Nicaragua is a socialist country, as is most of Central and South America, and the local people have never experienced any other form of government. This form of governing makes it very difficult to climb out of the lower financial tiers and as a result, these people have never experienced a true free market system, nor do they understand how it works.
I recently heard a story from an American acquaintance who owns a home on the Pacific coast of Nicaragua. He has befriended a few of the locals who work in the resort community where he built his ocean front house.
He had a conversation with a local man who worked as a gardener and maintenance man for the resort property. The local man wanted to open a shop nearby and mentioned that he could charge twice as much for his merchandise since he was near people who were rich and rich people are used to paying more for merchandise, plus they can afford it.
This is how people who don’t understand free market capitalism think. They think that just because you’re rich, you can afford to pay a higher price and will do so without thinking twice about it, simply because you can afford it. I mean why not, right?
I know people in the U.S. who think the same way. I’ve had tenants, who were government dependent that thought the exact same thing. I would offer them a job and they would give me a price that was twice as high as what I could get it done for by somebody else, but they thought I would pay just because they considered me to be rich and I can afford it. If I refuse to pay their asking price, it’s because I’m racist and trying to keep the poor man down.
This is what socialist governments teach their populace. If they don’t understand the way a free market system works, then they won’t try to break away from the socialist system that keeps them dependent on the government.
It’s a pretty good way to maintain your power base when you can make everyone dependent on you, isn’t it?
The U.S. Treasury and the FED operate on the same socialist principal. The Fed along with all other central banks is a group of Keynesian academics that think that markets should be controlled by a central governing committee and not be free for natural price discovery under the natural laws of a free market system.
If you don’t know what Keynesian Economics is, then let me explain. Keynesian economics comes from John Maynard Keynes, a British economist and socialist from the 1930’s, who thought that economies require intervention by governing bodies and central banks, especially during times of recession or depression.
According to Keynesian economics, ‘state intervention was necessary to moderate "boom and bust" cycles of economic activity.’ Thus the creation of the U.S. central bank following the crash of 1929.
Look at socialist countries like Argentina, Brazil, Mexico, Europe and now the U.S.
What? You thought the U.S. was a capitalist country? LOL. That was before the Depression of 1929 and the U.S. has steadily become more socialist over the years. There are no free markets anymore.
History shows that, over time, socialism always reaches a breaking point in which it fails. Yet the entire planet tends to gravitate toward this system. Why do you think that is?
Power and control by the governing elites, that’s why. For those in power, greed and hubris (arrogance) reign. The more power and wealth they can accumulate, the better. Even if it means stealing from the poor souls they are allegedly supposed to serve.
The Fed operates for the benefit of the private banks, which operate for the benefit of the politicians. The chairman of the Fed has no power. He or she is just a figurehead. The largest banks, Goldman Sachs, JP Morgan Chase, Bank of America, CitiBank, Wells Fargo, along with the rest of the banking cartel are the ones pulling the strings.
It’s a basic flaw of human nature. Power corrupts!
The elites have been trying to control the U.S. economy for decades. We have had zero interest rates for 7 years now and QE for most of those years and the economy is worse now than when they started. It is believed by most analysts in the financial world that the Fed has no idea what they are doing.
Free Market Capitalism is a naturally occurring law, just like Mother Nature, with the law of supply and demand as the basis for market driven actions. Economics has been exploited and twisted by the academics to meet their own perverted ideological view of how the world should be.
But here’s the point. Socialism always fails from an economic perspective. The natural laws of a free market system always win and overpower the socialist constraints.
As Margaret Thatcher once said…
“The problem with socialism is that you eventually run out of other people's money.”
For those of you who took my advice and have positions in the Gold miners and royalty companies, you should be feeling pretty jubilant right now, but it’s only just beginning.
In the chart below, notice the down trend line from 1302 printed from last January. You can clearly see where Gold crossed over for the start of the next leg up.
A little closer look in the chart below shows that we are now in Wave #3 of a 5 wave EW pattern. I expect this next wave to build some momentum and eventually reach 1200 or higher. The next point of resistance will be 1168, where I expect a brief retrace for a couple of days before moving up again to break that resistance level and head to 1200 or beyond.
I am using a 30% trailing stop at present, however, as we get closer to the target price of 1200 or higher, I plan to tighten that stop with a strategically placed hard stop or a trailing stop with a narrower price range. I will notify you of what that is when we get there, possibly as early as next weeks report.
Stock Market Indices: (SPY) (QQQ)
The stock market has been in a sideways channel pattern for the past 30 days and the recent run up is due to the short squeeze by the massive amount of shorts that were placed in the market right after the initial crash back on black Monday.
As a result of those shorts covering, we have had a significant run up which has gotten all the Bulls excited. Don’t be fooled, this is a temporary affliction. As you can see, today the market lost its momentum after reaching a high point at the top of the Bollinger Bands. It’s due for a retrace back down and I think it will begin next week and possibly blast through the lower support line of the channel pattern shown below.
If that happens, I wouldn’t be surprised to see a continued move down to test the lows of Black Monday or even lower.
Full disclosure, I am short (SPY) 2016 PUT options and plan to hold until the next crash cycle begins.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Crude Oil breached the upper resistance line today but immediately got smashed down. It’s also had 4 days fo Bollinger Band crash, therefore, expect a retrace back down on Monday. This could be a good set-up for a short trade to the downside.
I currently have no position in this trade, but I might add one on Monday with a January 2016 PUT option position for a quick 2-3 week trade.
Financial Stocks: (XLF) (IYF)
It’s time to short financial stocks, the tide has turned and the devastation will be ugly.
Biotech: (BIB) (KITE) (IBB)
Biotech might be a good sector to get into once the stock market bottoms near the end pf 2016, but for now I’m staying away.
Commodities: (FCX) (JJG) (DBA)
Commodities will move higher when we have inflation, however, I think we deflation will dominate as the global economies crash. Inflation will begin once the central banks begin printing more money to try to stem the crash in the markets. I will just watch these until I see a signal of a move up in price and a break of the downtrend line.
Welcome To The Future: Downward Mobility & Social Depression
Is This The Most Shocking Chart In The History Of The Gold Market?
Mining shares are at an all-time low vs the price of gold. This disparity cannot last and the turn in favor of the mining shares will be quite spectacular. In the fullness of time this will surely be seen as one of the greatest opportunities in the history of the gold market.