Hi ,

Can a computer model predict the world economy?

MARTIN ARMSTRONG, once a US based trillion dollar financial advisor, developed a computer model based on the number pi and other cyclical theories to predict economic turning points with eerie accuracy. In the early 80s he established his financial forecasting and advising company Princeton Economics. His forecasts were in great demand worldwide. As Armstrong's recognition grew, prominent New York bankers invited him to join "The Club" to aid them in market manipulation. Martin repeatedly refused. Later that same year (1999) the FBI stormed his offices, confiscating his computer model and accusing him of a 3 billion dollar Ponzi scheme. Was it an attempt to silence him and prevent him from initiating a public discourse on the real Ponzi scheme of debts that the world has been building up for decades?

Armstrong predicts that a sovereign debt crisis will start to unfold on a global level after October 1, 2015 - a major pi turning point that his computer model forecasted many years ago.

The long awaited release of Socrates is soon to be here, Martin Armstrong and his team brings you the most innovative financial analysis available now at a click of a button. You will have the ability to have access to thousands of research reports covering the entire global economy – equivalent to more then 100 analysts at your beck and call, this is truly a revolutionary system brought to you by a company which has been at the forefront of financial engineering for more than 40 years, with an outstanding track record to match.

Socrates monitors the entire globe, tracking every market everywhere and resolving the global International Capital Flows to provide the only international perspective of the financial world we live in. The only way to gather the knowledge of generations and retain it is now before your eyes and ears. Socrates accumulates knowledge as we do in the hard-sciences building upon the accomplishments of those who went before us. Unfortunately, in the most important area of political economic science, we never look at the past and constantly deal with crisis after crisis without ever asking the simple question – has anyone tried this before? Socrates monitors the world without any prejudices, biases or political agenda. The analysis he writes is his, with no human intervention beyond the original programming design.

Socrates gathers all financial data from stocks, bonds, commodities, political trends, wars, civil unrest, and economics while monitoring all major news feeds from around the globe. Everything is correlated to create a picture of international trends. Herbert Hoover wrote in his memoirs about the Great Depression: “foreign government reserve deposits were constantly driven by fear hither and yon over the world. We were to see currencies demoralized and governments embarrassed as fear drove the gold from one country to another. In fact, there was a mass of gold and short-term credit which behaved like a loose cannon on the deck of the world in a tempest-tossed era.”

Socrates was designed on the simple comprehension that everything is connected. It is the flow of capital around the globe that drives the booms and bust within the economy and alters the course of politics. What Herbert Hoover saw with hindsight is still not understood nor taught in school to this very day, yet it is the key to everything. You have arrived at the origin of Capital Flow Analysis. We invented it giving birth to Socrates where everything is correlated and then viewed through the prism of world in all currencies.

From a purely mental perspective it's a snap. We know when the low will occur and the gold market will turn from a bear to a bull. It will happen when most market participants expect a higher future price than the then spot price plus the cost to carry. Ludwig von Mises, in Human Action, and Murray Rothbard, in Man, Economy and State, explained it. Whenever the current price and expected future price differ, entrepreneurs will seek to profit by buying now when they expect the price to increase, and selling now when they expect the price to decrease. They will do this until prices, including the cost to carry, become equal and thus no further opportunity to profit exists.

Today’s expectation of the future price is effectively all that determines the future price. Fundamentals are irrelevant. All prior price action is simply historical data and has no effect on the future price. This follows from the economic law that all value is subjective. When it comes to calling the low in the gold market, today's actions and the future price trend are determined by what market participants expect the future price will be. That expectation is a subjective judgement. It cannot be analysed by adding, subtracting, multiplying or dividing. We can only use ordinal numbers to analyse a subjective judgement. We can only know that A is preferred over B. We cannot know the distance between A and B.

This may seem like a severe handicap. It is not. Since 97% of everything written about economics uses computed mathematical data, we now know what percentage of opinion will be wrong: 97%. That means we only need to concern ourselves with the remaining 3%. Of that remaining group, what percentage focuses on the only relevant issue: market participants' subjective judgement concerning the future price of gold? What percentage can even properly define who to include as a member of the market participants group?

All that we've discussed so far has to do with your mental knowing, your mental understanding. This is vital for market timing, but it's only the first step. Intellectually understanding what drives the market and what in particular to observe and analyse before taking action is crucial. Without this understanding, you may never even attempt to act. But you also need emotional knowing, which is the confidence inherent in mental knowing coupled with sufficient desire to act. It is the fuel needed for human action, for the potential to successfully trade to exist. Then there's the level of knowing that comes from taking successful physical action. This level reinforces mental and emotional knowing. To assist all three levels of understanding I use four criteria for calling a low in the gold market.

1. An extreme reading in negative sentiment indicators. This is now, September 20, 2015, at the same level it was when gold sold for $260 an ounce in 2001. I mark these criteria as met.
2. A break in the general securities market. This is needed for new capital to enter the gold market. This is provided by a bear market in the general stock market. The DJIA is now under its previous 10 months' trading range. Last month’s worldwide panic stock market down move marks these criteria as met.
3. Specialist short covering. This will happen when the specialists' books have no sell orders and no new sellers are induced to enter the market when specialists drop the bid. It is when the bid price is less than the existing owners' retention price: the price at which they would be willing to buy. This has not yet happened.
4. Ending wave pattern. This is a subjective confirming indicator. Alone it has little predictive value. But it is very helpful for organizing and tracking alternatives. A fifth wave five-wave diagonal triangle consisting of five contracting waves that divide into three waves each would be confirming. So might a standard fifth wave. We do not have a confirming ending wave pattern yet.

Sentiment indicators are good contra-indicators. If people tell you they think gold shares are going lower, they have already sold. They say this in order to justify what they have already done. So, if 90% say gold is a bad investment, only 10% are still able to sell. Once the bid price falls below the retention price of this last 10%, there are zero sellers and this is the low marking the end of the bear and the start of a new bull market. The first leg up can be entirely short covering, but in order to have a sustained up move there must be new buyers and that requires a new bear market elsewhere. It looks like we will get that when the DJIA makes a new low below the earlier panic low in August.

Dow Theory Letters, published since 1958 by the pre-eminent author of financial newsletters, Richard Russell, sees a new bear market for USA shares. This is a leading indicator for gold shares. Now we're just waiting for the market to show an ending pattern and specialist short covering. A sharp drop to or below 1,000 on the bullion would be ideal.

I hope this short introduction will motivate you to study further the two books referenced and Sun Tzu Meets Jesse Livermore.

Market Commentary (above) by Arthur Fixed

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