Friday, April 13, 2007

Martin Armstrong's Punishment by a Corrupt State

On April 27, 2007 Martin Armstrong's - record 7+ Years Contempt of Court Incarceration was ended. He will now have to start another 5 Years in prison which means he will end up in prison for 12 years for a very questionable criminal charge. His right to a speedy trial was denied, he was not allowed to hire top lawyers and in fact the court took his money away from his original lawyers. He never had a proper trial, he was forced into a plea after they put him into solitary confinement for several days without sleep, as well as having been almost killed by a murderer who was allowed into his cell and then beat him with a typewriter causing Martin to lose many of his teeth while the prison guard looked on according to other inmates, Martin then had to spend a week in intensive care, the man who smashed a typewriter on his face was never charged. This shows how corrupt the US Justice System is, most likely deliberately getting a prison thug to attempt to murder Martin! Nobody in the US government cares though, what has it got to do with their salaries and gold plated pensions. As Martin says: "Strangely there was not one wire transfer (of Princeton Economic's client money) into my personal accounts." No mention was made of the fact that the CIA tried to get his $60 million super-computer model in 1998 a year before he was charged criminally - as Princeton Economics employees witnessed and was written about by one employee named James Smith. The Court then demanding Martin hand over assets (including his computer model) before he had his trial to determine if he was 'Innocent Until Proven Guilty' is wrong and a major conflict of interest by the government since the CIA wanted his model in 1998. A brilliant man will continue to rot in prison.

Southern District of New York Judge John Keenan sentenced Armstrong to the maximum , saying he had no choice but to make the criminal sentence consecutive to the civil contempt, even though the Judge could have legally given Martin credit for time already served.
In a interview with Martin's lawyer: It was stated that they filed a petition with the Supreme Court for holding Martin in contempt for more than 18 months, which is unlawful. Mr Sjobolm is hoping that "the SC grant cert, find in our favor & Mr. Armstrong will be credited for time served and be released."

The criminal sentence follows Armstrong's guilty plea (under physical duress after being put in solitary confinement without sleep for several days) last August for conspiracy to commit securities violations.

Martin did not steal money, plain and simple. What he or employees allegedly did was:

(1) Lose money trading (not a crime) and Martin claims that Republic Bank employees did illegal trading in his Princeton accounts.

(2) Failed to disclose such trading losses in some cases, some have written that it was some Princeton or Republic employees that may have actually lost the money and kept it hidden.

(3) Allowed Republic to consolidate client funds to limit their own liability and concern for accounting, which then of course allowed payment to some old clients with new client money.

Since Martin's original high end lawyers had his money taken away from them he never got a proper defense team for this, his mother hired one lawyer who while he tried hard was not likely of the same quality as the original team. He was tortured in solitary confinement for days (supposedly for damaging a vent cover!) after an attempted murder by an inmate who was allowed into his cell, proceding to strangle Martin and smash a typewriter over his face causing him to lose many of his teeth and requiring him to be transferred to an intensive care hospital room for a week. After all that they pretty much forced a minimal guilty plea out of him in desperation, since he had been in prison without a trial for 7 years, his life was going by.

The real reason Martin continues to be held in prison as his daughter Victoria Armstrong has stated may be because he will not hand over his computer model's code which President George W. Bush's CIA tried to aquire in 1998. This is constitutionally illegal for the US government to seize copyright material and private property. America is supposed to be all about protecting private property from totalitarian government.

Judge Keenan, who also ordered Martin Armstrong to pay $80 million and $1 in restitution that even the government acknowledged he did not have, said "every criminal case is a tragedy but this is a particularly sad one."

The 57-year-old Armstrong, after being rebuffed in a last-minute attempt to appear pro se, spoke for about 25 minutes, taking the judge on a tour of the origins of what he called the "franchising" of Princeton Notes for large-scale currency trading that began in 1992.

When Keenan told him to get to the point, the former head of Princeton Economics International Ltd. portrayed his downfall as anything but his own fault.

"I was too occupied. I didn't pay attention," he said, his voice quavering. "I don't think this is a situation where I started to go get money from someone. [I earned a] $78,000 salary. I worked all the time. I took care of my kids and I guess that's the most important thing. I trusted people I shouldn't have trusted."

The government alleged that Armstrong was the key player in a multi-billion dollar "Ponzi scheme," (even though it was never proven that Armstrong got any money from the alledged misdeeds) one of the largest ever, which covered the losses of initial investors with money from new investors, said Assistant U.S. Attorney Alexander Southwell. It charged he made misrepresentations about both the value of assets in some accounts and his trading record and illegally commingled funds from separate investor accounts.

Republic Securities, the broker-dealer used by Armstrong, pleaded guilty in 2002 to conspiracy and securities fraud charges. Two of its employees entered guilty pleas in 2004, as did a former employee of Armstrong.

Both Armstrong and his lawyer, David Cooper, disputed the use of the term "Ponzi scheme" Tuesday, saying there was no evidence Armstrong sought to enrich himself.


That claim is disputed by Alan M. Cohen, the receiver appointed by Judge Richard Owen in the civil case brought against Armstrong and his Princeton companies by the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Owen initially ordered Armstrong jailed in 2000 for contempt for failure to disgorge some $1.4 million in assets -- a figure that later grew to more than $14 million and included gold bars, rare coins and even a bust of Julius Caesar. The civil court never proved that any of these assets were bought with Japanese investors money. They also are illegally trying to get his $60 million computer model that the CIA tried to aquire in 1998.

Armstrong contended that he no longer had the assets, but Owen did not believe him. A seven-year fight over the limit of the contempt power of federal judges was under way as Armstrong refused to budge and launched challenge after challenge to his detention from his jail cell at the Metropolitan Correctional Center.

Ultimately, on Armstrong's fourth trip to the 2nd U.S. Circuit Court of Appeals, attorney Thomas Sjoblom, now of Proskauer Rose, argued in January 2006 that the inherent power of federal judges to jail for contempt is limited by the Anti-Detention Act, 18 U.S.C. 4001(a), which states no citizen shall be imprisoned unless authorized by an act of Congress, and the so-called "recalcitrant witnesses" act, 28 U.S.C. 1826, which gives the power to jail non-cooperative witnesses for up to 18 months.

The argument was rejected by the court last November, with then-Chief Judge John M. Walker writing that Congress authorized "indefinite coercive civil confinement" in the Judiciary Act of 1789 and finding that Armstrong could not be considered a witness.

The court also took the unusual step of removing Owen from the case, saying reassignment was the best course because the long-running dispute over the missing assets could use a "fresh look by a different set of eyes."

Those eyes now belong to Southern District of New York Judge Kevin Castel, who will hold an April 27 hearing on the civil contempt.

Mr.Cooper, a veteran defense attorney who said this was his last case before retirement, went out firing, saying his client was in a bizarre state of legal limbo because of Owen, the absurdity of which became complete when Keenan was unable to consider the civil contempt in determining the criminal sentence to give Armstrong.
"I've never seen a criminal case in which defendant has been subpoenaed to turn over the things he stole," he said. "The fact we aren't allowed to talk about seven-plus years in prison for refusing to turn over items he is supposed to have stolen is crazy. If that's the law, it's crazy.

"The contempt was outrageous and everyone knows it was outrageous and Judge Owen was notorious for the outrageousness of his conduct," he said. "Why did they take it away from Judge Owen? Because he was going to keep him in. The circuit was trying to say 'Let him out -- we are beginning to look draconian.'"

The implication or "wink" that the circuit gave to the lower court, he said, was "resolve" this matter, Cooper said, "But Judge Castel didn't catch the wink."

Despite Cooper's comments, Castel has been pressing hard for both sides in the civil action to reach a settlement.

Saturday, March 17, 2007

Martin Jr. Request for Letters of Support

Request from Martin Armstrong Jr. to help Martin Armstrong Sr.

To all whom are concerned,

I'm writing to you on behalf of my father, Martin Armstrong. Over the years you have all kept a watchful eye and provided much appreciated support as he has fought a seemingly never ending, one-sided legal battle.

As you probably know by now, my father's criminal sentencing hearing
was earlier this week and Judge John Keenan, despite legal authority to do
so, refused to give credit to my father for time served on the civil
contempt towards his criminal sentence of 5 years.

This was obviously very disappointing. For those that wrote letters of
support to the Judge, I want to thank you as it was very much appreciated.

This battle is not over, as my father has a hearing on April 27th in front
of his Judge on the civil case to bring the contempt of court to an end (not
only did Judge Keenan not grant credit for time served on the civil
contempt, he ordered that the 5 years on his criminal sentence not begin
until the civil contempt is complete). If you have not already, but still
feel compelled to do so, it would be greatly appreciated if you could write
a letter of support for my father to the Judge presiding over his all
important civil case.

Below is his information:

Hon. P. Kevin Castel
United States Courthouse
500 Pearl St., Room 2260
New York, NY 10007

In addition, if you could copy my father's attorney, Thomas Sjoblom, on your
letters that would be very much appreciated so that he and my father are
aware of letters that were sent to the Judge prior to the proceedings. You
can do so at the following mailing address:

Thomas V. Sjoblom
Attorney at Law
Proskauer Rose LLP
1001 Pennsylvania Avenue, NW Suite 400
South Washington, DC 20004

or send an email to:

Thank you for your time and your continued support. On behalf of my father
and his family it is very much appreciated.


Below please find the mailing addresses for each of the two judges:

JUDGE ON MARTIN ARMSTRONG'S CRIMINAL CASE: Hon. John F. Keenan United States Courthouse 500 Pearl St., Room 1930 New York, NY 10007

JUDGE ON MARTIN ARMSTRONG'S CIVIL CASE: Hon. P. Kevin Castel United States Courthouse>500 Pearl St., Room 2260 New York, NY 10007

In addition, if you could copy my father's attorney, Thomas Sjoblom, on your letters that would be very much appreciated so that he and my father are aware of letters that were sent to the judges prior to the proceedings. You can do so at the following mailing address: Thomas V. Sjoblom - Attorney at Law - Proskauer Rose LLP 1001 Pennsylvania Avenue, NW Suite 400 South Washington, DC 20004 or send an email to:

Thank you for your time and your continued support. On behalf of my father and his family it is very much appreciated.


Letter from Vicky Armstrong - Martin Sr.'s Daughter

It took nearly 30 years for my dad to develop this model and his refusing to turn over its source code to the government is a big reason why he has been held in jail for over 7 years without a trial. His model was his life’s work and his passion that ultimately landed him in jail. Although it's great to hear people that have benefited from his insight, after seeing what has happened to him I wish he kept it to himself.

There is obviously so much I can say and although I never post messages, I am now reaching out. I could never put into words what this has done to my father and my family. Even as I write to you now and try and express my feelings towards what has happened to him my eyes are filled with tears.

Regardless if you support my father's beliefs or not, I'm asking for your help. As of now his criminal sentencing is set for March 20th (now delayed until April 2007 according to brother Martin - editor) and his Civil Contempt hearing for the end of April. These dates have changed many times since they were originally set in January and they are likely to be pushed back again. My family, friends, old client's of my father, and myself have been sending emails and letters to members of the Judiciary Committee of the House and Senate and the Judges involved. Unfortunately our efforts have gone unanswered and we ask for more help. For those of you that have posted supportive comments and blessings, we thank you. You really have no idea how much your thoughtful words mean. Although my dad is a fighter, sometimes he needs to know he's not alone so I've printed out some of your messages and sent them to him just for this reason and I know it has helped.

For over 7 years he's been living in a cell with a 1-hour weekly visit and 300 minutes a month for phone calls. The visiting hours are on Wednesday and I'm the only one of my family who lives near the city so I get to see him the most. Since my grandmom (his mother) is 88 and lives in south jersey almost 2 hrs away, she relies on my brother and/or aunt near her to drive her up. Given that they have to take the day off of work to do so they don’t get to see him that often.

I’m not looking to change anyone’s views or opinions, I only ask for your help in a situation that should make every citizen of the United States outraged.

I attached the latest NY Times article that explains an accurate account of what has happened and some contact information of people that have the power to do something. This obviously means a lot to my dad and my family for you to share your thoughts with any or all of the people listed below. My deepest appreciation for your help and support.

Thank you,
Vicky Armstrong

The email addresses of the Judiciary Committee Chairmen for the Senate and the House of RepresentativesPatrick Leahy: senator_leahy@leahy.senate.govJohn Conyers Jr.:
House of Representatives Judiciary Committee: General email box
Senate Judiciary Committee: Website that gives their mailing address

In Fraud Case, 7 Years in Jail for Contempt
Published: February 16, 2007
The New York Times

On Jan. 14, 2000, Martin A. Armstrong, a globe-trotting investment manager, was told to produce $15 million in gold and antiquities, as well as documents, in response to a civil suit by the government accusing him of securities fraud involving hundreds of millions of dollars.
When he said that he did not have the items and could not produce them, a federal judge ordered him jailed for contempt of court.
Seven years later, Mr. Armstrong sits in the Metropolitan Correctional Center in Lower Manhattan.
Imprisoned two years before Enron and WorldCom brought corporate crime to center stage, Mr. Armstrong, 57, is the white-collar defendant whom time forgot. Over the years, the losses of his former clients have been repaid by a bank involved in his trades.
Still, he remains jailed on one of the longest-running charges of contempt. In many cases, a federal law limits to 18 months how long someone can be held under civil contempt while the court tries to coerce compliance with an order. Even in cases of criminal contempt, whose goal is punishment rather than coercion, an individual is entitled to the full protections of due process after six months.
“A legal proceeding is supposed to be the quest for truth,” Mr. Armstrong said in a phone interview last week from the 12-story building, which is used mostly as a temporary holding site for prisoners. “But this contempt was used to stop me from going to trial, and it’s been nothing but bad faith from the government ever since.”
How Mr. Armstrong has been held for so many years without a trial is a tangled and bizarre tale. Mr. Armstrong, his lawyers say, has been stuck in a surreal situation in which criminal prosecutors have never had to prove their 24-count indictment at trial while the civil case tied him up. Nevertheless, they have gotten their desired result — a lengthy prison term for Mr. Armstrong.
Last August, he pleaded guilty to one count of conspiracy in the criminal case. He struck that deal with federal prosecutors after he was moved from the 75-square-foot cell he shared with another prisoner into solitary confinement and had not slept for days, his lawyer said. Over the years, prosecutors have said that they were ready to proceed to trial and that civil contempt had nothing to do with their case. Mr. Armstrong countered that his detainment impeded his efforts to mount a proper defense, blocking his access to essential documents and computers as well as the assets to pay counsel.
Because there has been no jury trial in the case, it is impossible to say which side is right: the government, whose indictment in September 1999 contended that Mr. Armstrong misappropriated hundreds of millions in client funds; or Mr. Armstrong, who said that officials at the bank executing his trades generated temporary losses that could have been recovered in the market. (Two of those officials later pleaded guilty to fraud in a related case involving the bank.)

Rick Maiman/Bloomberg News
Martin A. Armstrong, pictured in jail in February 2000, has almost served more jail time for civil contempt than he would have if he had been sentenced to the likely 6.5 to 8 years on conviction of 24 criminal counts of securities fraud, commodities fraud and wire fraud.
Exceeding a Sentence
But this much is certain: Mr. Armstrong’s years in jail for civil contempt will soon exceed the sentence of 6.5 to 8 years that he would have received if he had been convicted of all 24 criminal counts of securities fraud, commodities fraud and wire fraud. “The case sends a very bad signal,” said Bernard V. Kleinman, a criminal lawyer in White Plains who represented Mr. Armstrong until 2004 and argued twice for his release before the United States Court of Appeals for the Second Circuit, in Lower Manhattan. “I think it bodes very ill for anybody held in civil contempt. District court judges can look at this case and feel that the likelihood of the circuit reversing them is small and that time is, in and of itself, no factor in determining whether civil contempt has lost its coercive effect and has become punitive.”
John F. Keenan, the Federal District Court judge overseeing the criminal case, has not yet sentenced Mr. Armstrong. It is unclear whether the judge will give Mr. Armstrong credit for the time he has served. Under federal sentencing guidelines, his lawyers expect a sentence of about five years.
A spokeswoman for the United States attorney in Manhattan said that the office did not comment on open cases.
Judge Richard Owen, the senior district judge who ordered Mr. Armstrong held in contempt, still sits on the bench in the Southern District of New York, where he has been for 34 years. When he ordered Mr. Armstrong taken away by federal marshals, he declared, “Mr. Armstrong has the keys to the jail cell in his pocket by production and telling people where to go to get it and dig it up and turn it over.”
Over the years, Judge Owen would revisit the contempt order every 18 months, guided by the federal statute. He repeatedly said that Mr. Armstrong was motivated by greed and was awaiting his release from jail to retrieve the $15 million that the government said was missing. According to lawyers who worked on the case in the early days, the financier’s headstrong manner irritated Judge Owen almost immediately.
But Judge Owen was moved off the case in November by a panel in the Second Circuit Court hearing Mr. Armstrong’s third appeal on the contempt charge.
The three judges unanimously rejected the appeal to free Mr. Armstrong but found that on the seventh anniversary of his confinement, “his case deserves a fresh look by a different pair of eyes.”
It was the second time in less than a year that the Second Circuit had ordered Judge Owen replaced on a high-profile case. In March, a panel overturned the 2004 conviction of Frank P. Quattrone, the former investment banker at Credit Suisse, because Judge Owen failed to instruct the jury properly; the panel assigned the case to a new judge in the “interest of justice.” Later, the government decided not to retry Mr. Quattrone.
Judge P. Kevin Castel has taken over the Armstrong civil case. A hearing is scheduled on the contempt matter for March 15. A request to interview Mr. Armstrong in person was denied by corrections officials, and Judge Owen did not return a call seeking comment.
A Budding Businessman
At the peak of his career in the mid-90s, Mr. Armstrong oversaw $3 billion in client assets. He was widely quoted in the financial news media, including The New York Times, on interest rate and currency movements. He began working at a coin and stamp dealership when he was 13 and opened a collectors’ store when he was 21. He founded Princeton Economics International, based in Princeton, N.J., in 1981.
Mr. Armstrong, an intelligent and imperious man who claimed to have made his first million by age 15, seems to have begun having trouble in 1999 when trading losses turned up in accounts that were held for the firm at Republic Bank. The problems appeared as the HSBC Group conducted a financial review before acquiring Republic.
The government said that Mr. Armstrong had improperly commingled accounts and overstated the value of the account’s securities in client statements.
Mr. Armstrong said that he did not authorize the transactions that produced losses and that he was not involved with commingling of the accounts. He was indicted in September and released on $5 million bond.
In January 2000, the receiver appointed by the court in the civil case said that Mr. Armstrong had purchased gold coins and other assets with his firm’s money. His lawyers argued that the assets might have been purchased before the suspected wrongdoing.
When Judge Owen ordered the assets returned, Mr. Armstrong delivered 4 of the 5 computers sought, 8 of the 11 requested boxes of documents and gold coins worth $1.1 million. He said that was all he had. The receiver said assets worth about $15 million were missing. Mr. Armstrong’s odyssey in the judicial system began.
His assets frozen, Mr. Armstrong has been unable to pay lawyers. He now relies upon David Cooper and Steven Z. Legon, two lawyers from the Criminal Justice Act panel, set up to help indigent defendants, and Thomas V. Sjoblom, a lawyer at Proskauer Rose, who has received nominal compensation.
“On what grounds can you tie up the system of criminal procedure and civil procedure and hold everything in abeyance during contempt?” Mr. Sjoblom asked. “What about your speedy trial rights? What about the government’s need to move forward in the civil case? You’re using the contempt process to wring a settlement or a plea out of the person. That, to me, is abuse of the process.”
Over the years, more than half a dozen government lawyers have cycled through the case. In 2003, Mr. Armstrong changed his legal approach in challenging the contempt charge, saying that he did not have to produce the assets and citing his Fifth Amendment right.
The receiver, meanwhile, has recovered the vast majority of money said to have been lost by investors in the case. In January 2002, Republic New York Securities, a brokerage firm that housed Princeton Economics’ accounts, pleaded guilty to conspiracy and securities fraud charges. Republic Bank paid $606 million to victims, all Japanese companies. It was “full restitution,” the assistant United States attorney said at the time.
Alan M. Cohen, then a lawyer at O’Melveny & Myers and now executive vice president and global head of compliance at Goldman Sachs, is the court-appointed receiver.
His former colleague, Tancred V. Schiavoni, a lawyer at O’Melveny, said that all the victims had been satisfied. “We tried to do the right thing, and we’ve gotten nothing but grief,” he said. “What this guy wants is to be given credit for time served on the contempt and leave with the money.”
O’Melveny & Myers has received at least $3.9 million to cover its fees and disbursement over the years, according to court filings.
The discovery process was protracted partly because of the complexity — hundreds of boxes of materials had to be examined and data transcribed into digital format — and because Mr. Armstrong was in jail and relying on lawyers working pro bono.
In January 2006, criminal prosecutors said they were eager to put Mr. Armstrong on trial in October. Then in early August, federal prosecutors appeared at the correctional center to strike a plea deal. The visit, Mr. Sjoblom said, came a week after Mr. Armstrong had been ordered into solitary confinement — known as “the hole” — for damaging a vent in a common area.
Mr. Armstrong pleaded guilty to one count of conspiracy to commit securities fraud for failing to keep his investors informed about losses and for agreeing to make investor funds available to Republic to cover Princeton Economics’ unrelated trading losses.
“I think the government just wore Marty out,” Mr. Sjoblom said.
On Dec. 7, Stephen J. Obie, regional counsel for the Commodity Futures Trading Commission, visited Mr. Armstrong, with a settlement offer in which he would sign over some $30 million as a penalty. Mr. Armstrong declined.
The Securities and Exchange Commission and the C.F.T.C. declined to comment on the case.
The government has said that $21 million is still owed. Even if that must be paid by Mr. Armstrong’s firm and not Republic Bank, an estimated $40 million is left in what was once Princeton Economics: $30 million in the United States and $10 million in a British entity. Mr. Armstrong and his lawyers learned of the $10 million three weeks ago.

Fred R. Conrad/The New York Times
Victoria Armstrong visits her father most Wednesdays at the Metropolitan Correctional Center in Manhattan, where he has been held for contempt for seven years.
Weekly Visits
Mr. Armstrong, who is divorced, has two children and an elderly mother who await his release. His daughter, Victoria Armstrong, 30, visits most Wednesdays, spending about one hour with him in a common room with other visitors and prisoners.
“You never stop thinking about where he is and what he goes through,” Ms. Armstrong said in an interview last week.
Her brother, Martin, 31, said he was bewildered at what he sees as the breakdown of due process in his father’s case. “That you can keep someone in contempt for such a long time with so many unanswered questions — that part of it has been a real eye-opener,” he said.
Sonia Sotomayor, a judge on the Second Circuit panel that heard Mr. Armstrong’s appeal last year, seemed to echo this point. “The district court’s finding that Armstrong is motivated solely by greed is not enough to justify disregard for due process,” she wrote. “Courts must exercise caution in their use of the contempt power and must recognize when it has reached the limits of its utility.”

Saturday, January 06, 2007

Discovery of the 8.6 yr cycle


Discovered in the 1970's by dividing the number of major panics into a given time frame Armstrong's 8.6 year pi cycle (piX1000=3141 days or 8.6 years) has had many direct hits on various market indexes, commodities and currencies producing billions to one odds against it being just a meaningless coincidence.Similar to Benner's Cycle which is based around a 9 year cycle, Armstrong's cycle gives dates down to the day years and decades ahead of time, not just a yearly date as Benner's shows. Armstrong's is much more precise. So much so that the CIA and Chinese government tried to aquire his super-computer model after his amazing prediction of the crash of 1998 to the day. Mr. Armstrong has had his constitutional rights stripped from him, his Constitutional right to a speedy trial was taken away from him. Did the founding fathers of America want future judges and politicians to ignore the Constitution? What would the founding fathers do to officials who ignored the Constitution?

Recent events in the world's stock markets show the accuracy of his model, the markets sold off right on his forcasted date of Feb 27, 2007. He said in effect that everything would rise up into 2007 -including the stockmarkets, housing and especially hard assets like commodities. The fact that the hard assets peaked last spring (gold copper etc) shows that capital flows are currently focused on the stock markets world-wide, it is likely that they will continue up and commodities should resume their bull market for the next major leg up - $100+ a barrel oil and Gold well over $2000 - even 3 or $4000 according to some estimates.

According to Timer's Digest top market timer Don Wolanchuk we will be entering into 'Primary Wave 3' that is going to take the Dow to 20,000 in the coming years, gold and commodities should keep moving up too.

[Update as of Oct.16, 2008: Well now that all hell has broken lose in the markets, being one of 5 major crashes over the past 200 years, and coming down with a velocity only exceeded on two other instances in history, we can see much more clearly now. The housing and mortgage issue that I was concerned about in early 2007 certainly turned out to be a very unpleasant event with the US government having to step in with a 700 Billion bail-out package for the financial institutions that used leverage and derivatives to speculate in unsound mortgages. In retrospect Martin Armstrong's pi cycle showed the high in the US financial indices back in February of 2007 which produced a mini-crash, that turned out to be the warning shot fired which has now led to about a 50% loss in the stock markets in one year. As noted elsewhere in my articles, Mr. Armstrong wrote in 1999 that by late 2007 it would be obvious that there was serious problems with the economy. Don Wolanchuk still thinks that the Dow Jones Industrials can have his huge rally, I presume approaching 20,000 before 2011 and while I did think that was a possiblity before, I now think that is pretty unlikey.

After viewing a live webinar put on by today, I think it worth noting that a market that declines with this much velocity and by so much is likely to take out the initial panic low that we saw on Oct.10, 2008. It seems like it would be a miracle now for the markets to resume a major bull market. Mid 2011 is the next pi cycle low, so I think the markets are likely to keep going down into that time now, although there can always be strong retracement rallies within any bear market.

I pray that this is not going to get too ugly but I think we can expect to see unemployment rates move up agressively over the next couple of years. As I have explained on a public forum to Mr. Wolanchuk, I do not have the advantage of Martin's 32,000 variables super computer model but I will continue to interpret his model using just my brain, lol.]

Below written in early 2007.
My concern here is housing - if it keeps breaking down into mid 2009 as my own work is suggesting - things may get a little rough, and the next major trough for the economy should be Martin's mid 2011 date. I think it possible that gold and commodities will go up into 2009, which would then lead to the 2011.45 trough, just as the year 2000 was the peak in the markets and led to the low a couple of years later.

The Business Cycle And The Future
By Martin A. Armstrong
September 26,1999

For many years, I have pursued a field of study that is at best non-traditional. My discovery of a global business cycle during the early 1970's was by no means intentional. As a youth growing up in the 1960's, the atmosphere was anything but stable. I don’t really know if it was Hollywood that captivated my interest in history with an endless series of movies about Roman and Greek history, but whatever it was that drove me, I can only attest to what resulted.
My father had always wanted to return to Europe after serving under General Patton during the war. My mother insisted that she would go only when he could afford to take the whole family. That day finally came and something inside me insisted upon being able to earn my own spending money. I applied for a job despite my age of only 14. It wasn’t much, but on weekends I worked with a coin/bullion dealer. In those days, gold was illegal to buy or sell in bullion form so the industry centered on gold coins issued by Mexico, Hungary and Austria. I soon became familiar with the financial markets as they were starting to emerge. It was this experience that began to conflict with the formal training of school.
One day in a history class, the teacher brought in an old black and white film entitled "Toast of the Town." This film was about Jim Fisk and his attempt to corner the gold market in 1869 that created a major financial panic in which the term "Black Friday" was first coined. In the film was a very young support actor named Cary Grant who stood by the ticker tape machine reading off the latest gold prices. He read the tape and exclaimed that gold had just reached $162 an ounce. I knew from my job that gold was currently selling for $35. At first I thought that the price quote of $162 in the movie must be wrong. After all, Hollywood wasn’t known for truthfulness. Nonetheless, I was compelled to go to the library to check the newspapers of 1869 for myself. This first step in research left me stunned – the New York Times verified $162 was correct.
For the first time in my life, I was faced with a paradox that seemed to conflict with traditional concepts. How could gold be $162 in 1869 and yet be worth only $35 in the 1960's? Surely, inflation was supposed to be linear. If a dollar was a lot of money in 1869, this meant that adjusted for inflation gold must have been the equivalent of several thousand dollars. If value was not linear, then was anything linear?
I began exploring the field of economics on my own and reading the various debates over the existance of a business cycle. Kondratieff was interesting for his vision of great waves of economic activity. Of course, others argued that such oscillations were purely random. Over the years that followed, this nagging question still bothered me. I had poured my heart and soul into history, quickly learning that all civilizations rose and fell and there seemed to be no exception.
I was still not yet convinced that a business cycle was actually definable. Kondratieff’s work was indeed interesting, but there was not enough data to say that it was in fact correct. On the other hand, it seemed that the random theory crowd was somehow threatened by the notion that the business cycle might be definable. After all, if the business cycle could be defined, then perhaps man’s intervention would not be successful. Clearly, there was a large degree of self-interest in discouraging any attempt to define the business cycle. I knew from my study of history that a non-professional German industrialist took Homer and set out to disprove the academics who argued that Homer was merely a story for children. In the end, that untrained believer in Homer discovered Troy and just about every other famous Greek city that was not supposed to have existed beyond fable.
I didn’t know how to go about such a quest to find if the business cycle was definable. Admittedly, I began with the very basic naive approach of simply adding up all the financial panics between 1683 and 1907 and dividing 224 years by the number of panics being 26 yielding 8.6 years. Well, this didn’t seem to be very valid at first, but it did allow for a greater amount of data to be tested compared to merely 3 waves described by Kondratieff.
The more I began to back test this 8.6-year average, the more accurate it seemed to be. I spent countless hours in libraries reading contemporary accounts of events around these dates. It soon became clear that there were issues of intensity and shifts in public confidence. During some periods, society seemed to distrust government and after a good boom bust cycle, sentiment shifted as people ran into the arms of government for solutions. Politics seemed to ebb and flow in harmony with the business cycle. Destroy an economy and someone like Hitler can rise to power very easily. If everyone is fat and happy, they will elect to ignore drastic change preferring not to rock the boat.
The issue of intensity seemed to revolve around periods of 51.6 years, which was in reality a group of 6 individual business cycles of 8.6 years in length. Back testing into ancient history seemed to reveal that the business cycle concept was alive and well during the Greek Empire as well as Rome and all others that followed. It was a natural step to see if one could project into the future and determine if its validity would still hold up. Using 1929.75 as a reference point, major and minor turning points could then be projected forward in time. For the most part, I merely observed and kept to myself this strange way of thinking. In 1976, one of these 8.6-year turning points was quickly approaching (1977.05). For the first time, I began to use this model expecting a significant turn in the economy back toward inflation. My friends thought I was mad. Everyone was talking about how another Great Depression was coming. The stock market had crashed by 50% and OPEC seemed to be undermining everything. I rolled the dice and stuck to it and to my amazement, inflation exploded right on cue as gold rallied from $103 to $875 by January 1980.
As my confidence in this model increased, I began to expand my research testing it against everything I could find. It became clear, that turning points were definable, but the wildcard would always remain as a combination of volatility and intensity. To solve that problem, much more sophisticated modeling became necessary.
As the 51.6-year turning point approached (1981.35), there was no doubt in my mind that the intensity would be monumental. Indeed, interest rates went crazy with prime reaching 22% and the discount rate being pushed up to 17%. The government was attacking inflation so hard, they moved into overkill causing a massive recession into the next half-cycle date of 1985.65. It was at this point in time that the Plaza Accord gave birth of the G5. I tried to warn the US government that manipulating the currency would set in motion a progressive trend toward higher volatility within the capital markets and the global business cycle as a whole. They ignored me and claimed that until someone else had such a model, they did not believe that volatility would be a concern.
The next quarter cycle turning point was arriving 1987.8 and the Crash of 1987 unfolded right on cue. It was at this time that a truly amazing development took place. The target date of 1987.8 was precisely October 19th, 1987 the day of the low. While individual models specifically based upon the stock market were successful in pinpointing the high and low days, I did not think for one moment that a business cycle that was derived from an average could pinpoint a precise day; it simply did not seem logical.
After 1987, I began to explore the possibility that coincidence should not be just assumed. I began researching this model even more with the possibility that precision, no matter how illogical, might possibly exist. I began viewing this business cycle not from a mere economic perspective, but from physics and math. If this business cycle were indeed real, then perhaps other fields of science would hold a clue to this mystery. Physics helped me understand the mechanism that would drive the business cycle but mathematics would perhaps answer the quantitative mystery. I soon began to understand that the circle is a perfect order. Clearly, major historical events that took place in conjunction with this model involved the forces of nature as well. If this business cycle was significant, surely it must encompass something more than the mere economic footprints of mankind throughout the ages.
The Mystery of 8.6
At first, 8.6 seemed to be a rather odd number that just didn’t fit mathematically. In trying to test the validity of October 19th, 1987 being precise or coincidence, I stumbled upon something I never expected. This is the first time I will reveal something that I discovered and kept secret for the last 13 years. The total number of days within an 8.6-year business cycle was 3141. In reality, the 8.6-year cycle was equal to p (Pi) * 1000. Suddenly, there was clearly more at work than mere coincidence. Through extending my studies into physics, it became obvious that randomness was not a possibility. The number of variables involved in projecting the future course of the business cycle was massive, but not completely impossible given sufficient computer power and a truly comprehensive database. The relationship of 8.6 to p (Pi) confirmed that indeed the business cycle was in fact a perfect natural cyclical phenomenon that warranted further investigation. Indeed, the precision to a day appeared numerous times around the world in different markets. Both the 1994.25 and the 1998.55 turning points also produced clear events precisely to the day. The probability of coincidence of so many targets being that precise to the day was well into the billions. Indeed, the relationship of p to the business cycle demonstrated the existence of a perfect cycle that returned to its point of origin where once again it would start anew. The complexity that arose was that while the cycle could be measured and predicted, precisely which sector of the global economy would become the focal point emerged as the new research challenge.
It was also clear that the driving forces behind the business cycle had shifted and intensified due to the introduction of the floating exchange rate system back in 1971. My study into intensity and volatility revealed that whenever the value of money became uncertain, inflation would rise dramatically as money ceased to be a store of wealth. Numerous periods of debasements and floating exchange rate systems had taken place throughout recorded history. The data available from Rome itself was a spectacular resource for determining hard rules as to how capital responded to standard economic events of debasement and inflation. The concept of Adam Smith’s Invisible Hand was valid, but even on a much grander scale involving capital flow movement between competing economies. The overall intensity of the cycle was decisively enhanced creating greater waves as measured by amplitude by the floating exchange system. As currency values began to swing by 40% in 4-year intervals, the cycle intensified even further causing currency swings of 40% within 2-year intervals and finally down to a matter of months following the July 20th, 1998 turning point.

The Domino Effect
The events that followed 1987 were all too easy to foresee. The G5 talked the dollar down by 40% between 1985 and 1987 essentially telling foreign capital to get out. The Japanese obliged and their own capital contraction led to the next bubble top at the peak of the 8.6-year cycle that was now due 1989.95. As the Japanese took their money home for investment, the value of their currency rose as did their assets thereby attracting global investment as well. Everyone was there in Tokyo in late 1989. Just about every investment fund manager globally was touting the virtues of Japan. As the Japanese bubble peaked, capital had acquired a taste for foreign investment. That now savvy pool of international investment capital turned with an eye towards South East Asia. Right on cue, the capital shifted moving into South East Asia for the duration of the next half-cycle of 4.3 years until it too reached its point of maximum intensity going into 1994.25. At this point, international capital began to shift again turning back to the United States and Europe, thus causing the beginning of a new bull market in a similar manner to what had happened in Japan. In fact, 1994.25 was once again the precise day of the low on the S&P 500 for that year. As American and European investment returned home, the steady outflow of capital from South East Asia finally led to the Asian Crisis in 1997. In both cases, Japan and South East Asia blamed outsiders and sought to impose punitive measures to artificially support their markets. In Japan, these interventions have left the Postal Savings Fund insolvent as public money was used to support the JGB market. Financial institutions were encouraged to hide their losses and even employees from the Minister of Finance were installed in some cases engaging in loss postponing transactions of every kind. Major life companies were told not to hedge their risks for fear that this would make the markets decline even further. Thus, the demise of Japan that would have been complete by 1994 was extended by government intervention that has most likely resulted in a lengthening of the business cycle decline into 2002.85.
The next peak on the 8.6-year business cycle came in at 1998.55, which was precisely July 20th, 1998. While the intensity was defined rather well by the model’s forecast of 6,000 on the Dow by the quarter-cycle target of 1996.4 followed by 10,000 for 1998, the development of highly leveraged hedge funds created a trap that was not fully anticipated. It was clear that the European markets had captured the greatest intensity between 1996 and 1998 and that Russia too had reached our target for maximum intensity. However, the excessive leveraging of funds like Long-Term Capital Management had significantly created the peak in volume as well. Thus, the spread trades were so excessive, that the collapse that was to be expected, took on a virus type of affect. As Russia moved into default, and LTCM moved into default, the degree of leverage caused a cascade of liquidation that was spread around the world. Everything became affected causing the collapse in liquidity and credit to further undermine the global economy as a whole. Despite the new highs in US indices into 1999, the broader market has failed to keep pace and the peak in both liquidity and volume remains clearly that of 1998.55.
The Future
While this business cycle can be calculated on quarter-cycle intervals of 2.15 years into the final peak for this major wave formation of December 24th, 2032. Though this is long beyond my life expectancy, there is so much more behind the true understanding of the driving forces within the business cycle. I have learned that it is easy to claim coincidence and ignore the telltale signs of a hidden order. It is easy to argue that there is no basis for such a model without ever making an effort to test results. If everyone stopped with such criticism, most of ancient Greece would still be buried and Homer would still be considered a book for children. Man would not fly or travel to the moon. A cure for cancer would not be sought and progress would simply not exist. But furthering our understanding is part of humanity. Like law, that when strictly enforced deprives society of justice when circumstances are ignored, it is also the sin of ignorance toward new concepts that deprives mankind of progress and ultimately our posterity.
The Economic Confidence Model in 2.15-year intervals
1998.55... 07/20/98
2000.7.... 09/13/00
2002.85... 11/08/02
2005.... 01/02/05
2007.15... 02/27/07
2009.3... 04/23/09
2011.45... 06/18/11
2013.6... 08/12/13
2015.75... 10/07/15
2017.9... 12/01/17
2020.05... 01/26/20
2022.2... 03/22/22
2024.35... 05/16/24
2026.5... 07/11/26
2028.65... 09/04/28
2030.8... 10/30/30
2032.95... 12/24/32
In the next issue of the WCMR, the details of this business cycle will be expanded to provide a list of turning points down to the 8.6-month interval. There is a wealth of knowledge that lies ahead if we are not afraid to explore. Regularity of the business cycle does not mean that we lack free will. For it has taken me 30 years of observation to get this far. The peak for one nation may be the low for another. For within the scheme of global capital flows, not everyone can enjoy a boom simultaneously. For every gain in trade, there must be someone who loses. This is simply the nature of the global economy. The greatest booms unfold when capital concentrates in one sector. When that capital shifts, you also find the result of the greatest financial panics in history. An individual will always possess the free will to follow the crowd or strike out with his own independence to buck the trend. There will be those who believe in the business cycle and use it to their advantage just as there will be those who refuse to acknowledge its existence. As long as not everyone believes, the cycle will exist forever. The regularity of the business cycle is not determined by man alone; for within its deep calculations resides the very heart of nature itself. Like the Biblical forecast of Joseph that seven years of plenty will be followed by seven years of famine, understanding the nature of the business cycle can certainly enhance our ability to better manage our affairs rather than constantly add to the intensity of the cycle through our own error of intervention. For now, it is more likely that the politics will continue to act in the opposite direction of the cycle adding to its intensity and enhancing its volatility. Perhaps I have been an evangelist seeking to point out that the economy is like a rain forest – destroy one species and it will ripple through the entire system. The global economy to me is the same delicate system that cannot be viewed in isolation, but only through its collective integration. The failed labor policies of Europe have created perpetually high unemployment and the worst record of economic growth for the past 30 years. Instead of objectively reviewing what has happened, Europe seeks to federalize and strengthen the very controls that already exist. Communism and socialism are all political byproducts of our failure to understand the business cycle. Blaming the rich, your neighbor or a particular race are all vain quests to explain the cause of a cycle that has moved through the boom bust phase. Who knows, perhaps it is possible that if for one moment we truly understood the business cycle and worked in harmony with it, the possibility of reducing the amplitude just might result in a more stable political-economy for all mankind.