yr Italy closed 1.22%, Greece 8.34%, Turkey 9.73% and Gilt 1.41%.

Private Blog Update

QUESTION: Dear Martin,

I have been reading your work for several years. since you were in prison…I was able to download it from the internet and saved it all. I bought your Gold and Banking Analyses and read your daily pieces religiously. I was not able to attend the WEC as it appears you favor conferences in cold weather climates in the winter and I live in the Caribbean due to a medical condition involving an allergy to cold weather. So I know there are holes in my comprehension of your methodology because I wasn’t able to attend. What I still do not understand is are you suggesting that we should be invested in the DJIA at this point or are you saying that no bullish reversal was elected as the Dow did not close at/above 17750 at month’s end so it potentially has further to fall.

Thank you for your introducing me to an entirely new way of looking at the world.

ANSWER: We will try to hold the next conference in warmer weather. We are looking at Orlando, which is easily accessible for everyone, and the TSA is not so harsh there because everyone wants to see Mickey Mouse.

In the Dow, we have a cluster of Weekly Bullish Reversals starting at 17680, 17750, and 17846. You will notice that the top of the Downtrend Line stands at 17651.03. It appears that the Dow should create a temp high and we have a Directional Change Next Week. A closing today BELOW 17420 should signal a drop to retest support. I would expect a follow through to the upside only if we close above 17856 level.

It appears that it is still in a consolidation phase, but it is obviously firming up. There is a potential to break out to the upside with a closing above 17846 today, but that may not be instantaneous. Closing above 17750 may see some follow through into next week, but it would not likely be sustained. Closing above 17856 would imply that the Downtrend Line might start to provide support for any retest. That pattern would warn that we could make new highs and then pull back. This would clearly put a lot of pressure on the Federal Reserve to focus on domestic policy objectives.

So pay attention here. The markets may put the maximum amount of pressure on everyone in every direction, not the least of which is the Federal Reserve.

When you have a consistent system that is running on absolutely everything around the world, you can simply look at it dispassionately and judge everything by the same standards. In gold, euro, Canadian dollar, DAX, and many other markets, we generally moved to weekly, monthly and/or quarterly reversals and then stopped shy of electing them. This typically reflects the reactionary phase that takes people as far as they can go as they buy the high, expecting the trend to continue. They are always trapped in this manner, regardless of the market we are looking at. This emotional human response applies in markets and politics.

There was one noted exception: the Dow. The Dow is the blue chip index, which is the trophy investment for BIG INTERNATIONAL CAPITAL. It did not make a new low, as did the S&P 500 and NASDAQ. The chart pattern is instinctively far more bullish than even the DAX in nominal terms. I have warned that the markets speak to us. Some have asked if the Dow had to make a new low under that of 2015. I stated that the answer was NO. We accomplished our goal of breaking last year’s low to set the stage for a slingshot move to the upside. The Dow was the ONLY real market to elect long-term monthly and quarterly buy signals. We are still waiting for the Weekly Bullish, which has been flirting with the 17750 area.

The market is trying to tell us, “Hey fool, this is not your typical scenario.” All we are waiting for is everyone to wake up and smell the roses before they close the coffin. When the general public at large stops watching sports and guzzling beer and begins to get off their asses and say enough is enough, then we will see this shift from public to private.

Trump is the symptom, not the cause. He just shoots off his mouth and wrongly assumes it is him that the people love. But he is seriously wrong. Trump illustrates just how corrupt the system truly is as we can visibly see how negatively the press treats him at every possible moment. They have their marching orders from the establishment to stop giving him a free ride. The establishment is vowing not to support Trump even if he wins. This further demonstrates that we are just the Great Unwashed; if the people really voted for Trump, those in power would not give a shit. It’s almost worth voting for Trump just to see how corrupt these people openly become, but I think they would assassinate him if history is our guide.

Those in power see this as their country and their rule. How dare the people rise up. Just who do they think they are anyway? Sound familiar? “Qu’ils mangent de la brioche” or “Let them eat cake,” Marie-Antoinette (bride of France’s King Louis XVI) supposedly sniffed. With that callous remark, she became a hated symbol of the decadent monarchy and fueled the revolution that would cause her to (literally) lose her head several years later. While some argue she did not really say that, those were the words attributed to her by the people. She lost her head because of those words, so it really does not matter if she said them or meant them to that extent. The arrogance of those in power today is no different. The audacity of Cruz, who says he will not support the Republican candidate, demonstrates that this is no democratic process. As long as the people vote for whomever the establishment crowns, then the pretense we live in continues. His words demonstrate he will sell the people down the river, which is no different from Hillary doing whatever the establishment tells her or Obama who called the NSA unconstitutional under Bush and then took it even further when in office.

There is no doubt that those in power ALWAYS develop that same attitude of distain against the people they truly view as the ignorant, Great Unwashed. We are the Great Unwashed: too stupid to know how to run a country and too ignorant to know what is best for ourselves. Only the elite know best. So when they abuse their power to the extreme and raise our taxes insanely because they are incompetent and too dishonest to ever manage the affairs of state, then the people will rise up as they always do. It does not matter if it is Hillary or Cruz, for both will raise taxes to maintain socialism, which is rapidly becoming unsustainable.

Above is the government’s own forecast on the budget — not mine. Every politician knows we are screwed since Social Security and Medicare go negative in 2017, yet no one talks about it in the elections and the press is dead silent. The mainstream press is too busy lining their pockets with their privileged position of being the real check against government as envisioned in the First Amendment. They view their right to free speech as an opportunity to bullish us to support their own political agenda that they sell to the highest bidder. So we are close to the tipping point, but not quite there just yet. You will start to hear about this budget crisis next year after the elections.

The markets are positioning themselves now. The Dow still reflects the international net capital movement. Even in debt, blue chip corporations have NEVER defaulted, but governments always do. People tell themselves this time will be different and that the past is no longer a guide since we are technologically advanced now. Politicians are thieves today as they were centuries ago. Technology changes, yes, but humanity never does.

The Dow is confirming what our long-term forecast is saying. The rest of the markets reflect that we are not quite ready for prime time. Do not worry, it’s coming. Just watch the arrays for WHEN.

You really have to question what Trump was thinking when he commented that he supports punishing women for having illegal abortions. Of course, he has now come out and reversed his stance after saying women who undergo the procedure should face “some form of punishment” if doctors are outlawed from performing such procedures.

Legally he would be correct if Congress actually passed such a law. The president is not capable of doing anything more than signing or vetoing the bill. Since a bill must start in Congress and pass the House and Senate, even if a president did sign such a bill, then it goes to the Supreme Court. Anyone running for office, pledging one way or the other, is really placating a particular group on a particular issue. It is like running for office and saying you would invade Russia, which would take an act of war by Congress. Obama tried to invade Syria and lost that one. The press knows this, and if they were honest, the question would be: “If Congress passed an act outlawing abortion, would you sign it?” They prefer to give the impression that a vote for Trump would make abortion illegal and send women to prison. They are deliberately misrepresenting the facts to influence the minds of whom they view as the stupid, Great Unwashed.

It appears more likely that Trump will not win the nomination, no less the White House. The real problem we face is no different if we have Cruz or Hillary. Nothing will change in government and your taxes will explode; when Social Security goes bust next year, both sides will raise taxes. Neither Democrats nor Republicans will want to be known as the party who killed FDR’s socialist agenda, even if they rob the money in there anyway.

So there will be no difference with Cruz or Hillary — both are bought and paid for. Goldman Sachs will own the White House no matter who wins. We should just get used to how bad things are going to be come 2017. By 2018, it looks really bad for politics. The establishment is fighting to keep things as they are, so this will give new meaning to “Government Sachs.”

More than 10,000 millionaires have left France. It is looking like we will have to do the same here in the States. You can bet the bankers will be exempt from tax increases. The rest of us are just the Great Unwashed.

QUESTION: Marty, your point is well taken that we instinctively seek a guru be it in forecasting or politics. We have to understand we are doing that in order to escape responsibility and are really followers. Do you have any idea why we do that so instinctively?

BH

ANSWER: No. Perhaps it stems from the same concept that, as they say, if God did not exist, man would create him. Being a guru implies that you know everything about everything. It seems that the general expectation of a guru, appears to be defined as having some special access to some inner source of all-seeing, all-knowing, wisdom that, if mere mortals could only get close to, then all would be well. This does seems to have infected both analysts and politicians. Even in politics, society applies the same guru stupidity. Once a politician says one thing, they cannot possibly change positions. They will search someone’s statements 30 years ago to argue that was he real view. The press imposes this standard or never reversing a thought. It is curious.

Yet, it is strangely evident that we all change our opinions with time, for as time passes we gain experience and that is the foundation of knowledge. Perhaps we just do not want to think. Religion is an overpowering factor that often stops people from critical thinking and applying logic. If all religions assert that killing is a sin, then why is it OK if you are working for government as a policeman or a soldier as long as some higher-up orders you to do kill someone? The Germans put on trial after World War II said they were just following orders. Perhaps this is really just the “Obedience to Authority” as discovered by Stanley Milgram, whoi was inspired by those Germans saying they were just following orders.

We all acquire knowledge as we move through life. It is strange that people are searching for some guru who is never wrong be it a market analyst or a politician. Yet in medicine, it is typical to seek a “second opinion.” Curious, the different standards. I believe Mark Twain said it best.

“When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.” — Mark Twain

After an initial opening surge in the Nikkei, briefly topping 17k, sellers appeared and drove prices lower to close the day -0.7%. The JPY was weaker throughout the morning session but had also turned stronger to balance the Nikkei swing. With the 10yr JGB having turned negative recently, this will squeeze banks and foreigners in playing in the yen markets. Q2 could well be the start of dealers jumping back on the yen carry, especially if the currency recovery has just finished. In China, the Shanghai and the HSI closed almost unchanged in quiet trading. Just a couple of stories heard from Asia today and they were the PBOC‘s disclosure that they are running a $28.5bn short FX “Forwards” position. This is the PBOC increasing the transparency of their activity. PBOC also fixed yuan rate at 6.4612 compared to yesterday’s 6.4841 fix. After the close, we heard that S&P had cut China’s credit outlook to negative from stable (AA-).

Eurozone inflation released -0.1% (was -0.2% in February), although it is slightly better its still negative. The core indices were all down but CAC and IBEX suffered the most, dropping 1.45 and 1.7% respectively. The DAX and FTSE held up relatively well but both closed down around -0.7%. Peripheral banking stocks were a lot of the conversations between dealers today showing a decline of roughly 20% for the first quarter of 2016. Although additional physical policy is expected, dealers were claiming BREXIT, terrorism and subdued earnings all continue to weigh on European stocks.

In the US stocks have been treading water ahead of tomorrow’s employment report and ISM due later that day. Initial claims came in 276k and also Chicago PMI better at 53.6 (up from previous 47.6 in February) but with Q1 ending and tomorrow’s numbers volumes were unsurprisingly light. Indices closing almost unchanged we await Fridays data release.

Gold was another much-talked story today with many claiming Q1 2016 has been the best quarter since 1986. Closing this evening at $1232 having had a $9 0.6% rally on the day.

US dollar has seen a lot of position squaring since we heard from Janet Yellen and the DXY has lost almost 0.3% today with last price seen 94.62. The euro performed a little more today trading above 114 at one stage but in contrast we saw the GBP come under more pressure. Closing this evening at 1.4365 is down 0.3% reversing gains seen earlier this week.

US Treasuries have also seen renewed buying since Janet Yellen addressed the Economic Club in New York. The curve has started to flatten once again closing 2/10 this evening at +105bp. US 10yrs traded down to 1.77% this evening, tightening the spread to German 10yr Bunds. 10yr Bunds were almost unchanged this evening at 0.15%, closing the spread at +162bp. Italy 10yr closed 1.22%, Greece 8.37%, Turkey 9.71% and Gilts 1.41%.

We touched briefly on JGB’s earlier but we hear that the 30yr bonds did not actually trade today in Tokyo trading. JGB 10yr closed -0.04% and 30yrs were closed 0.53%.