Wednesday, February 3, 2016

Europe: Why It's Going to Get a Lot Worse Before It Gets Better

(Interview) Europe: Why It's Going to Get a Lot Worse Before It Gets Better

New interview with our European markets expert

By Elliott Wave International

Brian Whitmer, the editor of our monthly European Financial Forecast, explains what indicators helped him anticipate market volatility.

You'll also learn what he's expecting for the year ahead in European stocks.

You can read Brian's commentary comparing Germany to the Greek god Atlas as part of our report, Deflation and the Devaluation Derby.

Here's what you will learn:

  • How Europe's biggest economies are screeching to a halt
  • Currency devaluation's role in the developing global crisis
  • How the self-reinforcing aspect of deflation is already apparent in commodities trading
  • Why the top 1% of earners are in for a rude awakening
  • The hair-raising future for U.S. stocks

Just recall how swiftly the 2007-2009 financial crisis unfolded. We anticipate that the next global financial crisis could be even more sudden and severe.

Prepare now with our new report, Deflation and the Devaluation Derby.


This article was syndicated by Elliott Wave International and was originally published under the headline (Interview, 4:32 min.) Europe: Why It's Going to Get a Lot Worse Before It Gets Better. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Monday, January 18, 2016

Socionomic Trendspotting for 2016

2016 is already shaping up to be quite a show. Let's pick out some of the major themes which have been developing and see what socionomics has to tell us about them.

Nuclear Testing

Socionomics has long looked to nuclear weapons tests as a marker for social mood. It is my opinion that they are even more important as a mood marker now than in the past, as the major proof-of-principle and development tests have been completed for a variety of weapons systems by the major nuclear powers. Any full-blown nuclear tests by an established nuclear power would be part of a larger geopolitical struggle or messaging than a strictly technical test.

Other powers seeking nuclear weapons might be expected to continue limited testing. What's quite interesting is that North Korea led the year off with the detonation of what they claimed was a hydrogen bomb at their test facility at Punggye-ri (sometimes referred to as P'unggye-yok).
First, a quick detour. Their claims that they set off a hydrogen bomb have largely been derided. It is almost certain they did detonate a nuclear weapon of some sort. I find it highly unlikely they have been able to construct a classic hydrogen bomb due to issues of complexity as well as the need for specialty items and substances required to make such a device work.

That said, it is plausible that North Korea did test a device that utilized fusion as part of a primarily fission weapon. This is known as a "boosted weapon" and in short, it means a nuclear warhead based on fission (much like the weapons detonated at Hiroshima and Nagasaki), but laced with materials which, when subjected to the intense energy of a nuclear explosion, also fuse, adding even more power to the blast.

Details aside, what I wish to draw your attention to is the use of nuclear tests as socionomic markers. I propose you keep the following list of what I regard as ranking potential nuclear tests in mind as we navigate 2016:

Baby Bear

North Korean nuclear tests do correlate with other negative mood indicators, but in my opinion should not be solely relied upon. North Korea has other factors it is dealing with - including a still relatively new leader as well as tensions with not only the US and South Korea, but China, Russia, and Japan. A one-off nuclear test of North Korea should be noted, but such an event does not necessarily correlate with intense levels of negative mood outside of the region.

Momma Bear

The next level up in concern would be any test or tests by Pakistan or India. These are regional rivals who have fought a number of wars since the middle of the last century. A weapons test by one, the other, or both, should be noted with alarm and taken in the context of any other geopolitical situations. These would be, in my opinion, markers of not only regional negative mood, but potentially a negative mood marker for the larger world system.

Poppa Bear

The last time Russia tested a nuclear weapon was 1990, when it was still part of the Soviet Union. The last US test was in 1992. The last UK test was 1991, and China and France conducted their last tests in 1996.

Were one or more of the Big 5 to test a nuclear weapon I would regard this as an intensely negative mood marker. As stated earlier, while there are plenty of engineers and physicists in these countries' weapons programs who want to test to confirm the weapons would still behave as expected, political considerations to refrain from testing overwhelm this desire - currently.

Should a country such as Russia conduct an underground test, consider it not only a "message" to the West, but as a flashing negative socionomic indicator.

Charts to Watch

SASEIDX - Bloomberg
Check the Saudi index every week. I cannot stress this enough. Should the House of Saud go the way of the Bourbons, then the conflict we see in Syria will be little more than a warm-up for the slaughter to come. 


Donald Trump’s presidential campaign continues to burn hotly on socionomic fuel. The Donald’s popularity looks to me far more akin to that of a rock star than a traditional political candidate.
What he does have on his side is a large wave of anger and revulsion for the political process as it has metastasized to date. Bernie Sanders has a similar wave of disillusionment and anger pushing his campaign from the Democratic side.

How will it play out? Trump himself could act as a primary marker of social mood over the course of the year. If we see a further deepening of negative sentiment, he might actually attain the White House. Should the waves have another run towards the positive, then he should flicker and die out, another negative mood structure shown to have foundations build on sand when the positive tide moves in.

I want to especially emphasize the first point above. For all the vaporing over Trump, should he actually be elected, what could he possibly accomplish? He has no party (the Republican Party elders would be reluctant in the extreme to allow anything constructive to happen under his watch – just to show the little people the folly of not voting for a proper Establishment figure if nothing else). He has no theory or mechanism to inspire, past his celebrity. For all those comparing Trump to Hitler, recall the National Socialists had a deep and disciplined party structure built over a decade. They built up an ideology that German universities accepted, like shooting an infectious disease into their veins. There was a deep base from which Hitler could draw. Not so much for Trump. Treat him as a marker. Granted, should he actually be elected and survive to take office, we could see a level of dysfunction that would make the 1850’s look like a time of blessed harmony.

Another issue that bears watching is the Bundy militia occupation of a federal wildlife refuge. Right now it is mostly being played for laughs or indignation by the main information channels in the U.S. Again, social mood will dictate whether this is an incident around which a lot of anger out West over federal ownership and authority over vast areas of those states turns into a movement, or whether it fades away. And before you dismiss it as another Clown Shown to distract everyone, let’s recall another armed action against a federal facility, taken in an era of intense political polarization, and meant to ignite a conflict – John Brown’s Raid on Harper’s Ferry. It “worked” in the sense that not long after, the U.S. entered into a period of bloodshed so vast that it took a World War to exceed its death toll.

And a final issue you might see thrust back into the limelight with the coming of spring – and a downdraft in mood – could be another wave of unrest on various college campuses. I have a lot of opinions here, having been at ground zero for one of the more well-publicized events this past fall. We’ll see how things work out. One thing I will point out regarding the campus protests you saw – they are in some ways an example of what a strong set of theories and an entrenched “machine” made up of like-minded people can do. Note that you have seen men and women in positions of authority calling for the evisceration of the First Amendment – and not one of them has suffered a single penalty, while their targets have been forced into silence or to resign.


This is a theme I am quite intrigued by and expect to see gain tremendous traction this year. In a way, it is unfolding in a manner that rhymes with the clashes of the 1930’s between fascism and communism across Europe.

As in the 1930’s watch Spain. If you are someone pushing for independence for a region or a peoples – whether it be Scotland or Texas, Wallonia or Biafra, I expect you already have your plane tickets booked for Catalonia.

Where this goes will be interesting to say the least. Should negative mood rip the last shreds of legitimacy from the old powers that be in 2016, we all need to keep our heads and see where the waves are rushing – either to move safely with the tide, or attempt to move to safety in order to avoid being engulfed…

Thursday, December 31, 2015

Pulling Another Brick from the Wall

Wall Collapse
The little things build up.

We've had a year in the United States where the fabric of civil society continued to unravel in many public ways. Much of the expressions of this unraveling continued to match up with how socionomics describes negative mood eras. From campus protests, to the Black Lives Matter movement, to a deepening divide among partisans of the two main political parties, to the Donald Trump phenomenon - it looked and sounded like a country in the grip of negative mood. The DJIA managed to start the year at around 17,800 and finish around 17,500, and though that change doesn't look like much, it encompassed a year where we swung from 18,351 to 15,651 and back again.

While I'll save my projections for 2016 for a later post, I did want to draw your attention to an issue that is getting some press and which I think matters deeply for reasons beyond the headlines. I want you to think a bit about the fact that the United States is on the cusp of withdrawing recognition of the identification documents issued by a handful of states which make up the Union.

As Ars Tehcnica put it:
TSA may soon stop accepting drivers’ licenses from nine states

The citizens of several US states may soon find that they can't use their drivers' licenses to get into federal facilities or even board planes.

Enforcement of a 2005 federal law that sets identification standards, known as "Real ID," has been long-delayed. But now Department of Homeland Security officials say enforcement is imminent. The "Real ID" law requires states to implement certain security features before they issue IDs and verify the legal residency of anyone to whom they issue an ID card. The statute is in part a response to the suggestion of the 9/11 Commission, which noted that four of the 19 hijackers used state-issued ID cards to board planes...
...The law was originally scheduled to go into effect in 2008 but was subject to repeated delays. In recent months, DHS has been telling states those delays are over and that the law will be implemented in 2016. However, any restrictions on air travel won't go into place without at least 120 days' notice, and no state has received such a notice yet. In several states, however, restrictions on entering federal buildings could kick in as early as January 10...
The latest list (as of 31 December 2015) from the DHS has the following states shown as non-compliant and subject to enforcement as of January 10, 2016:
  • Illinois
  • Missouri
  • New Mexico
  • Washington
Many articles address the initial concerns for people who hold ID cards from these states. The main issue on most people's minds is that they won't be able to be used as an ID to get past TSA for air travel. It also means they won't be able to get into federal facilities using their valid driver's license to boot.

We'll see how it works out in practice, but let's also think beyond the hassle factor and the clown show way popular media will deal with it (on the one hand, crazy state level conspiracy nuts won't abide by a sane law passed for our own good - on the other hand, this is yet another federal overreach and unfunded mandate put to the states with no real positive outcome other than an expansion of Big Guvmint). Socionomics tells us to expect anger and separatism in negative mood eras. Now imagine setting up lines at airports where Americans from non-compliant states need a passport to travel internally (via airlines) or are treated for all intents and purposes as foreign nationals before they can visit federal facilities. How is that going to play? Some of us with day jobs in one of the non-compliant states listed above who have to travel to D.C. on occasion to work with regulators are wondering just how we are supposed to meet with the feds if we can't get in the front door.

Would this include Congress? By that I mean not only will Congressional members have to use passports to travel, but what about citizens who want to visit their representatives? What about other facilities which are federally regulated such a nuclear power plants? How might this affect interacting with the IRS?

Add this issue to the various marijuana legalization and state-level gun law movements which smack of nullification (as we discussed last month) and we are pulling at yet another thread of our national fabric and setting up another psychological break between the states and the central government in D.C.

More to come on this issue, I am sure.

I wish you all a very Happy New Year. Keep your eyes open and your powder dry.

Thursday, December 17, 2015

Risk ON? Risk OFF?

While I am still cooking some longer posts that will go in-depth on some of the macro-level issues that a negative Socionomic mood era can produce, I'd like to share the following from EWI.

As usual, I regard a lot of what they produce as not only interesting, but actionable.

- - -

Here is the opening paragraph of the just-published, subscriber-level report from our friends at Elliott Wave International, the world's largest independent financial forecasting firm.
[We have] been tracking a steady global shift to greater financial conservatism over the last 18 months. As we noted in October, the long duration of the transition from a "risk on" to a "risk off" attitude suggests that the next decline will "go deeper and last longer than that of 2007-2009," which was the biggest bear market since the Great Depression. The relationship between the MSCI Emerging Markets Index and the MSCI World Index on this chart shows a trend away from risk that will gradually ...
Now, I'm sorry, but I have to cut it off there, because the next part shares EWI's big-picture forecast, typically reserved for paying subscribers (but we have arranged for you for free at this link).
EWI's subscribers pay $59 per month to read insights like these and others, so they would string me up if I copied and pasted them right here into this email. But for the next week only, you can read their urgent new report in full, 100% free. It will be on your screen in about one minute.

Follow this link to unlock the rest of this report now -- free this week only >>

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

Friday, December 11, 2015

Nuclear Strike of the Month (December 2015): Target Dabiq

Daesh and the Apocalyptic Battle at Dabiq

Note on the Nuclear Strike of the Month Series: In this series I want to illustrate various ways attacks using nuclear weapons can play out.  I will be using Dr. Alex Wellerstein's online NUKEMAP tool to generate the estimates of the blast and follow-on effects and we'll be turning to concepts found in Nuclear Emergencies to help evaluate consequences.

My rationale is to show a wide range of nuclear attack scenarios short of all-out thermonuclear war. The idea is to give readers a feel for the destructive power of nuclear weapons, provide scenarios as thought experiments for your own planning, and to discuss what nuclear weapons can and (sometimes more importantly) what nuclear weapons can't do.

For a variety of reasons, it is my opinion we will see nuclear weapons used in warfare sometime between now and 2030. We might as well brush up on the basics. 

Nuclear Strike of the Month:  Dabiq

This scenario takes Daesh at its word and envisions a battle centering on the town of Dabiq. In this scenario, Daesh forces have assembled in the area for a major showdown with the forces of "Rome".  In this instance, one or more of the nuclear powers involved in the conflict in "Syria" and "Iraq" come to the conclusion that detonating a nuclear warhead over the site is warranted.

In this scenario we are making an assumption that the various players in the multi-sided conflict in "Syria" and "Iraq" actually want to see Daesh defeated, or at least the nuclear powers have decided it is time.

The Scenario

After taking Aleppo, Russian and Syrian forces loyal to Assad shifted focus to the south, rolling up various groups while holding a line extending to Raqqa. A new U.S. administration backs away from its support for the proposed Qatari pipeline through Syria and begins aiding Iraqi and Iranian-backed forces in Iraq substantially as well as coordinating closely with Russian forces, leading to a slaughter in Ramadi and a bloodbath in Mosul, which puts Daesh on the run.

The roll-up of Daesh continued up and until the fall of Raqqa. Where an historic photo captures a U.S. Special Forces officer shaking hands with a Russian Spetznas officer over the dead body of an ISIS commander. 

Daesh forces retreat for a death-or-glory battle in Dabiq. In addition, sleeper cells in Russia, the U.S., the U.K., and France, conduct a series of near-simultaneous terrorist strikes against soft targets. Shopping malls, football stadiums, markets, and tourist hotels are targeted. The deaths number in the thousands.

The Attack 

After joint consultation between the leaders of the four countries, including observers from China and India, the United States launches an SLBM armed with a W88 warhead and detonates it over Dabiq.

Air Burst Over Dabiq

Not much to see in terms of this kind of attack modeling. The destruction would be vast. An air burst would allow for forces to move in post-detonation, though one would expect to give it a week or so just to minimize contamination.

For an alternative view, here is what the detonation footprint and fallout pattern look like for a ground burst:
Ground Burst at Dabiq

Ground Burst at Dabiq, regional view
As a ground burst would foul the headwaters of the Euphrates as well as deposit radionuclides in lakes and reservoirs Turkey depends upon, one would need to be very angry with Turkey (and Iraq to a degree) to contemplate a ground burst here. 

The Aftermath

I'll let you think about what an attack on what, to some of the Salafists, is the equivalent of Megiddo (that is, Armageddon) in their world view. The potential blowback in places like Saudi Arabia or Turkey could be immense.

Thoughts and Plans

My thoughts on this one are that while we continue to regard the use of nuclear weapons against a non-nuclear opponent as unlikely, I wish to continue to remind you that when we make these historical phase changes - the U.S. in 1860, Europe in 1939, the USSR in 1991 - the "rules" the various elites have fashioned to help control situations in the old order go out the window.

There is another thought for you to ponder as well, and that is, as we've seen over the course of the Nuclear Strike of the Month series this year, nuclear weapons are extremely blunt instruments. The damage and slaughter they can do is immense, but there are many other factors in fighting a war than body counts.

NOTE: This is the final installment in the Nuclear Strike of the Month series. While I do expect to continue to blog on this topic, we have covered plenty of ground over the past year in terms of scenarios. Future work is expected to drill more deeply into specifics of handling a post-nuclear war environment or analyzing current events which might lead to an exchange.

Clown Show Disclaimer 

Due to the subject matter of this post, it will be necessary to provide the following disclaimer. Blog posts like this tend to bring out comment trolls ready to gin up the Clown Show of name-calling, knee-jerk willful misinterpretation, and angry discourse generating much sound and fury, but which in the end, signifies nothing. Such comments will be deleted. 

I am not promoting nuclear war. I am not attempting to wish such an attack upon any population anywhere.  I am attempting to provide a plausible scenario which might lead to the use of nuclear weapons. My expectation is that you will use this scenario to war game whatever plans you may be putting into place to deal with this new era we find ourselves in and see if you are as ready as you hope.

Tuesday, November 24, 2015

Poking the Bear
Russian Plane Shot Down by Turkish F-16s

As I am sure any reader of FutureJacked is already well aware of, Turkish F-16s have shot down a Russian Su-24 fighter jet. They claim the Russian jet invaded Turkish airspace. The Russians disagree.

Take this opportunity to recall historical moments have a way of snowballing out of control during negative mood eras. The power play going on in Syria and Iraq has pulled in every major power on the planet except India.

Take time out to review your situation. If war - real war - comes, expect to see strict capital controls, a lockdown on social media and internet platforms, dislocations across all sorts of economic and service sectors (especially if China decided to halt certain exports, say of rare earths and other key components to the West), a potential spike in oil if critical refineries and transport nodes in the Middle East were hit.

Should this really mark the beginning of a downward spiral to a nuclear exchange, take time to review the Nuclear Strike of the Month series and wargame your current preparations.

While I'm not convinced this is the trigger to a global war, history can move at absurd speed when the proper conditions are in place.

Be prepared, friends. If you aren't prepared - get there.

Monday, November 16, 2015

Automation, Jobs, and What Comes Next

In my recent post, Your Greatest Enemy, I emphasized the idea that as our current system continues to fly apart, being able to think creatively about how to handle this new environment will be critical. In that spirit, give a listen to Charles Hugh Smith and Chris Martenson in this excellent talk about automation, jobs, finance, and how might we go about building a new system of work, community, and governance - or at least thinking about it - before the final implosion hits us.