NASA’s Impossible Space Station – Name The ISS Contest

This video touches a few bases. During a segment showing LIVE ISS footage alternating with the later produced NASA produced videos, I had a moment to again explain where I come from and how I ended up a Flat Earther. Also announce the ISS Naming Contest (see below) and show an interesting video of George W. Bush explaining how they indoctrinate the country with Government produced videos shown by the news without the public knowing that it is not an actual news story but propaganda pushed on the unknowing public by the very Government talked about in the news piece..

ISS NAMING CONTEST- Simple. Just give the initials I.S.S. a better name. Anything you want. Only put one potential name per comment, comments with more than one name will not count towards the winner. You can make as many comments as you want with potential names. (1 per) – Winning comment will be the person who had one name for the ISS inside their comment and receives the most thumbs up as of 10am May 4. Winner can choose a $20 Gift Card for Starbucks or Target.

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Chinese bank assets have inflated from about $7.0 TN to over $30 TN

Let’s return to last week’s theme of China as the “marginal source of global Credit and liquidity” for a runaway global Bubble that has been pierced at the periphery. It is difficult for my thoughts not to return to the analogy of the matador’s sword initially piercing bull flesh. It amounts to the beginning of the end. It could also very well mark the point of maximum bull madness and pandemonium.

From my analytical perspective, the spring of 2007 marked the piercing of the mortgage finance Bubble. The blowup of funds leveraged in subprime mortgage exposure marked a momentous inflection point in terms of speculator deleveraging, the flow of finance to the mortgage sector and an overall tightening of mortgage finance. Federal Reserve measures to hold Bubble bursting at bay pushed the crisis out several quarters into late-2008. Highly unsettled (crazy) markets saw a major bond rally – especially in agency debt and MBS – that extended the period of high-risk mortgage lending. Fed loosening in the midst of a highly unstable Bubble Dynamic also spurred a speculative frenzy in commodities, with crude oil surging to $145. It all exacerbated fragility.

The world has changed profoundly since 2007. For one, total Chinese bank assets have inflated from about $7.0 TN to over $30 TN. Annual growth in Chinese system Credit growth (“total social financing”) expanded from about $900 billion in 2007 to 2015’s $2.35 TN. Momentous changes have rewritten central banking doctrine. Not even contemplated in 2007, QE (ECB and BOJ) will add close to another $2.0 TN to global liquidity in 2016. Central banks will also push short-term rates (and bond yields!) further into negative territory this year, a policy course that would have been totally absurd in 2007. Prior to 2008, no one would have dared imagine today’s “whatever it takes” monetary management.

It’s an incredible confluence. Building on it’s historic $1.0 TN Q1 output, China could surpass $3.0 TN of 2016 system Credit growth. For perspective, Chinese Credit growth will likely expand at least 50% more than U.S. Credit this year. Such unprecedented Credit growth in the face of a stock market collapse, sinking corporate profits and rapidly intensifying Credit deterioration is simply astounding. It’s definitely a testament to the brute power of “whatever it takes” Chinese state-directed finance and investment. Combining Chinese communist leadership with “whatever it takes” global central bankers (with no constraints on their “money” printing operations) creates a backdrop for financial folly unrivaled in history.

Recall that Chinese authorities had previously tightened mortgage Credit in a belated attempt to rein in Credit excess and rapidly inflating housing (apartment) prices. Then to counter a weakening economy and incipient Credit problems, officials loosened policy in 2014. The upshot was a surge of liquidity (and leverage) into stock market speculation. After trading just above 2,000 in July 2014, the Shanghai Composite ballooned to almost 5,200 by June 2015 (Friday’s close 2,959).

The bursting Chinese stock market Bubble spurred “whatever it takes” measures out of Beijing that must leave Draghi, Kuroda and Yellen with deep senses of envy. And with perceptions fully solidified that Chinese officials have no tolerance for financial or economic crisis, “money” and speculative leverage returned with a vengeance in key housing markets and within commodities.

The global backdrop is unique. The late-twenties period does, however, offer some germane similarities. Incredible technological advancement, financial innovation, “globalization” and policy experimentation nurtured the extraordinary “Roaring Twenties” Bubble period (commencing during the first World War). Later in the twenties, the myriad affects of loose financial conditions – certainly including over-investment, mal-investment and income equality – became more pronounced. There was intensifying downward pressure on commodities and good prices, along with corporate profits.

The late-twenties Bubble period was characterized by an unusual backdrop that promoted financial speculation over productive investment. And as much as the Fed hoped to rein in speculative excess while providing a boost to the flagging real economy, cautious measures to dampened speculation were ineffective. Meanwhile, efforts to bolster the real economy were successful in stoking securities markets Bubbles and speculative leveraging. Money was literally flooding into New York to play the best game in town (and the world).

April 22 – Bloomberg: “Chinese speculators have a new obsession: the commodities market. Trading in futures on everything from steel reinforcement bars and hot-rolled coils to cotton and polyvinyl chloride has soared this week, prompting exchanges in Shanghai, Dalian and Zhengzhou to boost fees or issue warnings to investors. While the underlying products may be anything but glamorous, the numbers are eye-popping: contracts on more than 223 million metric tons of rebar changed hands on Thursday, more than China’s full-year production of the material used to strengthen concrete. ‘The great ball of China money is moving away from bonds and stocks to commodities,’ said Zhang Guoyu, a Shanghai-based analyst at Tebon Securities Co. ‘We’ve seen a lot of people opening accounts for commodities futures recently.’ The frenzy echoes the activity that fueled China’s stock market last year before a rout erased $5 trillion, and follows earlier bubbles in property to garlic and even certain types of tea.”

April 17 – Financial Times (Yuan Yang): “House prices in China’s leading cities surged as much as 63% in the year to March while lower-tier cities saw prices tumble, highlighting the country’s increasingly bifurcated market. In places such as Shanghai and Shenzhen, soaring house prices and subdued wage growth have sparked a frenzy of borrowing — estimated at an additional $48bn in January alone — prompting city governments… to crack down. These measures, introduced in January and including curbs on financing for downpayments and second homes, have had little impact so far in the ‘tier-one’ cities… ‘When you create a lot of liquidity, it flows to the hottest markets,’ said Ms Yao, who suspects easy credit and property speculation have stoked sharp price rises. Homebuyers have circumvented clampdowns on downpayment financing… by finding ever more novel ways to obtain the 20% of value deposit requirement.”

The extreme measures China adopted to counter its stock market crash and unfolding crisis have now incited precarious speculative Bubbles in commodities and housing. This creates extraordinary uncertainties for China and the world. A deepening Credit crisis (see “China Bubble Watch”) would seem to ensure the usual cautious official measures to counter speculative excesses. So the world has of late been contemplating booming China: ongoing loose financial conditions with 2016 Credit growth in the neighborhood of $3.0 TN – providing extraordinary fuel for a rather destabilizing speculative blow-off.

Keep in mind that The Mighty World of Speculative Finance has been positioned long “defensive,” long “deflation,” long “duration” and long sold balance sheets. This world has been short commodities, energy, yields, cyclicals, financials and bad balance sheets. Moreover, many of these (Crowded) macro themes have been combined into leveraged portfolios (“risk parity”, etc.). China with $3.0 TN of Credit growth fueling unpredictable housing and commodities speculative Bubbles upsets the leveraged speculators’ applecart.

We need to deepen our discussion of China as “marginal source of Credit and liquidity.” A three Trillion (in U.S. dollars) Chinese Credit onslaught would bolster a vulnerable Chinese economy, in the process providing a much needed boost to EM economies and the global economy in general. Resurgent Chinese housing and commodities Bubbles would be expected to stoke the real economy and finance more generally – if unpredictably.

Chinese officials have adopted various capital control measures over recent months. These seem to ensure that a less-than-normal amount of newly created Chinese liquidity will make its way out into the global system. At the same time, Chinese Credit and Bubble Dynamics have already begun to have major indirect impacts on global market liquidity.

At this point, China – as the “marginal source of global Credit and liquidity” – is exacerbating what had already evolved into a powerful central-bank induced short squeeze dynamic. Despite the collapse of Doha talks over the weekend, crude’s march higher ran unabated again this week. Industrial metal prices have been surging. Silver jumped 4.4% this week, with copper up 5.4%. The week saw nickel prices rise to a five-month high and aluminum to eight-month highs. Platinum, palladium, zinc and lead prices have all shot higher. Some iron ore prices have jumped to highs since early 2015.

The problem is that China’s newfound commodities speculation is underpinned by historic Credit growth – say, more than $3.0 TN annualized. Meanwhile, global short-squeeze dynamics are bolstered by $2.0 TN of annualized QE (ECB and BOJ). Moreover, there’s the massive pool of speculative finance – including a $3.0 TN hedge fund industry – with large leverage positions throughout global markets. In an extraordinary development, as scores of trades continue to unwind, a destabilizing global dynamic feeds on itself and gathers momentum. It’s monetary disorder on steroids.

Thursday under the prescient Bloomberg (Netty Idayu Ismail) headline, “Yen Bulls Vulnerable to Kuroda Shock Amid Record Hedge Fund Bets: “Yen bulls are at risk from Haruhiko Kuroda’s favorite tactic: surprise. By pushing bets on a stronger currency to the most on record, speculators have left themselves vulnerable should the Bank of Japan governor blindside them with additional stimulus at the April 27-28 policy meeting… “Short dollar-yen is now a consensus trade,’ said James Purcell, cross-asset strategist at UBS Group AG’s wealth-management business in Hong Kong. ‘The market was caught on the wrong side when the cross fell in the first quarter. There is a danger people will get wrong-sided again.’”

Sure enough, Friday trading saw the yen sink 2.13%, “the most in 17 months.” When trade unwinds/blowups proliferate, no trade is safe. Interestingly, the energy and commodities surge even began to garner the attention of global bond markets. Nothing dramatic thus far, yet bonds around the world are priced for deflation. Throughout equities and fixed income the “safety trade” is likely the most Crowded trades of all.

It’s also worth mentioning that the VIX (equity volatility) closed the week at 13.20, down from last week’s 13.62 to near one-year lows (not far from five-year lows). Considering the general mayhem operating below the market’s surface, a 13 VIX is incredible. Then again, the VIX has been right in the thick of the disorderly unwind of hedges and bearish bets. Besides, it’s at best an indication of the short-term probability of stock market dislocation. And for now markets are betting that “whatever it takes” Chinese officials and global central bankers have things under control.

And that’s what makes the current environment so dangerous. From my perspective, things continue to unfold in the worst-case scenario. Beijing has lost control of what has evolved into complex Credit, market and economic systems. Global central bankers have lost control of speculative market dynamics – not to mention inflation dynamics. And it’s not as if current predicaments are inconspicuous. So investors, speculators and investment managers around the world are forced to plug their noses and play the game.

Returning back to China: The “marginal source of global Credit and liquidity” is short-term supportive of global risk markets. Yet its Credit system is self-destructing – and doing so rather conspicuously. If any other country employed a similar policy mix the world would be sprinting from that currency.

Thus far, Chinese officials have been determined to carefully manage China’s pegged currency regime. Yet current Credit and market dynamics are inconsistent with a stable currency. I would furthermore argue that breakneck Credit growth in the face of rapidly deteriorating underlying fundamentals is a proven recipe for a crisis of confidence. Global markets are in the midst of a destabilizing adjustment to China’s resurgent booms in Credit and speculation. This ensures real havoc when global markets are confronted with a Chinese Credit and/or currency dislocation.

For the week:

The S&P500 increased 0.5% (up 2.3% y-t-d), and the Dow added 0.6% (up 3.3%). The Utilities sank 3.3% (up 9.6%). The Banks surged 5.2% (down 4.0%), and the Broker/Dealers jumped 5.5% (down 3.7%). The Transports gained 1.4% (up 7.7%). The S&P 400 Midcaps increased 0.8% (up 5.6%), and the small cap Russell 2000 rose 1.4% (up 1.0%). The Nasdaq100 fell 1.5% (down 2.6%), while the Morgan Stanley High Tech index increased 0.2% (down 2.2%). The Semiconductors slipped 0.7% (up 0.8%). The Biotechs jumped 2.5% (down 14%). Though bullion was little changed, the HUI gold index gained 2.1% (up 81.9%).

Three-month Treasury bill rates ended the week at 23 bps. Two-year government yields rose nine bps to 0.82% (down 23bps y-t-d). Five-year T-note yields surged 15 bps to 1.36% (down 39bps). Ten-year Treasury yields jumped 14 bps to 1.90% (down 36bps). Long bond yields rose 15 bps to 2.71% (down 31bps).

Greek 10-year yields sank 50 bps to 8.21% (up 89bps y-t-d). Ten-year Portuguese yields rose 11 bps to 3.26% (up 74bps). Italian 10-year yields jumped 14 bps to 1.47% (down 12bps). Spain’s 10-year yields gained 10 bps to 1.59% (down 18bps). German bund yields rose 10 bps to 0.23% (down 39bps). French yields increased nine bps to 0.56% (down 43bps). The French to German 10-year bond spread declined one to 33 bps. U.K. 10-year gilt yields surged 19 bps to a three-month high 1.60% (down 36bps).

Japan’s Nikkei equities index surged 4.3% (down 7.7% y-t-d). Japanese 10-year “JGB” yields slipped a basis point to negative 0.12% (down 14bps y-t-d). The German DAX equities index jumped 3.2% (down 3.4%). Spain’s IBEX 35 equities index surged 4.3% (down 3.3%). Italy’s FTSE MIB index rose 2.4% (down 12.8%). EM equities equities were mixed. Brazil’s Bovespa index slipped 0.6% (up 22%). Mexico’s Bolsa was little changed (up 6.1%). South Korea’s Kospi index was about unchanged (up 2.8%). India’s Sensex equities index gained 0.8% (down 1.1%). China’s Shanghai Exchange sank 3.9% (down 16.4%). Turkey’s Borsa Istanbul National 100 index added 0.3% (up 19.7%). Russia’s MICEX equities index jumped 3.1% (up 11.7%).

Junk funds saw inflows of $410 million (from Lipper), the eighth straight week of positive flows.

Freddie Mac 30-year fixed mortgage rates increased a basis point to 3.59% (down 6bps y-o-y). Fifteen-year rates slipped a basis point to 2.85% (down 7bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-yr fixed rates down two bps to 3.67% (down 32bps).

Federal Reserve Credit last week expanded $3.7bn to a three-month high $4.452 TN. Over the past year, Fed Credit increased $4.3bn. Fed Credit inflated $1.641 TN, or 58%, over the past 180 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week declined $1.4bn to $3.242 TN. “Custody holdings” were down $46.7bn y-o-y, or 1.4%.

M2 (narrow) “money” supply last week was little changed at $12.607 TN. “Narrow money” expanded $715bn, or 6.0%, over the past year. For the week, Currency slipped $0.6bn. Total Checkable Deposits declined $4.5bn, while Savings Deposits added $1.6bn. Small Time Deposits gained $0.8 billion. Retail Money Funds increased $2.8bn.

Total money market fund assets sank $32.9bn to a six-month low $2.698 TN. Money Funds rose $110bn y-o-y (4.3%).

Total Commercial Paper jumped $17.5bn to $1.111 TN. CP expanded $85bn y-o-y, or 8.3%.

Currency Watch:

April 16 – Reuters: “Japan’s efforts to seek informal consent to act against an unwelcome yen rise bore little fruit, with the United States offering a cool response to concerns voiced by Tokyo that the currency’s gains are too sharp and may justify intervention. A lack of G20 sympathy for Tokyo’s appeal may embolden yen bulls to test the currency’s 17-month highs against the dollar hit earlier this month, keeping Japanese policymakers on edge to contain the damage on a fragile, export-reliant economy.”

The U.S. dollar index recovered 0.4% this week to 95.12 (down 3.6% y-t-d). For the week on the upside, the Canadian dollar increased 1.2%, the South African rand 1.1%, the British pound 0.5%, the Mexican peso 0.4% and the Norwegian krone 0.1%. For the week on the downside, the Japanese yen declined 2.8%, the Swiss franc 1.1%, the Brazilian real 1.0%, the New Zealand dollar 1.0%, the euro 0.5%, the Swedish krona 0.4% and the Australian dollar 0.2%. The Chinese yuan declined 0.4% versus the dollar.

Commodities Watch:

The Goldman Sachs Commodities Index surged 3.5% to a five-month high (up 11.7% y-t-d). Spot Gold was little changed at $1,233 (up 16%). Silver jumped 4.4% to $16.97 (up 23%). WTI Crude rose another $3.34 to $43.74 (up 18%). Gasoline gained 4.7% (up 21%), and Natural Gas jumped 12% (down 9%). Copper advanced 5.4% (up 6%). Wheat increased 3.0% (up 1%). Corn declined 0.8% (up 5%).

Fixed-Income Bubble Watch:

April 22 – Bloomberg (Brian Chappatta): “Make no mistake about it: Puerto Rico will default in May on some of the $470 million it owes, according to Moody’s… The cash-strapped commonwealth is expected to fall short of paying $422 million to holders of bonds from the Government Development Bank, the credit rater said… It may also default on debt from the Employees Retirement System, Industrial Development Co. and Highways and Transportation Authority because the GDB has just $562 million in liquidity as of April 1…”

April 21 – Financial Times (Joel Lewin): “The debt doghouse is filling up fast. More companies were downgraded to junk status by Moody’s in the first three months of the year than in the whole of 2015. In total, 51 companies were pushed into junk territory, up from eight in the fourth quarter and 45 in 2015. The sharp increase in number of so-called ‘fallen angels’ — as those companies stripped of their investment grade status are known — comes as focus intensifies on whether the current credit cycle, which began after the 2008-2009 financial crisis, is turning… Moody’s also blamed the travails of the commodities market on the significant swelling in the number of ‘potential angels’, or those companies at risk of being cut to junk. The increase in the number pushed the amount of debt in ‘potential angel’ camp to $265bn by the end of March. That is up from just $234bn at the end of the year and $105bn at the end of the first quarter in 2015.”

April 21 – Bloomberg (Chris Martin): “SunEdison Inc.’s liabilities of $16.1 billion makes the world’s biggest renewable energy developer the biggest bankruptcy of 2016. Here’s a review of the almost $35 billion in previous U.S. restructurings this year… Peabody Energy, $10.1 billion… Arch Coal Inc., U.S. mining company, $6.45 billion…Verso Corp., paper products company, $3.88 billion…Energy XXI Ltd., oil producer, $3.62 billion…Republic Airways Holdings Inc., airline, $2.97 billion… Paragon Offshore Plc, oil services provider, $2.96 billion… RCS Capital Corp., financial services, $1.39 billion… SH-130 Concession Co., highway operator, $1.27 billion… Noranda Aluminum Holding Corp., mining company, $1.12 billion… Southcross Holdings LP, natural gas processor, $1.07 billion…”

Global Bubble Watch:

April 17 – Financial Times (Eric Platt): “Corporate borrowers across the world have defaulted on $50bn of debt so far this year as the number of delinquent companies accelerates at its fastest pace since the US emerged from the financial crisis in 2009. The number of defaults rose by five in the past week, including the first European company of the year, according to Standard & Poor’s. Forty-six companies have defaulted since the year began.”

U.S. Bubble Watch:

April 20 – Reuters (Alistair Gray): “The six biggest US banks have suffered their steepest decline in quarterly revenues since 2011, after a profound slump on Wall Street overshadowed a boost from their consumer businesses. JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo generated total revenues of $98bn in the first quarter, down 9% from a year earlier — the steepest fall in five years… Deep cost cuts failed to counteract the fall in revenue so the six lenders also saw their collective net income plummet 24% year on year to $18bn.”

April 20 – HousingWire (Kelsey Ramírez): “Home sellers in March sold their homes for an average 17% gain, or $30,500 more than the purchase price, making it the highest average monthly price gain for home sellers since December of 2007, according to RealtyTrac… Of the nation’s 125 metropolitan areas with at least 300 sales in March, the largest gains occurred in San Francisco with a 72% gain. This was followed by San Jose, California with gains of 60%, Boulder, Colorado with 53%, Prescott, Arizona with 51% and Los Angeles 48%.”

April 17 – New York Times (John Herrman): “The business of online news has never been forgiving. But in recent weeks, what had been a simmering worry among publishers has turned into borderline panic. This month, Mashable, a site that had just raised $15 million, laid off 30 people. Salon, a web publishing pioneer, announced a new round of budget cuts and layoffs. And BuzzFeed, which has been held up as a success story, was forced to bat back questions about its revenue… ‘It is a very dangerous time,’ said Om Malik, an investor at True Ventures whose tech news site, Gigaom, collapsed suddenly in 2015, portending the flurry of contractions.”

China Bubble Watch:

April 18 – Bloomberg: “The unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel. Spooked by a fresh wave of defaults at state-owned enterprises, investors in China’s yuan-denominated company notes have driven up yields for nine of the past 10 days and triggered the biggest selloff in onshore junk debt since 2014. Local issuers have canceled 61.9 billion yuan ($9.6bn) of bond sales in April alone, and Standard & Poor’s is cutting its assessment of Chinese firms at a pace unseen since 2003.”

April 20 – Bloomberg (Bonnie Cao and Ye Xie): “Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession. China’s March credit-growth figures should be viewed as a warning sign, Soros said… The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362bn) last month, far exceeding the median forecast of 1.4 trillion yuan… and signaling the government is prioritizing growth over reining in debt. What’s happening in China ‘eerily resembles what happened during the financial crisis in the U.S. in 2007-08, which was similarly fueled by credit growth,’ Soros said. ‘It can reach a turning point later than everyone expects.’”

April 21 – Bloomberg (Tracy Alloway): “Here’s a growing list to further excite China bears this Thursday: Baoding Tianwei Group Co., China National Erzhong Group, Sinosteel Co., China Railway Materials Co. Ltd., Guangxi Nonferrous Metal Group, Greenland Holdings Corp.’s Yun Feng unit, and Dongbei Special Steel Group Ltd. These are the eight state-owned enterprises (SEOs) that have run into some sort of repayment problem this year, exacerbating already heightened concerns over the future of China’s debt-fueled economy… SEOs that overindulged on debt may actually be keen to default on their bonds, while government officials may be loath to bail them out entirely. Meanwhile, banks will likely want to suppress defaults in the SEO arena through potentially any means possible, including, perhaps, pushing losses on to investors who have purchased the debt through wealth management products (WMPs).”

April 20 – Bloomberg (Lianting Tu and Molly Wei): “Chinese companies have never had to wait so long to get paid, as stockpiles build and customers delay sending funds. Firms now take a record 192 days to collect payment for their goods or services from when they pay for the inputs… The cash conversion ratio is up from 125 days five years ago. Liquidity is tightening in China after company profits declined for the first time in three years and as debtors face their hardest time ever paying interest. ‘The longer the cash conversion cycle, the higher the risk of corporates not having enough cash to repay their debts,’ said Iris Pang, senior economist for greater China at Natixis SA… ‘That creates a chain reaction.’”

April 18 – Bloomberg (David Yong): “China’s state-owned enterprises are likely to suffer more defaults over the next year as the government shows its readiness to shut companies in industries struggling with overcapacity, according to Standard & Poor’s. ‘In a major policy shift, the central government appears willing to close and liquidate struggling enterprises in the steel, mining, building materials, and shipbuilding industries,’ S&P analyst Christopher Lee wrote… ‘We believe this stance will exacerbate the problems of companies in these cyclical and capital-intensive sectors, which are facing sluggish demand amid slowing investment growth.’”

April 22 – Reuters (Ruby Lian and Manolo Serapio Jr): “China’s commodity exchanges are trying to cool their markets as benchmarks rallied rapidly this week, with turnover of a single rebar contract on Thursday worth nearly 50% more than the total value traded on the Shanghai stock exchange. Chinese investors – both funds and individuals – appear to be making big bets that a rise in infrastructure spending will be positive for battered commodities such as steel and iron ore, turning their interest away from equities after a crash last summer that has driven down stocks by 40%.”

April 17 – Reuters (Clare Jim): “China’s home prices in March gained at the fastest pace in almost two years but that growth may slow as local authorities tighten home purchase requirements in the two top performing cities on fears of a bubble forming. The southern city of Shenzhen continued to be the top performer, with home prices surging 61.6% from a year ago, followed by Shanghai with a 25% gain. Prices in the two cities were up 3.7% and 3.6% respectively from a month earlier… While property in China’s top-tier cities is booming, prices in smaller centers, where most of China’s urban population lives, are still sinking and complicating government efforts to spread wealth more evenly and arrest slowing economic growth.”

April 20 – Bloomberg: “China’s central bank is signaling less of an appetite for expanding monetary stimulus following evidence of an acceleration in growth that has led some private economists to upgrade their forecasts… While monetary policy will maintain a certain degree of looseness in coming months, prudence will feature more prominently than last year, Xinhua said. Late Tuesday, PBOC research bureau chief economist Ma Jun said… that future policy operations, while observing the need to continue supporting growth, will also pay attention to heading off macroeconomic risks — especially an over-expansion of corporate leverage.”

April 15 – New York Times (Neil Gough.): “For Chinese banks, the decision to lend to companies like Bohai Steel was for years a no-brainer. Lenders took heart from its state backing, which appeared as solid as the millions of tons of steel pipes that rolled off its production lines each year. That ironclad image is now tarnished. Plunging demand and a worsening glut in production capacity have left Bohai Steel struggling to repay as much as $30 billion in debt. Worried creditors — more than 100 of them — are locked in negotiations with the company and local officials. China’s bad loans are on the rise, as companies that borrowed heavily in headier times struggle against a slowing Chinese economy.”

April 20 – Bloomberg (Ye Xie): “Global investors have cheered the recent signs of economic pickup in China. Andrew Colquhoun is unimpressed. Colquhoun, the head of Asia Pacific sovereigns at Fitch Ratings, sees the growth spurt, fueled by a resurgence in borrowing, threatening to wreak havoc on the financial system. ‘Whether we call it stabilization or not, I am not sure,’ Colquhoun said… ‘From a credit perspective, we’d be more comfortable with China slowing more than it is. We are getting less confident in the government’s commitment to structural reforms.’ While global equity and commodity markets have rallied on signs that a surge in lending is helping stabilize the economy, the borrowing binge is adding to an already unsustainable debt level, according to Colquhoun.”

ECB Watch:

April 21 – Associated Press (David McHugh): “European Central Bank head Mario Draghi made it clear Thursday he is ready to launch even more stimulus if the eurozone economy needs it. And he told German officials, who are complaining the ECB’s stimulus is hurting the country’s savers, to please butt out… Draghi firmly rejected criticism from German officials who think the ECB has done too much. They complain low rates have wiped out returns for people saving for retirement. Finance Minister Wolfgang Schaeuble even blamed Draghi for much of the success of the anti-euro, anti-immigrant Alternative for Germany party. Draghi alluded to the EU treaty, which forbids the ECB from taking orders from politicians.”

April 21 – CNBC (Holly Ellyatt): “Relations between the European Central Bank (ECB) and Germany’s leaders are becoming increasingly strained as differences grow over the increasingly dovish path taken by the central bank. The criticism in Germany targeted at the ECB and its President, Mario Draghi, has reached fever-pitch since the ECB brought out an even bigger bazooka from its arsenal of monetary policy strategies to try to stimulate growth and inflation in the anemic euro zone. As well as cutting its main interest rates, it expanded its massive bond-buying program to 80 billion euros ($90.3 billion) a month and added corporate bonds into the mix.”

April 20 – Bloomberg (Patrick Donahue and Birgit Jennen): “German Vice Chancellor Sigmar Gabriel said the European Central Bank has ‘reached its limit’ with stimulus measures, wading into the euro area’s debate over monetary policy with a call for governments to step into the breach with higher spending. ‘The ECB is acting as an ersatz economy ministry, but it’s not made for that, because its only instrument is printing money,’ Gabriel said… Wherever fiscal investment and growth impulses are lacking among European Union states, the ECB jumps in with liquidity.’ While ECB policy is ‘very problematic’ for Germans who see their savings whittled away by shrinking rates, ECB President Mario Draghi shouldn’t be cast as the ‘bad guy,’ Gabriel said…”

Europe Watch:

April 17 – New York Times (Landon Thomas Jr.): “Executives of the International Monetary Fund mutter darkly about Greeks tapping their phones in Athens. Greek government officials accuse the fund of torpedoing their economy via tough austerity measures. And both the Greeks and the fund moan about the refusal of Germany to consider any form of debt relief for Greece. Signs of the growing tensions over Greece and its debt were evident at meetings of the I.M.F. in Washington last week.”

Central Bank Watch:

April 19 – Wall Street Journal (Tom Fairless): “UBS… Chairman Axel Weber, the former president of Germany’s Bundesbank, warned that central banks in Europe and Japan have reached the limits of monetary stimulus, weighing into an increasingly fractious debate in Germany over the European Central Bank’s easy-money policies. ‘We are now at a point…probably [where] the net benefits of further monetary easing, in particular in Europe but also in Japan, are outweighed by the costs and side effects,’ Mr. Weber said… He warned that negative interest rates ‘are only possible for a very short time and in close proximity to zero,’ and said he doubts that the ECB’s bond-purchase program will bolster economic growth and inflation.”

Japan Watch:

April 20 – Bloomberg (Keiko Ujikane): “Bank of Japan Governor Haruhiko Kuroda said he isn’t thinking about using so-called helicopter money and that the notion contradicts the law. With inflation and economic growth still lagging, debate in Japan has turned to the policy idea coined by Nobel laureate Milton Friedman in 1969. Such an initiative could involve the government selling debt straight to central bank for newly printed money that’s then injected directly into the economy via tax cuts or spending programs.”

April 22 – Bloomberg (Toru Fujioka Masahiro Hidaka): “Having adopted a negative interest rate on some excess reserves to penalize financial institutions for leaving money idle, the Bank of Japan may consider helping them lend by offering a negative rate on some loans, according to people familiar with talks at the BOJ. Such a discussion could happen in conjunction with any decision to make a deeper cut to the current negative rate on reserves… The BOJ’s Stimulating Bank Lending Facility, which now offers loans at zero percent interest, would be the most likely vehicle for this option, they said. The officials said that adding this to the central bank’s arsenal could have a positive impact on the economy, but would also raise questions about giving subsidies to commercial lenders.”

Leveraged Speculation Watch:

April 20 – Bloomberg (Will Wainewright and Nishant Kumar): “Hedge funds suffered the worst withdrawals last quarter since the tail-end of the financial crisis as wild swings in stocks and commodities caused losses at some of the best-known firms. Investors pulled a net $15 billion between January and March, reducing assets under management to $2.86 trillion from $2.9 trillion, …Hedge Fund Research Inc. said… The last time outflows were higher was in the second quarter of 2009, when $43 billion was redeemed. Clients are redeeming after many hedge funds failed to protect them during market turmoil in the second half of last year and again at the start of 2016… Hedge funds following macro economic trends to bet across asset classes suffered $7.3 billion in outflows, while those betting on corporate events saw about $8.35 billion pulled out…”

April 18 – Wall Street Journal (Ryan Tracy): “Top U.S. regulators are set to focus on borrowing by the hedge-fund industry, particularly large funds, as they assess potential risks in the asset-management sector. The Financial Stability Oversight Council voted unanimously at a public meeting Monday to endorse a 27-page ‘update’ of its more-than-two-year review of financial-stability risks tied to the asset-management industry. Treasury Secretary Jacob Lew said the oversight council… has found that leverage in the hedge-fund industry appears to be concentrated at larger funds… ‘We do not have a good metric for leverage in this context,’ Commodity Futures Trading Commission Chairman Timothy Massad said… ‘We have not yet connected the dots.’”

Brazil Watch:

April 18 – Reuters (Anthony Boadle and Lisandra Paraguassu): “Brazil’s President Dilma Rousseff vowed on Monday to fight impeachment tooth-and-nail in the Senate after a heavy defeat in the lower house of Congress raised the likelihood of an end to 13 years of leftist rule in Latin America’s largest economy. In a raucous vote late on Sunday that sparked jubilation among Rousseff’s foes, the opposition comfortably surpassed the two-thirds majority needed to send Brazil’s first female president for trial in the Senate on charges she manipulated budget accounts. If the Senate votes by a simple majority to accept the case next month, as is expected, Rousseff would become the first Brazilian leader to be impeached for more than 20 years.”

April 20 – Bloomberg (Carla Simoes): “Rio de Janeiro said it’s running out of money to pay for basic services months before the Olympic Games while other Brazilian states warned of similar financial crises if the federal government doesn’t provide debt relief. Six state governors and a representative for Rio de Janeiro said… their fiscal woes are forcing them to make cutbacks that could lead to a breakdown of social services. Rio has been delaying payment of salaries to public servants since the beginning of the year.”

Geopolitical Watch:

April 17 – Reuters (John Kemp): “Saudi Arabia’s decision to scupper negotiations on a coordinated oil output freeze in Doha on Sunday seems to confirm a significant shift in the kingdom’s oil policy. For decades, the kingdom has insisted it does not wield oil as a diplomatic weapon, but at the weekend it did just that as part of an intensifying conflict with Iran. The kingdom’s position on Iranian oil production has steadily hardened over the course of the last year and at the weekend it reached its logical conclusion. Saudi Arabia will not accept any constraints on its output, even freezing at record levels, unless Iran agrees to similar controls, which it has rejected until production has reached pre-sanctions levels.”

April 20 – Reuters (Alex Lawler): “Iran is determined to recover its share of the world oil market following the lifting of sanctions, and can withstand low prices since it has sold oil for as little as $6 a barrel in the past, a source close to Iranian oil policy said… ‘We paid for our barrels with our centrifuges,’ the source said, referring to Iran’s acceptance of curbs on its nuclear program in order for Western sanctions on Tehran to be lifted. ‘We are going to get our share back. For us, oil is only 12% of our GDP. We used to sell oil in the war (between Iran and Iraq in the 1980s) at $6 a barrel.’”

April 21 – Wall Street Journal (Jeremy Page): “Chinese President Xi Jinping added a new military leadership post to his already extensive collection of official titles—commander-in-chief of a new joint-battle-command center—given as part of the biggest restructuring of the armed forces since the 1950s. State media announced the title and the setting up of the new command center this week in reports that on state television showed Mr. Xi making a rare public appearance in green camouflage fatigues and black combat boots. The changes are the latest in an overhaul of the military command structure that Mr. Xi has pushed in the past few months to strengthen his control of the People’s Liberation Army, or PLA, and transform it into a modern fighting force.”

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The Three Phases of a Bull Market

Originally posted at on April 19. 2016.

The 5 year bear market in the precious metals appears to be over. We wont know for certain until the current rally ends and we undergo a secondary reaction followed by a renewed uptrend. This future uptrend must exceed our current rally high before we can declare the bear market as officially over. So with the presumption that this will occur it is now time to turn our sites towards the bull market which lies before us. We need to understand the structure in which a bull market unfolds and develops. This approach served us well in the previous precious metals (PM) bear, as it enabled us to recognize the bear well before the average investor, thereby allowing us to avoid chasing false bottoms all the way down to its final lows. Some of us even made positive returns being short at critical times. But, even more valuable than skimming profits, this knowledge allowed us to preserve our intellectual capital, thus allowing us to be mentally ready to play the upside once the bottom was in. By chasing false bottoms all the way down the average investor became damaged goods with blown out psyche no longer willing to cast his lot onto the markets once the bottom was in. He arrived at the start of a new bull unable to recognize it and adapt the correct strategy to profit from it. The required strategy of buy and hold and ignore the skeptics had been beaten out of him over the past 5 years. That’s the mental capital he had lost. So in review let’s look at what has transpired over the past 5 years represented in the price action of the HUI.

HUI Monthly Chart
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The end of the great 10 year bull market from 2001-2011 took the form of a classic H&S top which spread itself out over 2 years. This H&S top encompassed the Phase I bear period in which stocks sell minus the frothy “hopes and expectations” of the final boom of the previous bull market. Once this H&S top violated its neck line we entered Phase II of the bear market. This phase is the longest phase where stocks discount a long period of progressively worsening business conditions. It is in this phase where severe panics occur as support levels are swept away. Once the initial panic crashes are over in phase II the market consolidates these levels in a series of bear market rallies (BMR’s) serving to exhaust longs who are chasing false bottoms. Once this process is complete and the longs no longer retain the strength to hold up the market it enters its final Phase III or as I label the annihilation phase.

There are many ways to chart the bear of 2011-2016 and what you see above is my preferred method. The bear encompassed 4 crashes, 2 in phase II and 2 in phase III. I chose to display a diamond formation for the phase II post crash consolidation as once the diamond was violated to the downside we entered Phase III. Using the break out to break out method we had a perfect measured move predicting its final bottom within 3 points and in the middle of its forecast period. Having made this forecast a full 2 years before the ultimate bottom my only regret was in not sticking to it.

Once the initial 102 low was made I waffled and readjusted my forecast for a possible 67 low in the HUI. Things seemed so bearish at the time. Yes, phase III was truly an annihilation an 85% decline from top to bottom in the SENIOR shares.

Now its time to use our method to tackle the upcoming bull market in precious metals. Learning and understanding how bull markets develop and unfold provides us with the tools to operate in them. Bull markets, once begun, travel through 3 distinct phases just as bear markets do. By identifying these phases we can adapt our strategy to ride the bull. Big bull markets can last from 10 to 20 years. This is a long time to be lost wandering in the wilderness without an overarching plan. Our methodology combines classic Dow Theory with Chartology to give us the plan. I have observed the great wall street analysts of old were far superior to anyone providing analysis today. So we use the method of the great analysts, Charles Dow, William P. Hamilton, Robert Rhea and Richard Russell to guide us. When we combine their method with what we term “Chartology” (The modern adaption of the classical TA of Edwards and Magee , as taught by Rambus ) it gives us a means to operate in the market. The Key to making a family fortune every market participant dreams of.

The vast majority of retail traders in a market lose money. So how is one to make the fabled family fortune in a bull market? The answer is simple, buy and hold . Sounds easy right? Well its far from easy. To make a family fortune one must property identify the beginning of the bull market, or phase I and buy when everyone tells you you are a fool. You must then hold all the way until phase III nears its top and sell when that same group tells you to buy. We only encounter a few secular bull markets in our lifetime, three at best, so more than likely you only have the maturity to take advantage of one or two. Consider this, how many people were able to identify the beginning of the great bull market starting in August 1982, then take a major position amid great skepticism, hold that position until the internet bubble peaked, then sell everything? Think of what this would have required. Stay long through the crash of 1987, the bear market of 1990 with its gulf war uncertainty, the Orange county bond crisis of 1994, the Mexican crisis of 1995, LTCM in 1998 and then finally recognize the internet bubble as a final phase III blowoff and sell. How many? I would say it could be numbered in the hundreds of investors…that’s all, but you know what? I believe for a dedicated, disciplined student of the market its achievable to do just that. Hold from bottom to top and then sell, that’s what we are going to do and our method is going to be the tool we use to do it.

Bull Market Phases

Phase I

Prior to a bull market the previous bear market knocks down prices to below “known values”. This occurs in the devastating annihilation phase which we forecast in the early portion of the last PM bear market. This forecast was met with universal derision at the time because everybody’s head was still in the previous bull market. These skeptics are no longer ridiculing this call, however they do remain skeptics. The psychological damage that they incurred by their obstinate bullishness in a bear market prevents them from embracing the current uptrend. They see this rally as simply another bear market rally (BMR) within the previous bear market.

It is with this atmosphere of skepticism that Phase I of the new bull market begins. Phase I is the Accumulation Phase, where farsighted investors sensing that prospects although now depressed, are due to turn up. They are willing to pick up all the shares offered by discouraged investors and distressed sellers. They are willing to raise their bids gradually as selling diminishes in volume. The public is disgusted with the market and has now exited. Activity has trailed off and becomes dull. Price action normally undergoes a prolonged sideways movement and becomes immune to bad news. Most remaining investors have a general disposition to expect worse things ahead, but it is now too late to sell.

It is now that stocks have sunk to below “Known Values” and under these conditions informed, serious investors begin their accumulation, therefore this phase is named the Accumulation Phase. It actually starts before the previous bear market is officially over. Competition is at a minimum as the public is disinterested, careful and controlled purchases take place as a long base is established. The uninformed public is incapable of recognizing the bargains as they don’t look for value. It is under these conditions that stocks return to Known Values. This all happens in phase I where no rule exists as to how long this process occurs. It may resemble the dynamic of a beach ball under water released or it may be a long grinding process. Either way the objective of the market is to return price to Known Values.

Phase II

Phase II may be called the Mark-Up Phase. It occurs as the improved tone of business and rising price action begin to attract public and institutional attention. This second phase is the longest phase and most deceptive of the three phases. It is characterized by a steady advance building on increasing activity reflected in growing volume. It will be punctuated by secondary reactions when investors become convinced lower prices are out of the question. When the bull chorus is the loudest a secondary reaction often strikes to the downside which is unusually violent compared to the other phases.

The advancement in prices during phase II is in response to the known improvement in earnings. Stocks are marked-up because belatedly the public becomes aware that pessimism or necessity had forced prices too low. They therefore begin to buy the floating supply of stock in the market. The second phase is the only phase a skilled technical trader should actively reposition oneself by trading stocks. If one can avoid being caught in a secondary reaction then reposition oneself back in after a drop and base is formed, he can improve his position handsomely.

Phase III

Phase III is termed the Blow Off Phase or Mania Phase. It is labeled this as the market undergoes a character change. No longer are stocks bought in due consideration of intrinsic value or earnings power, but instead the crowd buys on prospects only with no regard for values. Certain stocks take on a religious component as their future seems certain and the masses flock to them. The market boils with activity, financial news is all good, price advances are spectacular, IPOs dominate the financial headlines and grab everyones attention. It’s in phase III where your obnoxious brother in law reminds you how he scored huge by flipping the latest fad stock, oblivious of course to the fact that it had been going up for years and has zero earnings. In phase III the market has been going up for so long it seems to actually take leave of its senses. General confidence has allowed price to discount not only present values, but future dream like possibilities. For those of you in the markets from 1999-2000 you know what this feels like, it’s true manic insanity, but there is no stopping it. At the market top in 2000, the bull had been roaring for 18 years and virtually all investors had never witnessed a top and were unaware of what they were seeing. Meanwhile, informed value conscious investors are engaged in quiet distribution while the public is actively accumulating. The mirror image of what occurred during the bull’s genesis. Why distribution? Because wise investors sense danger and they protect themselves by converting stocks into cash. The top is now in and the market now enters the first phase of a bear market.

The most important thing to know about phase III is that in an extended bull market a bear market signal is ONLY valid in phase III. This is why it is critically important to know how to discern what bull market phase we are in.

Separating the Phases

Secondary Reaction or Cyclical Bear

What separates the phases is a change in market psychology. It is therefore often hard to pinpoint precisely the transition from one phase to the next. The transition is often defined by a break in the price action caused by either a secondary reaction or an actual cyclical bear market within the context of a secular bull market. A secondary reaction typically lasts from 3 weeks to 3 months and it corrects 1/3 to 2/3 of the previous advance. It arrives when least expected and serves to dampen the enthusiasm of amateur speculators. It is as necessary to the stock market as a safety valve is to a steam boiler. When too many investors have climbed aboard the valve is released in the form of a intense sell off. This sell off is often mistaken as a true reversal of the primary trend, however it is not. Instead it has simply served its function of controlling the level of exuberance while a new base is constructed to support a further advance. In some cases and entire cyclical bear market lasting from 8-24 months may be required to complete the transition. These mini bears can be particularly deceptive.

Bull Market Case Studies

Secular bull markets tend to span long periods of time. Long stock bulls can last upwards of 20 years, while commodity bull markets seem to reach a limit at around 10 years, presumably since that’s about how long it takes to bring about massive new supply which overwhelms existing demand. The oil bull of 1998 to 2008 is a good example of this. Rising prices into the mid 2000’s incentivized development of new oil supply which met demand by 2008. Since then we have been in a secular bear market in oil. In the below examples we can see how full secular bull markets can be broken down into three separate phases.

USA 1949-1960

In 1949 the public was uninterested in the stock market. Daily volume averaged less than one million shares. The general consensus was the long expected postwar depression had arrived. It was in this fearful depressing atmosphere that the greatest bull market to date was born. Through three recessions , war scares, through Korea, Suez, Lebanon, Eisenhower’s heart attack, Sputnik the market climbed the wall of worry and the averages surged upward. Finally, in early 1956 the market seemed to peak and over the next year put in a triple top. It then underwent a devastating secondary reaction lasting 3 months. This convinced the majority of market opinion that the bull was over. However there was a young independent market observer by the name of Richard Russell who noted that the market had not yet shown characteristics of a phase III. Instead the market had been busy climbing the wall of worry and hadn’t had time to become manic yet. He therefore made a market call that one should buy the correction and hold on and wait for the phase III. His career took off from there.

Do Jones Industrial Average 1949-1960
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USA 1921-1929

This epic bull market has clean and obvious separation between the 3 phases. William P. Hamilton called the end of the preceding bear on September 18th 1921, 6 points from the bottom. He stated that the stock market was acting as if there were better things in sight and he declared the beginning of the great bull market of the 1920’s. The initial phase I accumulation was met with normal skepticism yet motored higher for one year before putting in a major decline. A 7 month 20 % bear market provided the transition between phase I and II. The market then provided a gift it seldom extends. It offered the fabled “gentleman’s entry”. You can see in June 1924 it successfully retested its previous low signaling it was alright to get back into the water- unusual indeed.

Scores of wonderful books have been written about this epic bull market, my personal favorite is Rainbow’s End by Maury Klein. He gives the reader the feel on just how crazy it got in that final phase III.

Dow Jones Industrial Average 1921-1930
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USA 1982-2000

This is what I regard as the End of Empire Mega Bull as it finished up its insane blow off phase III at the time the USA empire peaked in the year 2000. This is the one I watched intently from beginning to end. I clearly remember the week it launched in August 1982, it was ever so powerful of a launch yet one would believe it. Once the blast off occurred there was absolutely no gentleman entry. It simply never looked back. It never ran out of juice for an entire 17 months. If you didn’t just close your eyes and buy you never had a chance to get in. I have recently gone back and reviewed market commentary from this time period and seasoned newsletter writers were scared to death to buy this market and they got stuck on the sidelines. Kinda reminds me of todays gold bugs.

After the impressive broad rally of almost 2 years the market finally entered a mini bear market of -20% lasting 7 months. Very typical and consistent with our other secular bulls that we have reviewed. If you had missed the accumulation phase it was now time to get on as the market climbed the wall of worry. For the next 3 years the market made its ascent with not even a 10% pullback. This is not desirable, as when a market goes that long with out a correction it sets itself up to correct all at once. This was the set-up for the the crash of 87.

Sadam’s incursion into Kuwait was the catalyst for the next mini bear market, but the market smelled victory in the first gulf war by October and discounted the victory ahead of time. By 1995 the market had been in a secular bull market for 13 years and it began to take on a character change. Note how once the market passed 4000 its angle of ascent changed permanently. This was the start of the roaring 90’s. I find it difficult to definitively classify when phase III actually began on a chart. After 1995 the market progressively gained steam. It began displaying Phase III characteristics in 1996. and by 1997 the uncontrolled tech boom was full on. I recall a workmate of mine getting cleaned out in April 1997 (notice minor blip) because he let his broker put his entire account into new issue tech stocks. These were the “cats and dogs” that start to fly in a phase III. So by 1997 I would consider the market in phase III, however after LTCM in October 1998 when Greenspan “rescued” the market with the LTCM bailout and Y2K juice it entered an accelerated Phase III. This was in my view even a greater mania than the 1929 market. It became more than just a “New Era” it became a religion. If you were not in it, you weren’t just stupid you were an infidel.

Dow Jones Industrial Average 1982-2000
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Japan 1971-1989

Japan’s super bull began by announcing Japan’s entry as a world manufacturer and ended in a credit fueled, real estate driven insane blow out. Their post bubble adaptation of Keynesian policies has insured they remain mired in a debt trap to this day 26 years later. The beginning of this bull had all the elements any savvy market operator could wish for. A double bottom followed by a launch into a 7 month surge. This move was rapidly corrected back down to its break out point where it held at support. The market then offered the rare “gentleman’s entry”…an obvious no-brainer entry point, granted to latecomers. Once offered, the market then zoomed up a correction free 250% within the next 14 months. It now paused to rest and delivered a pounding 40% bear market over the next 2 years. This bear served to separate phase I with phase II.

While western markets remained mired in stagflation throughout the 1970’s Japan powered ahead in its own private phase II advance. Stocks steadily got marked-up over the next 11 years. The word was now out and Japan was recognized as a world juggernaut. Nixon’s Watergate comment made in 1972 that he didn’t want a “cheap” Sony recorder seemed embarrassedly dated. “Made in Japan” no longer meant inferior it represented quality. As a result, the market entered a credit fueled mega blow off lasting 4 years. This final phase III market spasm could do no wrong and embodied every element of a classic phase III. Buying Rockefeller Center to Pebble Beach was a resultant manifestation of the credit binge of the blow off. Japan Inc. occupied the covers of US business publications, and we pondered how to be as smart as the Japanese. The reality was it became a credit stoked belief system where human frailties exhibited themselves to the world. A 19 year bull market leads to humans becoming full of themselves and letting a crescendo of credit creation distort all reality.

Japan Super Bull Market 1970-1990
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Oil Bull 1998-2008

Commodity bulls are somewhat different animals as they are more focused on a single product as opposed to a broad equity market. In an equity bull market we see rotation from one class of industries to another, lending it staying power. However in a single class commodity it seems to take around 10 years to bring on excess supply which ultimately kills the bull. We all know that commodity prices are often much more volatile than equity markets and we witness this in the oil bull of 1998-2008, however many of the principles remain the same.

Phase I rallied the oil market for 22 months without ever offering a gentleman’s entry. This no look back rally powered the price up 350%, a classic case of “got to be in it to win it”. Once exhausted, however the market demanded a one year 55% crushing bear market to transition itself into phase II. This ran coincident with the equity bear market, but ended a year ahead of it.

Phase II proved to be the classic mark-up event which was interspersed with normal secondary reactions along the way. We see that volume followed trend as it gradually grew as price rose. We see in the chart that the series of higher lows eventually led to a breakout above the $40 resistance level. This level essentially goes all the way back to 1980 so the channel between $10 and $40 contained the oil price from 1974 to 2004, a period of 30 years. Market price spent 30 years coiling energy which would be released in an upward impulse once it could break through its $40 resistance level. Amazingly the move all the way to $147 over the next 3 years was a forecastable event as it complied precisely with its measured move distance of channel range built out over 30 years.

The division between phase II and III is clearly defined and separated by a short 6 month mini-bear market of 38%. So quick it’s tempting to simply call this an extended secondary reaction. We can see how volume exploded as the cult of Peak oil took hold. The top of $147 was matched with a RSI indication not seen since 1980 which was the start of that 20 year secular bear market. True to form this indicator announced the start of the next secular bear market which is still in effect today 8 years later.

Oil Bull Market 1998-2008
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In conclusion, these models are examples of how secular bull markets transition from Phase I to Phase III. Each phase has its own psychological characteristics. By understanding these principles we can effectively navigate through the vagaries of a bull market as it unfolds. These are time tested methods discovered by the greatest of market analysts with no parallel to be seen on the likes of CNBC. Successful investing requires one to be a student of the market and its message combined with a disciplined approach.

Now we shall turn our attention to the budding new precious metals bull. The reader having this background in market history is encouraged to have his own personal plan in place for riding what promises to be a truly life changing investment opportunity.

Trade prudently and prosper.

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Your One Way Ticket To The Red List

by Susan Duclos, All News Pipeline

Government Software ‘Ranking’ Social Media Users As Law Enforcement Uses Programs To Calculate Your ‘Threat Score’

For social media users, platforms such as Twitter, Facebook and others are online sites  to stay in touch with family, friends, share pictures and news, meet and talk to people around the world, but to the U.S. government  it is a place to collect and store information about users and to “rank” them and determine which “list”  those users belong on…. the Red, the Blue or the Green.

Over twenty ago Steve Quayle shared information he was given by a high ranking government agency head who has since passed on, about the U.S. government putting citizens on lists with those slated for the “Red list” being people which were deemed as “enemies of globalism”  and marked for termination.

Red listers are the people that would not comply to a complete police state, would not give up their weapons, would lead a rebellion…. people like our nation’s veterans, gun owners, constitutionalists, preppers, survivalists, all people that the Obama administration has publicly targeted as “extremists”, calling them “dangerous,” and associating them with potential “domestic” terrorism.

We’re also reminded by Quayle that his source had also told him others were on that Red list in the form of the “Curative Process,” where the “weak, elderly and infirmed,”  would be systematically destroyed, along with doctors and nurses as vaccines were made mandatory (which we see 20 years after he revealed this, states are implementing mandatory vaccines) and that much of the EPA’s “toxic waste incinerator” funds were being diverted to create huge crematoriums to dispose of over 100 million bodies, with Steve stating “Guess we know who is considered toxic waste!”


To this day there are many that consider the “red list” a conspiracy theory, but what they will see below proves without a doubt that  the red list exists and how social media users themselves are now creating their own files, building their own dossiers for the government with every tweet, like, share, email, discussion and “private” chat they participate in, and it is those dossiers that will ultimately determine which list they are on…. or in their terminology, how they are “ranked.”

Following a link a reader left this morning back to its original source, opened up a Pandora’s Box of information regarding the extent of surveillance the U.S. government is conducting on its citizens and what that information is being used for.

Law enforcement is creating fake social media accounts in order to build relationships to monitor friends, events, and to gather information “about suspects they consider a high risk of being involved in a future crime,” as part of their “Predictive Crime Prevention” program.

In a social media guide for law enforcement officials published by the Justice Department, the document details, officers create fraudulent profiles even though Facebook officially bans the practice.

It is noteworthy that while Facebook bans that practice for their users, they exclude law enforcement from that particular rule, as we also see that Facebook actively works with law enforcement by monitoring and scanning private messages and photos, then reports anything they consider suspicious, leading the website American Intelligence to make the following point:

Facebook most likely wants to keep this software secret since most people do not think fondly of someone rummaging around their private messages and photos looking for criminal activities. Also how far is this system willing to go and will they soon pursue minor crimes or even thought crime?

Great question, but I would add others such as, what are the qualifications of the Facebook employee the software notifies to determine whether a random comment is suspicious? How many of the users supposedly “private” conversations are then gone through? Where are the morals and ethics in any company offering “private” messaging and then invading those messages that are supposed to private?image/YouTube

RelatedPolice are Creating Fake Accounts on Facebook So They Can Monitor You, How to Identify a Fake Account

There is no privacy online, even Google makes it a practice to scan your emails or as they phrase it in their TOS, “automated systems analyse your content,” but the invasion of privacy is not the worst of what is being done to users.

On April 14, 2016 American Intelligence reported that the U.S. government is now soliciting bids for a “citizen ranking program,”  that will “monitor information on social networks in real time and even contact users.”

 The Orwellian system will report on “sentiment analysis,” “influence identification,” will have “access to historical Twitter data,” – “ability to detect sarcasm,” and “heat maps,”  portraying  user trends by color intensity according to government documents.”

Heat maps portraying user trends by color intensity….. kind of makes  you wonder if those “heat maps” are using the colors Red, Blue and Green, doesn’t it?

Government Solicitation for the program shown below:

For anyone that doubts the “red list” exists and that social media users are buying a one ticket to the red list, the following quote from a January Washington Post article should be an eye-opener. The headline reads “The new way police are surveilling you: Calculating your threat ‘score’:”

The program scoured billions of data points, including arrest reports, property records, commercial databases, deep Web searches and the man’s social- media postings. It calculated his threat level as the highest of three color-coded scores: a bright red warning.

Does anyone doubt for one second that if states’ law enforcement is using these programs that will calculate your “threat risk” based on data obtained from your Internet usage, including postings on social media sites such as Facebook, Reddit, Twitter, Snapchat, LinkedIn, and Instagram, that the U.S. government is collecting that same data, utilizing the same programs, and using those scores to determine just what “list” you belong on?

RelatedWhy We All Should Be Concerned Over “Citizen Rankings”




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Robert Kiyosaki: Why the Ultimate Stock Market Crash Will Begin in 2016

In this segment, Christian economist Jerry Robinson is joined by author/investor Robert Kiyosaki to discuss why he believes the biggest stock market crash in history could likely begin this year! (Actually, Robert made his prediction about 2016 being the beginning of a massive stock market collapse way back in 2002. The prediction appears in a book he wrote 14 years ago entitled Rich Dad’s Prophecy.) In this fascinating interview, Kiyosaki tells Jerry why he has pulled all of his money out of the stock market and provides compelling reasons why the stock market is likely to implode later this year.

He also explains how America’s financial and tax systems are rigged for the benefit of the “rich.” The solutions Robert offers require you to know the “rules” of the economy.

Not the “textbook” version…
Not the “ideal” version…
But the real version, in all of its crony capitalistic glory.

Modern attempts at bending natural economic law will distort and finally destroy the economy. Robert is among a rare breed of men who are able to harness power over our modern upside-down economy simply by understanding the “rules” of the game. He is the 1%… and he got there on his own.

In his books, he explains in layman’s language how he and his wife Kim raised themselves up from homelessness (living out of their car) to what is now an estimated net worth of $80 million. His unique rags-to-riches story, while controversial at times, has stood the test of time. Enjoy the interview with the world’s best-selling personal finance author, Robert Kiyosaki.

Visit Robert and Kim Kiyosaki online…

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Steve Quayle on The Second Coming of Nephilim

“More and more we are finding that mythology in general though greatly contorted very often has some historic base. And the interesting thing is that one myth which occurs over and over again in many parts of the world is that somewhere a long time ago supernatural beings had sexual intercourse with natural women and produced a special breed of people.” -Francis A. Schaeffer

Evidence for the existence of the Nephilim goes beyond the biblical record. The story of Lamech, found in the Genesis Apocryphon, relates how Lamech had been away from home on a long journey. When he finally came back, he discovered to his chagrin, that his wife, Bat-Enosh (sometimes spelled as “Bit- Enosh,” i.e. the daughter of Enosh) had given birth to a baby boy in his absence. He was sure that the child had not been sired by him, and what is more, the child bore no resemblance to him or to anyone else in the family.


Adding to the mystery was the fact that the boy was extremely beautiful, and when he opened his eyes he lighted up the whole house. ”I have begotten a strange son,” said Lamech, “…his nature is different and he is not like us, and his eyes are as the rays of the sun, and his countenance is glorious. And it seems to be that he is not sprung from me but from the Angels…” (1)

Lamech did what most husbands would have done: he reproached his wife for infidelity.

Bat-Enosh, however, swore by all that was sacred that Lamech himself must have fathered the child. She had not known any other man, not a stranger and note this – not a Watcher or Heavenly Being.

How enlightening for our study! Who were these Watchers or Heavenly Beings? According to the Book of Daniel they were fallen angels (Daniel 4:13,17, 23).

Here is the statement made by Bat-Enosh as it reads in the Lamech Scroll: ”My lord and kinsman, remember my delicate feelings. How (ever), the occasion is indeed alarming, and my soul (is writhing) in it’s sheath. I will tell you everything truly.”

Then she saw how perturbed her husband was, and decided to repress her passion and indignation a little: ”My lord and kinsman, (I will ignore) delicate feelings and swear to you by the Holy (and) Great One, the Sovereign of heaven (and earth) that this seed came from you, conception was by you, and this fruit was planted by you and not by some stranger or any of the Watchers or heavenly beings. (Have done with) this troubled and marred expression and this gloomy mood. I am telling you the truth.” (2)

Lamech by this time must have begun to realize that the child born could have been conceived by one of these Watchers or Heavenly Beings. If so, his child belonged to the Nephilim.


Who Are The Nephilim? 

“…climax at the beginning.” -Arthur Custance.

Of all the imaginable phenomena on Earth, the progeny of this union between extraterrestrials and humans is the most bizarre. Man has paid little attention to them until now, for the fact of their existence has been shrouded in legend. But can they be dismissed as myth any longer? In this end time hour many strange phenomena are occurring. Jesus said, “As the days of Noah were, so shall also the coming of the Son of man be” (Matthew 24:37).

It was the wickedness of humanity and the abominable union of the supernatural with the natural that moved God to judge the world. We are fast approaching a new period of God’s wrath.

The return of these super creatures may even now be a threat to us.

Who are these beings? A clue to their identity is found in their name–Nephilim. The word itself is Hebrew, and it is first used in Genesis 6:4.

There were giants in the earth in those days: and also after that, when the sons of God came in unto the daughters of men, and they bare children to them, the same became mighty men which were of old, men of renown.

Nephilim is translated “giants” in the Authorized King James Version, but “giants” is in no way a complete description.

Commentators like Lange trace the word “Nephilim” to the root “Niphal” meaning “distinguished ones.” This corresponds perfectly with the “men of renown” at the end of Genesis 6:4, nevertheless it is not a generally accepted translation.

Others have sought the root of the word in the Hebrew consonants “npl” as found in Psalm 58:8. Here it means “miscarriage.” Accepting this theory, the Nephilim would be those superhuman beings that resulted from miscarriages. Genesis Rabbah (26:7) seems to confirm this translation when it states:

Nephilim denotes that they hurled the word down, themselves fell (naflu) from the world, and filled the world with abortions (nephilim) through their immorality. (1)

Most scholars, however, reject both these interpretations and trace the word “Nephilim” to the Hebrew root “Naphal” meaning “to fall.” The Nephilim are the “fallen ones.” A direct reference to the fallen angels who sired them. Some writers such as Ben Adam believe the word “Nephilim” refers to the fallen angels themselves and not to their offspring.

Because of some uncertainty in the translation of the Hebrew word, more and more Bible versions are now leaving the original word untranslated.

  •  Thus the New International Version renders the passage: “The Nephilim were on the earth in those days…” (Genesis 6:4).
  • This also does justice to the fact that the definite article precedes the word in the original. “The Nephilim were on the earth…”
  • The same definite article is also found in the other biblical passage where the word “Nephilim” occurs, namely, Numbers 13:33. “We saw the Nephilim there…”

Interpreting the Nephilim as “the fallen ones” dismisses the suggestion of one modern author that belief in the Nephilim could lead to racism. He fears that people would boast of having celestial blood in their veins and consider themselves superior to those of ordinary, human ancestry. To claim descent from stellar explorers could lead to a class distinction surpassing anything ever seen in society, but he need have no such qualms! If the Nephilim are stellar, they are also infernal. To claim descent from such beings would be to admit an ancestry from Hell.

Although there is no etymological evidence to justify “giants” as an accurate translation for “Nephilim,” such a translation is not without merit.

In more senses than one, Nephilim were giants.

For one thing, they were giants in size and strength. Much documentation of the exceptional physical stature and super- human strength of the Nephilim exists, and this is not in the least surprising, knowing that they were “fathered” by angels. Angels as already stated, do “excel in strength” (Psalm 103:20). They are greater “in power and might” than men of earth (2 Peter 2:1 1).

What applies to holy angels, applies equally to rebellious angels. Their moral fall does not seem to have reduced their physical prowess. The Book of Enoch states that their “height was like the tallness of cedars and whose bodies were like mountains.”

A modern author describes them in the following terms: Perverted power and strength are (thus) conspicuous attributes of fallen angels. This titanic energy is displayed in the supernatural strength demons can impart to the human body when they enter it and possess it. (2)

The New Testament supplies many such examples. One of the most noted is that of the Gadarene demoniac, who by his super-human strength could snap fetters and break chains.

The Roman Catholic Church confirms this attribute of fallen angels when it demands the presence of super-human strength before it will diagnose a person as being demon-possessed.

Actually a person under investigation must reveal the presence of three phenomena before the Roman Catholic Church will categorize him as “possessed.”

  • First, he must be able to speak in a language unknown to him.
  • Second, he must have knowledge of secret facts, previously unknown to him.
  • Third, he must possess unnatural strength beyond his age and ability. (3)

Dr. Kurt Koch, from his vast experience and extensive research into occultism, has discovered that even children or delicately built women can offer effective resistance to three or four strong men when demon possessed. (4)

Similarly, Professor Oesterreich cites a number of examples from his research, demonstrating the same super-human strength in demon-possessed people. One example he gives is of a ten-year- old boy who could be scarcely held down by three adults. Another is of a young girl who could barely be controlled by two men. (5)

In a similar vein, Robert Pearson wrote from Borneo in 1967 concerning the Dyak uprisingEvidences of demonic power were witnessed at Andjungan. Dyaks used their fists and feet to break display cases with glass flying all over the place. Some actually danced on it with bare feet but no one was injured. One missionary watched Dyaks step into pans of acid used to coagulate rubber. Undiluted, this acid can normally burn the flesh to the bone, but these men were unharmed. Others struck locked and barred doors with their bare hands, breaking them down so easily as if they had been rammed by a truck…These things are hard to understand, but we know that Satan is powerful and…able to endow men with his power when it suits his purpose. (6)

John Wesley in his journal entry for May 2, 1739, writes of a certain John Haydon, a respectable person, present in one of his meetings, and who,

“fell off his chair and began screaming terribly and beating himself against the ground …Two or three men were holding him as well as they could. The man then roared out, “O thou devil! thou cursed devil! Yea, thou legion of devils! thou canst not stay! Christ will cast thee out!”‘ Fortunately, after prayer, Wesley reports that “both his body and soul were set at liberty.”

These and countless similar examples are reminiscent of what happened to the seven sons of Sceva in Acts 19. A demonized man out-numbered seven to one, was able to overcome all seven by a phenomenal show of strength.

The Bible states that they were fortunate to escape from the house naked and wounded.


In Genesis 6, where the word “Nephilim” is first used, we are told that the Nephilim appeared on the Earth just before the Flood, and that their appearance was the main reason for the Flood.

There followed another incursion of these fallen angels at a later date.

  • We read in Genesis 6: “The Nephilim were on the earth in those days and also afterward…” (N.I.V.).
  • This data is found in Numbers 13:33: “We saw the Nephilim there (the descendants of Anak come from the Nephilim)” (N.I.V.).

This second eruption was probably on a more limited and restricted scale than the first. Nevertheless, God ordered their complete destruction.

One has often wondered at the severe an extreme measures that God asked Joshua to put into effect once he entered the land of Canaan. God commanded him to “utterly destroy them.” We have found it difficult to reconcile this with the character of God. One can only surmise that God had a special reason to issue such a command. Could it be that God knew the heritage of these Nephilim?

God was aware that the Canaanites and their neighbors manifested the whole gamut of demonical practices, and that they were a threat to the character and destiny of His chosen people, who were entering the land at that time. This is why He warned the Israelites not to imitate the occult practices of these people whom they dispossessed. With the same unmatched anger that He had displayed in Genesis 6, God orders the complete extermination of the inhabitants of Canaan.

“But thou shalt utterly destroy them; namely, the Hittites, and the Amorites, the Canaanites, and the Perizzites, the Hivites, and the Jebusites; as the Lord thy God hath commanded thee” (Deuteronomy 20:17).

However, Israel, as so often in her history, failed to obey God, and there is reason to believe that some of the Nephilim survived (Joshua 13:13, 16:1 0; Judges 1:28-34).

The progeny of these Nephilim went under various names. We read of, the Anakim, descended from Anak (Numbers 13:28), the Rephaim, descended from Rapha, the Zamzummimsthe Emims, the Avims, etc.

All shared the characteristics of being huge, tall and strong. Rabbi Bahya ben Asher, a Spanish Cabalist, claimed the Nephilim were heads of the family called “sons of God.” They were so called because terror fell on those who saw them. As the virility of the stock declined, they were called Anakim and later Rephaim(7) Here is an Old Testament description of the Emim:

“The Emim dwelt therein in times past, a people great, and many, and tall, as the Anakim; which also were accounted giants, as the Anakim; but the Moabites called them Emims. (Deuteronomy 2:10, 11).”

These men were such giants that the Israelite spies who went in to reconnoiter the land, cowered before them: “And there we saw the giants, the sons of Anak, which come of the giants: and we were in our own sight as grasshoppers, and so we were in their sight.” (Numbers 13:33).

Flavius Josephus, the noted Jewish historian of the first century A.D., described these giants as having “bodies so large and countenances so entirely different from other men that they were surprising to the sight and terrible to the hearing.” (8) And he adds that in his day, the bones of the giants were still on display!

Deuteronomy 3:11 describes one of these giants in more detail: “For only Og king of Bashan remained of the remnant of giants: behold, his bedstead was a bedstead of iron; is it not in Rabbath of the children of Ammon? Nine cubits was the length thereof and four cubits the breadth of it, after the cubit of a man.”

A super king-sized bed! In modem measurements it was 18 feet, 6 inches long, and 8 feet, 4 inches wide!

Some of these giants carried spears that weighed from ten to twenty-five pounds. One carried a spear whose staff was “like a weaver’s beam” (II Samuel 21:19). Goliath wore a coat of armor that weighed 196 pounds, and he was said to be about nine feet tall.

Some of these giants had six fingers on each hand and six toes on each foot.


These giants were not confined to the Middle East. Two dozen human footprints of abnormal size have been found in the Paluxi riverbed, Texas, some of them measuring eighteen inches long. Other giant markings have been discovered in such diverse places as Colorado, New Mexico, Arizona and California.

In the Mt. Vernon area of Ohio, Dr. Wilbur G. Burroughs of the Geological Division of the Berea College, Kentucky, reported finds of human foot prints 23.75 cm. long and 10.25 wide! Near Antelope Springs, Utah, William Meister discovered in 1968 two human footprints 32.5 cm. long and 11.25 wide.

Similar giant footprints have been discovered in other countries especially in the Mt. Victoria region of Australia.

Not only do we have footprints of giants but actual skeletons as well. In 1936 Larson Kohl, the German paleontologist and anthropologist, found the bones of gigantic men on the shore of Lake Elyasi in Central Africa. Other giant skeletons were later found in Hava, the Transvaal and China. The evidence for the existence of giants is incontrovertible. “A scientifically assured fact,” says Dr. Louis Burkhalter. (9) 


The Nephilim also were giants in knowledge. According to the Book of EnochGod was incensed against the fallen angels partly because they disclosed certain classified information to humans. The ancient world associated demons with special esoteric knowledge and with superior intelligence. The word “demon” in Greek (daimon) comes from the root meaning “knowledge” or “intelligence.”

The Scriptures also testify to the fact that demons have access to knowledge and information denied to ordinary mortals. We read in the Gospels how they recognized and acknowledged the deity of Christ when humans seemed totally blind to the fact.

When the Gaderene demoniac saw Jesus, he fell down before him, and cried out, “What have I to do with thee, Jesus, thou Son of God most high?” (Luke 8:28).

These demons recognized Jesus at the beginning of His ministry, way ahead of His own disciples.

In the Book of Acts, with the same supernatural knowledge, demons recognized the mission and message of the Apostle Paul. The possessed damsel at Philippi cried, “These men are the servants of the most high God, which shew unto us the way of salvation” (Acts 16:17).

This happened at a time when the people of Philippi had no idea who Paul was, nor did they know the nature of his mission. We cannot but note that every recorded statement made by demons in the New Testament concerning Christ or Paul was one-hundred percent accurate.

Clement of Alexandria suggested an interesting reason for this superior knowledge of demonsIt is evident, since they are demoniac spirits, that they know some things more quickly and more perfectly than men, for they are not retarded in learning by the heaviness of a body.

Examples of this trait in demons is supplied by various missionary organizations. They tell us how people possessed by evil spirits acquire superior knowledge, far above that of their brethren. In an editorial in Christian Life Magazine we find these words concerning the murder of five young American missionaries in the jungles of Ecuador in 1956:

“Indians at Arajuno mission base knew in a few hours what had happened when five missionaries deep in Ecuador’s Auca territory in 1956 failed to make radio contact with anxiously waiting fellow missionaries. How? They asked a local witch doctor. He obliged by falling into a trance, calling up his favorite demons and asking them to tell him where the missing missionaries were. According to the friendly Indians, they heard demons leave the scene and, in a short time, returned with the message that the missionaries were in the Curaray River with Auca lances in them.”

John L. Nevius, a medical missionary in China at the end of the last century gathered a significant compendium of data on this subject. After sending a detailed questionnaire to Protestant missionaries all over China, he gleaned a vast amount of information about the symptoms of demonism.

One characteristic he found again and again was the prevalence of superior knowledge and intelligence in the possessed person–even on subject matters of which the person had no prior knowledge.


This may well supply the key to the great knowledge and expertise that characterized certain men in ancient times. As already seen, such knowledge and expertise by “primitive” men continue to defy explanation. P.J. Wisemanadmits to this mysterious factor: It was expected that the more ancient the period, the more primitive would excavators find it to be, until traces of civilization ceased altogether and aboriginal man appeared. Neither in Babylonia, nor Egypt, the land of the oldest known habitations of man, has this been the case. (10)

Arthur Custance pertinently states this strange sequence right at the beginning of human history: “…an unbelievably long time with almost no growth; a sudden spurt leading within a very few centuries to a remarkably high culture; a gradual slowing up, and decay, followed only much later by recovery of lost arts and by development of new ones leading ultimately to the creation of our modern world. What was the agency which operated for that short period of time to so greatly accelerate the process of cultural development and produce such remarkable results?” (11)

Could this agency be the Nephilim? Could this expertise have been imparted by beings from outer space? And could this explain the mysteries surrounding Stonehenge, the Mayan Caracol, Tiahuanaco, the Bay of Pisco, and particularly the Great Pyramid? Did the knowledge necessary to construct these monolithic structures come from the Nephilim? Were they the ones responsible for what Custance calls the “climax at the beginning”? (12)

As for the Great Pyramid, many scientists suggest a date back in the generations preceding the Flood. If so, those happen to be the very times of the Nephilim, the generations of the “giants” and of the “men of renown.” But what if it could be proven that the Great Pyramid was not built until after the Flood? There is still no problem.

Could not Noah and his family have carried this information with them into the Ark, and transmitted it later to their descendants? According to the Babylonian version of the Flood, the “Chaldean” Noah was made to bury his books before the Flood, and then disentomb them after emerging from the Ark.

But there is still another possibility: Could this knowledge have come from the second eruption of the Nephilim, which occurred after the Flood?


If we go further back, could one find a linkage between this esoteric knowledge and the “tree of knowledge” found in the Garden of Eden? We know that this was the one tree whose fruit Adam and Eve were forbidden to eat, or even touch (Genesis 2:17, 3:3). Why was this tree so named?

Few commentators have shed any light on its meaning. Many dismiss the account as mere symbolism, without even telling us what the symbolism is supposed to represent. Others look upon the passage as poetry, conveniently forgetting poetry is often the truest history. It not only relates facts but interprets them as well. Poetry has been described as “history written from the inside rather than from the outside, and therefore incomparably truer. (13) Or in the words of British author Graham Green, “Poetry is the photography of the invisible.”

Supposing we applied this principle to the “tree of knowledge.” If it is a symbol, then obviously it must be a symbol of something. Or if poetry, then it must convey some inner truth. But why should one speculate and search for cryptic meanings when the truth may well be on the surface. Obviously, the “tree of knowledge” must have something to do with knowledge, or why should it be so named? It undoubtedly contained the key to certain divinely classified material that God did not want early man to possess. But somehow, and it could well be by means of the Nephilim, early man did come to possess that knowledge–at least a part of it.

This was knowledge that primitive man could never have discovered on his own. Indeed, it was knowledge beyond the capacity of modern man! Kelly Segraves reminds us: “With all our intelligences, we cannot figure out how pyramids were constructed.” (14)

We ask again, could this intelligence have been transmitted by the “sons of God”?

Egypt is not the only country that has pyramids. A whole network of them can be found around the planet–in Cambodia, Shen Shi, ChinaThailandMexicoNazcaYucatanAlaska… How does one account for such advanced scientific technology, on such a universal scale, and in such prehistoric times?

Could the answer be man’s longevity at that time? The average age span before the Flood was close to nine hundred years– thirteen times the proverbial “three score and ten.” This, of course, provided exceptional opportunity for learning, research, experimentation and the accumulation of knowledge. If only modern-day scientists could live that long! But longevity alone could never account for the specialized knowledge that our forefathers possessed. Their awesome expertise indicates a source outside of themselves. No other viable explanation can be offered except that mankind was preprogrammed from the depths of space.

The Bible not only supplies the key to the source of this knowledge, but to the way it was transmitted–space-beings called “fallen-angels.” As we have seen, such extraterrestrials possess superior knowledge. This they transmitted to man in direct contradiction to God’s wishes.

Satan, the leader of fallen angels, is himself a creature of rare brilliance and inimitable genius. The Latin translation of his name, “Lucifer” (from the Hebrew “Helel”), comes from a root meaning “brilliance” or “magnificence.” This is a trait he shares with his cohorts. He and they have access to classified, divine information, and are cognizant of hidden things (See Acts 16:16, 17).

According to Professor C. S. Dickerson, “The source of their knowledge is found in their superior created nature and in their vast experience, as they lived through many thousands of years observing and collecting information.” (15)

John L. Nevius, after surveying demon possession in China, documents the amazing knowledge revealed by the demon- possessed:

“Many persons while demon possessed give evidence of knowledge which cannot be accounted for in ordinary ways. They often appear to know of the Lord Jesus as a divine person and show an aversion to, and a fear of Him. They sometimes converse in foreign languages of which in their normal states they are entirely ignorant.” (16) 


Betty and Barney Hill of New Hampshire, while returning home from a vacation in Canada in 1961, spotted a flying saucer and pulled off the road to watch it land. The engine of their car went dead, but they have no recollection of what happened after that. The next thing they remembered was being close to home… sixty miles south! After this bizarre experience, they suffered from nightmares, anxiety syndromes and ulcers. They finally consulted a psychiatrist, the noted Dr. Benjamin Simon of Boston.

By the use of hypnosis, he was able to induce from them–quite independently of each other–the story of those missing hours. Both told the same story. Taken aboard the flying saucer, they underwent physical examination by the humanoid occupants. Tape recordings were made of their story (given under hypnosis), and a book was published. Later, an NBC television movie was made of the event.

Stanton T. Friedman, a nuclear physicist, studied these reports and was greatly impressed. But what finally convinced him was the map drawn in 1964 by Betty Hill of a star system unknown to science at the time. Betty claimed that she had been shown this map aboard the UFO, and revealed the details of it under hypnosis. The astronomers who examined the map at that time, dismissed it. But since 1964 new evidence has appeared on the subject–star systems that were invisible in 1964 have now been discovered. And an amazing fact has come to light.

Dr. Friedman explains: “Using these new data, a computer came up with a map of the Zeta Reticuli system–faint stars 220 trillion miles away – which astronomers agree matches Mrs. Hill’s precisely.” (17) 


Giants in wickedness is another distinction of the Nephilim. Sired by demonic beings, their character and activity certainly reveal the nature of the “fallen ones.”

Many of the legends surrounding the cross breeding between the natural and the supernatural depict subhuman behavior. To the last one, the semi-gods of mythology–Zeus (the Roman Jupiter), Poseidon (Neptune), Eros (Cupid),Hermes (Mercury)–were violentwantonlustful and promiscuous beyond restraint. They constantly engaged in sex orgies and seduction, and produced the strangest of offspring.

Emil Gaverluk tells of Zeus“He disregarded marriage laws and engaged in love affairs with members of both sexes. Zeus married Hera, his sister. One of the loves of Zeus was Europa. He seduced her by becoming a bull and carrying her away. Another was Leda, daughter of Thestios, King of Aetolia and the wife of Tyndereus, King of Sparta. But this did not stop Zeus…Athene was the daughter of Metis by Zeus. Metis tried to evade him. He seduced her. She warned him that if he did this again and the child was a male, that child would depose and conquer him. Zeus didn’t like the sound of this and took no chances. He swallowed the child whole. Zeus’ amorous victories illustrate the actions of uncontrolled spirit-beings lusting after human flesh.” (18)

This is only one example from Greek mythology of the evil associations between spirit-entities from space and human beings from Earth. But it was not only the spirit-beings who acted this way; they seem to have passed on the trait to their descendants.

The Nephilim, in this respect more than in anything else, were close imitators of their fathers. They reflected the works of their demon ancestry. And just as there are degrees of goodness among the saints, so there are degrees of evil among the demons. Evidence of this is recorded in Matthew 12:43-45. It tells of the unclean spirit returning to occupy the house from which he had been displaced, and returns with “seven other spirits more wicked than himself.”

Irrespective of the degree of evil, all demons are regarded by God as vile and depraved. A recurring biblical adjective is “unclean” (Matthew 10:1, Mark 1:27, 3:11). These spirits are both morally and spiritually unclean, and the same distinctive applies to their progeny on Earth. What is more, those who traffic with such beings, frequently end up like them. Indeed such is the degree of their degradation that the Lord abandons them to their own depravity. Romans 1:24-32 graphically states that “God gave them up.” The depths of their degradation and the infamy of their immoralities, puts them on a level lower than animals. Abandoned by God to the consequences of their wickedness, and deranged by demonic harassment, people have been driven to insane asylums and even to suicide.

Is it any wonder when incorrigible spirit-beings and rebellious humans cooperated to pollute Earth, to seek genetic control and produce hybrids that threatened the race itself, and even tried to thwart the very plan of God, that Godshould intervene in a judgment terrible to behold? (19)


The Nephilim were giants in pride also. Lord Acton claimed that power corrupts, and absolute power corrupts absolutely. So does knowledge. With their superior intelligence and knowledge, the Nephilim soon succumbed to the sin that became the downfall of Lucifer–pride (1 Timothy 3:6). Like Lucifer, his followers also dreamed of being gods, desiring to control and rule the Earth. Their advanced knowledge was the desired diet for their egoism. Such knowledge wedded to an already arrogant nature led to self-deification.

They craved divine honors and religious worship. This was the ambition of Lucifer, of the Nephilim, and of every fallen creature. They were propelled in all that they did by self-will, self-determination, self-glorification, and ultimately self-deification. No wonder Josephus refers to the Nephilim as “sons who were overbearing and disdainful of every virtue.”

Man’s fascination with the occult and otherworld phenomena is amazingly significant today. At no other time has he been more conditioned to accept the possibility of extraterrestrial life. Having once escaped his Mother Earth, man now strains at his celestial tether, wondering what or who lies beyond the final frontier. With this starward look, the stage could be set for the coming of the unwelcome guests from space.

The “days of Noah” are again here; perhaps even now agents from another realm are plotting the return of the Nephilim.



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