Transcription
Good morning everyone. Now I know we're all quite pity regarding where our investments accounts are today and how amazingly they've grown through the years. I'm sorry to say that I may be the only one coming here to you with a bleak picture of what I'm seeing in the future. So I'm just going to offer my apologies up front.
But before I go into my views on where we stand in the markets, um I want to give you a little background to how I view markets. Now, I'm quite sure each and every one of you have had times where you were scratching your head when the market rallies on bad news or when good news comes out and the market tanks. I'm sure you all have the same questions when a stock gun does the same. But have you ever taken the time to consider why this happens? And if you're being honest with yourself, you probably recognize that it happens quite often. Has this ever caused you to consider that something other than fundamentals or the news may be driving the mark the market in directions that you would not normally expect? I know speakers before admitted regarding oil about how it moved in certain ways that didn't expect around times of Iran.
Well, over the last 40 years, there have been a number of people who've been considering this conundrum. in the Baltics and they've tried to find that answer and in their search for that answer there have been a number of studies which have made it quite clear that these fundamentals or the news are really not what is ultimately driving the market stocks. For example, in 1998 there was a study conducted by Cutler Bun Summers entitled what moves stock prices? They reviewed stock market price action after major economic or other type of news including major political events in order to develop a model through which one would be able to predict the market retrospectively. You heard me right when I said that they were not even at the stage of developing a perspective prediction model. And what they concluded in the study is that macroeconomic news explains only about 1ifth of the movements in stock prices. In fact, they even noted that many of the largest market movements in recent years have occurred on days where there were no major news events. They also concluded that there is surprisingly small effect from big news of political developments and international events. They also suggested, quote, the relatively small market responses to such news along with evidence that large market moves often occur on days without identifiable major news releases. And this is the key, cast doubt on the view that stock price movements are fully explicable by news.
So then the question we're all left with is what does move the stock market? Well, in another paper entitled Large Financial Crashes published 197 1997, the authors within their conclusions presented a really nice summation of this phenomena within financial markets. And I quote, "Stock markets are fascinating structures with analogies to what is arguably the most complex dynamical system found in natural sciences, the human mind. Instead of the usual interpretation of the efficient market hypothesis in which traders extract and incorporate consciously by their action, all information contained in market prices, we propose the market as a whole can exhibit an emergent behavior not shared by any of its constituents. In other words, we have in mind the process of the emergence of intelligent behavior at macroscopic scale that individuals at the microscopic scales have no idea of. This process has been discussed in biology for instance and animal populations, ant colonies or in connection with the emergence of consciousness."
And since the time that these studies have been published, ladies and gentlemen, we're talking almost 40 years ago, more and more studies have been conducted into the psychological aspects of our markets. And the more we learn, the more we realize that fundamentals are really only coincidental factors and not driving ones. The more recent studies are actually proving that more and more more and more that mass psychology is what is driving our financial markets. Now, while I understand that that may seem somewhat unbelievable to many of you, and it may shock your senses and rock all your long-term beliefs in how markets work, I will tell you that as someone who began their career with fundamental analysis, I was astounded by the power of understanding the psychological side of the market relative to the fundamental side. In fact, I fully converted.
Now, I'm not going to I'm not going to claim that this is something which I have recently discovered on my own. In fact, over 60 years ago, Bernard Barup, an exceptionally successful American financeier and stock market speculator who lived from 1870 to to 1965, excuse me, 1965, noted the following. All economic movements by their very nature are motivated by crowd psychology. Without due recognition of crowd thinking, our theories of economics leave much to be desired. It has always seemed to me that the periodic madness which afflicts mankind must reflect some deep root deeply rooted trait in human nature. A trait akin to the force that motivates the migration of birds, crushed lemmings to the sea. It's a force wholly impalpable. Yet knowledge of it is necessary to write judgments on passing events.
So of course it begs the next question you must be asking yourself. How can we track mass psychology? Well, back in the 1930s, a gentleman named Ralph Nelson Elliott discovered that the stock market is actually a barometer for mass sentiment. And since mass sentiment is what drives both stock prices and fundamentals, it makes sense why so many have viewed the stock market as a leading indicator for the economy, even though they did not necessarily understand why. Today, they were beginning to understand why. Eleanor also determined that the market was fractal in nature long before the famous mathematician Mandelro popularized that view. What this means is that the market structure is variably self similar at all different degrees of trend and Elliot formed that structure into his fivewave construct that we follow today. As you can see, Elliott determined that the market moves in five waves with waves 1, three, and five moving with the trend, waves two, and four being counter trend. If you delve further into waves 1, three, and five, you will see that they are also made up of fivewave structures themselves. And as you move higher or lower in the wave degrees, you'll see that these these similar structures throughout. Again, this is what Elliott meant when he outlined that markets are fractal in nature as they're variably self- similar at all degrees of trend.
Now Elliott also noted that once a fivewave move in public sentiment is completed then it's time for the subconscious sentiment of the public to shift in the opposite direction and simply the natural cycle within the human cycle and not the operative effect of some form of news. We saw this hypothesis supported in the studies I presented earlier. Now, of course, the next question is, well, how do we figure this out in real time? Well, those that have followed our public work over the last 15 years likely would know that we've used this to make some major market calls. For instance, we correctly called for a multi-year rally in the dollar back in 2011 when everyone expected it to crash during the QE and we are seeing the same potential right now in the dollar. We also called for a major top in gold in 2011. While everyone also expected a strong move at that time through 2000. We were able to call the bottom of the ensuing gold correction to the exact day we outlined the bottom in gold at the end of 2015 when it hit a,50. Now, he prepared our clients recently for the top that we recently struck before this major decline we just saw, along with the 47% decline we recently experienced in silver. And in the equity market, our clients have considered two of our most astounding calls occurring at the end of 2019 when we were calling for a 30 to 35% market decline before anyone even heard the word co followed by a major rally to new heights. In fact, this was something that was outlined in my charts for many years before. And we had called the bottom of that market crash at 2200 in the S&P despite seeing the worst of the COVID death numbers and worldwide economic shutdowns occurring as the market was striking its bottom target. So before you view me as a perma bear from what I'm about to say, consider that I was one of the few pounding the table to go long the S&P 500 during the heart of the COVID crisis as we were actually approaching the bottom of that crash.
Now, we've done the same in all the markets and stocks we track and much more often than I'm than what I'm showing you. Alas, we're short on time. Otherwise, I could bore you. Sorry. I mean, I could astound you for hours outlining our calls on market turning points. And while I'm not going to stand here and claim that we're always right, I will note that our clients have tracked us at north of 70% accuracy when making these types of calls.
So, let's look at where I believe we are in the S&P 500, gold, and silver within this psychological market construct. And I'm going to have to move through them pretty quickly because we're short on time, but I'll be going through the detail a little bit more in my presentation later. Now, as you can see, this chart of the S&P 500 over 100 year long chart counts the structure starting from the bottom of the 1929 stock market crash, which ended in 1932. And I view that as the end of a major second wave within Elliot's five-wave construct. Since that time, we have been involved in a multi-deade third wave, which was actually called for by Elliot himself when he published his expectation for a 70-year plus bull market to take hold, a market prognostication he made during the Great Depression. However, now I'm seeing us approaching the conclusion to that 70 plus year third wave. And if you remember, I noted earlier that each of waves 1, three, and five break down into five substruct five wave substructures as well. Now, we're coming to the conclusion of the fifth wave of the of the substructure that completes the third wave which began in 1932. In fact, we're completing the fifth wave within that fifth wave of that major third wave. And when we complete that in the coming year or so, my expectation is that we will likely enter into a 13 to 21-year bare market in a larger degree fourth wave in silver. My primary view is that we've likely struck a major top and potentially enter into a larger correction. While I'm considering an alternative that provides for one more major rally, I'll need to see strong evidence of that take shape. by through a an initial fivewave structure off the low. But my expectation is that the current rise we're seeing right now is likely just going to set up another bout of selling which will probably take us below $60 in silver. Could be potentially in the coming months. My perspective in gold is pretty similar to silver, but in gold, I'm seeing a bit more potential for one more rally before a major top is struck. Again, I'm going to be looking for the same evidence that I just noted about in silver. Now, please do keep in mind that back in 2011, silver topped five months before gold did. So, either we're going to see something similar this year or both have already formed a major top. In fact, as we were rallying into the top struck in the metals, I was telling my clients to sell that I was personally selling into that rally while I bought very large paper positions in metals and mining stocks in the last quarter of 2015. I was selling those positions into the rally. Now, as we rallying into those highs, I basically sold out almost all those paper positions. The only thing I personally hold right now are physical medals which I will never sell and will be leaving with God's help to my children and grandchildren. Now I do want to add that the mining stocks have the best opportunity for another major rally this year. So our focus in the coming months is going to be on that area metals complex for higher probability profitability.
Now before I open the floor to questions hopefully we'll have some time. Now I want to let you know that in my former professional life I was trained as a lawyer. I passed the CPA exam. I was formerly a partner and national director in a major firm. And as such it was understandable that I was formerly an investor who also used to pour over financial statements, economic reports and and go through the news, you know, to make investing decisions like almost everybody sitting here. But when I was convert when I when I discovered Elliot wave analysis, I really was converted when I learned the power of it. And I'll also tell you that I have over 8,000 clients worldwide with approximately a thousand of them money managers, some of which are managing in the billions of dollars who have said the same. So I want to thank you for listening to my presentation. Now if we have time to open the floor some questions, I'd be glad to take some questions. But before we start the questions, I just want to let you know I'll be giving another presentation later today. I'll be going into a little bit more detail about how I come through this analysis, how we apply the analysis, and our expectations. So if anybody has any questions, I'm more than happy to take some.
>> The one right in the middle there.
>> Yes, sir.
>> Okay. 13 21 years. Can you give me a number just a ballpark? Where will the When this thing ends,
>> I will tell you that my expectation is we will return to the region from which we began the rally after co. So my expectation is we will minimally be getting back down into the 2000 region. Um, while I know that seems very hard to prove, I will tell you that I did this exact same thing number of years ago when I was standing up on a stage and I was telling people, you know, in 2011, gold was about to hit a top. Even though it was rallying parabolically at the time, gold was rallying and everybody was expecting it to go over 2,000. I said, "No, gold is not going to go to 2,000. It'll probably approach 1,000 first before it goes over 2,000." And people there thought I was crazy as well. This may sound like a crazy prognostication, but based upon the theoretical underpinnings of the methodology we use, the target that it identifies is at least the 2000.
>> Yes, sir.
>> You're going to have to speak up.
>> If you guys want to come to the mics, it may be easier. Unfortunately, unfortunately, it appears that uh all if not most of the uh fiat currencies in the world are being uh purposely uh destroyed and that they'll ultimately will approach zero. Does this affect your uh Elliot wave and the in the values of gold and silver and the stock market moving forward?
>> I'm not sure I understand that.
>> Okay. Well, with the uh all the fiat currencies of the world uh being based upon more and more debt. It appears that the countries are devaluing their currency ultimately creating uh inflation which would drive up the price of metals stock market perhaps.
>> Basically you're viewing markets as they seem to present today. um market analysis at least good market analysis does not is not supposed to look at markets linearly. So whereas most people view inflation as the problem today my expectation is we are going to transition to a period of time in the not too you know not too distant future where deflation will start rearing its ugly head. So yes today inflation looks like the issue and that's starting to come under control. Ultimately, I believe we will be transitioning to a point of deflation.
>> Yes, sir.
>> Last question.
>> You talked you talked about silver being five months ahead of gold. Do you have anything that gold would be ahead of the S&P before it started to maybe
>> my my my reasoning for pointing out that silver was ahead of gold or top ahead of gold in 2011 not necessarily to say that it gave us the indication of something rather it just historically that was something we saw. Could we see something the same today? I'm not sure. I'm an analyst. I'm not a prophet. I say that all the time. I'm an analyst. I'm not a prophet. What I can tell you is it's not inconceivable to see silver pop before gold. That's really the point I was making. Um, it's not that gold and silver will be running together. Gold and and the market will be running opposite. Too many people believe that gold is a safe haven for the S&P 500 or for the market volatility. But if you look at history, that's absolutely false. It's an absolute fallacy. Um, if you look at, for example, 2008 time frame, 2009 time frame. Gold dropped 33% alongside the S&P 500 decline. Wasn't exactly the safe haven everybody was expecting it to be. So, we look at each chart on its own, each asset class on its own, and identify where we believe we're looking for each asset class specifically. really doesn't make a difference to us what others are doing. So, thank you. Thank you all very much.