Martin’s answer to a question:

“The majority of wars have begun in the spring and summer with August being the danger zone.

The War of the Roses began on May 22, 1455, which was one of the earliest. The 100 Years War really began on June 24, 1340. As we bottomed in global climate during the 1700s, this cycle shifted the wars to late summer. The American and French revolutions technically began in July. However, the insurrection of August 10, 1792, was one of the real defining events in the history of the French Revolution since the monarchy fell 6 weeks later. If we look at World War I, that began on July 28, 1914, and World War II began on September 1, 1939. The Vietnam War and the Tonkin Gulf incident was August 1, 2014. The Gulf War (first invasion) took place on August 2, 1990. The Iraq War (second invasion) began on March 20, 2003, but this was clearly a monetary war game set in motion by Dick Cheney, as it appears clearly out of sync historically with conflicts.

We are in the danger zone this month for armed conflict. The cycle turned up in 2014. Ever since, we have seen a rising international arms race created by Obama and a rising trend of civil unrest and terrorism. We have Iran and North Korea in a mad rush to enter the nuclear weapons game. So yes. Beware of the month of August. Statistically speaking, this tends to be the favored season for war events.”

Commodities

The decline in crude oil fell into the Sequential Buy Pattern, which concluded earlier in the week. Also, as Ross pointed out it was declining into support. The market seems to be turning and it could retrace around half of the recent loss. That works out to 45.50, or there-a-bouts.

The turn was being helped by the weakening dollar, which could continue flat to down through August.

For most commodities, we have been looking for a trading range through August, and perhaps into September. Often crude can set a seasonal high around late September.

However, as pointed out a few weeks ago breaking below 41 would be significant. The low was 39.26 on Tuesday.

Most commodities started the August trading range at support. The DBC declined to the 200-Day ma at 13.96 on Tuesday and has recovered to 14.21.

Base metals (GYX) tested support at 271 a couple of weeks ago and are at 277. The last high was 283 and getting beyond that level the swing could reach 300.

Grains (GKX) soared to 339 in early June and slumped to 281 on Tuesday. This was down to 30 on the Daily RSI and at support. Firming for some weeks is possible. There is resistance at the 293 level.

Since March, lumber’s advance has had corrections limited by the rising 50-Day ma. The high at 338 a couple of weeks ago was at resistance. And, again, the correction was to the

50-Day, this time at 313 on Monday. There is resistance from 338 to 342 and we still think a cyclical peak is building.

This year’s “Rotation” in iron ore was outstanding. That’s in the price gain as well as in its technical peak. The low was 31 in January and the high was 60.58 in April, which generated a Sequential (9) Sell. The price fell to 42 at the end of May.

The next zoom made it to 58.65 on Monday.

This was with enough thrust to register a Sequential Sell on both the 9-week and 13-week determinations. This should be effective within a week.

We can’t help but wonder if iron ore and copper have been again leveraged in the financial engineering game that was the sensation in 2015. As Shanghai was blowing out.

Once rolled, the target becomes the low at 42. After all, iron is the most common element, not the most precious.

Small Cap Valuation Goes Sky High

Source: Zero Hedge

• “Normal” is around 11.
• Now at 21.
• Latest rally is testing the December high.
• What could drive it higher?
• What could go wrong?

GDP: Rate of Change and Recessions

• Note the “best” level reached in June 2007.
• Also note the jump as crude oil and credit spreads came off of their best in June 2014.

U.S. Leveraged Loan Default Rate Since 2003

Debt to EBITDA Ratios

• The two previous sharp increases occurred in severe contractions.
• Perhaps an involuntary plunge in earnings.
• The huge rise since 2011 seems to be during the “good times”.
• Could be driven by an inordinate increase in debt.
• While voluntary, it may soon be regrettable.

The above is part of Pivotal Events that was published for our subscribers August 4, 2016.

also: Peter Schiff on Central Banks Are Choking Productivity

Listen to the Bob Hoye Podcast every Friday afternoon at TalkDigitalNetwork.com

It’s a fledgling industry with a $6 billion dollar price tag. The question – is it time for a little weed in your portfolio? Justin Trudeau’s government intends legalize by next spring and 25 US states have now passed medical marijuana laws, 4 states allow recreational use. 

Perhaps related? another Big Fat Idea – Making Money From The Oldies

Also, Making Sense of Market Action from Aug 6th.

If the Economy were a car, productivity would be the engine. Heated seats, on-demand 4-wheel drive and light-sensitive tinted windshields, are all very nice. But they mean little if the engine doesn’t turn and the car just sits in the driveway. The latest productivity data from the Commerce Department confirms that our economic engine is sputtering.

If you strip away all the bells and whistles of economic analysis, the simple truth is that the increased living standards that have taken us from the stone age to the digital age happened because we increased our productivity. Better plows, windmills, bulldozers, factories and, more recently, better software, technology and automation, have allowed economies to produce more output with less human effort. This means there are more goods and services for more people to share and workers can work less to acquire those goodies. When productivity stops increasing, no amount of financial gimmickry can compensate.

With this in mind the latest batch of productivity data should have significantly changed the conversation. But like other pieces of evidence that point to a weakening economy, the news made scarcely a ripple. The fact that few opinions about our economic health changed as a result, confirms just how big our blinders have become.

Most of the economic prognosticators were fairly confident about the Second Quarter numbers. After all, productivity had unexpectedly declined for the prior two quarters, and given the optimism that is ingrained on Wall Street and Washington, a big snap back was expected. The consensus was for an increase of .5%. Instead we got a .5% contraction. That’s a huge miss. The contraction resulted in three consecutive declines, something that hasn’t happened since the late 1970’s, an era often referred to as the “Malaise Days” of the Carter presidency. That time, which spawned such concepts as “stagflation” and “the misery index,” was widely regarded as one of the low points of U.S. economic history. Well, break out your roller disco skates, everything old is new again.

But it gets worse. Productivity declined by .4% from a year earlier, marking the first annual decline in three years. According to data from the Bureau of Labor Statistics, the total magnitude of the three quarter drop was the largest decline in productivity since 1993. The last three quarters mark a significant decline from the already abysmal productivity growth we have since the Financial Crisis of 2008. According to the Wall Street Journal, during the 8 years between 2007 and 2015 productivity growth averaged just 1.3% annually, which was less than half the pace that was seen in the seven year period between 2000 and 2007.

The talking heads on TV can’t seem to offer any real reason why productivity has gone missing. Some feebly suggest that globalization is the problem, or that automation has moved so fast that the benefits usually offered by technological improvements have lost their power. But it would be hard to come up with a reason why trade, which has universally benefited local, regional, and international economies through comparative advantage and specialization, has suddenly become a problem. Similarly, when does greater efficiency become a problem rather than a solution? So they are stumped.

But these economists ignore the major change that has befallen the world over the last eight years, a change that has coincided neatly with the global collapse in productivity. The Financial Crisis of 2008 ushered in an age of central bank activism the likes of which we have never before seen. All the worlds’ leading central banks, most notably the Federal Reserve in Washington, have unleashed ever bolder experiments in monetary stimulus designed to reflate financial markets, push up asset prices, stimulate demand, and create economic growth. And while there is little evidence that these policies have produced any of the promised benefits, there is every reason to believe that the scale of these experiments will just get larger if the global economy doesn’t improve.

But very few brain cells have been expended about the unintended consequences that these policies may be creating. But let’s be clear, there is nothing natural or logical about a set of policies that result in an “investor” paying a borrower for the privilege of lending them money. So in this strange new world, we should expect some collateral damage. Productivity is a primary casualty. Here’s why.

Another set of statistics that has accompanied the decline in productivity is the severe multi-year drop in business investment and spending. Traditionally, businesses have set aside good chunks of their profits to invest in new plant and equipment, research and development, worker training, and other investments that could lead to the breakthroughs and better business practices. The investments can lead to greater productivity.

But the business investment numbers have been dismal. But it’s not because corporate profits are down. They aren’t. Companies have the cash, they just aren’t using it to invest in the future. Instead they are following the money provided by the central banks.

Ultra low interest rates have encouraged businesses to borrow money to spend on share buybacks, debt refinancing, and dividends. They have also encouraged financial speculation in the stock market, the bond market, and in real estate. Investors may believe that central bankers will not allow any of those markets to fall as such declines could tip the already teetering global economies into recession. The Fed, the Bank of England, the Bank of Japan, and the European Central Bank have already telegraphed that they will be the lenders and buyers of last resort. These commitments have turned many investments into “no lose” propositions. Why take a chance on R&D when you can buy a risk free bond?

Higher interest rates are actually healthy for an economy. They encourage real savings, with lenders actually concerned about the safety of their loans. Without the backstop of central banks, speculators could not out bid legitimate borrowers who make capital investments that produce real returns. But with central banks conjuring cheap credit out of thin air, supplanting the normal market-based credit allocation process; the result is speculative asset bubbles, decreasing productivity, anemic growth, and falling real wages. Welcome to the new normal.

If the cost of money is high, people think carefully about where they want to put their money. They select only the best investments. This helps everyone. When money is cheap, they throw darts against a wall. This is not the best use of societies’ scarce resources. Is it any wonder productivity is down?

Many economists are now saying that the Fed won’t be able to raise rates until productivity improves. But productivity will never improve as long as rates stay this low. This is the paradox of the of the new economy.

When will central bankers conclude that it’s their own medicine that is actually making the economy sick? They will not make that connection until they succeed in killing the patient…and even then they may continue to administer the same toxic medicine to a corpse. The political pressure is just too great to ever admit their mistakes, so they repeat them indefinitely.

Read the original article at Euro Pacific Capital