The Dow October 22, 2014 & Bond Bubble

DJIND-D 10-22-2014


The resistance in the Dow Jones Industrial Index for today stands in the mid 16700 zone on a technical basis. Targets in time for this week were Wed and Friday with the latter being the main target. ONLY a closing back above 17010 would signal that the low is in place for a broader term. This week should produce a reaction high. A closing on Friday at least below 16880 will keep the market in check. A closing BELOW 16660 will signal that a drop back into the week of Nov 3rd is possible with a new low.

Retail participation remains at record lows so this crash we will call the Rich Man’s Panic of 2014. The same trend is witnessed everywhere, including Asia and Europe. While the press was bashing the little guy saying he has missed the entire rally,

The stats show that the total size of the world stock market capitalizations closed 2013 at $54.6 trillion which was only 25% of the total world market capitalization – the rest being bonds.The bond market is larger than the stock market for various reasons. Whereas only corporations issue stocks, governments and corporations both issue fixed income securities. The U.S. Treasury is the largest issuer of bonds worldwide. Because U.S, Treasury bonds provide the bulk of reserves which are just over $30 trillion.


This is the real bond bubble. Capital is so accustomed to just hiding in bonds, it knows no other alternative. We can see that debt increased sharply in 1928. However, the collapse with the Sovereign Debt Crisis is what really made the Depression so Great. You can drop the stock market by 50% and you will not create a prolonged depression. Reduce the bond market by 33% and you get a depression.

Mellon-AndrewThis is why Andrew Mellon first boasted during the 1929 that conservatives were not hurt - “Gentlemen buy bonds.” However, soon the Crash of 1929 turned into a serious Depression and that comes NOT by taking stocks down, but by wiping out the bond market.

In 1987 we predicted the low, and the very day of the low we stated the low was in place and new highs would be made by 1989. Just as at the low on this move I stated the low should hold temporarily. The numbers always define the market – NOT my personal opinion.

In 2011 even Barron’s reported that I was again warning new highs would be made and again they unfolded with the turn in the ECM. Each and every turn, even 1985 and 1998 in the middle of the Long-Term Capital Management Crisis, that low was followed by new highs BECAUSE the bond market was intact. Undermine the bonds, and then we have a crisis. If you do not look at absolutely all markets and how they function, you will be wrong. You simply CANNOT forecast anything be it gold, stocks, bonds, or commodities, unless you look at the interconnections and for that – sorry you need centuries of data not just back to 1971.

The central banks trying to stimulate the economy with lower interest rates have set the stage for the greatest crash of all time. You cannot imagine the bloodbath if interest rates go back to just 8% where they began this Phase Transition in bonds. We will see the worse economic bubble burst all over the street and this will be the real “GREAT” event of all time.

Earth’s Magnetic field could FLIP in our Lifetime




In the Maya Discovery of Time report I discussed the real strength of the Maya’s discovery of cycles. Of course there were the traditional people who grab everything and twist it into the next conspiracy theory that the world is coming to an end. What they obfuscate is the truth and the importance of the subject that they trivialize much as the gold bugs and money, or the environmentalists with global warming,.

Well now, scientists have come out at last admitting that the pole strength is weakening and the poles do flip. They have conceded there is a cycle and this is real not hype and gee - it is overdue. Amazing what you can discover when you just stop the bias and hype.



Entire Court in California Had to Step Down – All Judges


The legal system in the United States is becoming so corrupt, this is exactly as Edward Gibbon wrote about the collapse of the rule of law in Rome.

Edward Gibbon wrote of him: Each

distinction of every kind soon became criminal. The possession of wealth stimulated the diligence of the informers; rigid virtue implied a tacit censure of the irregularities of Commodus; important services implied a dangerous superiority of merit; and the friendship of the father always insured the aversion of the son. Suspicion was equivalent to proof; trial to condemnation. The execution of a considerable senator was attended with the death of all who might lament or revenge his fate; and when Commodus had once tasted human blood, he became incapable of pity or remorse

(Book 1, Chapter 4).

The legal system in the United States now seriously needs reform for nobody’s property, human rights, or civil rights remain safe when judges are government appointees for life. New York is, of course, out of control where judges are free to simply alter transcripts changing the words of witnesses after the fact, In an important case, US v Ziccetello, the judge alterations unwittingly favored the defendant. The government intent on keeping its 99% conviction rate, argued that the judge changed the transcripts. On page 97 of the opinion, the Court of Appeals admitted it was a “unique” practice and then said it lacked the power to tell judges to obey the law since it is a 5 year felony to alter such court documents. If the Appeals Court lacks power, then who possesses such power.

Owen Richard


Judge Richard Owen is a real notorious pro-government former prosecutor playing the role of judge. He has handled most of the high-profile SEC cases. Amazingly, everyone seemed to get him.  He took the lawyers away from Steven H. Schiffer in a SEC case and then tormented him so he committed suicide all alone on. Then he would joke about it that he was never overruled because Schiffer didn’t know how to handle himself.

06-14-2000 114 MEMO-ENDORSEMENT on Emergency Ex Parte Application; Ex parte request for relief in Bankruptcy Court or, in the alternative, request for hearing on order to Show Cause before 6/8/00; this is filed as “on hold” due to Mr. Schiffer’s death on 6/9/00 ( signed by Judge Richard Owen) Copies mailed. (lam) (Entered: 06/21/2000)

QuattroneSorkinFrank Quatrone of First Boston found himself also before Judge Owen who was also changing the transcripts in his case. In fact, after I directly confronted Judge Owen publicly about changing my transcripts, no newspaper would report the confrontation. However, the New York Times journalist  Andrew Ross Sorkin who wrote Too Big to Fail, came to see me about Judge Owen changing transcripts. The Appeals court directly criticized Sorkin claiming he improperly reported events but still recuse Judge Owen. I spoke to Sorkin and he told me Owen changed the transcript after he reported. . Still the NY Times would not publish the truth about Judge Owen changing transcripts.

Owen Changing Transcripts


In my own case I forced Judge Owen to publicly admit he was changing my transcripts on September 23, 2003. Judge Owen had thrown the Associated Press out on April 27th, 2000 creating a closed secret court proceeding that is totally illegal. As an American citizen I was supposed to have a public trial – good one! The AP actually printed that it was a closed court proceeding.



The AP reported I had stated from the outset Republic stole the money. You cannot get $1 billion out of a bank and nobody knows where it is. That kind of money can only be wired, yet they pretended to be looking for something Republic had all the time. When Republic finally pleads guilty, they got no jail time in return for all the missing money.

Now, in California, some prosecutors have resigned because Eric Holder’s boys were fabricating evidence in order to confiscate property in the tens of millions of dollars. One former prosecutor Eric Overby stated: “It’s called the Department of Justice. It’s not called the Department of Revenue.” Overby has stated that in his entire career, “I’ve never seen anything like this. Never.” The entire court has had to step aside because all judges are tainted. Just amazing.

We are screwed as a nation without a legal system that is reliable. How can we have a ruling against the NSA or anything sensitive when judges are not really judges? You just cannot appoint career prosecutors as judges and no one should be there for life.

Too Big to Fail = Too Big to Exist


Several banks who are friendly and not the wild trading types, reported to us before that the Federal Reserve officials were visiting them warning that they needed to change their models. Now the Fed is warning banks that they MUST do more to curb excessive risk-taking. They have also been warned about the bogus claims of “rogue” traders who amazingly lose billions and somehow management never knew. That claim is BOGUS, for anyone claiming that means that the bank should be shut down for it is incapable of risk management and should be barred from trading. So the Fed has again informed the banks that they have to now improve employee behavior at their firms or face stiff repercussions, including being broken into smaller pieces.

ECM Banking Proprietary Trading

The bankers have come in second to politicians as the most untrusted profession. Our model turned in 2013 and from then on the banks are losing control of government. This time around we WILL see banks broken apart. The Fed will cover only deposits. There is no political stomach for another $1 trillion check to bail them out next time. Besides, next time would be 3 times as great as the last bailout. This seems to be the growth path that they are on with a MINIMUM 300% increase from one bailout to the next. However, our models are pointing to a Phase Transition in this statistic. That means we may see more than a 500% increase in losses next time around.

Hedge Funds get Hit – Unable to See TIME – “Rich Man’s Panic of 2014″


The rumors we were reporting on the street about the Hedge Funds appear to be true. They have been unable to see time as so often the case and have been hit with the worst losses in Industry’s history since 2011. This may indeed contribute to what we see with the postponement of the Phase Transition being set in motion with the rush into bonds.

This is turning out to be the “Rich Man’s Panic of 2014″ that has produced a bloodbath among many hedge funds who often trade-off of just opinion interspersed with fundamentals. This is shaping up to be perhaps the industry’s worst loss since late 2011 when then as well they could not see the change in trend.

Long-Term Capital Managment

The $2.8 trillion hedge-fund world has not proven to be great market timers. After all, it was Long-Term Capital Management that needed to be bailed out for its massive losses on Russian bet. They are often praised for going with the trend, yet wiped out when that trend shifts unable to see TIME. Far too many are simply fundamental traders rather than technical. They scour the surface looking for sure bets like takeovers and broad economic trends. This time, they were hit also unable to see the coming rise in volatility our models were warning about would begin in 2014 with September.

The losses came with the sharp sudden rise in volatility in stocks, bonds, currencies and commodities. The Wall Street Journal reported firms that were hit such as Jana Partners LLC, Discovery Capital Management LLC and Paulson & Co., all of which have posted losses ranging from 5% to 11% for the month. With retail participation at record lows, the market became a crowded affair with everyone on the same side. That has historically been a danger for any market.

The Wall Street Journal quoted one  executive saying “An idyllic investment environment amid an improving economy…and then cue the music…dun-dun…dun-dun…dun-dun,” wrote Paul Westhead, chief executive of $4 billion fund Rimrock Capital Management LLC, in a letter to investors.

So where will fund managers go now? It appears they run into the arms of bonds. They appear to have a best one year before getting really wiped out on that one. Fr too many are just fundamental traders with inconsistent winning streaks that last for 3 to 4 years at a time.

Some funds were counter-trend plays and they made money into last week, However, such funds are typically the minority. It often takes real experience to know when to play counter-trend moves.

UBCBT-Y 10-19-2014

DJIND-Y 2013


US 30 years Bonds back to 1798 – Dow Jones Industrials back to 1790

The crisis we face in all financial markets cannot be ascertained with models back-tested only a few decades. We need extensive databases to correlate human interaction when events unfold and how long do trends even last. We must explore the fourth dimension – TIME. This is where history counts. If we do not understand history, as Lady Thatcher said – we might be condemned to repeat its mistakes.


Serious Political Changes in the Wind for Germany


I have warned that economics changes everything. When there is a boom, people are fat and happy and war declines. When the economy crashes, you are faced with a serious problem. Either we will move to the extreme left and see a return of authoritarian states as we are moving toward, or we can swing back to freedom and democracy if we truly identify the cause.


Governments will seek to blame the rich for then they will get to confiscate all wealth and they will promise security to the mindless masses. History repeats in this manner. Even Sparta v Athens was an ancient virtual communist state v democracy. You cannot even purchase ancient coins from Sparta because they refused to even issue money.

Nov 1918 Revolution Berlin


The Germany Hyperinflation only took place because of the Communist Revolution in 1918, which defaulted on all the debts of the previous government. Hyperinflation unfolds when a government CANNOT issue debt so they print.




The rise of Hitler only came after the turmoil of reparation payments that oppressed the Germany people. After the disastrous hyperinflation, the German people turned to Hitler in 1933 pushed by the Great Depression. Americans elected FDR 1933 and in China Mao comes to power – all 1933.

Now in Thuringia, Germany, the SPD has for the first time put in leftist Prime Minister. The board of the SPD in Thuringia has decided to choose Bodo Ramelow the first left prime minister in Germany since 1918. Now with 25 years after the reunification, a candidate of the Left Party is once again coming to power, which had previously competed as PDS, which was the successor to the SED. Thuringia could be considered as a model for the federal government, where Sigmar Gabriel wants to keep all options open. This is showing that there is a rising trend of discontent. However, if you blame wealth rather than politicians, you lose all freedom.

We must be concerned for when the ECM turns down, the economy will move toward a hard landing. The austerity policy of Germany will deepen the crisis and we will see the politics shift everywhere.

It’s More than just a Debt Bubble – It’s a Social Bubble

UBCBT-Y 10-19-2014


Our computer is monitoring everything everywhere and it correlates the world. Everything is tested against everything from adzuki beans in Tokyo and palm oil to wheat, gold, DAX, FTSE and the Dow. We also include nature, weather, earthquakes, politics, and social trends. You would be amazed but as an economy expands, the family size and birth rates decline, divorce rises with affluence, and this is in itself a sign of a pending collapse.


Just look at marriage and what a disaster we have made of that since 1900 the same as Rome. Yes, the first Roman Emperor Augustus (27BC-14AD) introduced family laws outlawing bachelors, restricting divorce, banish Ovid for his writings and banished his own daughter for promiscuity. There were laws introduced forbidding the payment of a prostitute with a coin that had the image of the emperor which they all did. Hence, the birth of sex tokens. The client bought the token, paid the prostitute, and she then redeemed the token all making it nice and legal.


During the 19th century, the age difference dropped to 25% whereas typically the male was 2x the age of his wife for he had to FIRST establish himself to afford a family when there was no government programs during the 18th century. The age difference declined with the rise in economic power and government  Hollywood and socialism caused that differential to drop dramatically to virtually the same age. But men mature slower than women and the divorce rate rose in direct proportion to the age differential decline. London has become the divorce capital of the world.

Today, 70% of those dating believe in love at first sight with expectations of happily ever after and run to the lawyers with the first argument. This is part of the bubble that is unfolding. We are reversing social trends with the collapse in debt markets. What use to be secure becomes insecure. A lot is changing gradually before our eyes. Socialism has wiped out the traditional family structure along with pensions and fiscal irresponsibility. Those with daughters, you better start realizing that her future should be secure. That is what the Dowry was all about – a pension for the woman, She married a stable older man who provided the security. This is what is starting to return and studies are starting to emerge showing a man’s life expectancy increases with a younger wife for she keeps him more active. Looks like the old trends are returning. Strangely, women with younger men die faster. Perhaps the stress of having to wear the pants or they cannot keep up with the younger man. Thomas Jefferson was 18 when he married his wife who was 23. They were married for 11 years during which she gave birth to 6 children, all but two died and only one lived past 25. She died and Jefferson had relations then with his slave fathering several children.