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Ar mst r ong Economi cs

Willthe DowReach

30,000by 2015?

2007.15

Copyr i ght Mar t i n A. Ar mst r ong A l l Ri ght s Reser ved August 14th,2009

Comments Wel come: Armst rongEconomi cs@GMai l COM ( I nt e r na t i ona l l y )

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A C K N O W L E D G E M E N T S

I would l i k e to thank themany people who have

been w r i t i n g from around the world. I t i s encouraging

to know t h a t the re are somany people who ar e i n t e r e s t e d

i n unco verin g the t r u t h . I have a l s o s p e c i a l thanks for

somany p r o v i d i n g valuable i n s i g h t i n t o trends around

the world from China, S o v i e t Republics, South A f r i c a ,B r a z i l , A u s t r a l i a n , and I n d i a . I b e l i e v e we can s u r v i v e

the f o l l y of governments even i f they ref use to l i s t e n .

The key i s und ers tan din g the nature of eve nts , and that

allows us to c o r r e c t l y make the d e c i s i o n t o be on the

opposite s i d e .

I would l i k e to a l s o thank a l l my o l d f r i e n d and

former c l i e n t s for t h e i r support and toknow t h a t they

have continued to gather informationt h a t serves us a l l

i n times of c r i s i s .

We are standing on the p r e c i p i c e of a new era i n

global-social-economics. How we en ter t h i s new age i s

of c r i t i c a l importance. Government i s in ca pa ble to doing

anything for any reform, of i t s own abuse of power i s not

up f o r n e g o t i a t i o n . We must weather the storm, and to do

so we need to understand i t s nature. J u s t as the 1930s

Great Depr ess ion set in motion profound changes t h a t were

even manifest i n g e o p o l i t i c a l c o n f r o n t a t i o n s , we have now

reached such a cr oss ro ads . A debt c r i s i s has i t st e n t a c l e s

deeply embedded i n t o every s e c t o r r i g h t i n t o government.

T h i s i s the d i s t i n c t i o n from a mere stock market crash that

never a l t e r s the economy long-term. We are s e r i o u s l y s t i l l

over-leveraged and somebanks are s t i l l t r y i n g to be hedge

funds and have t o specul ate tomakea p r o f i t . That i s a key

warning s i g n t h a t theworse i s yet to come.

Comments, Suggestions & Questions

Pleasemail to:

Ma r t i n A. Ar ms t r o ngFCI F o r t Di x Camp, #12518- 050PO Box 2000F o r t Di x, NJ 08640

PLEASE REGI STER YOUREMAI LADDRESSFOR FUTUREUPDATEDNEWSCRI TI CAL TO OUR SURVI VAL

Ar mst r ongE cor j Cf Di c s Gf e i l . COM

Copyri ght , Ma r t i n A. Amt st xong, a l l r i gh t s r e se rved .

ThisReport may be forwarded as you l i k e without charge to individuals orgovernmentsaround the

world. It is provided as a PublicService at thistime without cost because of the c r i t i c a l racts

that MISnow faced economically. The contents and designs of thesystemsare infactcopyrighted.

At afuturedate, a new editionof the 1986 The GreatestBull Market InHistory will be released

and a new book'w i l l soon be published on themodel itself - TheGeometryofTime.It isvital that

biedo not forget this is a worldeconomy and the arrogance that any nation can dictateto the world

is just insanity. Every nationeffects a l lothers no different than if one nationwereto pour a l l

i t s toxicwasteintothe ocean. Everything isinterlinked and solutionsare never isolated events.

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Our c yc l i c a l j o ur ney t hrough t i me has gi ven us an exp l anat i on t hat t heEconomicConfidence Model i s a g l o ba l model and what peaks p r e c i s e l y wi t hi t i swhat one cou l d c a l l t he "hot money. " I n r e a l i t i t y , t h i s i s t he

. c o nc e nt r a t i o n o f c a p i t a l i n t o a pa r t i c ul a r na t i o n, s e ct o r , and even down i n t o t he i ndi v i dua l l e v e l . The Ma r x i s t s a r e t a r g et i n g t he " r i c h" andknow no t what t h ey ar e doi ng. I t i s l i k e d i s c o v er i n g t her e i s a noi s e i nyour c he s t ( t he beat o f your he ar t ) and t hey t h i n k i t s ho ul d be s i l e n t .

A par t i c ul a r s e c t o r becomes a t t r ac t i v e t o c ap i t a l . I t ac t s l i k e a magnet dr awi ng i ti n f r om ar ound t he wor l d . As t h i s s e c t o r becomes t he f ocus o f t he c a p i t a l c on ce nt r a t i o nwe end up wi t h t he r e s ul t of booms and bus t s as we l l as pr ogr e ss and i nnovat i on . Th i si s the ve ry essence o f economi c l i f e . Y et a t t he same t i me, t her e i s t h i s c ons tan to s c i l l a t i o n bet weenPublic and PrivateConfidence. T hi s i s d es c r i be d i n t i mes o feconomi c c r i s i s as t he "flig ht to quality" but we must r es pec t , i t i s not a one- ways t r e e t . When c a pi t a l becomes f r i ght ened a f t e r a s pe cul a t i v e bubbl e i n t he p r i v at es e c t o r , i t r ushes t o t he pu bl i c s e ct o r bonds. But when t he s our c e o f t h at de c l i n e i nconfidence l i e s wi t h i n t he publicsector, then t he c ap i t a l f l o w i s r ev er s edand t he "flight toquality" i s t he t a ngi b l e as s et s i n t h e p r i v a t e wor l d. What we ar el ook i ng a t i s a c ol l a ps e i nPublicConfidence t ha t i s goi ng t o ma t e r i a l i z e i nt o anew "bullmarket" t ha t wi l l see t he Dow J ones I ndus t r i a l s r i s e t o per haps even t he30, 000 l e ve l g oi ng i n t o Oct ober 1s t , 2015.

Now l e t us t ake t h i s t o t he next l e v el .As I have p r e v i o us l y ex pl a i ned, each andevery mar ket has i t s own d i s t i n c t and ve r yuni que c y c l i c a l f r equency. So what does notpeak wi t h t he Economi c Conf i dence Model wi l lf o l l o w t he beat o f i t s own drums.

Ne ve r t he l e s s , each i nd i v i dua l mar ketwi l l a l s o d i s p l a y an und er l y i n g c ur r entwi t h i n. J us t l i k e t he wat er a t t h e beachwhere t he ener gy f l owi ng through t he wat erc r e a t i ng t he c y c l i c a l wave mot i on may bemovi ng eas t t o west , t her e i s s t i l l t h e c u r r e nt wi t h i n t h e wat er t ha t may be movi ngn or t h t o s o ut h. These t wo a c t i o n s a r e i nf a c t movi ng at 90 ang l es t o each o t h e r .

The one r u l e t o al ways r emember , what h ol dst r ue i n t h e p hy s i c a l wo r l d must ho l d t r ue i nt he wo r l d o f huma n- i nt e r a c t i o n t h a t i s o urs oc i a l - pol i t i c al - ec onomy . The l aws o f t hes c i e nc e o f phy s i c s a pp l i e s t o a l l t hi ngsi nc l udi ng how we even i n t e r a c t wi t h eacho t h e r .

Thi s I s a l s o t he Gr and Un i f i e d Theor yof a l l c y c l i c a l movement . I t i s t h e ver yessence of how ener gy i t s e l f i s t r a ns por t edand t r ans f o rme d. As i t moves t hrough s o c i e t yc r e a t i ng booms and bus t s , a l l we can do i sunder st and how, why, and when such movement swi l l t a ke p l a c e.

I have e xp l a i n ed t h e v o l a t i l i t y c y c l eof 72 year s . The samenumber s wi l l r eappeart i me and t i me agai n a t a l l d i f f e r ent l ev e l s

i n o ur o bs e r v a t i o n. I f we t a ke 8. 6 mont hsand d i v i de t ha t by 12 mont hs t o o bt a i n t heper cent age t h i s r epr esent s of one year , weend up aga i n wi t h 72% ( r ounded) .

What I am about t o i l l u s t r a t e i s t hatt h e p r o o f o f t h i s 8. 615 c y c l i c a l f r equencyt h a t whenmeasur ed i n y ea r s equa l s P i ( 3. 14t i mes 1, 000 i n days, i s t hat i t appear s i nev er y t h i ng ar ound us evenwhen we may no tbe l o ok i n g f o r i t . T hi s pr oves i t s f r a c t a lnatu re , and t hus i t i s t he key t o a l l c yc l e

1

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EconomicConfidenceModelGopy / f f l / f / B y Ma r t i n A.A r m s t r o n g !

Si x Waves, of Ml -Gyr.cun-Mne l o fo rm

~The: S-Jfiyr Wave""breaks/down'Into 3. individual :"alloir-latin;} waves .iwiilva l im i ; d u ra t i o n of z.15an d l.tJ/5 y e a r p e r i o d s .Jbr'

:

:tV.1 eg.-. WeV refe.r''.!*;:the se - as - Ta-:?long"f and" s h o r t " l egs -

Furt her pr oof t hat t her e i s a hi ddenwor l d of t i me i s a l so demonst r at ed by t hef a c t t ha t we saw a 17. 2 mont h dec l i ne i ni n t e r e s t r a t e s f r o m t he J une 2007 hi gh.What we have i s t he same f r equency showi ngup i n d i f f e r e nt medi ums t hat possess t h e i rown uni que f r equenc i es i n nor mal t i mes .

The emer gence of t he 8.6 f r equency i na wi de v ar i e t y of medi ums i s i nd i c at i v e ofmaj or event s . L i ke t he ocean, t here are j us tper i ods wher e t he wi nd i s cal m and t he wavesi n t he wat er al most do not e x i s t . T hi s i swhen t he cur r ent wi t h i n t he wat er becomest he domi nat e mover and shaker .

Ther e i s a c yc l e t o ev er y t h i ng r i gh tdown t o your moods. Whenwe l ook out at t hewor l d, what we see i s a compl ex i nt er ac t i ono f f or c es t hat ar e c l a s hi n g l i k e t i t o ns ofo l d . Per haps t he Gr eeks a s c r i be d t o gods

t hese f or ces t hey obser ved and a t t r i but edt hem t o ac t i ons o f bei ngs .

We ar e deal i ng wi t h t he compl exi t y ofl i f e i t s e l f . Dar wi n observed f r o m hi s ownempi r i c al ex pl or a t i o n, t hat emer ged i n t ohi s t heor y o f ev ol u t i on. Today, we havedi s c o ve r e dwhat he c ou l d not see - DNA. Wecan now t ake t ha t DNA code and t r ack t hes i mi l a r i t i e s and evol ut i on. Those who onl ysee e v i l i n such t hi ngs as bei ng cont r ar y t or e l i g i o n and t he Bi b l e , over l ook a si mpl ef a c t . Thi s i swhat can be pr oven. I t does

not mean t hat God di d not deci de t o t ake amonkeyand t r ans f or m hi m i n t o a man. The t wop o s s i b i l i t i e s cannot be mutual l y exc l us i vei ns of ar as s ci ence and r e l i g i o n .

I f DNA i s t he bl uepr i nt on how t omakecopi es of a speci es t o perpet uate l i f e i t s e l fi n a l l f orms, t hen per haps cyc l es are t hee qui v al e nt DNA i n how a l l l i f e i nt e r a c t s .Movi ng f r o m one l e ve l i n t i me t o t he nexti s mappi ng a f r a c t a l wor l d of compl exi t y .

What I hope t o r eveal i s a dynami c andnew wor l d of i nt e r a c t i on . I f we can cl i mb t h i sexchel on of compl exi t y, we can reach a newunder st andi ng and pr ogr ess beyond t he wor l do f b i as and pr e j udi ce not t o ment i on t hemanys upe r s t i t i ons .

I f we can under st and t he wor l d of compl e

i n t er a c t i on , we wi l l end t he wi t ch- hunt s andst op t he quest t o bl ame someone f or what ourown gover nment does every t i me - dest or y ourf u t u r e by s e l f - i n t e r es t , c o r r upt i on, and f earof a l os s of power .

I f we ex i st edwhen t he di nosaur s r anar ound, no doubt we woul d be bl ami ng t hat onsomeone a l s o. We t r y t o pr et end we can eveni d e n t i f y a s i ngl e sour ce and t hen t e l l t hewor l d we have c r i mi na l l y t hr own t hem i n j a i land t he economy i s back t o nor mal . Nonsense!

We ar e e i t her goi ng t o graduat e t o t henext l e ve l of exi st ence or we wi l l s t ay i nour p r i mi t i v e pr i mo r d i a l ways o f bl ami ng a l levent s on man as i f we have t he power t o i nf a c t move the wor l d l i k e t he Gr eeks bel i evedi n t h e i r gods wer e mi schi evous cr eat ur es who

j u s t enj oyed mess i ng wi t h t he pl ans of men.Today, we pr osecut e ever yone and conj ur e upwi l d t heor i es t o make i t sound good t hat areno mor e t r u t h f u l , t han anyone e l s e i n t h i spr i mi t i v e pr i mo r d i a l h i s t o r i c a l s t a t e . J us tas t heCommodi t y Fut ur es Tradi ng Commi ssi onaccused me of mani pul at i ng t he wor l d economy,

t h i s i l l u s t r a t e s my po i nt . We mi ght as we l ls t i l l be s ac r i f i c i n g v i r g i ns and pr ayi ng t oNeptune t o make t he waves s mal l er .

We cannot r i s e t o t he next l e ve l u n t i lwe abandon t hese st upi d pr esumpt i ons. We canno mor e c o n t r o l t he worl d economy even as anat i o n, t han we can t he weat her . The systemi s so compl ex, we cannot see i f we r ef use t oopen our eyes. Ther e i s a dynami c wor l dwai t i ng f or us i f we s t op t he arr ogancet h a t we ar e as al mi ght y as t he Gr eek gods.

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CapitalFlow

I t i s c l e ar t hat t he economy peaked i nFebruary 2007 wi t h t he Economi c Conf i denceModel f o r t hat i swher e t he housi ng mar keti ndexes r eached t h e i r z e n i t h . The s t o c kmar ket crashed b r i e f l y p r e c i s e l y t o t he day o f

t he model , but t hen r a l l i e d l a t e r i n t heyear showi ng t h at t he c o nc e nt r a t i o n o f t hec ap i t a l was s q ua r e l y wi t h i n t h e debt mar ket sand not s t ocks .

I nt er e s t r a t es r o s e i n t o J une showi ngt he hi dden cor e was a debt pr obl em. Thi s wast he f i r s t r e s u l t of t he February h i g h i n t heeconomy wi t h t he model . As debt pr obl emsbegan t o emer ge, t h i s s i g na l l e d t hat t her ewas t r oubl e l y i n g beneat h t h e s u r f a c e. Manyneeded cash and t h i s s t a r t e d t o f o r c e r a t e shi gher i n t o J une g i v en a c l e a r war ni ng o f

what was t o come.

The Dow J ones I nd u s t r i a l s r a l l i e d i n t oOct ober 11t h, 2007 bef or e r eac hi ng i t s hi gh.Keep i n mi nd, t h a t s t oc k s have i n nor malc ondi t i ons been t he compet i ng i nvest ment f o rf i x ed i ncome. Th er e f o r e , cash wi l l a t f i r s tf l e e f r o m debt t o s t ocks and t h i s t hen hadc r e a t e d t h e next r e s ul t - t he Dow peak.

Un f o r t u na t e l y , t he ma j o r i t y do not evenunder st and t h a t c a p i t a l f l ows , no l es s how.

The f l ow of c ap i t a l can be t r acked t hr ough

out t i me and j u s t as i t c onc ent r at es i n t oone sec t or and nat i on , we must under st andwhat happenswhen t h at c onc ent r at i o n begi nst o r ev er s e . The r i s e i n s t o c ks a f t e r t heeconomy peaked i s a nor mal r e s u l t o f how t h ec ap i t a l f l ows l i k e wat er t hrough our s o c i a lpo l i t i c i a l - ec ono my . The f i r s t r eac t i on i st o f l e e f i x ed i ncome and move t o equi t y .

Thi s i s t he t y pi c a l f l o w o f c ap i t a l i n adebt c r i s i s . I t i s r e ver s ed i n a s pe cul a t i v ebubbl e i n s t o ck s wher e c a pi t a l f l e e s t o t h ebonds.

I l l u s t r a t e d above i s an o v er l a y o f t heEconomi c Conf i dence Model wi t h behi nd i t wef i n d t he two i nd i v i dua l mar ket s o f e qu i t yand i n t e r e s t r a t e s . Not e ve r y t h i ng peaks a tt he same t i me . For every a c t i o n i n t he f i r s tgl o ba l model , t h e r e becomes an equal andoppos i t e r e ac t i o n t hat r i p pl e sdown t he l i n e

The peak i n t he housi ng mar ket , s et i nmot i on a c ont r ac t i o n i n c a pi t a l t h a t causedt he r a l l y i n i n t e r e s t r a t es i n t o J une 2007,t hat was t hen f o l l o we d by t he i n i t i a l rushf r o m f i x e d i ncome t o equi t y c r ea t i ng t he newDow hi ghs i n Oct ober 2007.

The l ow i n i n t e r e s t r at es t hus t ookp l a c e i n 17. 2 mont hs (2 x 8.6 mont hs) f r o mt he J une h i gh of 2007. As t he f l i g h t t o soc al l e d qu a l i t yended, t he next t o bottom i nMar ch was t he equ i t y mar ket 17. 2 mont hs f r o mi t s hi gh i n 2007 (2 x 8.6 mont hs) .

These a r e t he n a t u r a l consequences o fhow c a p i t a l wi l l f l o w i n t o a s e c t o r and t hend e p a r t . What we ar e l ooki ng at on t he ver ybr oader t er m, i s t ha t t he Dow wi l l r i s e andand r eac h a new r ec or d hi gh as we see t her e ve r s e c o nt i nue t o u nf o l d . I n ot he r wor ds,t he f l i g h t t o q u a l i t y now wi l l be t he f l i g h tf r o m gover nment debt back t o p r i v at e s e ct o r

e qu i t y r a t h e r t han debt . T hi s s h oul d t henmat e r i a l i z e a maj or hi gh i n t he Dow t hat wi lt h er e f o r e be f o l l o we d by a r i s e i n i n t e r e s tr a t es s e t t i n g t h e st age t h er e af t e r f o r t henext new dawn o f a c y c l i c a l t r e n d .

These event s t a ke pl ac e i n sl ow- mot i onwhen we l ook at t hem f r o m t he l ong- t er m vi ewon an annual ba s i s - n ot d a i l y no i se . The

Free Mar ket s ar g never wr ong f o r t hey showyou what w i l l u nf o l d i n s l ow- moti on.

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CapitalFlowAnalysis

( 1) Ca pi t a l f l ows among na t i ons d r i v i ng cur r ency val ues hi gher and l ower

j u s t as manki nd mi gr at ed spr eadi ng out ar ound t he whol e gl obe. Ca pi t a l

r esponds i n t he same way l ooki ng f or t he greener gr ass

( 2) Ca pi t a l f l ows even wi t h i n a nat i on bet ween s ec t o r s c r e at i n g t he boom

bust c yc l e .

( 3) Ca pi t a l f l ows t o t he mover s & shaker s of i nnovat i on on an i ndi v i dua l

bas i s and t h e i r excess c a pi t a l i s put back i n t o t he g l obal pond and t hen

beccmes a va i l a b l e f or someone el s e t o cr eat e a new wave of i nnova t i on

Ca p t i a l f l ow anal ys i s i s somet hi ng I have devel oped f r o m obser vat i on andworki ng wi t h t he mover s & shaker s ar ound t he wor l d. I n t he 1980s, ever yonewas i nGeneva. That was t he cent er f or deal i ng wi t h t he vast hoar ds ofcash comi ng i n f r o m OPEC. However , as o i l dec l i ned as d i d gol d goi ng i n t o1985, t he next 4. 3 year s was a s hi f t i n c ap i t a l f l ows t hat was s i gna l l edby t he f a i l u r e o f t he J apanese yen t o c or r e l a t e i n 1985. The yen, unl i ke

ot her cu r r enc i es , bot t omed i n 1982 - not 1985. The huge popul ar t r ade back t hen wast he Deut sc hemar k/ J apaneseyen s pr ead. Suddenl y, t hat spr ead began t o r ever se andt he mar k was now headed t o new r ecor d l ows near l y 4 t o t he d o l l a r goi ng i n t o 1985.

The yen, he l d i t sgr ound.

One of t he pr i mar y l ess ons of my manyyears of obser vi ng, has been t ha t^fogolutelynothingtakesplacewithout reasonand a

veryclearpurpose. J us t as E i ns t e i n hadd i f f i c u l t y b e l i ev i ng t hat anyt hi ng coul dbe pur el y random and t hat God was p l ay i ngdi c e wi t h t he uni ver se , t he same i s t r ue i n

everyiiiing I have ever obser ved.

J us t because we may see s omet hi ng t ha ti s st r ange and makes no sense a t t hat b r i e fmoment i n t i me, i t does not mean t hat weshoul d i gnor e i t . The FreeMarketsare justneverwrongl P o l i t i c i a ns wi l l di sagr ee aswi l l Ma r x i s t s , because t hey des i r e t he t r uepower t o mani pul at e t he economy. Never t hel e s s , i t i s b u l l s h i t t o bel i eve i n such anar r ogant p os i t i on . We can no mor e c o n t r o levent s t han pr event death per pet ual l y .

The f a c t t hat t he yen bot t omed i n t he1982 cyc l e event , s et t he st age f or a c l ea r7 year b u l l mar ket goi ng i nt o t he bubbl et op f o r 1989. A l l ot her c ur r e nc i es bot t omedi n 1985, r ose i n t o 1987, cr eat ed a cr as hpr e c i s el y t o t he day of t he model Oct ober19t h, 1987, but t h i s was a l l c a pi t a l f l owspouri ng out of t he Uni t ed St at es and evenEur ope headed on a j our ney t o f l ow t o t he

new hot es t mar ket i n t he wor l d - J apan!

J us t l i k e t he t a l k i ng heads on TV who tt o prov i de t he d e f i n i t i v e e xpl anat i on eachday how t he market ' s movement i n a s i ngl e and i s t i n c t f undament al ex pl ana t i on, r e a l i t y i snever what t h ey be l i e ve , i f t hey bel i ev ewhat hey ar e even sayi ng. Gover nment does t he vesame t h i ng, and i t seems t o me t hey de l i ght

t h e i r own appl ause f or bei ng so smar t .

Th i s i s a f a r t oo compl ex system of i n ta ct i ons on a g l oba l s ca l e t o r educe t he caust o a 60 second or l es s sound- bi t e. We are i na l l honest y pr event i ng our own evol ut i on f orwe ar e t r apped i n t h i s wor l d where t he c l ea rmaj or i t y b e l i e ve t he wor l d i s f l a t . May be iwi l l t ake a co l l apse of such devast at i on t ounf o l d bef or e we wi se up and r e a l i z e we j us tgot i t a l l wr ong.

Ever y subt l emove i s f o r a pur pose. The

f a c t t hat t he yen di d not make new l ows i n1985, set t he st age f or t he mi ni mumr e a l b u lmar ket t hat r equ i r es 7 year s mi ni mum. Thi si s why t he 1982 l ow hel d and 1985 was a r e t ewi t h t he r a l l y i n t o t he bubbl e t op f or 1989.

The Pat t er n Anal ys i s pr oj ec t ed c or r ec t l y . Thi nd i v i dua l c y c l i c a l t i mi ng model s on J apanwer e a l s o l i n e d up wi t h 1989. And above a l l ,t he 1989 December hi gh l i n e d up wi t h t heEconomi c Conf i dence Model 1989. 95. Thi s wasnow a f or eseeabl e event hor i zon i n J apan.

4

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THE FLIGHTTOgrjALTTYMAYBE OVER

DOWJONES INDUSTRIALS

We can see f r o m t he above t woc ha r t st h a t t he f l i g h t t oq ua l i t y andt he DowJ onesbot h r eached t h e i r l ows i n 17. 2 mont hs - ak ey t i mi n g i n t e r v al oft wi c e t he 8. 6mont hf r equency. TheDowJ ones I n du s t r i a l s f e l li n t o Mar ch 2009. T hi s wasf o l l o wi ngas wi f twa t e r f a l l ef f e c t i n s o f a r as t her e was nor e ac t i on r a l l y - j u s t amel t down.

L oo ki ng at t he DowJ ones I ndus t r i a l s ,i f we pr o j ec t p r e c i s e l yf r om t he Oct 11t h,2007 h i gh , 17. 2 mont hs t o t he day g i ves usMar ch19t h, 2009. Thep r e c i s e l ow on ani nt r aday bas i s wasMar ch 6t h a t 6, 470. Thel owes t c l o s e took p l a c e t he next weekonMonday Mar ch 9 t h . Thei de al t a r g e t of t he19t h was8. 6t r a d i ng days l a t e r .

Thi s demonst r at es t ha t as i de f r o m t hei nd i v i dua l c y c l i c a l f r e que nc i es wi t h i n t heDow J ones I ndus t r i a l s t h a t a r e d i f f e r e nt f r o mt heNASDAQ100 andt he S&P500, s t i l l t h e r ei s t h a t uni que s i g na t u r e f r e que nc y of 8. 6t h a t moves t hrough e ver y t h i ng anda t t i me s

i s a t a90 a ngl e t ot he c or e i nhe r e nt n at u rf r e que nc y wi t h i n t he i nd i v i dua l mar ket t h a twe ar e o bs er v i ng. L i k e wat er , t h i s i s t hehi dden c u r r e n t under t he s u r f a c e t h at i s beie f f e c t e d byt he wi nd f o r c i ngener gy t of l o wa t t he s u r f a c e c o nt r a r y t o t he un de r l y i ngc u r r e n t hi dden beneat h.

The r ef or e, c y c l i c a l c o mpl e xi t y r uns vedeep i ndeed . Tosee i t a l l , weneed comput ert o p e al back t he l a ye r s bot h i n t i me, andit he a c t u a l a c t i v i t y . Ther e i sa vas t new wor lt hat i s wa i t i ng t o beexpl or e d, i f weunder s t and i t even ex i s t s . The f a c t t h a t t h eDowr eached t h i s Mar ch l ow i n 17. 2 mont hs i sawi ndow i n t o t h e e xi s t e nc e ofawo r l d we shouno t i gn or e .

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I f i n d i t c ur i ous t ha t when t heCI Ac ont ac t e d P r i n c et o n Economi cs , t hey evenadmi t t ed t h a t t hey r e c og ni z e d t h at I hadi n ve nt e d c a p i t a l f l ow a na l y s i s andwant edms t ob u i l d amodel i n Washi ngt on. When Ide cl i ned, t h e s t a f f b el i e ve t h at was t hereason f o r t he as s a ul t on t he companyandme p er s ona l l y . Per haps, but I amno t suret hey wer e t he source. Theymay have been

i ns t i ga t e d by o t h er s , but t h at sourcewasNewYor k I nvest ment Bankswho saw t he modelas a t hr e at because t hey cou l d no t t r adea ga i n s t i t , and wewer e ed uc a t i n g t h e i rus us a l prey .

Ne ve r t he l e s s , t heCIAr e c og ni z e d t h att h e f a t e ofna t i o ns c o ul d bep r e di c t e d byc ap i t a l f l ow a na l y s i s . When t he model hada c c ur a t e l y p r e di c t e d t he change i n t r end i nChi na andi n 1998 I gave a l e c t u r e i n t heCi t y ofLondon t h a t was r epor t ed i n t heLondon F i nanc i a l Ti mes t h a t summer t h a t

our model p r e d i c t e d t h e c o l l a ps e i n Rus s i ai n about 30days, whi ch u nf o l d ed t h a t Septmat er i a l i z i ng i n t he Long- Ter mCa pi t a l Management c ol l aps e andc o nt a gi o n, t hey t henand t her e r e a l i z e d t he i mpor t anceof t h i st ype ofmodel .

At t he c o ur t h ea r i n g ofOct ober 3 r d ,2000, t he SEC andCFTCdemanded a l ong wi t ht h e r ec ei v er t hat t h e I n s t i t u t ebe shut downand when s t a f f showedupwi t h wr i t t en l e t t e r sr eque s t i ng f r o m t he Depar t ment ofEner gyt oc o n s t r u c t amodel f o r t hembecause we hada l s o f or ec as t when o i l h i t $10 t hat i t woul dr i s e t ot he $100l e ve l go i ng i n t o 2007. TheCommodi t y Futures Tr a di ng Commi ss i onwasi ns t i ga t e d by t he NewYor k I nvest ment Bankst o shut t he model downat a l l c os t s . Theydemanded t he c our t c l o se t h e I n s t i t u t e andi g no r e ot he r agenci es r e qu es t i n g he l p. Theywon.

The SEC andCFTC sawP r i nc et on as t het h r e a t because t hey d i d n ot under st andanymodel . To t hem, a ny t h i ng t h at c o ul d do such

t h i ngs i s pr oof ofbei ng t oo i n f l u e n t i a land t hus evi dence ofmani pul a t i ng t he wo r l deconomy. They want t okeep t he p ub l i c dumbso t he NewYor k I nvest ment Banker s can f eedon t hem t oear n pr o pr i e t a r y t r a di ng wi t ha bs o l ut e i mmuni t y f o r what ever t hey do. Thi si s t he sads t a t e oft he c or r upt i on i n ourso c a l l e d r egul at or y s yst em. I t i s par t oft he c y c l e andi s what i s c aus i n g t h e r e a lc ol l aps e i n P ub l i c Conf i dence. Thi s i s t heessence ofwhat we f a c e .

I suppose I w i l l bebl amed f o r t he f a ct h a t t h e f l i g h t t oqu a l i t ycame t o an end 17. 2 mont hs aga i n . They wi l l most l i k e l y a lbl ameme f o r t h e demi se oft he p o l i t i c a l -economy t h a t we ar e f a c i n g. But t hey have if a c t f u l f i l l e d t he c y c l e . T he i r own c or r upti s d es t r o yi ng our f u t u r e . T hi s wi l l becomes el f - ev i dent whent he c ap i t a l f l ows f l e e t hegover nment bonds andr e t u r n t oequi t yand

go l d where t he Dow may r a l l y i n t o 2015. 75.

What Does TheFut ur e Hol d

The F ree Mar ket s ar e never wr ong, o nl ythose who ana l yze t hem, i nc l ud i ng mysel f . Isomet hi ng i s not de ve l opi ng as expect ed, i tc a n never be t he mar ket s, o nl y t h e f a i l u r etc ons i der a l l t he data i mpac t i ng t he mar ket .

Consequent l y, - i fwes t epbackand l ook att he maj or t r e n d s , we cansee t he event ualout come.

J us t as t he yenbot t omed i n 1982,a 7 year r a l l y pr e di c t e d t h e peak i n 1989.When o i l bot t omed, an 11 year b u l l mar ketwas p r o j e c t i n g i n t o 2007.

The maj or l owf o r t h e Dow t h a t was i npe r f e ct har mony wi t h t h e Economi c Conf i dencModel was 1994. 25. The l ow was t ot he p r e c iday. B u l l mar ket s unf o l d i n i ncr ement s o f 711, and 21 i n t e r v a l s . The f i r s t t i mi ng ont h i s P at t er n P r o j e ct i o n Ana l y s i s was l i n e df o r 2000. Thi s was a bubbl e t o p i n t he Dot .and was pr e c i s el y 7 year s f r o m t he l owest 1

annual c l o s i ng i n 1993/ 1994 i nt r a day . Thenext t a r g e t 11 years produced n ot hi n g. TheDow r a l l i e d i n t o 13year s f r o m t he 1994 l oand t hat was not on t h e Pa t t e r n Pr o j e c t i o nAna l y s i s g r i d . Thi s was t he c ap i t a l f l o wr e s ul t f r o m t he Economi c Conf i dence Modelpeak i n February 2007 ( 2007. 15) . Si nc e t h i s2007 hi gh does not conf or m ona l l l e v e l s aa l l s l i c es ofana l y s i s , i t cannot be a maj oh i gh . That meanswemust l ook at t he f i n a lt i mi ng el ement on t h e P at t e r n P r o j e c t i o nAna l y s i s t ha t br i ngs us t o 21 years f o r t heb i g hi gh f r o m 1994 - 2015.

I n o t h er wor ds, t he r e a l peak i n equi ti s t a r g e t e d t ot he next peak i n t he EconomiConf i dence Model 2015. 75. For now, we mays ee a 6mont h r a l l y . Themai n r es i s t a nc e i s11 , 000 l e ve l i n t he Dow. We need amont hl yc l o s i ng above t h a t l e ve l t os i g na l t he Mar c2009 l ow wi l l ho l d . Ot her wi se, we shoul dexpect a r e t e s t oft he l ows and s t i l l evenper haps new l ows goi ng i n t o 31. 4mont hsdowf r o m t he Oct 2007 hi g h wi t h a r a l l y i n t o t hneat t a r g e t 2015. 75 r e ac hi ng 30, 000*.