Friday, May 27, 2011

Turning Point Approaching

This Monday we take a day off to honor soldiers who died fighting for the freedoms unique to America.  This is what we are told the day celebrates although some simply enjoy it as the official kickoff of summer or a Sunday night to party without consequences.

This is a good time to ask what the soldiers are dying for?  Be careful of your surroundings when bringing this up as you will instantly be labeled a conspiracy theorist or helplessly negative.  These labels should not be taken personally as they typically come from members of a society that has completely lost the ability to think.  Most Americans have willingly abandoned their ability to use logic, reason and common sense to navigate life.  The sad truth is that the soldiers fight for freedoms enjoyed by corporate and banking interests, not the citizens of the United States.

This behavior will not last forever.  There is a major tidal change occurring and almost no one sees it happening.  Your editor has been studying Martin Armstrong's Pi Cycle theory in great detail.  Mr Armstrong was jailed for nearly a full decade over this theory, seven of those years on a contempt of court charge with no trial!  He used this theory to predict the October 1987 market crash and the peak of the mortgage credit crisis.  Goldman Sachs was appointed receiver when his company was seized.  They ironically made several moves that lined up with his housing model predictions showing 2007.15 as a major phase transition.  The exact date can be found by multiplying 365.25 by .15 giving February 23, 2007 significance.

These predictions center around the importance of Pi.  Pi is the ratio of any circle's circumference to it's diameter.  Markets move in cycles forming repeating waves.  These waves are not visible to the average participant and certainly not to your stockbroker, but they exist.  If you take Pi (3.14159265) and multiply it by 1,000, then divide that by 365.25 (the exact number of days in a year) you get 8.6.  This number marks a very definite cycle pattern and shows that physics and the laws of the universe are very active in markets.

2007.15 certainly marked a phase transition in credit markets.  Active market participants can think back on that time in late February 2007 and remember the conditions.  The time that has passed since has been characterized by a credit crisis, quantitative easing (counterfeiting), special bailouts and most importantly an explosion in public debt.  Who will pay the bill for this phase?  At this time America is enjoying desert and cognac with no idea that there is a bill coming.

Every cycle is made up of a peak, a valley and the time spent between the two.  We have established that these cycles are 8.6 years in duration so 4.3 years should mark the turning points.  2011.45 marks the next turning point.  The decimal conversion for the date of this turning point is June 13, 2011.  Turning points are not rapture events, they are merely phase transitions that happen without the average person having any knowledge of their significance.  Only later will there be acceptance that something has changed.

In order to properly allocate capital in light of this knowledge we must survey the current landscape and determine what circumstances lie ahead.  We are facing a decision on the future of quantitative easing by the Federal Reserve within days of this important date.  Just to put things into proper context the Fed is purchasing a majority of surplus treasury debt enabling the congress to spend $1.6 trillion more than it takes in through taxes this year.  This unmanageable number is causing pressure in the system making contagion likely.  This will catch many off guard but we have been shouting about the issue to deaf ears for some time now.  The levels of federal, state, local and personal debts in the US are unmanageable.  A record low synthetic interest rate environment void of real market participation has created the illusion of stability.

As the citizens wake up to realize there are not jobs for one in five workers and the treasury is having difficulty rolling over its massive debt burden politicians will frantically search for a scapegoat.  If the US is forced to pay real market interest rates on treasury debt there will be no way for the congress to tax citizens sufficiently.  This is why we are predicting a shift in assets from public to private.  Can you see how a nation that is technically insolvent will be forced to relinquish its financial sovereignty?

When preparing for this phase certain assets should be accumulated.  We recommend the following:
  • Unleveraged real estate with utility (anything someone will rent from you)
  • Physical precious metals (see previous posts on proper allocation)
  • Equity in precious metal mining firms (NEVER use margin in this phase)
  • Bilateral contracts that shift currency risk to the opposing party
The last suggestion is not possible for all investors but if you run a business that allows for prices of supplies to be locked in over long periods of time or needed capital equipment can be financed at low fixed interest rates these arrangements should be considered.  Contracts of this sort become incredibly advantageous in environments characterized by extreme currency debasement. 

Gold will cross $12,000/oz in the next 4.3 years as we climb to the crest of this wave.  The United States bond market once seen as the most stable in the world will experience a dramatic price decline.  Citizens who have toiled long hours building a savings account will be baffled by their lack of buying power as their currency has been abused right in front of their very eyes.  Why didn't someone tell them?  We tried.  These events will be a coup de grace to a financially crippled citizenry.

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