In this exclusive interview with Marcopolis.net Marc Faber covers it all: from commodities and China to the outlook on inflation, the Euro and gold. According to him the global economy is not healing. To the contrary, we might find ourselves back into recession within six months or a year. In that case he expects more money printing by central banks, which eventually could lead to high inflation rates and renewed strength in commodity prices. On the bright side, he sees great economic potential in Vietnam. Also, the Iraqi stock market has good potential now that a deal with Iran has been reached. While mining stocks are extremely depressed we might see defaults before any meaningful recovery.

Click HERE for Kondratieff explanation and a larger version of the chart (scroll down for the charts)

If you’re like most investors, you believe the worst of the 2008 debt crisis — and the Great Recession that followed — are over. 

You believe America is now solidly on the road to economic recovery, her greatest struggles behind her.

But if you’ve been following my work, you know it’s nothing but a mirage; bought and paid for by the very people who triggered these great calamities.

The reality is, America’s fate has already been sealed; sacrificed on the altar of power and greed by those who swore an oath to defend her — with the blood of every man, woman and child they swore to defend.

The fact is that America is on the decline, destined to go the way of the many great empires that came before us. Like Rome. Byzantium. France. Spain. And Great Britain.

No, the U.S. won’t disappear. But we will slip to number two, and ultimately to number three in the world, behind China and Southeast Asia.

And the thing is, America’s demise will NOT be triggered by hyperinflation … or a bond market collapse … or a stock market crash … or

any single catastrophic event, as some may have you believe.

In fact, even though the equity market correction I have been expecting is now here, long-term, the U.S. stock markets remain poised for very substantial gains. 

And yes, even if the U.S. economy just muddles through. Why? 

It’s simple:

A. Europe is in worse shape than the United Sates. So is Japan. And …

B. Our own government in Washington is the most indebted of them all, lighting a fuse under savvy investors who are already starting to pull their money out of the sovereign U.S. bond market and putting it right into stocks.

If you understand those two forces, you will not only be able to protect your wealth in the months and years ahead, you’ll also be able to profit, very well indeed. 

Yes, I know, it makes no sense. If America is on the decline, how can stocks go higher?

We’ve seen the forces I speak of above before. It’s what I call the other side of the Great Depression that no one seems to ever want to talk about.

It’s when 17 countries in Europe failed and Great Britain was quickly losing its superpower status, yet between 1932 and 1937, the Dow Jones Industrials exploded 387% higher, even as the U.S. economy sunk further into a depression.

So once the current correction in U.S. equities plays out, get ready to load up on stocks. 

And not only because the parallels to the above will soon be in play …

But also because most companies in America are in better financial shape that our own government. And, importantly, stocks are considered largely non-confiscatable. 

That’s important, because on its way down, Washington will seek to nationalize part or all of your retirement assets, confiscate gold, and certainly tax you more and more.

Yet, they will never subpoena Apple for a list of its shareholders. They will never confiscate your shares in a publicly traded company.

Also keep in mind that history tells us that when governments and empires start to decline, they regularly unravel with terrifying speed.

17 years for the British Empire … 

11 years for the Ottomans … 

8 years for France … 

2 years for the Soviet Union … 

In every case … the people ignored the writing on the wall, thinking it couldn’t happen to them. 

In every case … the government feigned ignorance, swearing on a stack of Bibles that the worst was over.

In every case … the majority failed to prepare for what was coming.

One need only look to Europe for the tragic results, where rioting, civil unrest, and depression-like conditions are now a way of life.

Jobs are being hemorrhaged. Personal income is falling. Social services are deteriorating. Home values are plunging. Crime is soaring. 

It’s virtually impossible to put into words the nightmare of poverty, hunger, and homelessness jobless workers throughout Europe are feeling. While ironically, hundreds of thousands of others seek refuge in Europe’s dying empire. 

All this as the European aristocracy preserves their own wealth by looting the economy, while slashing wages and social services for the working class at the same time. Imposing life-suffocating austerity measures on virtually every country and people but themselves.

It’s easy to see these as isolated events. It’s easy to bury your head in the sand and ignore, because it’s happening “somewhere else” … 

It’s easy to forget if you listen to all the government-rigged economic numbers … 

Yet millions of real people, and real families, in Europe and Japan are suffering very real consequences; quickly finding themselves living in total desperation — with little hope of having a “normal” life.

It’s even easier to think we’re immune; that it can’t happen in America.

Yet the frightening reality is that …

• Some 94 million working age Americans are not in the labor force …

• The average duration of unemployment has soared since January 2009 – from 19.8 weeks to 28.4 weeks …

• 39% of those lucky enough to have a job earn less than $20,000 a year …

• 46.7 million Americans – or 15% of the U.S. population – are now living in poverty, according to the U.S. Census Bureau …

• 45.9 million Americans are now on food stamps …

• The rate of homeownership has declined eight years in a row.

This is the new reality.

But there is a silver lining in this grim cloud of reality; important lessons to be learned by studying the history of failing empires.

First, understand the lessons of history and you will not only be better prepared to protect your wealth, but stand to grow it substantially as well. Just like many of the titans of the Great Depression, who saw the capital fleeing the bond markets of other countries around the world and who knew that there was no other place for that capital to go than into the deepest most liquid markets on the planet — U.S. stocks.

Second, open your mind to new possibilities, new ways to protect and grow your wealth.For as the above illustrations of what happened to U.S. stock markets between 1932 and 1937 clearly shows — is that during times of sovereign crisis …

Which is what is brewing now in Europe, Japan and the United States …

Everything you thought you knew about investing can be turned inside out and upside down.

Third, the tangible asset sector, commodities, natural resources, precious metals — will be amongst the biggest winners.

We’re not there quite yet, as most commodities have not yet bottomed. So build your stash of ammo for commodities …

Because when they do bottom, fortunes bigger than you can imagine can be had by you and I — lay people who will embrace what’s happening, and protect and grow our finances as sovereign empires start dying.

Best wishes,

Larry

erx

The Following is an update that was sent to NFTRH Premium subscribers yesterday.  It’s content is still applicable today, so I thought I would share it for your review and consideration during these interesting times in the markets. 

Well folks, ‘August low retest’ it is, as per plan.  Part 1 was the drop from the August breakdown.  Part 2 was the ‘bounce’ recovery (ended at SPX 2020).  Part 3 is the current drop to test the August 2015 (and October 2014) lows.  Again, we define test from a dictionary:  a procedure intended to establish the quality, performance, or reliability of something, esp. before it is taken into widespread use

Now it gets interesting because the procedure is in process.  

To read, view more as well a the conclusions…click HERE or the chart

To read, view more and read the conclusion…click HERE 

Here are a few more field notes from the end of a busy month, with help from analysts at Bespoke Investment Group.

— The single most vivid day of the past year was Aug. 24, when the Dow swooned 1,000 points at its worst. Turns out that the S&P 500 is up 2%, as of yesterday morning, from where it closed that day and up 4% from the closing low the next day.

— Bespoke analysts looked at the way asset managers with futures positions have positioned themselves in S&P 500 E-minis. The analysts discovered that asset managers are at their shortest right before the biggest gains and longest near the biggest declines. Currently, net asset manager positioning is at its shortest (i.e. least long) levels ever, dating back to 2006. Bespoke considers this an “incredibly bullish contrarian signal” that the market has run out of sellers for the time being.ddd

Bespoke quantifies this by looking at deciles of positioning vs. future performance. In the chart above are the ten deciles from the most short to the most long. As you can see, asset managers are currently max short, so they’re in the first of ten percentiles. Future performance has been strong in following periods, ranging from +1.3% in two weeks to +7.4% in three months. It would be a stunner if this turns out to be the case in the current instance. Based on history, the analysts report, it’s unlikely we see significant equity declines from current levels without a small rally or at least a pause for sideways movement.

— When a bull cycle is rolling we often look at short-selling as a contrarian indicator. Not so in a bear phase, as the sellers tend to be right in such stretches. Bespoke did a little study of this phenomenon. They found that the most heavily shorted stocks in the S&P 1500 have been getting mauled this month with an average month-to-date decline of 12.17%. That’s five times worse than the 1.31% decline for the S&P 1500! The top ten are shown below.

— Over the next three weeks, third-quarter earnings season will finally arrive. It’ll be nice to get back to talking about products, services and management. Analysts are preparing for the worst as they trip over each other cutting forecasts. Over the last four weeks, Bespoke reports, analysts have raised EPS forecasts for just 258 companies in the S&P 1500 and lowered EPS forecasts for 623. This works out to a net of -365, or -24% of the stocks in the index. The low reading this year was -32.4% back in early February. Every sector is showing negative revisions. Analysts are currently lowering forecasts at the fastest rate in the energy sector where the net revisions spread is -71% of stocks in the sector, according to Bespoke. That is depressed, but not yet near the lows of -95% in February.

Here’s a measure of how depressed the condition is: Only four stocks in the Dow Industrials are above their 50-day average: Nike, Home Depot, Intel and McDonalds. Five of the 30 stocks are down 25% or more for the year: Caterpillar, Chevron, Dupont, United Technologies and Wal-Mart.

In the much larger S&P 500, just 17% of stocks are over their 50-day averages. This total has been weakening steadily since December, making lower highs in February, April, June and August. That’s another signature of a bear cycle.

Up to now, health care has been one area of the market where people have been able to hide out. But even that group has begun to roll over in a major way, and it could just be getting started. Consider that the group has been lights-out awesome for the past two years, but right now there’s not one stock in the health sector in the S&P 500 trading over its 50-day average! The last time this happened, according to Bespoke, was August 2011.

— And now one final observation, this time about year-end seasonality. You have probably heard over the years that the fourth quarter tends to be the best stretch for stocks. Since the S&P 500 came into existence in 1928, the index has averaged a gain of 2.61% in the fourth quarter of the year with gains 72.4% of the time.

However, the analysts at Bespoke dug deeper into the seasonality numbers and discovered that in years like 2015, when the market is down 5% after three quarters, the index has actually averaged a decline of 0.65% in the fourth quarter with gains just 53.3% of the time.

Conversely, when the S&P is up year-to-date through the first three quarters, it has been almost a guarantee that the index is up in the fourth quarter. In these cases, the average fourth quarter return has been a whopping +4.33%, and the index has been positive 82.5% of the time.

If the market can make up for its 5% loss in the next three days, then expect a strong fourth quarter. If not, batten down the hatches as it could be a very bumpy ride.  But there would still be hope: the most recent example of a negative Q1-Q3, in 2011, actually led to a splendid fourth quarter.

Thanks for reading, and see you again next week.

Best wishes,

Jon Markman