 Hi, and welcome to Bright Minds from Tick Mill. I'm your host, Patrick Munnally, and in this series, we're setting out to answer some of the most commonly asked questions around investment and trading through entertaining and insightful conversations with seasoned insiders. As traders, we all have to accept some degree of market uncertainty, and it could be argued that our main objective as traders is to correctly predict future market conditions and act accordingly. Any successful trader will have a system that informs where they put their money and when, whether it's based on reviewing past performance of a product or commodity or relying on intuition or gut feelings. But what if examining market conditions across different cultures along with historical events and the performance of currency spanning hundreds of years, patterns could be uncovered that could successfully predict future events and market behavior. Our guest today, Martin Armstrong, has dedicated his entire professional career to doing just that. For nearly 50 years, Martin has been at the forefront of economic forecasting. His economic confidence model has been used to identify cycles within the global economy and to predict major economic events. His Socrates platform uses AI and computer modeling to power an innovative market analysis tool that can be used to identify and analyze patterns, trends and cyclical activity of capital markets around the world. I also note that your appearance today, Martin coincides with Pi Day, March 3rd 14th, a number I know is close to your heart. Your appearance is also timely given the current banking crisis of which you've witnessed quite a few. Martin is truly a market maverick and an innovator, and we're excited to have him on the show today. Martin, welcome to Bright Minds. Could you tell us how you went from trading coins and stamps as a teenager to move into the world of market and cycle analysis and prediction? Well, actually, I was an early trader, starting really in the precious metals. And when Britain Woods collapsed in 71, effectively, there was nobody around that even understood currencies, because it was all fixed since 1934. And I happened to have a client, Walter Zenglerly, who was one of the executive VPs at the first bank that went down. And that was Franklin National Bank in New York. And he says, look, you know about this kind of stuff, would you come take a look? I said, okay, fine. And effectively, that was the bank that started MasterCard. And they went down because of a 7.5% move in the Italian lira. So after that, it was like, you know, every crisis that came about was like, go get the guy that did that one. You know, it was pretty much that was it because I mean, none of this stuff was taught even in school. I mean, all your theories of, you know, Keynesian economics, all that is all based upon fixed exchange rates. So nobody understood currency at all. And so that's really where I would say we expanded globally because we were the only place that people could go to to understand what, you know, currencies were doing. How do you, you know, even trade them? Why do they move up and down? I mean, this was all just one giant black hole back then. So I guess it's from your overview or your approach to historical analysis that you were able to employ methods to identify cycles and patterns within currency markets? Yes. Well, I mean, what I basically found was that all markets trade the same because the common denominator is human nature. Basically, we panic the same way regardless of its wheat, if it's corn, if it's gold or it's a currency. So when you're really looking at a chart, you're looking at humans and how they're interacting with that instrument. That's the commonality. So it's not that, you know, gold per say is has some secret way of trading differently than, you know, any other currency, the Euro or the old Deutschmark. How did you make the link between the historical analysis of cycles? I mean, some of your work goes back to the Roman period and then bringing that forward to, I guess, like almost modern market theory and analysis. How did you make that link? The Roman coins are actually a fantastic documentary in the sense that the debasement that you see where silver coins go from silver to virtually just nothing but a piece of bronze scrapped. Only took eight years. I mean, Rome lasted for a thousand, but it fell apart in eight years. So I mean, even studying, you know, ancient economies and they were talking about, you know, if there was an earthquake in Asia, which was Turkey back then, it would send a panic off town. The Roman Effective Wall Street, which at that time, I mean, sister wrote about things like this. So panics and financial cycles have always been with us. And it's interesting you mentioned sister O then, because obviously you have developed the Socrates platform. Can you tell us a bit more about that and what it offers to users? Initially, my father was a lawyer. He wanted me to follow in his footsteps. I mean, I studied law, but effectively, it just got to the point. I really wasn't that interested in that. And so he pushed me off into computers. You know, I just listened to my father. I didn't really have any particular desire to go into that area. But you know, back then you went through the hardware and the software. So I understood how they even build a computer back then. And I just always liked trading. And when I got into trading, I just realized, gee, I could write a program to do a lot of this. That's what I did. I wrote a program back in the 70s to keep track of everything. And it just expanded. The more data I could put in, I understood that the world was all correlated. So and I think that's what's missing today in a lot of the analysis. But I mean, just look at the Ukrainian war, what happens there affects the dollar affects all the markets locally. So you can't just look at the Federal Reserve. Oh, what's the Fed going to do this week or that week? I mean, that's very nice. But that's very it's a fishbowl type attitude. You really have to see what's going on globally. So what Socrates does, it's tracking everything globally. The computer has been able to forecast these type of events by watching the international capital flows. How did you manage to process such an enormous amount of data before we've had the advancements that we've seen in technology and and how has technology enhanced the data sets that you work with to I guess, does it does it sharpen the analysis? Does it provide better insights or or aspect on on the on the analysis? Now, I would say it just it has simplified things. I mean, we became the largest institutional advisor in the world, mainly because it was so expensive. Our reports used to go out over telex. So they I mean, to get one report that was $75 back then. All right, so you had to be an institution basically to afford us. I mean, we had clients that were spending a few hundred thousand years just in communication costs. With technology, the internet naturally brought that down. You know, we went from effectively to from telex to faxes that dropped it dramatically. Then we went from faxes to emails. So now the the communication costs are zero. So that has expanded our our client base tremendously around the world. And we've got clients even in Bangladesh, you know, and the access to Socrates is tiered so that there is an entry point even for smaller retail investors. Do you think that it's important for this information to be available to all investors, not just professionals and institutions? Yes, because there is geopolitical implications of this. It's more than just trading. I mean, it's effectively been able to forecast our entire futures, you know, internationally. For example, if China and it was really going to go to war with the United States, what would you expect? They would start selling off US debt. Alright, you're not going to, you know, continue to buy treasuries and support the person you're against in war. I mean, I mean, there's some fundamental common sense things here that a lot of the domestic analysts don't look at, because they can only look at a few things, you know, on a personal level. So yes, we've created one that's just for the average person like $15 a month and they can go on and at least get the broad forecast and see what's going on, which I think is important for all of us to understand. So we've tried to broaden it out and we've created things for actual traders, etc., as well as you know, institutions and banks. I mean, the bank crisis that we have right now is an example of risk management. You know, they just simply don't get the information and they just read whatever on in the news and that's it and they actually make decisions that way. And it's shocking. I mean, I can tell you that in the 90s, we were called in by Mercedes and they had put on a hedge against the British pound, you know, because all the newspapers said, oh, gee, Britain's going to be out of the Euro and the pound's going to fall apart. So they sold it. Well, the market actually went the opposite way. So they called us in and they had lost about a billion dollars. And so we said, look, I mean, that's not the trend. I mean, but they took that just from the newspapers. So we had to help them restructure and get that out. But then the real shocking thing was they said, look, we set up a meeting you should go over to Daimler Benz and meet with the board because they got the same trade. So I went over there. We went and met with the board and told them, look, this is ridiculous. And the board was making hedging decisions at the board level. I didn't have a department or anything. It's interesting you mentioned about this corporate hedging and corporate trading departments because I mean, if you look at BP, for example, now, most people would think that they're, you know, they're the biggest or the most profitable part of their business is in is energy and oil. When in reality, their trading department, it produces the most amounts of profit within that that business, which is a good which is crazy. Most people wouldn't be aware of that aspect of the business even existing. Some corporations and some banks are sophisticated. Others are still in the dark age. And the ones that are in the dark age are the ones that are at risk of collapsing, because you know, they just read the newspapers all the Fed, you know, okay, inflation will stop, blah, blah, blah. So they invest long term and then the interest rates keep going up. And I will say this because I've probably met with more central banks than anybody in the world, mainly because that's where we started for an exchange. Sure. Just before the euro was being created. I mean, I was called in to, you know, China met with the central bank there after the Asian currency crisis in 97. And we had said, look, the capital flows are shifting. It's going back to get into the euro for 98. So I went over there. And I understood why China was doing much better. First, I just wanted to really go see the wall. And so I thought I'd have to sit there was a bunch of bureaucrats and just yeah, yeah, yeah, okay, fine. And they were all traders. China had sent people out and they worked on all the trading desk around the world. And then they went back to run the central bank. And then I understood why they called me in. And they said, Yeah, you're doing a great job. You're right. It's the capital flows you shifted for the euro. And I said, Great, I said, Why don't you guys come out and say that? And they said, Oh, we can't come out and criticize another central bank. Martin, I remember the first time I was introduced to your work was through your economic confidence model. Could you tell us more about that? Yes, we took a list of financial panics that expanded 224 years. And and that they were international, not just domestic. And I just added 26, you know, took to 26 events and divided into that ended up with 8.6 years. And I just thought it was an average. And so I plotted it out. And it picked even the 87 crash right to the day. I again, I thought it was a fluke. And that's why I mean, the model has taught me a lot. It picked the the the high and then in the Nikkei in December of 89, the fall of communism, there is a regular pattern and a regular cycle. And it's global in looking at this, you know, it's 8.6. I mean, even Paul Volcker came out and said, Look, the business cycle is about eight years. Yeah, this is the way it is. I mean, it, you know, three times that is 25.8. I mean, how long is the procession of the equinox 25,800 years? I mean, it's just systemic in absolutely everything. And when you look at this historically, you see what makes it so record because it incorporates everything. You look at the legal code of Hammurabi. It's a wage in price control. Setting wages, how much you're going to pay for silver? I mean, the Roman Emperor Dioclesion tried that during the hyperinflation of Rome. And so did Richard Nixon. All right. I mean, I was an advisor and friend of Margaret Thatcher. And when they pushed her out, and then there was the ERM crisis, because the Brits were trying to take the pound into the Euro. Yeah. And the ERM crisis blew everything up. Then they had to call me. All right. And I said, Look, you've overvalued the pound. You have to, you know, devalue it. They said to me, we can't because John Major ran for election and promised not to devalue the pound. So when I do my memoirs, this will be in there. I just took Richard Nixon's words. I said here, have them say this, we're going to allow the pound to float to seek its own level. They said, Oh, brilliant. So Martin, look, I mean, over the years, you've worked incredibly hard to provide insight and tools for traders and investors of all levels. Why is this mission been so important to you? And what drives you still to continue to produce the high quality of work that you do? What I hope to achieve is not only maybe protect the future for my own grandkids, but I'm hoping that, you know, by the time we get there, people will look at all the forecasts that this computer has put out. It's never been wrong in the long term. If we look at that, we can maybe rely upon it to recreate the next form of government, which will probably last another 200 years. The more we educate people that they understand, we can also affect the future, you know, geopolitically and economically. So it's beyond trading. Martin, I'm conscious of the time of which we're running out of at the moment. So firstly, I'd really like to thank you so much for your time today. Is there anywhere directly where listeners can go to to follow up? Armstrong economics.com is your website. Ask hyphen socrates.com is the platform. Yes. Thank you again, Martin. Thanks for listening to Bright Minds from Tick Mill. If you found these conversations useful, you can find us at youtube.com slash at Tick Mill Global. Let us know any questions or comments below the video or get in touch directly at podcasts at tickmill.com. Thanks again, Martin. Oh, thank you for inviting me.