InsidersPower

AnInterAnalystPublication August2016

 InsidersPower

Onthesurface,thingsseemprettyquietinAugust2016.
ThebiggestnewsstoriesareaboutthespeculationsurroundingDonaldTrumpschoiceofrunningmate,
thestockmarketintheU.S.keepssettingnewalltimerecordhighs,andthemediaseemscompletely
obsessedwithTaylorSwiftslovelife.Butunderneaththesurface,itisaverydifferentstory.Asyouwill
seebelow,theconditionsforaperfectstormarecomingtogetherveryrapidly,andtherestof2016
promisestobemuchmorechaoticthanwhatwehaveseensofar.
LetsstartwithChina.OnTuesday,aninternationaltribunalinTheHagueruledagainstChinas
territorialclaimsintheSouthChinaSea.TheChinesegovernmentannouncedaheadoftimethatthey
donotrecognizethejurisdictionofthetribunal,andtheyhaveabsolutelynointentionofabidingbythe
ruling.Infact,Chinaisbecomingevenmoredefiantintheaftermathofthisruling.Wearenthearing
muchaboutitintheU.S.media,butaccordingtointernationalnewsreportsChinesepresidentXi
JinpinghasorderedthePeoplesLiberationArmytoprepareforcombatwiththeUnitedStatesifthe
ObamaadministrationpressesChinatoabandontheislandsthattheyarecurrentlyoccupyinginthe
SouthChinaSea...
Chinese president Xi Jinping has reportedly ordered the Peoples Liberation Army to prepare
for combat, reports Arirang.com. U.S.based Boxun News said Tuesday that the instruction
was given in case the United States takes provocative action in the waters once the ruling is
made.
A U.S. aircraft carrier and fighter jets were already sent to the region in anticipation of the
ruling, with the Chinese Navy also carrying out exercises near the disputed Paracel islands.
Last October, China said it was not frightened to fight a war with the U.S. following an
incident where the guidedmissile destroyer USS Lassen violated the 12nautical mile zone
China claims around Subi and Mischief reefs in the Spratly archipelago.
Meanwhile,therelationshipbetweentheUnitedStatesandRussiacontinuestogofrombadto
worse.TheinstallationofamissiledefensesysteminRomaniaisjustthelatestincidentthathasthe
Russiansabsolutelysteaming,andduringapublicappearanceonJune17thRussianPresidentVladimir
Putintriedtogetwesternreporterstounderstandthattheworldisbeingpulledtowardwar...
We know year by year whats going to happen, and they know that we know. Its only you that
they tell tall tales to, and you buy it, and spread it to the citizens of your countries. You people
in turn do not feel a sense of the impending danger this is what worries me. How do you
not understand that the world is being pulled in an irreversible direction? While they
pretend that nothing is going on. I dont know how to get through to you anymore.

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AndofcoursetheRussianshavebeenfeverishlyupdatingandmodernizingtheirmilitaryinpreparation
forapotentialfutureconflictwiththeUnitedStates.JusttodaywelearnedthattheRussiansare
workingtodevelopahypersonicstrategicbomberthatisgoingtohavethecapabilityofstrikingtargets
withnuclearwarheadsfrom outer space:
The Russian Strategic Missile Forces Academy is developing a hypersonic strategic bomber
capable of striking with nuclear warheads from outer space, Lt. Col. Aleksei Solodovnikov told
RIA Novosti on Wednesday.
A trial model of Russia's nuclearcapable outer space strategic bomber will be developed
by 2020, according to its developer.
Flying Ahead: Russia Looks
Forward to 6th Generation Jet
Technology
Russian commander of the
Strategic Missile Forces (SMF),
Colonel General Sergei
Karakayev, had earlier reported
that the Russian Strategic Missile
Forces Academy has already
developed and tested an engine
for the experimental aircraft.
The engine is expected to be showcased at the Army2016 International Military Technology
Forum, which is set to take place on September 611 in the Moscow Region.
The idea is that the bomber will take off from a normal home airfield to patrol Russian
airspace. Upon command it will ascend into outer space, strike a target with nuclear warheads
and then return to its home base, Solodovnikov told RIA Novosti.
He added that the jet will be very capable and will need only onetwo hours to reach any place
on Earth through outer space.
We are cooperating with Russias Central Aerohydrodynamic Institute on the design of an
airframe and the aircraft's characteristics. I think that its liftoff mass must be 2025 metric
tons for it to be a strike aircraft. It will [be able to accelerate to] hypersonic speed in rocket
mode," he added.
Unfortunately,theObamaadministrationdoesnotfeelasimilarsenseofurgency.Thesizeofour
strategicnucleararsenalhasdeclinedbyabout95percentsincethepeakoftheColdWar,andmanyof
ourinstallationsarestillactuallyusingrotaryphonesandthekindof8inchfloppydisksforcomputers
thatwerewidelyusedbackinthe1970s.

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ButIdontexpectwarwithChinaorRussiatoeruptbytheendof2016.Ofmuchmoreimmediate
concerniswhatisgoingonintheMiddleEast.ThesituationinSyriacontinuestodeteriorate,butitis
Israelthatcouldsoonbethecenterofattention.
BackinMarch,the Wall Street JournalreportedthattheObamaadministrationwantedtorevivethe
peaceprocessintheMiddleEastbeforeObamaleftoffice,andthataUNSecurityCouncilresolution
thatwoulddividethelandofIsraelandsettheparametersforaPalestinianstatewasstilldefinitelyon
thetable...
The White House is working on plans for reviving longstalled Middle East negotiations before
President Barack Obama leaves office, including a possible United Nations Security Council
resolution that would outline steps toward a deal between the Israelis and Palestinians, according to
senior U.S. officials.
Andjustthisweek,theWashingtonPostreportedthattherewererenewedrumblingsaboutjustsuch
aresolution...
Israel is facing a restive European Union, which is backing a French initiative that seeks to
outline a future peace deal by years end that would probably include a call for the withdrawal
of Israeli troops and the creation of a Palestinian state. There are also rumblings that the
U.N. Security Council might again hear resolutions about the conflict.
Foryears,BarackObamahasstressedtheneedforaPalestinianstate,andnowthathissecondtermis
drawingtoaclosehecertainlyrealizesthatthisishislastchancetotakeactionattheUnitedNations.If
heisgoingtopullthetriggerandsupportaUNresolutionformallyestablishingaPalestinianstate,itwill
almostcertainlyhappenbeforetheelectioninNovember.Sooverthecomingmonthswewillbe
watchingthesedevelopmentsverycarefully.
Now is the time for real leadership that can revive and reaccredit the twostate solution as
President Obama enters his final months in office. And he can do this he can lay the
groundwork for a twostate agreement in the future by supporting an Israeli
Palestinian twostate resolution in the United Nations Security Council.
Such a resolution would restore U.S. leadership in the IsraeliPalestinian arena. It would
preserve the nowfoundering twostate outcome. And it would be a gift to the next president,
leaving her or him constructive options for consequential actions in the IsraeliPalestinian
arena, in place of the everworsening, politically stalemated status quo there is today.
And it is interesting to note that there is an organization called Americans For Peace Now
that is collecting signatures and strongly urging Obama to support a UN resolution of this
nature. The following comes from their official website . . .
Sadly,aUNresolutionthatdividesthelandofIsraelandthatformallyestablishesaPalestinianstate
wouldnotbringlastingpeace.Instead,itwouldbethebiggestmistakeoftheObamaera,anditwould
setthestageforamajorwarbetweenIsraelandherneighbors.

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Atthesametimeallofthisisgoingon,theglobaleconomiccrisiscontinuestoescalate.Eventhough
U.S.financialmarketsareingreatshapeatthemoment,thesamecannotbesaidformuchoftherestof
theworld.
JustlookatthecountrythatishostingtheOlympicsthissummer.Brazilismiredintheworsteconomic
downturnthatithasseensincetheGreatDepressionofthe1930s,andRiodeJaneirosgovernorhas
declaredastateoffinancialemergency.
Nextdoor,theVenezuelaneconomyhascompletelycollapsed,andsomepeoplehavebecomeso
desperatethattheyareactuallyhuntingcats,dogsandpigeonsforfood.
Elsewhere,Chinaisexperiencingtheworsteconomicdownturnthattheyhaveseenindecades,the
Japanesearestilltryingtofindtheendoftheirlostdecade,andthebankingcrisisinEuropeisgetting
worsewitheachpassingmonth.
Inquiteafewarticlesrecently,Ihavediscussedtheongoingimplosionofthebiggestandmost
importantbankinGermany.ButIamcertainlynottheonlyonewarningaboutthis.Inoneofhisrecent
articles,SimonBlackalsocommentedontheturmoilatthemostdangerousbankinEurope...
Wellcapitalized banks are supposed to have doubledigit capital levels while making low risk
investments.
Deutsche Bank, on the other hand, has a capital level of less that 3% (just like Lehman), and an
incredibly risky asset base that boasts notional derivatives exposure of more than $70 trillion,
roughly the size of world GDP.
ButofcourseDeutscheBankisntgettingalotofattentionfromthemainstreammediarightnow
becauseofthestunningmeltdownofbanksinItaly,SpainandGreece.HereismorefromSimonBlack..
.
Italian banks are sitting on over 360 billion euros in bad loans right now and are in desperate
need of a massive bailout.
IMF calculations show that Italian banks capital levels are among the lowest in the world, just
ahead of Bangladesh.
And this doesnt even scratch the surface of problems in other banking jurisdictions.
Spanish banks have been scrambling to raise billions in capital to cover persistent losses that
still havent healed from the last crisis.
In Greece, over 35% of all loans in the banking system are classified as nonperforming.
EventhoughU.S.stocksaredoingwellforthemoment,thetruthisthattrillionsofdollarsofstock
marketwealthhasbeenlostgloballysincethistimelastyear.Ifyouarenotfamiliarwithwhathasbeen
goingonaroundtherestoftheplanet,thismaycomeasasurprisetoyou.Duringmyrecent
appearanceatMorningside,Isharedsomeverystartlingchartswhichshowhowdramaticallyglobal

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marketshaveshiftedoverthepast12months.YoucanviewthesegmentinwhichIsharedthese
chartsrighthere...
Iwouldreallylikeitiftherestof2016wasasquietandpeacefulasthepastcoupleofdayshavebeen.
Unfortunately,Idontbelievethatisgoingtobethecaseatall.
Thestormcloudsarerisingandtheconditionsforaperfectstormarebrewing.
Sadly,most peoplearenotgoingtounderstandwhatishappeninguntilitisfartoolate.
Therealityisthatthisispreciselytheclimatethathappensbeforeeverymajorwar.Letspraythistimeit
isdifferent.
PleasefollowyourWealthPreserverarrowsandstayclosetoyourmarketalertsandInsidersPower
newsletter.

Current Bullish & Bearish Positions

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Ontheweeklylevel,indeedwehavebeengenerallytradingupsincethelowmadeweekofJune27that
1991.68forthepast3weeks,whichhasbeenasharpmoveof9.23%percentinastarkpanictype
advance.Thebroaderperspective,thiscurrentrallyintotheweekofJuly18threaching2175.63has
exceededtheprevioushighof2120.55madebackduringtheweekofJune6th.Wehaveseenarallyso
farfromthelastlowof1991.68forthepast3weeks.Onlyabreakofthatlowwouldsignalatechnical
reversaloffortune,however,themarketremainsstrongatthistimeandremainsabovemomentumand
hasbeentradingupforthepast9weeksoverall.

Lookingatthelongertermmonthlylevel,wedidseeacorrectionfromthekeyhighofMay2015for9
months.Sincethatlow,however,wehaveconsolidatedfor4months.

Universally,mybroadertermanticipationrecognizesabroaderbullmarkettrendsincewehavenot
electedanycurrentsellsignalsonourmodel.Furthermore,theS&P500CashIndexremainspositive
sincewearetradingabovelastyear'shigh.Obviously,thismarketremainsinabullish.Resistancenow
standspurelyonatechnicalbasis.Sofar,thismarkethasremainedinabearishtonesincethe2134.72
majorhighestablishedbackin2015.Viewingtheimmediatetrendisturningbullishsincethismarket
hasexceededtheweekofJuly11th'shigh.Thisisfurtherillustratedgiventhefactlastmonthalsoclosed
higher.
PleasefollowyourWealthPreserverarrowsandkeepreadingourprivatemarketalert;theyare
astoundinglyprofitable.

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Abodyofresearchinpositivepsychologysuggeststhatoptimismhasanumberofbenefits:social,
psychologicalandphysical(Schneider,Grumman,&Coutts,2011).Optimismhasbeencorrelatedwith
improvedmentalandphysicalhealth,betterworkandeducationaloutcomes,andrichersocial
relationships.
Whileoptimismappearstobeahealthyorientation,thingsarenotquitesosimple.Someresearchers
identifytwoclassesofoptimism:realisticandunrealistic(Weinstein,1980).Unrealisticoptimistsareat
riskforselfdeception,especiallyindomainssuchasriskassessment(Collingwood).Realisticoptimists,
ontheotherhand,moresuccessfullyincorporatedataaboutsituationsandevents,balancingthebest
ofoptimisticandpessimisticperspectives.Therealisticoptimistpointofviewcouldbesummedupby
theadage:"hopeforthebest,preparefortheworst".

Tomakemattersmorecomplex,theideaofoptimismandpessimismasdispositionalattributesisgiving
waytoamorenuancedviewoftheseconstructs(Paul,2011).Neitherperspectiveisinherentlygood
nor"bad",bothcanbeadoptedasneeded,bothmaybeconsideredhighlyfunctionaldependingonthe
situationalcontext.

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Insomesituations,"defensivepessimism"canbeapowerfulmotivatortomakebetterchoices.For
example,beingpessimisticabouttheeconomymaybeamotivatortoavoiddebtandmanageyour
moneymoreeffectively.
Personally,I'vealwaysconsideredmyselfsomethingofarealist.
Onascaleofhalfemptytohalffull,mostofthetimeIthink"oh,there'saglasswithsomewaterinit,
let'smeasureit".
Insomecontexts,I'mmoreoptimistic(e.g.,ifI'mworkingonthisnewsletterandIhaveasufficient
degreeofcontroloverit,I'musuallyreasonablyoptimisticthatitwillsucceed),inothercontexts,I'm
lessoptimistic(e.g.,ifI'moutfishingonaSundaymorning,andthetidesareallwrongandI'moutof
bait,I'mreasonablypessimisticaboutbringinghomedinner).
InsidersPower
Ibelievesocionomics,socialmood,andcapitalflowsdriveeconomiesincyclesglobally.Becauseofthe
WorldWideWebthereisnotimeinhistorythatallowsforeasierdatagatheringandtrackingbecause
allcountriesarenowhighlycorrelated.
ThisInsidersPowerNewsletterisacompilationofcurrenteconomicarticleswritten,notbyus,butby
globalauthorswithinthelast90days.Theyrepresentthecurrentglobalsocialmoodandcreatesa
globalPointofViewthathas,bytheway,beenextremelyaccuratefromancientGreeceandRometo
ourowncurrentsociety.
Itrepresentscurrenteconomicrealityonaglobalscalewhetheritspositiveornegative.Ultimately,Be
mindful,preparedandverydiversifiedandmostimportantly...watchyourWealthPreserver
SubscriptionGreenandRedArrowsontheequitymarkets.Itdeliverstheopportunityofanoptimistic,
positiveandprofitableoutcomeforyou.
Basedonthecriteriaalreadyoutlined,IbelieveInsidersPowertobeanextremelyREALISTICnewsletter
thatcarriesbothOPTIMISTICandPESSIMISTICcontentthatdeliversanOPPORTUNISTICoutcome.
Ultimately,Ijusthopeyouenjoyitscontentandprofithandsomely.
InsidersPowerhasreceivedbothpositiveandnegativecommentsbyreadersandweappreciatebothso
pleaseopineanytimetoInsidersPower@InterAnalyst.us.
Bytheway...whichpointofviewdominatesyourpersonality?Nowaskyourfriendorspousetosee
iftheyagree!

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