Martin A. Armstrong

Martin Arthur Armstrong (born November 1, 1949) is an American self-taught[1] economic forecaster and convicted felon who spent 11 years in jail for cheating investors out of $700 million and hiding $15 million in assets from regulators.[1]

Martin A. Armstrong
Born
Martin Arthur Armstrong

(1949-11-01) November 1, 1949
New Jersey
NationalityUnited States
OccupationForecaster
Known forEconomic Confidence Model

Career

At age thirteen, Armstrong began working at a coin and stamp dealership in Pennsauken, New Jersey. At age fifteen he bought a bag of rare Canadian pennies that for a brief period would have made him a millionaire, had he sold them before they crashed in value.[2] After becoming the manager of his employer's store at the age of twenty-one, he and a partner opened a store for coin and stamp collectors.[3] Armstrong progressed from investments in gold coins to following commodity prices for precious metals.[2]

In 1973, he began publishing commodities market predictions as a hobby. As his coin and stamp business declined, Armstrong spent more time on his commodities ventures, launching a paid newsletter in 1983.[3]

Armstrong has since traded under various business names, including Princeton Economics International, Princeton Economic Consultants, Inc., Economic Consultants of Princeton, Inc., and Armstrong Report, Inc.[2][3]

Education

After viewing The Toast of New York in high school, Armstrong came to believe that assets do not appreciate linearly over time and that, historically, some manner of economic panic occurs every 8.6 years.[2] His economic philosophy was influenced by his father, a lawyer whose grandfather had lost a fortune in the 1929 stock market crash.[2]

After finishing high school, Armstrong briefly attended RCA Institutes (now TCI College of Technology) in New York City and audited courses at Princeton University but did not obtain a college degree.[2]

Economic Confidence Model

Armstrong's Economic Confidence Model is an economic cycle theory that proposes that economic waves occur every 8.6 years, or 3141 days, which is approximately . At the end of each cycle is a crisis after which the economic climate improves until the next 8.6 year crisis point. The theory is based on a list of historical financial panics (26 in 224 years, between 1683 and 1907), producing a frequency of roughly 8.6 years.[2] Armstrong concluded that a wave of 8.6 years moved through larger waves building in intensity amounting to six waves of 8.6 years constructing a major long wave of 51.6 years.[2] Also key are quarter-cycles of 2.15 years.[4] Armstrong kept his cycle secret and The New Yorker commented that Armstrong suggested that his models were rooted in certain fundamentals and complex computer calculations, rather than in a simple mystical number.[2] Despite Armstrong's repeated claim that his model is accurate "down to the day"[5], he gave two different dates for the 2015.75 ECM dates. One is 10/7/2015 from his blog[6]. Another date also from his blog is 10/1/2015[7]. His fuzzy math comes from his liberal usage of the number 8.6, which is in fact 8.6153846615[8] according to the headline of his own website. That many digits of accuracy would certainly give a precision within a day. However, October 7th is obviously NOT October 1st. ECM date cannot be accurate down to the day if there are two different dates.

Computerized Services

Armstrong claimed in 2012 that he runs his models on a "Global Artificial Intelligence Computer System" [9], the IBM Sequoia. This computer is operated by Lawrence Livermore National Security, LLC, for the Department of Energy's National Nuclear Security Administration.[10] He claims the energy cost to run his program takes up 6 million dollars, which happens to be about 86% to 100% of the TOTAL energy cost for Sequoia[11]. Sequoia is meant to be used for government or academic research only. His claims on super-computer are extremely likely to be a lie to booster subscribers' confidence.

In September 2018, Armstrong claims that his computer software, named Socrates, originally written in assembler code[12], is a clone of himself.[13]

Since December 2015, output from his models is available as reports and graphs via the Socrates web application as a subscription service with three price levels. The performance of this service has been discussed in internet forums. Some critics question the profitability and integrity of the system due to conflicts created by ambiguities that require resolution by human interpretation, and due to important signals reported only in hindsight.

Predictions

Armstrong's theory was initially applied in 1977, when he used it to successfully predict an upturn in the price of commodities, according to The New Yorker.[2]

Armstrong's forecast of an imminent Russian economic collapse was mentioned in the Financial Times on 27 June 27 1998.[14] In August 1998 the currency market saw the 1998 Russian financial crisis.

Justin Fox wrote in Time that Armstrong's model "made several eerily on-the-mark calls using a formula based on the mathematical constant pi."[15]

Armstrong predicted that stock market will peak in 2015.75 ECM date[16], but it never came true.

Armstrong later predicted that bond market will peak in 2015.75 ECM date[17] (forgetting that he originally predicted stocks), but that never came true either.

Barron's noted the model called for a change in sentiment in June 2011.[4]

Armstrong also predicted the demise of bitcoin, falling to 775[18]. Instead, bitcoin zoomed back up and broke $10K level the next year after Armstrong's dire prediction.

According to an editorial in The Guardian, Armstrong incorrectly predicted that a sovereign debt crisis, or "Big Bang" as he called it, would begin on 1 October 2015.[19]

CFTC violations

In 1985 Armstrong was found to have violated Commodity Futures Trading Commission regulations by failing to register as a commodity trading advisor, failing to deliver required disclosure documents to clients, and failing to maintain proper records.[3] In 1987 one of Armstrong's trading entities, Economic Consultants of Princeton Inc., was charged with failing to disclose a commission sharing agreement, and another of his entities, Princeton Economic Consultants Inc, was charged with misrepresenting hypothetical performance results and omitting a required disclaimer in advertisements.[3] The penalties levied banned Armstrong and his companies from trading for twelve months, revoked their registrations, imposed cease-and-desist orders, and levied civil penalties totalling fifty thousand dollars.[3]

Criminal conviction

In 1999, Japanese fraud investigators accused Armstrong of collecting money from Japanese investors, improperly commingling these funds with funds from other investors, and using the fresh money to cover losses he had incurred while trading.[20] United States prosecutors called it a three-billion-dollar Ponzi scheme.[21] Allegedly assisting Armstrong in his scheme was the Republic New York Corporation, which produced false account statements to reassure Armstrong's investors. In 2001, the bank agreed to pay US$606 million as restitution for its part in the scandal.[21]

Armstrong was indicted in 1999 and ordered by Judge Richard Owen to turn over fifteen million dollars in gold bars and antiquities bought with the fund's money; the list included bronze helmets and a bust of Julius Caesar.[22][23] Armstrong produced some of the items but claimed the others were not in his possession; this led to several contempt of court charges brought by the SEC and the CFTC, for which he served seven years in jail until he reached a plea bargain with federal prosecutors.[24][25][26] Under the terms of the agreement, Armstrong admitted to deceiving corporate investors and improperly commingling client funds—actions that according to prosecutors resulted in commodities losses of more than seven hundred million dollars—and was sentenced to five years in prison.[27][22]

He was released from federal custody on 2 September 2011 after serving a total of eleven years behind bars.[28][29]

The case against Armstrong was finally closed in 2017, with the distribution of about $80 million to claim holders by the receiver, according to court filings.[30] Armstrong appealed the refusal of the receiver to transport his remaining possessions from storage lockers in New York and Pennsylvania to him in Florida, but the appeal failed in 2019.

Hidden rare coins cache

In 2014, a New Jersey day laborer claimed to have found a cache of valuable rare coins while clearing out the basement of a house, and subsequently sold them to a local thrift shop. Three years later in 2017, the thrift shop announced they were to auction the coins, however Armstrong came forward and claimed to be the rightful owner, saying he hid them in his mother's old house to take them "off the books" in anticipation of his firm's public offering. The thrift shop sued Armstrong, and asked the court to declare the thrift shop as rightful owners. Armstrong counter-sued also seeking ownership. The US government found out about the coins, in 2019, and claimed the coins as part of the treasure hoard Armstrong had refused to hand over to the Court, in 1999, and for which he served seven years in jail for contempt. The hoard consisted of 102 gold bars, 699 gold coins, an ancient bust of Julius Caesar, and rare coins in total valued at $12.9 million.[31][32]

Armstrong was deposed and, according to Receiver Alan M. Cohen, Armstrong admitted hiding the coins. However, Armstrong's attorneys said in a court filing that Armstrong did not make this admission. The auction house now possesses the coins and the US government has filed suit to take possession.[31][32]

Documentary film

The 2014 documentary film The Forecaster tells the story of Armstrong's financial model, his imprisonment and release.[33] It was directed by Marcus Vetter and Karin Steinberger and co-produced by Arte.[33] The film presents Armstrong's claims that he is innocent, that the bank involved was at fault, that he was coerced into admitting to fraud, and that the FBI was after his economic model. Representatives of the United States Department of Justice were not interviewed in the film.

A Los Angeles Times critic described the film as "intended primarily as a name-clearing platform for Armstrong to relate his version of the events" and that it lacked perspective due to its failure to present commentary from authorities.[34] A New York Times critic decried the film's "one-sided assertions and insinuations" and "less than skeptical" tone.[35] A Washington Post critic observed that "though the Armstrong partisans in the film strongly suggest that [his models work], director Marcus Vetter struggles to convince the lay viewer."[36]

Climate change

According to DeSmogBlog, Armstrong has posted on his website articles denying the existence or importance of man-made climate change.[37] Armstrong stated in June 2016 that "Britain is moving into an Ice Age".[38]

Personal life

Armstrong is divorced and has a son and a daughter.[31]

References
  1. "Felon Forecaster Blogs on Cycles After 11 Years in Prison". Bloomberg. 2011-09-11. Retrieved 2018-09-16.
  2. Paumgarten, Nick (October 12, 2009). "The Secret Cycle: Is the financier Martin Armstrong a con man, a crank, or a genius?". The New Yorker: 66–79. Retrieved September 30, 2012.
  3. Armstrong v. CFTC, 12 F.3d 401, 402 (3d Cir. 1993).
  4. Robin Blumenthal. "Circular Reasoning: A Market for Pi in the Sky?", Barron's, June 25, 2011
  5. Armstrong, Martin (2015-10-04). "Did World War3 Start on the precise day of the ECM".
  6. Armstrong, Martin. "ECM theory".
  7. Armstrong, Martin (2015-10-04). "Did World War3 Start on the precise day of the ECM".
  8. Armstrong, Martin (2014-10-14). "The number 8.6153846615".
  9. Armstrong, Martin (2012-10-01). "Institutional Time Share". Retrieved 2019-06-25.
  10. "Sequoia Installation Site". 2013-06-17. Retrieved 2019-06-25.
  11. Wagstaff, Keith (2012-06-19). "Sequoia Energy Cost".
  12. Armstrong, Martin (2016-03-19). "Socrates Project – Updated New Versions Beginning This Week". Retrieved 2019-07-01.
  13. Armstrong, Martin (2018-09-24). "The most VALUABLE lesson we can teach our children is HOW TO THINK – not what to think". Retrieved 2019-07-01.
  14. Riley, Barry (27 June 1998). "The rubble of the rouble". Financial Times – via Financial Times Historical Archive 1888-2010.
  15. Justin Fox. Time magazine. Pg 30; Nov. 30, 2009
  16. Armstrong, Martin (2012-03-01). "Dow reaching 30K" (PDF).
  17. Armstrong, Martin (2015-09-01). "Big Bang".
  18. Armstrong, Martin (2018-11-26). "End of Bitcoin".
  19. Mason, Paul (2015-11-02). "Apocalypse now: has the next giant financial crash already begun?". The Guardian. Retrieved 2017-09-14.
  20. Strom, Stephanie (1999-09-17). "INTERNATIONAL BUSINESS - INTERNATIONAL BUSINESS - Japanese Regulators Get a 2d 'Scalp' Under Their Belts - NYTimes.com". JAPAN: New York Times. Retrieved 2010-07-26.
  21. Gilpin, Kenneth N. (2001-12-18). "Republic New York Pleads Guilty to Securities Fraud - NYTimes.com". JAPAN: New York Times. Retrieved 2019-08-20.
  22. "Jailed Adviser Is Sentenced and Fined in Fraud Case". The New York Times. 2007-04-11.
  23. "Investor Ordered To Give Up Gold - NYTimes.com". New York Times. 2000-01-08. Retrieved 2010-07-26.
  24. De la Merced, Michael J. (April 28, 2007). "Jailed 7 Years for Contempt, Adviser Is Headed for Prison". The New York Times. Retrieved October 21, 2012.
  25. Jones, Ashby (January 8, 2009). "No Charge: In Civil-Contempt Cases, Jail Time Can Stretch On for Years". Wall Street Journal. Retrieved September 29, 2012.
  26. "Market Forecaster Is Still Behind Bars - NYTimes.com". JAPAN: New York Times. 2000-01-18. Retrieved 2010-07-26.
  27. "Adviser Jailed Since 2000 Pleads Guilty in Securities Fraud Case". New York Times. 2006-08-18. Retrieved 2017-08-30.
  28. "Ex-Adviser Out of Jail After 11 Years, Including 7 for Contempt". New York Times. 2011-03-15. Retrieved 2017-08-30.
  29. Martin Arthur Armstrong, inmate # 12518-050, Federal Bureau of Prisons, U.S. Dep't of Justice.
  30. Hamilton, Colby. "Ex-Trader Armstrong Loses Appeal Over Personal Property Liquidation". New York Law Journal. Retrieved 26 July 2019.
  31. Gretchen Morgenson (2007-02-16). "In Fraud Case, 7 Years in Jail for Contempt". The New York Times.
  32. Dolmetsch, Chris. "Cult Economist Jailed for Hiding Rare Coins Says They're His Now". Bloomberg. Retrieved 25 July 2019.
  33. http://www.theforecaster-film.de/, retrieved September 13, 2017
  34. Michael Rechtshaffen (2015-03-29). "'The Forecaster' could have profited from even-handedness". Los Angeles Times. Retrieved 2017-09-13.
  35. Nicolas Rapold (2015-04-15). "Review: 'The Forecaster' Traces the Downfall of an Investment Manager". New York Times. Retrieved 2017-09-13.
  36. Michael O'Sullivan (April 9, 2015). "'The Forecaster': Criminal or financial wizard?". Washington Post. Retrieved September 18, 2017.
  37. "Martin A. Armstrong". DeSmogBlog. Retrieved September 18, 2017.
  38. Martin Armstrong (June 9, 2016). "Britain's Ice Age is Unfolding". Armstrong Economics. Retrieved September 18, 2017.

Further reading
  • "EQUITY". The Martin Armstrong Case online. Jan–Feb 1990. Retrieved October 21, 2012.
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