Nearly there?

Hello everyone.

2015 draws to a close, so I thought I'd try to emulate GM Jenkins with a few charts for you. I have found a whizzo new (free) charting site recently, which has enabled me to mess around with some very long term charts.

I'll kick off with a recreation of one of GM's that I know has interested a few of our readers, the ratio of the US 10 year treasury yield and silver, and how this signposts big turning points in the price of gold:

Not long now?

As we can see, the upper trend-line was touched and pierced back in the early summer, and more recently the ratio has moved even further outside of the trend-line. This is not unprecedented, as we saw a similar episode at the bottom of the channel from mid-2011 through to the end of 2013, when gold had its last bubble phase. Whilst the channel doesn't provide a precise timing for turns up or down in the gold price, it does appear to help identify the process of topping and bottoming for the gold price. My feeling is that the gold price has one final plunge ahead very shortly, before the trend reverses for a number of years.

This next two charts show where the gold price might find its support in the next 3-6 months:

Andrews Pitchfork starting in 1999

Here is the same pitchfork extended to a recent date:

These lines will intersect the gold price sooner or later, and there is also strong lateral support in the $950 to $1,000 range

Here's another interesting pitchfork chart from way back in the 70s, which proved to be relevant again more recently:

Down to the bottom then back to the top again?

Everything seems to line up with a move down for gold to around $950 within the next 6 months or so, and I'd guess it will be a sharp move down rather than a drift lower, a classic capitulative finale to a bear market, with weak-handed holders selling in volume. It would then be followed by a relatively swift rebound and the start of a good few years of a strong bull market.

This would coincide with a global recession and the broad markets entering a deep bear market. Here's a quick look at the crash of 1987:

Upper and lower trend-lines from the crash of 1987

Here's the Dow Jones again with those same trend-lines extended to today's prices:

Bubble, what bubble?

Interesting how those trend-lines seem to come into play decades later isn't it?

We appear to be heading to an imminent major turning point for many asset classes based on these charts.

Good luck.

Fibonacci to markets: sorry, your time is up.

This is it folks, the end of the rally, today is the peak.

Here's why, just a couple of charts, the first one key, the second just to show how weak other markets are.

Complacency abounds, the bulls appear to believe clear blue skies lie ahead, when all I see are storms.

Good luck.

Checkpoint 1 : Armstrongs 2015.75

Recently we discussed magnitude of expected financial events and in our 20-year poll, one of the options for date prediction for a WTFUC event was that of Martin Armstrong's 2015.75. Now that date (September) has come and gone I wanted to take a quick snapshot of the results and make a few comments.

Any of the 34 respondents who voted for this option were ... wrong. And I say this not to be narky - in fact I'm very glad last months events did not pan out the way I described in my WTFUC definition. The entire point of the original article (and the 20-year poll) was to help bring discussion to the mental models we carry around with us i.e. an examination of our expectations and time-frames for all things financial. Depending on the settings on your computer the poll will allow you to change your vote.

Regarding the date expressed in Armstrong's economic confidence model (ECM), I'm not entirely sure what to make of it (or his renewed focus on Real Estate for that matter), I always thought the ECM was referring to confidence in government/public sector. I get the impression the turning point will be the focus of quite a good many follow-up articles in the years to come with the benefit of hindsight. In fairness it is not realistic to expect certain events on a very specific slice of time, but this gets us back to the discussion on time frames and relativity. My overall point is that predictions are useless without tests and context for those models. I cringe every time I read a call for COMEX DEFAULT, DERIVATIVES COLLAPSE or Bullion Bank IMPLOSION. The big problem is none of these events have transpired on the purported time frame and that should be a red flag for any continued predictions from the same folk. From a book recently read - I love this paragraph because the author could easily be talking about most precious metals blogs.

"... This desire for complete seamless explanation infests most examples of crank science. When somebody mails me their explanation of the architecture of the Universe derived from the geometry of the Great Pyramid, or the cipher of the Kabbalah, it will usually display a number of features: it will be entirely a work of explanation; there will be no predictions, no tests of its correctness; and nothing lies beyond its encompass. It is not the beginning of any research programme. Beyond refutation, it is always the last word."

The world is an incredibly complex place and it is beneath us to describe it in simple terms. Together, let's keep searching for the right model of gold and international finance. But let's judge and discard models which don't give specific predictions and which fail to explain the significance of the events in the context of their readership.

Next checkpoint is at the end of 2019, let's see what happens over the next 3 years. --Warren

The Sun and the Moon

Hello everyone.

We were long overdue a new post, so here's something a little different.

I'm sure everyone who visits this blog is interested in expanding their knowledge.

I wanted to quickly share something that I have discovered recently that appears to represent a major piece of the jigsaw in terms of understanding human behaviour and major climate cycles over the ages.

It would appear that all activity on our planet is affected by solar activity, lunar positioning, and also the movements of other planets in our solar system. Gravity and magnetic activity are both involved. Major periods of change for humanity have coincided with peaks and troughs in solar activity, as well as other impacts on a more regular basis. It is a fascinating subject. Everyone is affected by the sun, including your friendly central bankers and politicians. As we head into a major solar minimum in c. 2020, expect to see speculative behaviour wither away, with significant impact on business activity and the markets. It's already evident of course, as the latest bubbles begin to burst (Any biotech dip-buyers around yet)?

I don't have the time to explain the details here, so I am simply going to provide a few links to sites that I now follow regularly, and hope you find them interesting.

John Hampson writes regularly on the impact of solar cycles on markets and demographics.

Ben Davidson covers daily solar and climate activity, and their impact here on earth.

This site has a variery of information on solar and lunar matters, as well as other areas I have not looked at.

That's all folks, enjoy your weekend.

The Nexus

It’s time to delve into the murky waters of the nexus between money, central banks, governments, banks, and humankind. Most of my thoughts are focused on the present and the future, rather than the past, so that means there will be a certain amount of informed speculation. It’s much more interesting to look forward and consider where we are going (using current/recent events as a guide) rather than be constantly looking backwards for a guide to the future. Everything is subject to change at all times, so it’s best not to have a fixed view, but to treat matters on the balance of probabilities having considered all available evidence. So, some readers may need to cast aside any existing biases and prejudices they may have around this rather meaty subject, as the future is likely to make those biases irrelevant.

Where to begin? I’ll start by stating that I have seen plenty of evidence that money is and always has been debt, and that it simply evolved that way. The best anthropological evidence of this evolution is contained in the early sections of David Graeber’s book ‘Debt: the First 5,000 Years’.

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The Big Picture

One of the biggest challenges I have confronted in trying to discuss money is the difficulty many people have in thinking of money as a type of debt. On a personal level we use money in ways that can make this concept very counter-intuitive. We use currency to settle debts and make purchases. We get paid in money. There’s no obvious creditor and debtor relationship with money as there is with the contract for a housing loan or a car loan.

When a person has paid for something with money I don’t think it’s easy for them to reconceptualise that transaction as actually being an assignment of a debt. Yet, on a system level we can clearly show that money is a type of debt. We can identify the sources of the stock of money and point to their balance sheets where the liabilities (debts) reside that correspond to the total stock of money in the economy.  (Incidentally we can, as Jacques Rueff does in “Balance Of Payments”, also apply these insights to the international monetary, financial and trade system.)

My interim solution to this problem is to apply two different approaches to defining money. I think we need to use multiple functional definitions of money to describe people’s personal relationship with it as a way to try to establish some common ground. But we cannot discuss money from a monetary systemperspective without agreeing that it is a type of debt regardless of where that system lies on the spectrum between ‘realist’ and ‘nominalist’. We need a “systems thinking” approach to get the big picture perspective.

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The Nominalists And The Realists

Have you ever had a “light bulb” moment? A moment when a huge amount of information just falls into place like the pieces of a puzzle spontaneously rearranging themselves into a clearly recognizable image? Here’s a passage that did that for me a couple of days ago:   

The two extreme types of monetary systems are: the 'realist' under which each unit of money has, as a counter-part in the balance-sheet of the bank that has issued it, an asset that can be sold on the market for an equal value; and the ‘nominalist’ under which money is nothing but a token, void of substance. All the systems that have been, are, or will be in force range somewhere between these two models. (my emphasis)

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$1,081 gold bottom?

We've recently been updated by GM Jenkins on the 10 year USTs priced in silver chart, notably the ratio hitting its upper channel line at around the 1.50 level. GM is expecting a final lower low for gold shortly, before the trend changes back to a bull market.

I decided to see if the gold price was Fibonacci-friendly, and the chart below plots the key retracement levels from the bottom back in 1999 through to its peak in late 2011.

Here's the chart (I manually added the 23.6% level at $1,522):

Who knows what will happen, but the fib levels seem significant, so I'll be saving my pennies to buy the bottom at around $1,081, and I reckon it's coming within the next 5 weeks, in the midst of a liquidity crisis as stock markets take a dive.

I'm not expecting the 61.8% fib level to be hit.

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Don't believe the hype

Hello everyone.

Just a very quick post on the collapse in the Chinese stock market, and how it's being (mis)reported by mainstream media in China and in the West.

I'll assume all readers know that the Chinese stock market bubble has burst, and that the bursting is ongoing, with many stocks limit down today.

Reports in the media have all been saying the same things, which can be summarised as follows:

1. The Chinese government are doing all they can to stop the collapse.

2.The People's Bank of China is supporting the market, buying shares, helping brokers, and will do anything to keep it all propped up.

3. Interest rates are being slashed again to try to keep the bubble afloat.

4. Eventually, the Chinese will socialise the stock market and maybe the housing market.

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The (beginning of the) End

 Greetings friends!



We’re not yet at the end of the great bear market in gold (2011-2015), but I can confidently say it’s the beginning of the end.

[update 6/9] To clarify, based on a question in the comments, re: my statement to "expect a new low soon." Note that although the chart pattern suggests the next up leg in gold should begin when the $TNX/silver ratio hits the green line, in the past these points have been accompanied by a new low in gold first. So my best guess is that a new low is coming soon, while interest rates may also fall to keep the ratio near where it is.

[*update 6/15] Ratio is indeed still at 1.50 at the close of this week, with gold approaching a new low. One thing I should've made more clear is that the pertinent lows on this chart are for weekly closing prices, so a new low would be < $1158, which was the closing price the first week of March of this year. (It was also the lowest closing price in gold in 5 years, going all the way back to April 2010!) ...Working on some cool charts but no time yet to post.

Let it be widely known that I first called this 2 years ago. It actually surprised even me how relevant that post remains. 

However, I regret to say, a video I had posted at the top, the content of which I have only the vaguest recollection, but the titillation derived whereof I distinctly recall, has vanished…

Well, this one should be timeless. 

Note: Below the fold a chart that illustrates the trend in nominal interest rates since 1980, i refer to it in the comments

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