After Prison, a Forecaster Aims for a Comeback

Martin Armstrong uses cycle theory to predict economic calamities

Martin Armstrong is a self-taught economist who is starting to build an Internet following from an almost-empty office across the street from Philadelphia City Hall. He’s also an unrepentant felon who spent 11 years in prison for cheating investors out of $700 million and hiding $15 million in assets from regulators.

In Armstrong’s view, what matters is his record as a forecaster, not as a criminal. Using his theory that boom-bust cycles occur like clockwork every 8.6 years, he correctly called Russia’s financial collapse in 1998. His model also pointed to a peak just before the Japanese stock market crashed in 1989. As the European sovereign debt crisis roils markets worldwide, he reminds readers of his October 1997 prediction that the creation of the euro “will merely transform currency speculation into bond speculation,” leading to the system’s eventual collapse. “The stuff I wrote about in ’97 is all coming true,” he says.

Economists dismiss his theory. “His 8.6-year cycle perhaps roughly fits the timing of the last three U.S. recessions, but that’s about it,” says Karel Mertens, a professor of economics at Cornell University who has studied business cycles. “It’s comparable to numerology.”

Armstrong, 61, isn’t deterred by the criticism. After banging out commentaries on a typewriter in his cell, he’s now publishing online at and on topics including capital flows and currency debasement. “He’s a genius,” says Michael Krieger, a former commodities analyst at Sanford C. Bernstein in New York who now manages his own money. “He would have a line of people all over the world willing to pay a lot of money to work with him.”

At the moment, though, he is not looking for clients. Still on probation, he says he’s doing legal research for lawyers, fielding book proposals, and readying a seminar. A New Jersey native who didn’t graduate from college, Armstrong says he built a theory of “confidence cycles” when he discovered in the 1970s that financial panics from 1683 to 1907 were separated by 3,141 days on average. He later realized that number was equal to 1,000 times pi. By the late 1990s, Armstrong was running his firm, Princeton Economics International, out of an antiquities-filled office overlooking Tokyo’s Imperial Palace where, he says, he used charts that stretched from ancient Rome to the Great Depression to trade metals, stocks, and currencies. “His cycle analysis was pretty closely followed around the world,” says Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors, which has almost $100 billion under management.

In 1999, U.S. prosecutors accused Armstrong of cheating Japanese corporate clients by hiding losses on money they had given him to invest. Regulators also sued him and his firm for fraud. A judge later jailed him for contempt after he refused to surrender records and $15 million of assets, including 102 gold bars, 699 gold coins, other rare coins, and an ancient bust of Julius Caesar.

His failure to surrender the possessions—he says he’d given them away—led to the longest jailing ever for civil contempt in a federal white-collar case. Armstrong spent seven years in a Manhattan prison before pleading guilty in 2006 to conspiracy for lying to investors about his trading record and the value of assets he held. He was sentenced to five more years in a New Jersey prison and was released on Mar. 8, having served a total of 11 years and two months. Republic Securities, sold to HSBC Holdings in 1999, also pleaded guilty, admitting it helped Armstrong swindle clients. It paid $569 million in restitution.

Tancred Schiavoni, a partner at law firm O’Melveny & Myers who was the court-appointed receiver for Armstrong’s firm, says he believes Armstrong kept the gold. “He would love to hold a press conference in Switzerland with you taking a picture of him having just dug up the gold bars and thumbing his nose at the whole world,” Schiavoni says.

Armstrong says he hopes to someday overturn his conviction and is seeking to reverse an order by the U.S. Securities and Exchange Commission barring him from the securities industry. The government forced him to plead guilty, he says, by jailing him for so long on civil contempt charges. Spokeswomen for the SEC and for U.S. Attorney Preet Bharara in New York declined to comment.

Armstrong shakes his head when asked if he has the missing bullion. Besides, he says, his investors have recovered their losses from Republic and Princeton’s receiver. “I don’t owe anything,” he says, adding that if he did have the gold bars, “I could do anything I wanted with them.”


    The bottom line: After 11 years in prison, Armstrong is trying to build an online following for his theory of 8.6-year financial cycles.

    Before it's here, it's on the Bloomberg Terminal.