May 23, 2024 | My Forecast from 10 Years Ago

In an interview on May 11, 2014, I explained on USAWatchdog that confidence always outweighs reality. “It’s basically what you believe. There have been all sorts of studies on fundamentals that say if interest rates go up, stocks go down.  It is simply not true.  The stock market has never peaked with interest rates twice in history.  If you think you are going to make 25% in the market, you’ll pay 10% interest; but if you really think the market is only going to go up 10%, you won’t pay 10%.  So, it’s always the difference between what you believe and reality.”

The people have lost all confidence in government. There were rumors of a “soft landing” from the Fed, but the situation can no longer be controlled by the central bank. Washington maintains that everything is stable as banks continue to fail and inflation rages on. There can be no price stability when war is at play. Government spending has reached a new high, as have taxes which are not counted in any major data report. I explained in 2014 that great empires all come crashing down after piling on massive debt. People believe hyperinflation would cause such a scenario, but debt is the major player. Once the government accumulates enormous debt, it targets its citizens aggressively. That is what we are seeing today.

So where should you put your money? I said in 2014: “One of the number one questions I get all the time is where do I put my money?  If the banks can just take whatever they want now, there will be bail-ins rather than bail-outs. People are afraid.  What do you do with the cash?  So, people are buying things like real estate and stocks, just trying to get money out of the banking system.” Smart money has been trying to escape the banks for years. There was no incentive until very recently to park money in the banks due to artificially low rates. The hunt for taxation is causing people to flee from the banks. The downturn in government trust has caused everyone to run from government debt for fear that it will not be repaid.

I also explained that the Fed would only bail out deposits and had been asking institutions to change their models. “Everybody knows I advise some of the big institutions around, and I can tell you that they have told me directly that the Fed went to them and told them they will not be bailed out for proprietary trading.  It will be only on deposits.  That’s it,” I stated. “The Fed has been going around telling them, ‘hey, you better change your models.’  They don’t think it will be a flight to quality as it was before.  You buy the long-term (Treasuries), and that saves you.  They don’t think that’s going to happen.  It’s quite interesting. . . . It looks like the long-term (Treasury bonds) is going to end up starting to rise.”

Sound familiar with the current situation? People have moved from the public sector into the private sector. We are well into a private wave, and the public will not go back to the public sector for many years to come. By that time, the government will have transformed into a new model that is far different from what we have today. My warning from 10 years ago was derived from the computer models, who never relies on mere opinion and are unable to factor in bias.

When I say that the computer is honing in on a new target or date, often, we must simply look at what unfolds on that target to understand the full forecast. We are waiting for the CONFIRMATION. The computer will give us that signal and we just have to go with the flow. It may be worse than trying to give a 5-year-old cough medicine. Yes, it tastes horrible, but it is necessary for the cure. The majority will not be able to make that transition thanks to their preconceived ideas and preconditioning. Many pilots who flew prop planes could never fly a jet because they could not make that transition to faster travel requiring quicker reaction times. This is the type of transition we face. We just have to abandon all prejudice and go with the markets. May 7 marked a major shift in the geopolitical landscape that ensures major conflicts with both Russia and China are on the horizon. I trust the trends in motion to forecast the future. As they say, the trend is your friend.

Martin Armstrong May 23rd, 2024

Posted In: Armstrong Economics

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