Human Rights

02 Monday Feb 2026

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Human Values and International Law

I am going to start my presentation with a caveat. While I will endeavor to stick to established facts whenever possible, I caution that my presentation is influenced by own experiences of a person born in the USA and by my own perspective and viewpoint

My presentation of International HR will be broken down in 3 Sections

History of HR

Current View of HR and

The Futures of HR

1st A Quick History of HR (western perspective)

For most of recorded history all power was held by Pharoughs, Kings and Emperors and there was no such things as Individual HR, except to serve the autocrat. In my opinion, I see 3 main events that changed history for HR

The 1st Event was in 1600, and after Giordano Bruno was burnt at the stake by the Vatican, for saying, among other things, the earth revolved around the sun. Then a miraculous thing happened, Civilization reached a tipping-point and said Enough! And a schism erupted, where Faith and Theocracy separated from Science and Logic, which functions to this day. Followed was the Age of Reason and Enlightenment of Galileo, Kepler, and Newton, while Freedom of Thought and Freedom of Expression became a basic HR, influenced by such philosophers such as John Locke.

The 2ed Big HR Event occurred with Thomas Paine, in the writing the pamphlet ‘Common Sense,’ which called for a new nation to be formed based on the HRs for the Individual. This was an Astounding and Revolutionary idea, resulting in Thomas Jefferson writing The Declaration of Independence in 1776. We all know the words of the 1st paragraph of the Declaration of Independence as it has become part of our ethos, which binds us together, of who we are as individuals, a nation and as citizen of the world.  Let’s take a detailed look at that first paragraph of this historical document, which changed the world:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights,  that among these rights are Life, Liberty and the pursuit of Happiness, deriving their just powers from the consent of the governed,—That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it.”

Le’s take = a moment to appreciate these words.

Self-evident Rights: There are our rights even before government. According to John Locke  ( a favorite philosopher of Jefferson) They are obvious, universal and unquestionable, innately known. Some big assumption.

All men are created equal: This was written by Jefferson a slave owner, and was followed by a US Constitution that only gave white land owning men the vote. But Jefferson gave us the words as an aspirational goal and a process to obtain these goals in a flexible US Constitution, as a work in process which eventually ended slavery, and adopted HR for women, labor and civil rights.

Unalienable Rirhts: These are rights that cannot be taken away, even by law or the government. Governments do not grant these rights, their role is to recognize them and to protect them

That among these rights are life, liberty and the pursuit of happiness: These are broad categories of human rights with wide interpretation. Pursuit of Happyness? Now there is an aspirational promise, which appears in no other international document.

By the consent of the Governed:  This principal underpins our democracy. To insure the ‘consent of the governed,’ the Constitution and The Bill of Rights gives us the framework for change, where, ‘We the People” can determine and maintain our self-evident and unalienable Human Rights through Amendments, Checks and Balances of the 3 Branches of government, Periodic elections. Impeachment and Right to Assemble in Protest.

The Declaration of Independence 1st paragraph ends by dramatically saying, “When a government become destructive of these ends, it is THE RIGHT OF THE PEOPLE TO ALTER OR ABOLISH IT. This says, that in the US, it is the obligation of ordinary citizens to be the primary guardians of HR. I will say more about this statement[CB1]   in the next section.

So let’s appreciate and not forget this first paragraph of the Declaration of Independence written 250 years ago, which began this great nation on its path to become a beacon of light and hope for the rest of the world. George Washington called this nation, ‘The Great Experiment,’ Where ‘the consent of the governed can live together in a melting pot of different races, nationalities, religions cultures and wealth and live in harmony for the ‘common good’ of all.  E Pluribus Unam, Out of many One’ has been our nation’s motto since 1788. We are still seeing if this is possible.

The 3ed big HR historic event, with International and Universal implications, was issued on December 10, 1948 called the  Universal Declaration of Human Rights, adopted by the United Nations, (led by Elinor Roosevelt). It sets out the basic ‘self-evident’ ‘unalienable rights’  that belongs to every human being, including equality, freedom, justice, and dignity. Building on this, the UN adopted in 1954 the International Covenant on Civil and Political Rights Treaty. This treaty protects HR such as life, liberty, free expression, religious freedom, fair trials, and political participation. Alongside with this treaty is the 1976 International Covenant on Economic, Social and Cultural Rights Treaty, focusing on Economic and Social Rights. In 2005 The UN adopted the doctrine of Responsibility to Protect ( called R2P) and formed the International Criminal Court the ICC, which meets in the Hague, and protects populations from genocide, war crimes, Ethnic cleansing and crimes against Humanity. However, under the UN Charter Article 2: countries are protected from interference in  their  internal affairs and The ICC court decisions are unenforceable without UN Security Council approval, which because of the veto power of major nation, is unlikely,  

The main difference between UN HR and US HR is essentially that The US Constitution protects individual HR through placing enforceable limits on the US government, while the UN envisions a broader universal social concept of HRs that all nations should strive to achieve, such as basic pay, health care, child care, senior care, adequate housing, guaranteed retirement benefits, and a minimum standard of living.In the US, these are so far not self-evident human rights, but privileges.

A Quick  Worldwide Current View of Human Rights

China’s government has created a fast growing economy that combines the market place and socialism with an autocratic government. For now, individual have basically given up their individual HR rights for the sake of efficiency for the common good. One rule in China is: Don’t complain! It has given them 28,000 miles High speed trains,  an electric car like a Tesla at one third the price and it has become the equal economic rival of the US.As long as the economic magic is working, HR struggles, so far seem  highly unlikely, but I’m hopeful. 

Russia: with Putin has become a Fanciest government that rules by violence and fear. Russia did not sign UN HR declaration. HR struggles there, are not likely without brutal retribution

The European Union, Brittan and Canada PROBLEM: 6 of G7 nations have debt above 100% of GDP, making it difficult affording health care and senior care, while life and health spans are zooming into the 90s and 100s. When France retirement was raised from 62 to 64, it almost cause a government shutdown. GOOD: Parliamentary system

Most of the Islamic World functions as a Theocracy: Saudia Arabia; did not sign the UN Decoration of HR  The 1990 Cairo Declaration on Human Rights, states that in  all Islamic Nations, HR are subject to Sharia Law: which 1) Rejects freedom to change religion. 2) Enforces freedom of speech restrictions, including blasphemy laws 3) Applies-differences to women HR 4) Defends capital punishment. They seem unable to reach a ‘Bruno type’ Theocracy tipping point

Africa was covered by Lynda, a couple of weeks ago.

So now, lets look at the current HR situation in the USA, There appears to be flaws in the United States Constitution that has been interpreted by the Supreme Court to grant the President, ‘immunity’ and  ‘implied powers,’ such as’ ‘executive orders,’ and extraordinary military powers as ‘Commander-and-Chief.’ This has given the President the power to issue military strikes and over 250 executive orders  which have the binding force of law and ‘do not’ need the approval of the United States Congress.  At any time Congress could use it powers of oversight and issue legislation and laws to limit these Imperial Presidential powers, but it has so far declined to act.

Of the 27 grievances that the Deceleration of Independence declared against King George, I believe 10 of these HR violations are now being violated by the current administration.  Although I consider this administrations attacks on journalists, legal immigrants, free speech the independence of the Dep of Justice and other issues  important, For the sake of brevity, I will concentrate on just one area: the  Individual Rights of those designed to protect civilians from Federal Military Power. Those protections include The 1st Amendment:  Freedom of Speech, and the Right to Assemble and Protest.  The 2ed Amendment: The right to carry arms and form a militia. The Third Amendment prevents soldiers from occupying private homes, while the Fourth, Fifth, and Sixth Amendments guarantee individuals privacy, due process, civilian jury trial and ensuring that civilians cannot be searched, detained, or punished by the military, without lawful courts.

Congress in the past, has reinforced the Constitutional protections against the military, through the Posse Act of 1878, designated to keep soldiers out of civilian policing. The Supreme Court has upheld these limits in Youngstown v. Sawyer (1952). However, it should be noted that the President can invoke the Insurrection Act, Section 253, which can nullify all these Constructional and legal protections.

There is a is a critical U.S. federal law, 42 U.S.Code 1983 allowing individuals to sue state and local government officials or entities for violating their constitutional or federal rights, but so far, not Federal officials. While the judicial system and the Supreme Court argue what is Constructional or lawful, it appears that the majority of Americans, (particularly since the Minneapolis shootings), appear to be more concerned about, what is right, Self-evident and Unalienable. It takes time for the judicial system to clarify laws OR for Congress to pass new laws and there can be a lot of damage done to our democracy and our HR in-between elections.  In the meantime, “What can each of us do to insure that the ‘consent of the governed’ and our individual self-evident and unalienable rights are followed?

Some have suggested, we take to the streets in protest? This responsibility cannot be taken lightly. Let me tell you my own story of protesting, that puts this into perspective.  In 1968 the Viet Nam War divided the nation. I was against the war, but for the US troops to come home. The 1968 Democratic Convention was held in Chicago and I attended a peaceful anti-war protest of about 1000 people in Grant Park, when someone took down the American flag from a flagpole. The police came in swinging clubs. Us men instinctively formed a line, and hooked arms, to let the women and children escape. I was hit on the head and seriously injured.

That night, the television coverage switched back and forth between the convention floor, where Humphrey was being nominated, and TV coverage of a police riot that was occurring in front of Conrad Hilton Hotel on Michigan Ave. Demonstrators shouting, “The whole world is watching,” were being clubbed and pulled into patty wagons. Across the street from the Hilton, in my bloodied head bandana, I encountered a line National Guard troops with rifles, fixed bayonet and in gas masks. Between the blinding flood lights and the remnants of tear gas, the troops only appeared as surreal silhouette, when one of the silhouettes shouts, Birkelbach. It was my friend Steve Elkins, called up by the National Guard, who sits a couple of desks away from me. I asked,”How you doing?” He said, ‘We’re scared.” I said, “Who am I fighting. I think I’m going home.” I’ll never forget what he then said, “I wish I could.”   

On a Micro scale, this is just two friends talking. But on a Macro scale, it was the artificial axiom of ‘Us vs Them that put us two friends in this situation and in this particular case, it was Us vs Us.  At any moment someone could have tried to take a rifle away from one of the National Guard troops and my friend could have been ordered to shoot me. I tell this story, because hitting the streets in protest sounds like an easy solution, but as a practical matter it can be complicated, dangerous and is unfortunately a last resort.  However, We the People, will only be the home of the Free, if we remain the home of the Brave.

It was TV cameras that told the truth In 1965 in Selma Alabama, at the  Edmund Pettus Bridge and in Chicago at the 1968 Democratic convention. Now in Minneapolis, and it’s cellphone videos telling the truth. To quote from a recent Feb 12th NYT editorial board article, “The current crisis is’nt just a test of the 3 branches balance of power, it’s a test of the Bill Of Rights. When the illegality stems from the government itself, the damage is even worse. It sets us on a dangerous course in which tactics now used against a few, may ultimately be wielded against the many.” End quote. Unfortunately it reminds me of the poem “and then they came for me.” stated at the end of the WSHINGTON DC Holocaust Memorial

The Futures for Human Rights

I reject the future views  of dystopian novels such as George Orwell’s 1984  and Aldous Huxley’s Brave New World. Orwell feared pain, censorship and Big Brother totalitarianism, while Huxley feared control through pleasure drugs and genetic embryo engineering of the classes. I also reject the future outcome forecast in the 2013 movie Elysium, where the very wealthy live on luxury space station, while the rest of the population resides on a ruined Earth of poverty, rising seas and pollution.

When I asked AI about the future of HR she said, “Lower your shields. Resistance is futile. You will be assimilated.”  That of course, comes from the cyborg’s message to humanity in Startrek. I am also reminded of Asimov’s Robot and  Foundation  Series, where civilization, in order to protects itself from AI, returns to analog. I am concerned about how New Technology, the Social Network and Artificial Intelligence will affect HR. However, this opens up an entirely new large topic of equity, privacy, surveillance and free speech, which deserves another presentation for another time.

Here, is my opinion about the future. Darwin says it is the survival of the fittest. However, I believe that’s only partly true. I believe humanity has progressed because of our connectedness, which has created civilization out of jungles. I am optimistic about the future. I believe Us vs Them and Us vs Us, has reach its pinochle and the pendulum is ready to swing back toward justice.  I expect the America people to say Enough, as it did with slavery, women’s rights, civil rights and gay rights.

I believes in the meaning of Lincoln’s civil war ‘better angels speech’  when he said that the American people, at their core, love this country and that our better angels will once again prevail to bring out the basic virtues of our nation, which are  kindness, generosity, respect, empowerment, community, joy, compassion and the common good. I believe in the good hearts of Americans people and the good hearts of people that I have met throughout the world. And that includes the Russian people I have met in St Petersburg and the hundreds of people I have interviewed in Europe, over the last 3 years.

We have been given a wake-up call that should shake us out of our complacency of all we assumed was given and established This should motivate a new generation of heroes and leaders. Sometimes the flame of human rights has to be reignited and the spring has to be recompressed, in order to spring forward again. To do this we have to change our attitudes from fear and anger to hope. It will only happen if we believe it can happen. As Martin Luther King said, “We must accept finite disappointment, but never lose infinite hope.”

I just hope this happens in my lifetime, but I am confident it will happen. The Great Experiment is actually working. I know that from my grandmother born in Poland, my father born in Germany, from my wife born in Canada, From my daughter-in-law born in China, by my son-in-law born in Ireland, my oldest granddaughter’s husband born in Austria and my second oldest granddaughter’s husband born in India.  E Plutus Unarm, Out of many One. For many of our children it is already happening, because for them, more than 50% of our kindergarten students are non-white.  In urban areas, they play together as one humanity and not divided by race. Their commonality and connectedness, just hasn’t bubbled-up to the voting surface yet. As MLK said, “The arc of the moral universe is long, but it bends toward justice”.

In my opinion, the biggest warning has come from James Madison, architect of the Constitution and author of the BIll of Rights, who on June 20, 1888, (the day the Construction was ratified) said “If there e be no virtue and intelligence in the voting public there can be no virtue and wisdom in those that are elected.” As Pogo said in a 1970 cartoon ‘We have seen the enemy and it is us.” It is time to trash what divides us and to emphasis our common good.

We can do better, and we will.  We cannot be passive complainers and observers. Ultimately the defense of HR both at home and abroad depends on engaged, informed citizens, who are willing to actively participate in upholding their self-evident and unamiable HR. We stand on the shoulders of those who have come before us. It is just another challenge in a long row of candles, on a journey where Human Rights struggles to achieve the never ending quest for human dignity, which emphases our universal commonality and connectedness. HR are not preserved by parchment, they are preserved by people. It is now our turn to bend the arc of the moral universe toward justice.

QUESTIONS

  1. Are Human Rights universal, self-evident and unalienable, or do they depend on culture and national values?  Are rights discovered like gravity or are they invented like traffic laws. Are their limits, such as hate speech, privacy, blasphemy, journalistic investigative reporting of government secrets?
  • How far can international laws go in interfering with a country internal affairs, to stop Human Rights abuses? Is sovereignty no longer absolute? What rights are universal?
  • What role do ordinary US citizens have in protecting their Human Rights in the US? Can they make a difference?
  • What obligation do US ordinary citizens have in in protecting Human Rights globally? Does Manifest Destiny* still apply?
  • What do you think the future of Human Rights will be like in the US?

*Manifest Destiny supporters believed in the superiority of American culture and government, viewing expansion as a God-given right to bring liberty to the entire world

 [CB1]

Human Values and International Law

I am going to start my presentation with a caveat. While I will endeavor to stick to established facts whenever possible, I caution that my presentation is influenced by own experiences of a person born in the USA and by my own perspective and viewpoint

My presentation of International HR will be broken down in 3 Sections

History of HR

Current View of HR and

The Futures of HR

1st A Quick History of HR (western perspective)

For most of recorded history all power was held by Pharoughs, Kings and Emperors and there was no such things as Individual HR, except to serve the autocrat. In my opinion, I see 3 main events that changed history for HR

The 1st Event was in 1600, and after Giordano Bruno was burnt at the stake by the Vatican, for saying, among other things, the earth revolved around the sun. Then a miraculous thing happened, Civilization reached a tipping-point and said Enough! And a schism erupted, where Faith and Theocracy separated from Science and Logic, which functions to this day. Followed was the Age of Reason and Enlightenment of Galileo, Kepler, and Newton, while Freedom of Thought and Freedom of Expression became a basic HR, influenced by such philosophers such as John Locke.

The 2ed Big HR Event occurred with Thomas Paine, in the writing the pamphlet ‘Common Sense,’ which called for a new nation to be formed based on the HRs for the Individual. This was an Astounding and Revolutionary idea, resulting in Thomas Jefferson writing The Declaration of Independence in 1776. We all know the words of the 1st paragraph of the Declaration of Independence as it has become part of our ethos, which binds us together, of who we are as individuals, a nation and as citizen of the world.  Let’s take a detailed look at that first paragraph of this historical document, which changed the world:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights,  that among these rights are Life, Liberty and the pursuit of Happiness, deriving their just powers from the consent of the governed,—That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it.”

Le’s take = a moment to appreciate these words.

Self-evident Rights: There are our rights even before government. According to John Locke  ( a favorite philosopher of Jefferson) They are obvious, universal and unquestionable, innately known. Some big assumption.

All men are created equal: This was written by Jefferson a slave owner, and was followed by a US Constitution that only gave white land owning men the vote. But Jefferson gave us the words as an aspirational goal and a process to obtain these goals in a flexible US Constitution, as a work in process which eventually ended slavery, and adopted HR for women, labor and civil rights.

Unalienable Rirhts: These are rights that cannot be taken away, even by law or the government. Governments do not grant these rights, their role is to recognize them and to protect them

That among these rights are life, liberty and the pursuit of happiness: These are broad categories of human rights with wide interpretation. Pursuit of Happyness? Now there is an aspirational promise, which appears in no other international document.

By the consent of the Governed:  This principal underpins our democracy. To insure the ‘consent of the governed,’ the Constitution and The Bill of Rights gives us the framework for change, where, ‘We the People” can determine and maintain our self-evident and unalienable Human Rights through Amendments, Checks and Balances of the 3 Branches of government, Periodic elections. Impeachment and Right to Assemble in Protest.

The Declaration of Independence 1st paragraph ends by dramatically saying, “When a government become destructive of these ends, it is THE RIGHT OF THE PEOPLE TO ALTER OR ABOLISH IT. This says, that in the US, it is the obligation of ordinary citizens to be the primary guardians of HR. I will say more about this statement[CB1]   in the next section.

So let’s appreciate and not forget this first paragraph of the Declaration of Independence written 250 years ago, which began this great nation on its path to become a beacon of light and hope for the rest of the world. George Washington called this nation, ‘The Great Experiment,’ Where ‘the consent of the governed can live together in a melting pot of different races, nationalities, religions cultures and wealth and live in harmony for the ‘common good’ of all.  E Pluribus Unam, Out of many One’ has been our nation’s motto since 1788. We are still seeing if this is possible.

The 3ed big HR historic event, with International and Universal implications, was issued on December 10, 1948 called the  Universal Declaration of Human Rights, adopted by the United Nations, (led by Elinor Roosevelt). It sets out the basic ‘self-evident’ ‘unalienable rights’  that belongs to every human being, including equality, freedom, justice, and dignity. Building on this, the UN adopted in 1954 the International Covenant on Civil and Political Rights Treaty. This treaty protects HR such as life, liberty, free expression, religious freedom, fair trials, and political participation. Alongside with this treaty is the 1976 International Covenant on Economic, Social and Cultural Rights Treaty, focusing on Economic and Social Rights. In 2005 The UN adopted the doctrine of Responsibility to Protect ( called R2P) and formed the International Criminal Court the ICC, which meets in the Hague, and protects populations from genocide, war crimes, Ethnic cleansing and crimes against Humanity. However, under the UN Charter Article 2: countries are protected from interference in  their  internal affairs and The ICC court decisions are unenforceable without UN Security Council approval, which because of the veto power of major nation, is unlikely,  

The main difference between UN HR and US HR is essentially that The US Constitution protects individual HR through placing enforceable limits on the US government, while the UN envisions a broader universal social concept of HRs that all nations should strive to achieve, such as basic pay, health care, child care, senior care, adequate housing, guaranteed retirement benefits, and a minimum standard of living.In the US, these are so far not self-evident human rights, but privileges.

A Quick  Worldwide Current View of Human Rights

China’s government has created a fast growing economy that combines the market place and socialism with an autocratic government. For now, individual have basically given up their individual HR rights for the sake of efficiency for the common good. One rule in China is: Don’t complain! It has given them 28,000 miles High speed trains,  an electric car like a Tesla at one third the price and it has become the equal economic rival of the US.As long as the economic magic is working, HR struggles, so far seem  highly unlikely, but I’m hopeful. 

Russia: with Putin has become a Fanciest government that rules by violence and fear. Russia did not sign UN HR declaration. HR struggles there, are not likely without brutal retribution

The European Union, Brittan and Canada PROBLEM: 6 of G7 nations have debt above 100% of GDP, making it difficult affording health care and senior care, while life and health spans are zooming into the 90s and 100s. When France retirement was raised from 62 to 64, it almost cause a government shutdown. GOOD: Parliamentary system

Most of the Islamic World functions as a Theocracy: Saudia Arabia; did not sign the UN Decoration of HR  The 1990 Cairo Declaration on Human Rights, states that in  all Islamic Nations, HR are subject to Sharia Law: which 1) Rejects freedom to change religion. 2) Enforces freedom of speech restrictions, including blasphemy laws 3) Applies-differences to women HR 4) Defends capital punishment. They seem unable to reach a ‘Bruno type’ Theocracy tipping point

Africa was covered by Lynda, a couple of weeks ago.

So now, lets look at the current HR situation in the USA, There appears to be flaws in the United States Constitution that has been interpreted by the Supreme Court to grant the President, ‘immunity’ and  ‘implied powers,’ such as’ ‘executive orders,’ and extraordinary military powers as ‘Commander-and-Chief.’ This has given the President the power to issue military strikes and over 250 executive orders  which have the binding force of law and ‘do not’ need the approval of the United States Congress.  At any time Congress could use it powers of oversight and issue legislation and laws to limit these Imperial Presidential powers, but it has so far declined to act.

Of the 27 grievances that the Deceleration of Independence declared against King George, I believe 10 of these HR violations are now being violated by the current administration.  Although I consider this administrations attacks on journalists, legal immigrants, free speech the independence of the Dep of Justice and other issues  important, For the sake of brevity, I will concentrate on just one area: the  Individual Rights of those designed to protect civilians from Federal Military Power. Those protections include The 1st Amendment:  Freedom of Speech, and the Right to Assemble and Protest.  The 2ed Amendment: The right to carry arms and form a militia. The Third Amendment prevents soldiers from occupying private homes, while the Fourth, Fifth, and Sixth Amendments guarantee individuals privacy, due process, civilian jury trial and ensuring that civilians cannot be searched, detained, or punished by the military, without lawful courts.

Congress in the past, has reinforced the Constitutional protections against the military, through the Posse Act of 1878, designated to keep soldiers out of civilian policing. The Supreme Court has upheld these limits in Youngstown v. Sawyer (1952). However, it should be noted that the President can invoke the Insurrection Act, Section 253, which can nullify all these Constructional and legal protections.

There is a is a critical U.S. federal law, 42 U.S.Code 1983 allowing individuals to sue state and local government officials or entities for violating their constitutional or federal rights, but so far, not Federal officials. While the judicial system and the Supreme Court argue what is Constructional or lawful, it appears that the majority of Americans, (particularly since the Minneapolis shootings), appear to be more concerned about, what is right, Self-evident and Unalienable. It takes time for the judicial system to clarify laws OR for Congress to pass new laws and there can be a lot of damage done to our democracy and our HR in-between elections.  In the meantime, “What can each of us do to insure that the ‘consent of the governed’ and our individual self-evident and unalienable rights are followed?

Some have suggested, we take to the streets in protest? This responsibility cannot be taken lightly. Let me tell you my own story of protesting, that puts this into perspective.  In 1968 the Viet Nam War divided the nation. I was against the war, but for the US troops to come home. The 1968 Democratic Convention was held in Chicago and I attended a peaceful anti-war protest of about 1000 people in Grant Park, when someone took down the American flag from a flagpole. The police came in swinging clubs. Us men instinctively formed a line, and hooked arms, to let the women and children escape. I was hit on the head and seriously injured.

That night, the television coverage switched back and forth between the convention floor, where Humphrey was being nominated, and TV coverage of a police riot that was occurring in front of Conrad Hilton Hotel on Michigan Ave. Demonstrators shouting, “The whole world is watching,” were being clubbed and pulled into patty wagons. Across the street from the Hilton, in my bloodied head bandana, I encountered a line National Guard troops with rifles, fixed bayonet and in gas masks. Between the blinding flood lights and the remnants of tear gas, the troops only appeared as surreal silhouette, when one of the silhouettes shouts, Birkelbach. It was my friend Steve Elkins, called up by the National Guard, who sits a couple of desks away from me. I asked,”How you doing?” He said, ‘We’re scared.” I said, “Who am I fighting. I think I’m going home.” I’ll never forget what he then said, “I wish I could.”   

On a Micro scale, this is just two friends talking. But on a Macro scale, it was the artificial axiom of ‘Us vs Them that put us two friends in this situation and in this particular case, it was Us vs Us.  At any moment someone could have tried to take a rifle away from one of the National Guard troops and my friend could have been ordered to shoot me. I tell this story, because hitting the streets in protest sounds like an easy solution, but as a practical matter it can be complicated, dangerous and is unfortunately a last resort.  However, We the People, will only be the home of the Free, if we remain the home of the Brave.

It was TV cameras that told the truth In 1965 in Selma Alabama, at the  Edmund Pettus Bridge and in Chicago at the 1968 Democratic convention. Now in Minneapolis, and it’s cellphone videos telling the truth. To quote from a recent Feb 12th NYT editorial board article, “The current crisis is’nt just a test of the 3 branches balance of power, it’s a test of the Bill Of Rights. When the illegality stems from the government itself, the damage is even worse. It sets us on a dangerous course in which tactics now used against a few, may ultimately be wielded against the many.” End quote. Unfortunately it reminds me of the poem “and then they came for me.” stated at the end of the WSHINGTON DC Holocaust Memorial

The Futures for Human Rights

I reject the future views  of dystopian novels such as George Orwell’s 1984  and Aldous Huxley’s Brave New World. Orwell feared pain, censorship and Big Brother totalitarianism, while Huxley feared control through pleasure drugs and genetic embryo engineering of the classes. I also reject the future outcome forecast in the 2013 movie Elysium, where the very wealthy live on luxury space station, while the rest of the population resides on a ruined Earth of poverty, rising seas and pollution.

When I asked AI about the future of HR she said, “Lower your shields. Resistance is futile. You will be assimilated.”  That of course, comes from the cyborg’s message to humanity in Startrek. I am also reminded of Asimov’s Robot and  Foundation  Series, where civilization, in order to protects itself from AI, returns to analog. I am concerned about how New Technology, the Social Network and Artificial Intelligence will affect HR. However, this opens up an entirely new large topic of equity, privacy, surveillance and free speech, which deserves another presentation for another time.

Here, is my opinion about the future. Darwin says it is the survival of the fittest. However, I believe that’s only partly true. I believe humanity has progressed because of our connectedness, which has created civilization out of jungles. I am optimistic about the future. I believe Us vs Them and Us vs Us, has reach its pinochle and the pendulum is ready to swing back toward justice.  I expect the America people to say Enough, as it did with slavery, women’s rights, civil rights and gay rights.

I believes in the meaning of Lincoln’s civil war ‘better angels speech’  when he said that the American people, at their core, love this country and that our better angels will once again prevail to bring out the basic virtues of our nation, which are  kindness, generosity, respect, empowerment, community, joy, compassion and the common good. I believe in the good hearts of Americans people and the good hearts of people that I have met throughout the world. And that includes the Russian people I have met in St Petersburg and the hundreds of people I have interviewed in Europe, over the last 3 years.

We have been given a wake-up call that should shake us out of our complacency of all we assumed was given and established This should motivate a new generation of heroes and leaders. Sometimes the flame of human rights has to be reignited and the spring has to be recompressed, in order to spring forward again. To do this we have to change our attitudes from fear and anger to hope. It will only happen if we believe it can happen. As Martin Luther King said, “We must accept finite disappointment, but never lose infinite hope.”

I just hope this happens in my lifetime, but I am confident it will happen. The Great Experiment is actually working. I know that from my grandmother born in Poland, my father born in Germany, from my wife born in Canada, From my daughter-in-law born in China, by my son-in-law born in Ireland, my oldest granddaughter’s husband born in Austria and my second oldest granddaughter’s husband born in India.  E Plutus Unarm, Out of many One. For many of our children it is already happening, because for them, more than 50% of our kindergarten students are non-white.  In urban areas, they play together as one humanity and not divided by race. Their commonality and connectedness, just hasn’t bubbled-up to the voting surface yet. As MLK said, “The arc of the moral universe is long, but it bends toward justice”.

In my opinion, the biggest warning has come from James Madison, architect of the Constitution and author of the BIll of Rights, who on June 20, 1888, (the day the Construction was ratified) said “If there e be no virtue and intelligence in the voting public there can be no virtue and wisdom in those that are elected.” As Pogo said in a 1970 cartoon ‘We have seen the enemy and it is us.” It is time to trash what divides us and to emphasis our common good.

We can do better, and we will.  We cannot be passive complainers and observers. Ultimately the defense of HR both at home and abroad depends on engaged, informed citizens, who are willing to actively participate in upholding their self-evident and unamiable HR. We stand on the shoulders of those who have come before us. It is just another challenge in a long row of candles, on a journey where Human Rights struggles to achieve the never ending quest for human dignity, which emphases our universal commonality and connectedness. HR are not preserved by parchment, they are preserved by people. It is now our turn to bend the arc of the moral universe toward justice.

QUESTIONS

  1. Are Human Rights universal, self-evident and unalienable, or do they depend on culture and national values?  Are rights discovered like gravity or are they invented like traffic laws. Are their limits, such as hate speech, privacy, blasphemy, journalistic investigative reporting of government secrets?
  • How far can international laws go in interfering with a country internal affairs, to stop Human Rights abuses? Is sovereignty no longer absolute? What rights are universal?
  • What role do ordinary US citizens have in protecting their Human Rights in the US? Can they make a difference?
  • What obligation do US ordinary citizens have in in protecting Human Rights globally? Does Manifest Destiny* still apply?
  • What do you think the future of Human Rights will be like in the US?

*Manifest Destiny supporters believed in the superiority of American culture and government, viewing expansion as a God-given right to bring liberty to the entire world

 [CB1]

INVESTMENT STRATEGY LETTER #748

04 Friday Apr 2025

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HOW TO DESTROY AMERICA IN 100 DAYS

We have been fooled into complacency. Looking back through world history, periods of comfort, have been but brief interludes in an otherwise sea of chaos. More frequent have been times when the forces of authoritarian tyranny, irrationality, war, greed, bigotry, ignorance, suffrage, servitude and intolerance have ruled. Over the last 80 years, the United States of America has helped keep American’s and the world in their ‘Comfort Zone’ by creating an era of opportunity for freedom of thought, wisdom, compassion and generosity for the common good.  Our completive ‘market economy,’ rule of law and financial support has created the most prosperous period in world history. America understood that its citizens would prosper if the world grows richer and more peaceful.

All that ended, when Donald Trump became the 47th President. In less than 100 days he has alienated our Allies, (like NATO nations and Canada and Mexico) leaving the US not first among nations, but ‘alone’ among nations, He has created ‘tariffs’ that  may cause a worldwide trade war, similar to what caused the 1929 stock market crash and the Depression, He has assailed government institutions and fired employees without notice, which are involved in equity, education, world health, global warming, scientific research, human aid, consumer protection, and the military and has appointed incompetent administrators for these institutions. He has disregarded human rights, as masked federal agent are snatching students off of sidewalks for voicing their opinion and deportation without due process. He has also normalized disregard for the judiciary, banned major law firms from federal buildings, harassed the  media and has attempted to dismantle the nations election system, He has recommended that the US become a predator and take Greenland as our own, because of its military strategic location.

The President has overturned political procedure and long lived tradition, without opposition. How can the President act alone? So far, the Republican Senate and House has not interfered with Trumps decision by using its ‘checks and balances.’  Trump is able to act alone, because on July 1, 2024, the Supreme Court ruled in a 6–3 decision that presidents have absolute immunity for acts committed as president within their core constitutional purview.

Secondly, there is a flaw in the United States Constitution that has been interpreted to grant the president broad ‘implied powers,’ in the form of ‘executive orders, ‘executive privilege,’ and ‘emergency powers’ to issue rules, regulations and instructions and deploy troops. All have the binding force of law, which ‘do not’ need the approval of the United States Congress. Also, The Aliens Enemies Act of John Adams in 1798, is still in effect. If applied, it gives the president additional powers during times of war, invasion, or predatory incursion. Although there is no ‘war,’ Congress has not, so far, stopped Trump from using The Aliens Enemies Act.

So why is he doing this? Putin couldn’t do a better job of destroying America, if he himself were the President of the US. I don’t understand. Thump is known not to do his homeward or research, but operates pretty successfully on gut instinct. He is well aware of the stock market crashing and is no doubt aware of his shrinking public popularity. The only conclusion I can make is that he believes he is doing the right thing. But that is stupid and he is not stupid, but one the world’s most clever people. The only alternative I can come up with is that he is knowingly trying to create chaos and a disaster. Why? He has actively talked about a 3ed term. Also he knows how mid-term elections traditionally go against the party in power. If the world is in an economic depression in 2026 (self-caused) and maybe even a military skirmish with China or North Korea, he can cancel the elections because of ‘a national emergency.’ There are some checklists for becoming a dictator, which President Trump has been following. The lists ends with creating an emergency (like a war or economic disaster) to close Congress, stop elections and remain in power for a lifetime.

We have already spent our reserve on keeping the stock market up: Whether the upcoming economic disaster is self-inflicted, due to stupidly or serendipitous, the stock markets hates uncertainty and the odds favor a big drop in stock prices yet to come.  Up until now the stock market rise was due to low interest rates, quantitative easing, cheap oil and unprecedented growth of debt.  Now all that has stopped and debts are already at dangerous levels. Global debt has risen from 74 trillion in 2019 to over $330 trillion now. US federal debt to GDP was in 1980 34.5%, 2000 57.9% and is now 2024 127% at $36 trillion. So we have spent our reserve on keeping the stock market up and forgetting about the common good. Now that we need it, debt may be at too high a level to safely increase it to this time buy us out of this recession turning it into a Depression!

THIS TIME ITS DIFFERENT by Carmen Reinhart  See the book, This Time it’s Different, Eight Centuries of Financial Folly, by Carmen Reinhart and Kenneth S. Rogoff. This book is one of my favorites. It tells the story that each time after a catastrophe, such as the Great Depression or 2008, economists agree that it could never happen again. Who could be so stupid as to start a tariff war, let debt go to 127% of GDP and let six banks control 70% of the US assets (too big to fail) and allow all the economic growth to go to the top 1%, (and then give them tax cuts creating huge budget deficits), while eighty people own 50% of the world’s wealth? Reinhart tells about lessons from history, to show us how little we have learned and that we should prepare for future economic challenges, which are bound to happen again. In 2008, Standard and Poor’s ranked all mortgages as AAA, until they were worthless. Once again, incompetence rules and we are facing another disaster!

Sell Now: 4/1/2025 Dow 42,434, NASDAQ 17,744, S&P 500 5,703

Cancell this Buy Signal which I gave: ISL #732 March 20, 2020 Dow 19,175—NASDAQ, 7,502—S&P 2,542 “ONLY FOR THOSE WHO ARE YOUNG ENOUGH OR CAN TAKE RISK I suggest this ‘Investment Strategy Program’. Besides  investments in gold and the Bitcoin,  Set up a program’ to be ‘fully invested’ as follows:  Choose 21 of the best performing stocks like Amazon and 21 stocks that have big dividends and hold up well in down markets like Exxon. This portfolio should be updated every quarter.”

WHY STAY FULLY INVESTED? The financial industry approves of the Efficient Market Hypothesis Theory (EMHT), which proposes that it is impossible to beat the market by trading in and out and that investors should at all times be fully invested in the market in the aggregate, by owning an allocation of mutual funds, because in the long run the market will go up. The dangerous beauty of this theory is that accordingly, your goals will always be achieved sometime in the future. If you just ‘hang in there’ long enough you will make your money back. This gives investors a false sense of contentment. Everyone I talk to, is not worried. That makes me worry! They are all saying they are going to ride this decline out and ‘the market always bounce back.’ The average investor has few options to protect themselves except to get out of the market, which they have been trained, like Pavlov’s dog, to stay in the market for the long term. (Interest rates are too low not to be in the stock market). However, to quote John Maynard Keynes, “In the long term we are all dead!” As a reminder, in the last 20 years there were two stock market collapses of 50% each, one between 2000 and 2003 and the other between 2008 and 2009. Also a reminder, the Dow in 1998 was 9,000 and after trading both up and down in wild swings, was still at 9,000 in 2009, eleven years later. Not everyone is positioned to ‘buy and hold’.

Warning, A Political Opinion: Republicans promote an ideology Conservatism, saying they are for business, free markets, less taxes, less regulation, balanced budgets and guns. They are against abortion, immigrants, non-whites and they mistrust big government. However, this ideology is really a subterfuge to help get elected and to help the oligarchy. Under Trump, Conservatives disappeared, when it came to a balanced budget with huge tax cuts for the rich. Trump kept the voters’ attention away from the real issues of global competition, automation and a carbon free technology, while the super-rich played ‘winner take all’. What worries me most is what the Republicans are doing now. They are choosing getting elected over democracy. The Founders created a system that would produce the most virtuous people to govern. As Madison asked, “Is there no virtue among us?” If there be not, no form of government can render us secure. To suppose that any form of government will secure liberty or happiness without any virtue in the people is a chimerical idea. (Hoped for but illusory or impossible to achieve).”  I ask in Madisonian terms, “If there not be virtue in the governed, how can there be virtue in the government?”

As Tom Freeman  said in a 7/30/2020 PBS interview on Amanpour  “if  the ‘rule of law’ continues to be in jeopardy in the United States, we will not only loose our freedom, but also our prosperity.”

Carl M Birkelbach

4/1/2025 Dow 42,434, NASDAQ 17,744, S&P 500 5,703

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com

Your Legacy

05 Thursday Dec 2024

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On December 2, I was one of the panelists for a seminar at Chicago’s Union League Club entitled” Charting Your Courses:  A Roadmap of Healthy and Happy Aging.” This was the eight of 10 sessions. The topic was Legacy. This is approximately what I said:

“At your memorial service, no one will be interested in how much money you earned, how big your house was or if you drove a Mercedes. Your Eulogy and Legacy will depend on what kind of life you led and the values you pass on to others by example, as a role model. Last week I attended my great granddaughter’s baptism. She represents the 6th generation of my family in which I have been influenced by or will influence; starting with my grandmother Mary born in 1875 who I shared by bedroom with until I was 10 (that’s the way it was done in the 1940’s), my mother Charlotte, me, my daughter Susan, her daughter Ellen and her daughter Charlotte who should live past the year 2100.  That is 225 years of ‘association of influence’ in my one lifetime.

There are values that have been passed down to me, which that I am hopefully passing on to my family’s future generations: Love, Compassion, Kindness, Empathy, Tolerance, Forgiveness, Honesty, Loyalty, Generosity, Gratefulness, Patience, Persistence, Resilience and a Sense of Humor.  I have also written a 5 page message to my grandchildren outlining my values called the ‘Eight Fold Way’ and I have written a one page message to be read at my Memorial Service titled ‘I’m dead, get on with your life.’

I am also trying to pass on my Legacy to the outer world. My father was an entrepreneur and taught me how to be an entrepreneur and write my own pay check by creating a business that would outlive me. My daughter Susan followed in my entrepreneurial footsteps and is now handing her business over to her daughter Ellen.  I have also use my entrepreneurial skills to create some new  non-profit advocacy organization. I am proudest of being one of the founders of IMBA (International Bicycling Assertion) and Friends of the Cook County Forest Preserve.

I am presently engaged in doing research and interviews worldwide about living longer and better with my friend of 50 years Bill Langelier. We are also having some fun by riding pedal assist trikes in the US and foreign countries. So far we have over 325 interviews from 19 countries and have posted them on our website called Tour de Longevity.com. Bill is actively applying what we have learned to the senior living facilities he owns in California. We are also applying what we have learned by writing a book about increasing lifespans and health spans and suggesting changes that lead to a healthier lifestyle.”

Carl M. Birkelbach

THE INVESTMENT STRATEGY LETTER #747

23 Saturday Dec 2023

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Predictions for 2024

My latest prediction: 2024 could be a very dangerous year for the stock market, because of the uncertain situation in US politics. The stock market hates uncertainty. What if Biden get sick? What if there are
riots because of the Trump court cases. What if Trump is elected and found guilty and announces as president  he will pardonens himself and all the others. Will Truth and the Law will no longer matter? What if China becomes more unstable? What if more banks start failing as they  take over unwanted worthless commercial real estate? Also the stock market is ending the year 2023 at an all time high, led by only 7 stocks. Very vulnerable.

Dow 37,385  to 30,000    NASDAQ 14, 992 to 11,000   S&P 500  4,754 to 3,000

Why is the Stock Market doing so Well Now?

All of my negative predictions have become a reality and still the stock market makes new highs. It is puzzling and frustrating. Maybe, since retirement, I am no longer in touch with “Wall Street?” Anyway here is my opinion and view: 1) I predicted that US debt, which INCREASED FROM $7 TRILLION TO $20 TRILLION during the Obama Administration,(to combat the 2008 Bush economic debacle) would be terrible for the country.  It was, but nobody seemed to care that all the money went to save the banks, while 11 million people lost their  homes. The US could have simply guaranteed the mortgages and the money could have been used for national health care and eliminating US poverty.  2) I predicted that the Trump Administration and the Republican Party was good at winning elections, but had little interest in running the government.  (Even though candidate Trump promised he would“pay off the US debt in eight years”) My dire prediction turned out to be true, as Trump reduced taxes for the rich, which raised the US debt from $20 trillion to $28 trillion. Once again, progressive‘safety net’ measures were ignored and the rich grew richer and the poor got poorer and the stock market went up.  3) I predicted that Covid 19 would paralyze the economy, mainly because President Trump was ignoring its severity and proper precautions (masks and immunization). Over 1 million people died and yet the stock market went up as the Biden Administration fought off the effects of the slowdown in the economy with more US debt, increasing it from $28 trillion to$31 trillion. We have spent all our $ bullets and only Corporate America
and the super-rich have won. (Five US families have more wealth than the bottom
40%).Too much of this sort of winning, by raising debt can be costly, like households that
may end up eventually losing its ability to find buyers for its debt.

We could have used this money  to give every american free healthcare, end poverty and  provide free collegege for all who qualify.

4) I predicted that  banks were in trouble. They were, but the US government guaranteed the deposits. (See how easyit is to help the banks, but not the homeowners). There is still a problem with
the banks but it is temporarily being ignored. 5) I have been predicting that there is economic trouble in China. Suddenly everyone is writing about it (Economist Magazine, the Wall Street Journal
and the NYT). Still the stock market goes up. https://www.cnn.com/2023/08/21/economy/china-economy-troubles-intl-hnk/index.html 6) I have been warning that empty commercial office space will eventually hurt the banks and therefor the whole US economy. See a 9/1/2023 NYT article, ‘All That OfficeSpace Belongs to Someone.”https://www.nytimes.com/2023/09/01/business/office-vacancies-gural-gfp.html Although more office workers are back at their desks than a year ago,
attendance at office buildings in New York, Boston, Atlanta, Chicago, San
Francisco and other cities is well below pre-pandemic levels. As leases come up
for renewal, companies are often opting for smaller offices, leaving landlords
with millions of square feet in vacant space. More space is expected to hit the
market in the coming months as leases expire and more than
100,000 technology workers have lost their jobs. According to a
recent study by business professors at Columbia and New York University, the
value of U.S. office buildings could plunge 39 percent, or $454 billion, in the
coming years.

Dow 37,385     NASDAQ 14, 992   S&P 500  4,754

Carl M Birkelbach

4/27/2023

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com


THE INVESTMENT STRATEGY LETTER #746

02 Saturday Sep 2023

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Why is the Stock Market doing so Well?

All of my negative predictions have become a reality and still the stock market makes new highs. It is puzzling and frustrating. Maybe, since retirement, I am no longer in touch with “Wall Street?” Anyway here is my opinion and view: 1) I predicted that US debt, which INCREASED FROM $7 TRILLION TO $20 TRILLION during the Obama Administration,(to combat the 2008 Bush economic debacle) would be terrible for the country.  It was, but nobody seemed to care that all the money went to save the banks, while 11 million people lost their  homes. The US could have simply guaranteed the mortgages and the money could have been used for national health care and eliminating US poverty.  2) I predicted that the Trump Administration and the Republican Party was good at winning elections, but had little interest in running the government.  (Even though candidate Trump promised he would“pay off the US debt in eight years”) My dire prediction turned out to be true, as Trump reduced taxes for the rich, which raised the US debt from $20 trillion to $28 trillion. Once again, progressive ‘safety net’ measures were ignored and the rich grew richer and the poor got poorer and the stock market went up.  3) I predicted that Covid 19 would paralyze the economy, mainly because President Trump was ignoring its severity and proper precautions (masks and immunization). Over 1 million people died and yet the stock market went up as the Biden Administration fought off the effects of the slowdown in the economy with more US debt, increasing it from $28 trillion to$31 trillion. We have spent all our $ bullets and only Corporate America and the super-rich have won. (Five US families have more wealth than the bottom 40%).Too much of this sort of winning, by raising debt can be costly, like households that may end up eventually losing its ability to find buyers for its debt.

We could have used this money  to give every american free healthcare, end poverty and  provide free collegege for all who qualify.

4) I predicted that  banks were in trouble. They were, but the US government guaranteed the deposits. (See how easyit is to help the banks, but not the homeowners). There is still a problem with the banks but it is temporarily being ignored. 5) I have been predicting that there is economic trouble in China. Suddenly everyone is writing about it (Economist Magazine, the Wall Street Journal and the NYT). Still the stock market goes up. https://www.cnn.com/2023/08/21/economy/china-economy-troubles-intl-hnk/index.html 6) I have been warning that empty commercial office space will eventually hurt the banks and therefor the whole US economy. See a 9/1/2023 NYT article, ‘All That OfficeSpace Belongs to Someone.”https://www.nytimes.com/2023/09/01/business/office-vacancies-gural-gfp.html Although more office workers are back at their desks than a year ago, attendance at office buildings in New York, Boston, Atlanta, Chicago, San Francisco and other cities is well below pre-pandemic levels. As leases come up for renewal, companies are often opting for smaller offices, leaving landlords with millions of square feet in vacant space. More space is expected to hit the market in the coming months as leases expire and more than 100,000 technology workers have lost their jobs. According to a recent study by business professors at Columbia and New York University, the value of U.S. office buildings could plunge 39 percent, or $454 billion, in the coming years.

 What if?

My latest prediction: 2024 could be a very dangerous for stock markets, because of the uncertain situation in US politics. The stock market hates is uncertainty. What if Biden get sick? What if there are riots because of the Trump court cases. What if Trump is elected and found guilty and announces as president  he will pardonens himself and all the others. Truth and the law will no longer matter? What if the debt limit is not raised? What if China becomes unstable? What if more banks start failing as they  reposed unwanted commercial real estate? Also the stock market is ending the year at an all time high, led by only 7 stocks. Very vulnerable.

SORRY FOR THE DIFFERENT TYPE SIZE ETC.: CARL

What if the Fed is raising inters rates too fast and too high? As I said in ISL #743,  (with the Dow at 35,000), the reason that I believe the stock market is ready to resume it downside trend and turn into a true ‘Bear Market’ are many, but the main one is that the Federal Reserve is depending on higher interest rates to stop inflation. My worry is that the ‘cure’ may kill the patient. Also, I believe that investors should be worried as the Federal Reserve quickens the pace at which it removes one of its primary pandemic supports, quantitative easing, or QE.

The Fed’s balance sheet ballooned from a little over $2 trillion in early 2008 and $4 trillion in 2020, to a peak of nearly $9 trillion 2022. While QE brought investors back to the stock market and inflated stock prices, it also helped stoke inflation. Now, the Fed is reversing course through quantitative tightening, or QT, pulling back its support for financial markets while it raises interest rates to quell inflation. Investors should worry that the quickening pace of the Fed’s pullback could become too much for markets to bear, undermining the safety and reliability of the Treasury market.

If demand for Treasuries can’t keep pace with the supply, it could pull bond prices down. This could put banks and may BBB rated business in trouble .Prices move in the opposite direction to bond yields, a measure of borrowing costs. Higher Treasury yields would put more pressure on borrowers and investment portfolios already grappling with the Fed’s campaign to lower inflation by raising interest rates. I am worried that we are putting Q.T. on top of these rate hikes and it will have consequences that could push us into recession or worse.

Trouble in China!

As predicted in ISL #744, there is trouble in China. The Chinese Hang Seng Index has hit a new 10 year low. Also the China’s Consumer Confidence Index is at a record low. Something is wrong!  Is this supposedly successful fast growing super-giant in trouble? I have said so for some time. And if so, what are the economic global implications? In the September 17, 2022 edition of the Economist Magazine this was the headline on the finance and economics section “China’s Ponzi-like property market is eroding faith in the government. Its meltdown could scarcely come at a worse time for Xi Jinping.”

 

For decades the property industry has been symbolic of China’s rise. Private entrepreneurs have made vast fortunes. Average people have witnessed their net worth soar as home values trebled. Local governments have filled their coffers by selling vast tracts of land to developers. An astonishing 70% of Chinese household wealth is now tied up in real estate. To undermine trust in this model is to shake the foundations of China’s growth miracle. With sweeping covid-19 lockdowns and a crackdown on private entrepreneurs, this is happening on many fronts. But nowhere is it clearer than in the property industry, which makes up around a fifth of GDP. New project starts fell by 45% in July compared with a year ago, the value of new home sales by 29% and property investment by 12%.

 

The effects are rippling through the economy, hitting furniture-makers and steelworkers’ alike. The result is a crunch. China’s developers need to sell homes long before they are built to generate liquidity. Last year they pre-sold 90% of homes. But without access to bonds and loans, as banks cut their exposure to the property sector, and with sales falling, the Ponzi-like nature of the property market has come into full view.

Evergrande’s China’s largest real estate firm)shares fell 79% on August 28th, after resuming trading following a 17-month suspension, wiping out $2.2 billion of the company’s market value. An effort to restructure its offshore debts, intended as a model to follow, missed an end-of-July deadline. At least 28 other property firms have missed payments to investors or gone into restructuring. Confidence in China’s economic foundations could cross a threshold, beyond which it becomes far more difficult to recover.

 

World debt $226 trillion up from $74 trillion in 2019

The market rise was due to low interest rates, quantitative easing, cheap oil and unprecedented growth of debt. Simply put the market went up to far. Now, high inflation, interest rates and gas prices and the war in Ukraine are worrying investors. Last year, we observed the largest one-year debt surge since World War II, with global debt rising to $226 trillion as the world was hit by a global health crisis. Debt was already elevated going into the crisis, but now governments must navigate a world of record-high public and private debt levels, new virus mutations, rising inflation and falling stock and real estate markets. Borrowing by governments accounted for slightly more than half of the debt increase, as the global public debt ratio jumped to a record 99 percent of GDP. Private debt from non-financial corporations and households also reached new highs. My concern is in the world’s ocean of corporatedebt, worth $226 trillion up from $74 trillion 2019. US corporate debt has climbed during the same period from $18 trillion to $30 trillion. Two-thirds of non-financial corporate bonds in America are rated “junk” or “BBB”, the category just above junk. The growth in debt has now stopped, because suddenly bankers are worried and interest rates are high and going higher

US federal debt to GDP was in 1980  34.5%, 2000 57.9% and in 2021 100%+

The US Federal debt is over $30 trillion dollars and is growing. US Federal spending is $6.2 trillion and tax revenue is $4.2 trillion ($12,000 per person) for a $2 trillion deficit.  $30 trillion is a debt of $243,000 per tax payer and $91,000 per tax citizen. The US federal debt to GDP was in 1980 34.5%, 2000 57.9% and is about 100% today. The unwritten rule is anything above $100% is dangerous! Total US and State debt to GDP is 142%. ANNUAL INTEREST ON DEBT; $450 BILLION AND IS RISING AS INTEREST RATES GO UP. Here is the scariest statistic: OTC Derivatives are $600 trillion (10 TIMES WORLD GDP). $600 trillion is at about the same level that caused the 2008 trouble in the banking system.

THIS TIME ITS DIFFERENT by Carmen Reinhart

All economic disasters are a surprise and can start with something as simple as the SVB failure and escalate! Don’t’ forget the classic THIS TIME ITS DIFFERENT by Carmen Reinhart: It tells the story of eight centuries of Financial Folly. Each time after a catastrophe, (such as the Great Depression or 2008), economists agree that it could never happen again. Who could be so stupid as to let 10 banks control 70% of the US assets (too big to fail) and allow all the US economic growth go to the top 1%, while eighty people own 50% of the world’s wealth?

Dow 34,837     NASDAQ 14,031    S&P 500 4,515

Carl M Birkelbach

9/2/2023

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com

THE INVESTMENT STRATEGY LETTER #745

27 Thursday Apr 2023

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Troubles with Commercial Real Estate Signals a BIG Problems

With the pandemic almost over, children back in school many businesses are encouraging employees to return to the office. The companies that own big office buildings were hoping that the nightmare of the last two years is over. However, things not have gotten better, they have gotten worse. Remote work and rising interest rates are dealing a double blow to office landlords, with potentially grave consequences for the national economy.

Commercial Real Estate value down 39%?

Although more office workers are back at their desks than a year ago,  attendance at office buildings in New York, Boston, Atlanta, Chicago, San Francisco and other cities is well below pre-pandemic levels. As leases come up for renewal, companies are often opting for smaller offices, leaving landlords with millions of square feet in vacant space. More space is expected to hit the market in the coming months as lease expire and more than 100,000 technology workers have lost their jobs. According to a recent study by business professors at Columbia and New York University, the value of U.S. office buildings could plunge 39 percent, or $454 billion, in the coming years,

New York City as an example

Let’s take a look at the New York commercial real estate market as an example of how bad things are.  Rising interest rates have intensified concerns that the New York City office market, the largest in the country and a pillar of the city’s economy is at  risk. Low occupancy rates and falling property values and higher borrowing costs could increase the odds of a recession nationally and a budget crisis for the city. In the latest snapshot of New York City’s largest office landlord, SL Green Realty Corporation revealed that more of its properties lost tenants during the first months of 2023. Shares of SL Green and two other publicly traded office landlords in the city, Vornado Realty Trust and Empire State Realty Trust, stocks are all trading near their lowest level since the pandemic started. SL Green’s stock has fallen 76 percent since early 2020. Vornado is trading at its lowest territory since 1996. Empire State Realty, which owns the Empire State Building, is near its record low. Collectively, $17 billion of their market value has been erased since the pandemic started.

Urban doom loop.

According to a recent study by researchers at Columbia and New York Universities, the value of New York City office buildings could tumble $48.75 billion in the coming years. This would hamper a vital source of the city’s tax revenue. In addition, office workers in the city make about 75 percent more in annual salaries than the rest of the private sector (according to the Office of the State Comptroller) and their absence from the office every day deprives a host of local businesses of their spending. Stijn Van Nieuwerburgh, a real estate professor at Columbia University’s business school, has warned that New York City faces an “urban doom loop” sparked by remote work. While the current commercial real estate downturn shares similarities with previous declines, including periods in the early 1990s, after the Sept. 11 attacks and during the 2008 financial crisis, this drop has a new twist: The lower demand for office space appears permanent.

Trouble in commercial real estate = trouble for banks = trouble for the economy

Large banks like JPMorgan Chase and Wells Fargo have increasingly warned that a heap of commercial loans are coming due by the end of 2024 — estimated to amount to $1.5 trillion nationwide — and that  companies may struggle to repay or refinance them. More than two-thirds of all commercial real estate loans are held by small- and medium-size banks, prompting concern that regional banks might be unable to withstand a wave of defaults if landlords cannot pay off loans. Some analysts have forecast a dim future for city centers, likening the crisis to the slow death of many American shopping malls.

Conclusion

The banking crisis, that started with saving the regional banks such as SVB, is not over! I believe there is another shoe to fall, as expressed above. The banks have not yet felt the affect of the crash of commercial real estate prices on their loan portfolio. Defaults will come as a surprise to most investors, just as did the crash of CMO market.  Most economic disasters are a surprise and can start with something as simple as the SVB failure and escalate! Don’t’ forget the classic THIS TIME ITS DIFFERENT by Carmen Reinhart: It tells the story of eight centuries of Financial Folly. Each time after a catastrophe, (such as the Great Depression or 2008), economists agree that it could never happen again. Who could be so stupid as to let 10 banks control 70% of the US assets (to big to fail) and allow all the US economic growth  go to the top 1%, while eighty people own 50% of the world’s wealth?

FOR MORE, SEE ISL #742 (summarized below)

Trouble in China There is trouble in China. The Chinese Hang Seng Index  hit a new 10 year low in 2023. Also the China’s Consumer Confidence Index is at a record low. Something is wrong. Confidence in China’s economic foundations could cross a threshold, beyond which it becomes far more difficult to recover.

World debt $226 trillion up from $74 trillion in 2019. My concern is in the world’s ocean of corporate debt, worth $226 trillion up from $74 trillion 2019. US corporate debt has climbed during the same period from $18 trillion to $30 trillion. Two-thirds of non-financial corporate bonds in America are rated “junk” or “BBB”, the category just above junk. The growth in debt has now stopped, because suddenly investors are worried and interest rates are high and going higher

US federal debt to GDP was in 1980  34.5%, 2000 57.9% and in 2021 100% The US Federal debt is over $30 trillion dollars and is growing. It took the US from 1789 to 2016 to get to $15 trillion and only 6 years for it to double. With the spending of that kind of money, we could have eliminated US poverty and given health care for all. Now, we are just stuck with the problems, in addition to the debt! Total US and State debt to GDP is 142%. ANNUAL INTEREST ON DEBT; is $450 BILLION AND IS RISING AS INTEREST RATES GO UP. Here is the scariest statistic: OTC Derivatives are $600 trillion (10 TIMES WORLD GDP). $600 trillion is at about the same level that caused the 2008 trouble in the banking system. And now there is talk in Congress to let the US default on its debt. When you play with fire, you can get burnt!

Our DOWNSIDE PROJECTIONS ARE: a DOW of 28,000 to 27,000, NASDAQ 9,000 to 8,000, S&P-2,900 to 2,700. Don’t fight the Fed!

Dow 33,614,     NASDAQ 12,078    S&P 500  4,108

Carl M Birkelbach

4/27/2023

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com

THE INVESTMENT STRATEGY LETTER #744

11 Saturday Mar 2023

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A BANK FAILURE

Is this an isolated incident or the begging of a new economic disaster?

The Silicon Valley Bank on Friday became the biggest American bank to fail since the collapse of Washington Mutual in 2008. At the height of the global financial crisis, in 2008, the implosion of Washington Mutual, as well as the investment banks of Lehman Brothers and Bear Stearns, was followed by a system-wide failure of banks. To avoid an economic collapse, a big government bailout was initiated by the government and paid for by the tax payers,  This started the US debt  soaring by the trillions. From 2008 to 2015, more than 500 federally insured banks failed. The big question bothering investors today, is. this indicative of ‘the canary in a coal mine,’ or is this just an isolated incident?

It’s unclear whether the collapse of Silicon Valley Bank (SVB) will spread to the broader industry. SVB was best known for its lending to technology start-ups and it had $209 billion in assets at the end of last year, making it the nation’s 16th-largest bank. But that is still small in comparison with the top three BIG banks, which hold some 50% of total bank assets and have a much more diversified business model and customer base. But SVB and other Regional Banks (see 10 troubled banks below),  do not have the same regulatory oversight as the BIG banks, as in 2018 President Trump signed a bill that lessened scrutiny for many regional banks. If some of the smaller regional banks continue to fail, this could be the beginning of a surprising sequence that will topple an economy, which has been built on escalating debt.

Likely Conclusion

I believe there will be no big immediate fallout from this SVB failure.  On the short run. there will be a Federal Rescue Plan of some kind. However, on the long run, every CEO’s competency can now be questioned, if he puts the company’s money in a Regional Bank. ( Roku will have to wait to obtain any part of its almost $500 million dollars.) This run to pull money out on SVB was caused by a ‘Twitter’ panic post, which could happen again to any Regional Bank. In my opinion, in the long run, the SVB failure will cause further consolidation to the 5 largest Big banks .This will not be good for the Regional Banks or the health of the US economy. What happened to the Saving and Loan Banks, Community Local Banks, Regional Brokerage firms and non-bank owned Brokerage Firms and Mutual Funds??? All gone!  Wall Street wins + Main Street looses = An eventual economic disaster!

All economic disasters are a surprise and can start with something as simple as the SVB failure and escalate! Don’t’ forget the classic THIS TIME ITS DIFFERENT by Carmen Reinhart: It tells the story of eight centuries of Financial Folly. Each time after a catastrophe, (such as the Great Depression or 2008), economists agree that it could never happen again. Who could be so stupid as to let 10 banks control 70% of the US assets (to big to fail) and allow all the US economic growth  go to the top 1%, while eighty people own 50% of the world’s wealth?

It is the Fed (KISS)

As I said in ISL #743,  (with the Dow at 35,000), the reason that I believe the stock market is ready to resume it downside trend and turn into a true ‘Bear Market’ are many, but the main one is that the Federal Reserve is depending on higher interest rates to stop inflation. My worry is that the ‘cure’ may kill the patient. Also, I believe that investors should be worried as the Federal Reserve quickens the pace at which it removes one of its primary pandemic supports, quantitative easing, or QE.

The Fed’s balance sheet ballooned from a little over $2 trillion in early 2008 and $4 trillion in 2020, to a peak of nearly $9 trillion 2022. While QE brought investors back to the stock market and inflated stock prices, it also helped stoke inflation. Now, the Fed is reversing course through quantitative tightening, or QT, pulling back its support for financial markets while it raises interest rates to quell inflation. Investors should worry that the quickening pace of the Fed’s pullback could become too much for markets to bear, undermining the safety and reliability of the Treasury market.

If demand for Treasuries can’t keep pace with the supply, it could pull bond prices down. This could put banks  and may BBB rated business in trouble .Prices move in the opposite direction to bond yields, a measure of borrowing costs. Higher Treasury yields would put more pressure on borrowers and investment portfolios already grappling with the Fed’s campaign to lower inflation by raising interest rates. I am worried that we are putting Q.T. on top of these rate hikes and it will have consequences that could push us into recession or worse.

See how the Fed’s actions to raise interest rates had a devastating effect on SVB:

What Happened at Silicon Valley Bank?

As interest rates have risen, many banks have become more profitable, because the spreads between what they earn on loans and investments and what they pay for funding has widened. But there are always exceptions; flush with cash from high-flying start-ups, SVB bought huge amounts of bonds more than a year ago. Like other banks, SVB kept a small amount of the deposits on hand and invested the rest with the hope of earning a greater return. That had worked well until the Federal Reserve began raising interest rates last year to cool inflation. At the same time, start-up funding started to dry up, putting pressure on many of the bank’s clients, who then began to withdraw their money. To pay those requests, SBV was forced to sell off some of its investments at a time when their value had declined. In its surprise disclosure on Wednesday, the bank said it had lost nearly $2 billion.

SCB showed contracting margins over the past year. A Warning Sign:

Bank Ticker NIM – Q4 2022 NIM – Q3 2022 NIM – Q2 2022 NIM – Q1 2022 NIM- Q4 2021
SVB Financial Group SIVB 2.00% 2.28% 2.24% 2.13% 1.91%
Source::Market Watch FactSet

10 Banks to Worry About

So now, the question is, which other banks might face pressure because their net interest margins have contracted, or because their margins have only expanded slightly. Below is a list of the 10 banks showing contracting margins over the past year, or the smallest expansions of margins:

Bank Ticker City Net interest income/ avg. assets – Q4 2022 Net interest income/ avg. assets – Q3 2022 Net interest income/ avg. assets – Q4 2021 One-year contraction or expansion
Customers Bancorp Inc. CUBI West Reading, Pa. 2.61% 3.10% 4.03% -1.42%
First Republic Bank FRC San Francisco, Calif. 2.28% 2.53% 2.50% -0.22%
Sandy Spring Bancorp Inc. SASR Olney, Md. 3.10% 3.34% 3.29% -0.19%
New York Community Bancorp Inc. NYCB Hicksville, N.Y. 2.10% 2.06% 2.20% -0.11%
First Foundation Inc. FFWM Dallas, Texas 2.35% 2.98% 2.41% -0.07%
Ally Financial Inc. ALLY Detroit, Mich. 4.04% 4.20% 4.09% -0.05%
Dime Community Bancshares Inc. DCOM Hauppauge, N.Y. 2.98% 3.20% 2.95% 0.03%
Pacific Premier Bancorp Inc. PPBI Irvine, Calif. 3.34% 3.34% 3.27% 0.07%
Prosperity Bancshares Inc. PB Houston, Texas 2.72% 2.78% 2.65% 0.07%
Columbia Financial Inc. CLBK Fair Lawn, N.J. 2.69% 2.78% 2.60% 0.09%
Source::Market Watch FactSet

TAKE A LOOK AT ISL #729 ABOUT BANK STOCKS ( AN EARLY WARNING 3/14/2020)

“As stated above I worry about defaults on corporate debt and loans.  What worries me most is the collapse of many bank stocks, such as Deutsche Bank (DB), HSBC Holdings, (HBC1.BE), Credit Swiss (CS) and Barclays PLC (BCS). Credit Swiss is down from 78 in 2007 to 8.16. My 25 year charts doesn’t show the stock ever being so low! Barclays was as high as 55 in 2007, now 5.40.That’s a 35 year low! DB was as high as 149, now 5.97. Each rally is met with another new low! What are these falling bank charts telling me? Trouble!”

FOR MORE, SEE ISL #742 (summarized below)

Trouble in China There is trouble in China. The Chinese Hang Seng Index has hit a new 10 year low. Also the China’s Consumer Confidence Index is at a record low. Something is wrong. Confidence in China’s economic foundations could cross a threshold, beyond which it becomes far more difficult to recover.

World debt $226 trillion up from $74 trillion in 2019. My concern is in the world’s ocean of corporate debt, worth $226 trillion up from $74 trillion 2019. US corporate debt has climbed during the same period from $18 trillion to $30 trillion. Two-thirds of non-financial corporate bonds in America are rated “junk” or “BBB”, the category just above junk. The growth in debt has now stopped, because suddenly investors are worried and interest rates are high and going higher

US federal debt to GDP was in 1980  34.5%, 2000 57.9% and in 2021 100% The US Federal debt is over $30 trillion dollars and is growing. It took the US from 1789 to 2016 to get to $15 trillion and only 6 years for it to double. With the spending of that kind of money, we could have eliminated US poverty and given health care for all. Now, we are just stuck with the problems, in addition to the debt! Total US and State debt to GDP is 142%. ANNUAL INTEREST ON DEBT; is $450 BILLION AND IS RISING AS INTEREST RATES GO UP. Here is the scariest statistic: OTC Derivatives are $600 trillion (10 TIMES WORLD GDP). $600 trillion is at about the same level that caused the 2008 trouble in the banking system. And now there is talk in Congress to let the US default on its debt. When you play with fire, you can get burnt!

Our DOWNSIDE PROJECTIONS ARE: a DOW of 28,000 to 27,000, NASDAQ 9,000 to 8,000, S&P-2,900 to 2,700. Don’t fight the Fed!

Dow 31,909,     NASDAQ 11,138    S&P 500  3,861

Carl M Birkelbach

3/11/2023

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com

 

THE INVESTMENT STRATEGY LETTER #743

11 Wednesday Jan 2023

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YES, I AM BEARISH AGAIN!

The Investment Strategy Letter #739 May 20, 2022 predicted a big drop in in the Dow with its title of “TIME TO LIGHTEN-UP ON ANY FURTHER MARKET RISE.” In June 2022 the Dow was at approximately at 37,000 and then fell to 30,000 and has since then managed to rally to about 34,500. As I said in market letter #741 in June, “Expect Rallies.”  During the same period the S&P dropped from 4,800 to 3,500 and the rallied to 4,000; whereas the NASDAQ fell from 15,300 to 13,100 and is now at 10, 900. I NOW BELIEVE THE RALLY IS OVER AND THE MARKET IS READY TO RESUME ITS DONSIDE ‘BEAR MARKET’ THAT BEGAN LAST SUMMER. Our DOWNSIDE PROJECTIONS ARE: a DOW of 28,000 to 27,000 (Now 33,866), NASDAQ 9,000 to 8,000 (Now 10,876) S&P-2,900 to 2,700 (Now 3,951). Don’t fight the Fed!

The reason that I believe the stock market is ready to resume it downside trend and turn into a true ‘Bear Market’ are many, but the main one is that the Federal Reserve is depending on higher interest rates to stop inflation. MY worry is that the ‘cure’ may kill the patient. Also, I believe that investors should be worried as the Federal Reserve quickens the pace at which it removes one of its primary pandemic supports, quantitative easing, or QE.

The Fed’s balance sheet ballooned from a little over $2 trillion in early 2008 and $4 trillion in 2020, to a peak of nearly $9 trillion now. While QE brought investors back to the stock market, it also helped stoke inflation. Now, the Fed is reversing course through quantitative tightening, or QT, pulling back its support for financial markets while it raises interest rates to quell inflation. Investors should worry that the quickening pace of the Fed’s pullback could become too much for markets to bear, undermining the safety and reliability of the Treasury market.

If demand for Treasuries can’t keep pace with the supply, it could pull bond prices down. Prices move in the opposite direction to bond yields, a measure of borrowing costs. Higher Treasury yields would put more pressure on borrowers already grappling with the Fed’s campaign to lower inflation by raising interest rates. I am worried that we are pilling Q.T. on top of these rate hikes and it will push us into recession or worse.

Gridlock In Washington

I was surprised to see in today’s New York Times an editorial by Bret Stephens and David Brooks entitled “The Party’s Over for Us. Where Do We Go Now?” For decades, conservative values have been central to Bret Stephens’s and David Brooks’ political beliefs, and the Republican Party was the vehicle to extend those beliefs into policy. But in recent years, both the party and a radicalized conservative movement have left them feeling alienated in various ways. Now, with an extremist fringe seemingly in control of the House, the G.O.P. bears little resemblance to the party that was once their home. To quote from the article, “When people get on a bad path, whether it’s drinking or gambling or political or religious fanaticism, they tend to follow it all the way to the bottom, at which point they either die or have that proverbial moment of clarity. I’ve been waiting for Republicans to have a moment of clarity for a while now — after Joe Biden’s victory, or Jan. 6, the midterms, Trump’s dinner with Kanye West. I had a flicker of hope that the Kevin McCarthy debacle last week would open some eyes, but probably not. Part of the problem is that so many Republicans no longer get into politics to pass legislation. They do it to become celebrities. The more feverish they are, the better it sells.”

If these two stalwart Conservative Republicans have lost faith in the Republican Party, it appears there is no hope for a government that works for the people it serves. As James Madison said, “If there be no virtue in the electors there can be no virtue in the elected.” We are indeed in trouble as a man like George Santos serves in the House of Representatives after lying about everything in his resume. I am reminded of a session on June 9, 1954, when Senator Joseph McCarthy hunting Communist in the government when an amazed television audience looked on as Joseph Welch responded with the immortal lines that ultimately ended McCarthy’s career: “Until this moment, Senator, I think I never really gauged your cruelty or your recklessness.” When McCarthy tried to continue his attack, Welch angrily interrupted, “Let us not assassinate this lad further, Senator. You have done enough. Have you no sense of decency?”

I am very concerned. I believe as do Stevens and Brooks that “a successful democracy needs a morally healthy conservative party — one that channels conservative psychological tendencies into policies to check heedless progressivism while engaging productively with an evolving world.” I believe in the core values of old-fashioned democracy, faith in the goodness of people, human rights, the rule of law, free speech, political compromise, the political process itself. I believe in building things up, not just tearing them down. For the next two year, and maybe even longer, I believe the stock market and the country will suffer as the government falls into gridlock and disarray and maybe even defaulting on its debt..

World debt $226 trillion up from $74 trillion in 2019 (worth repeating from  ISL #742)

The market rise was due to low interest rates, quantitative easing, cheap oil and unprecedented growth of debt. Simply put the market went up to far. Now, high inflation, interest rates and gas prices and the war in Ukraine are worrying investors. Last year, we observed the largest one-year debt surge since World War II, with global debt rising to $226 trillion as the world was hit by a global health crisis. Debt was already elevated going into the crisis, but now governments must navigate a world of record-high public and private debt levels, new virus mutations, rising inflation and falling stock and real estate markets. Borrowing by governments accounted for slightly more than half of the debt increase, as the global public debt ratio jumped to a record 99 percent of GDP. Private debt from non-financial corporations and households also reached new highs. My concern is in the world’s ocean of corporate debt, worth $226 trillion up from $74 trillion 2019. US corporate debt has climbed during the same period from $18 trillion to $30 trillion. Two-thirds of non-financial corporate bonds in America are rated “junk” or “BBB”, the category just above junk. The growth in debt has now stopped, because suddenly bankers are worried and interest rates are high and going higher

US federal debt to GDP was in 1980  34.5%, 2000 57.9% and in 2021 100%

The US Federal debt is over $30 trillion dollars and is growing. US Federal spending is $6.2 trillion and tax revenue is $4.2 trillion ($12,000 per person) for a $2 trillion deficit.  $30 trillion is a debt of $243,000 per tax payer and $91,000 per tax citizen. The US federal debt to GDP was in 1980  34.5%, 2000 57.9% and is about 100% today. The unwritten rule is anything above $100% is dangerous! Total US and State debt to GDP is 142%. ANNUAL INTEREST ON DEBT; $450 BILLION AND IS RISING AS INTEREST RATES GO UP. Here is the scariest statistic: OTC Derivatives are $600 trillion (10 TIMES WORLD GDP). $600 trillion is at about the same level that caused the 2008 trouble in the banking system.

Dow 33,916,     NASDAQ 10,881    S&P 500  3,957 

Carl M Birkelbach

1/11/2023

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com

THE INVESTMENT STRATEGY LETTER #742

16 Friday Sep 2022

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Turmoil in the markets

After the big drop in June 2022, the Dow managed to rally from about 30,000 to about 34,000. As I said in our last market letter #741 in June, “Expect Rallies.” Our DOWNSIDE PROJECTIONS of a DOW 28,000 to 27,000 (High 37,000 – Now 30,700), NASDAQ-10,000 to 9,000 ( High 37,000 – Now 11,400) S&P-2,900 to 2,700 (High 4, 800 – Now 3,855) are being revised downward as follows: DOW 26,000 to 24,000, NASDAQ 9,000 to 8,000, S&P 2,800 to 2,700

Bond Market back at risk

In Mondays (9/12/2022) New York Times Business Section, 75% of the page was taken up by an article about going back to the office. At the bottom of the page, taking up 10% of the page, almost unnoticed, was an article titled . “Fed’s Fading Support Puts Bond Market Back at Risk.” With a sub title “Declining liquidity in Treasuries could end up causing turmoil.” What’s this all about and how come everyone isn’t talking about this? Shouldn’t investors be worried about the world’s largest and most important government bond market, as the Federal Reserve quickens the pace at which it removes one of its primary pandemic supports, quantitative easing, or Q.E.

When the global economy crashed in 2008 and in early 2020 when the corona virus pandemic hit, markets went into free fall, the U.S. Treasury market, the $25 trillion bedrock of the global financial system broke down. Sellers struggled to find buyers, and prices whipsawed higher and lower. The Fed stepped in, devoting trillions of dollars to steadying the market. In response to market turmoil in the early stages of the corona virus pandemic in 2020, the Fed unleashed the full force of its firepower, buying mortgage bonds and government debt in huge quantities, in a move known as quantitative easing, or Q.E. By becoming the buyer of last resort, the Fed helped restore confidence in markets, and trading in Treasuries began to recover.

The Fed’s balance sheet ballooned from a little over $2 trillion in early 2008 and $4 trillion in 2020, to a peak of nearly $9 trillion now. Stability also brought investment back to the stock market, enriching investors and helping stoke inflation. However, now, the Fed is reversing course through quantitative tightening, or Q.T., pulling back its support for financial markets while it raises interest rates to quell inflation. Investor’s should worry that the quickening pace of the Fed’s pullback could become too much for markets to bear, undermining the safety and reliability of the Treasury market.

Ralph Axel, an interest rate strategist at Bank of America, wrote in a research report last week. He sees emerging strains in the Treasury market as “the single greatest systemic financial risk today,” with the potential to do more damage than the housing turmoil that preceded the 2008 financial crisis. Oh my! The sheer scale of U.S. government debt also plays an important role. The Treasury market has doubled over the past decade, to around $25 trillion (some say it’s $30 trillion), as the government’s financing needs have grown. All that debt needs to be bought by someone, and not just the Fed.  In a May report the Fed noted a worsening of liquidity and said that “the risk of a sudden significant deterioration appears higher than normal.” We have been warned!

If demand for Treasuries can’t keep pace with the supply, it could pull prices down. Prices move in the opposite direction to bond yields, a measure of borrowing costs. Higher Treasury yields would put more pressure on borrowers already grappling with the Fed’s campaign to lower inflation by raising interest rates. I am worried that we are piling Q.T. on top of these rate hikes and it will push us into recession or worse.

Trouble in China!

There is trouble in China. The Chinese Hang Seng Index has hit a new 10 year low. Also the  China’s Consumer Confidence Index is at a record low. Something is wrong!  Is this supposedly successful fast growing super-giant in trouble? I have said so for some time. And if so, what are the economic global implications? In the September 17, 2022 edition of the Economist Magazine this was the headline on the finance and economics section “China’s Ponzi-like property market is eroding faith in the government. Its meltdown could scarcely come at a worse time for Xi Jinping.”

For decades the property industry has been symbolic of China’s rise. Private entrepreneurs have made vast fortunes. Average people have witnessed their net worth soar as home values trebled. Local governments have filled their coffers by selling vast tracts of land to developers. An astonishing 70% of Chinese household wealth is now tied up in real estate. To undermine trust in this model is to shake the foundations of China’s growth miracle. With sweeping covid-19 lockdowns and a crackdown on private entrepreneurs, this is happening on many fronts. But nowhere is it clearer than in the property industry, which makes up around a fifth of GDP. New project starts fell by 45% in July compared with a year ago, the value of new home sales by 29% and property investment by 12%.

The effects are rippling through the economy, hitting furniture-makers and steelworkers’ alike. The result is a crunch. China’s developers need to sell homes long before they are built to generate liquidity. Last year they pre-sold 90% of homes. But without access to bonds and loans, as banks cut their exposure to the property sector, and with sales falling, the Ponzi-like nature of the property market has come into full view.

Evergrande, the world’s most indebted developer, defaulted in December. An effort to restructure its offshore debts, intended as a model to follow, missed an end-of-July deadline. At least 28 other property firms have missed payments to investors or gone into restructuring. Confidence in China’s economic foundations could cross a threshold, beyond which it becomes far more difficult to recover.

In the US, I have seen prices skyrocket in Summit County Coronado. This was due to its location, which is only a hour from Denver, it’s 5 ski Hills, low temperature and humidity during summer, its vacation atmosphere, recreational alternatives and a good place to work, if you don’t have to go to the office. Just 4 months ago there was no availability. Nobody was selling but new building was progressing quickly. Now, with higher interest rates, people are being forced back into the office and with overbuilding, prices have dropped some 25% and dropping. Suddenly everyone wants to sell. Such is how fragile public confidence is. I draw an analogy to the stock market here. At the top nobody wants to sell, but panic selling once started, is hard to stop.

World debt $226 trillion up from $74 trillion in 2019

The market rise was due to low interest rates, quantitative easing, cheap oil and unprecedented growth of debt. Simply put the market went up to far. Now, high inflation, interest rates and gas prices and the war in Ukraine are worrying investors. Last year, we observed the largest one-year debt surge since World War II, with global debt rising to $226 trillion as the world was hit by a global health crisis. Debt was already elevated going into the crisis, but now governments must navigate a world of record-high public and private debt levels, new virus mutations, rising inflation and falling stock and real estate markets. Borrowing by governments accounted for slightly more than half of the debt increase, as the global public debt ratio jumped to a record 99 percent of GDP. Private debt from non-financial corporations and households also reached new highs. My concern is in the world’s ocean of corporate debt, worth $226 trillion up from $74 trillion 2019. US corporate debt has climbed during the same period from $18 trillion to $30 trillion. Two-thirds of non-financial corporate bonds in America are rated “junk” or “BBB”, the category just above junk. The growth in debt has now stopped, because suddenly bankers are worried and interest rates are high and going higher

US federal debt to GDP was in 1980  34.5%, 2000 57.9% and in 2021 100%

The US Federal debt is over $30 trillion dollars and is growing. US Federal spending is $6.2 trillion and tax revenue is $4.2 trillion ($12,000 per person) for a $2 trillion deficit.  $30 trillion is a debt of $243,000 per tax payer and $91,000 per tax citizen. The US federal debt to GDP was in 1980  34.5%, 2000 57.9% and is about 100% today. The unwritten rule is anything above $100% is dangerous! Total US and State debt to GDP is 142%. ANNUAL INTEREST ON DEBT; $450 BILLION AND IS RISING AS INTEREST RATES GO UP. Here is the scariest statistic: OTC Derivatives are $600 trillion (10 TIMES WORLD GDP). $600 trillion is at about the same level that caused the 2008 trouble in the banking system.

Dow 30,606,     NASDAQ 11,347    S&P 500 3,844 

Carl M Birkelbach

9/16/2022

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com

 

INVESTMENT STRATEGY LETTER #741 OMG

19 Thursday May 2022

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EXPECT RALLIES;

DOWNSIDE PROJECTIONS; DOW-28,000 to 27,000 NASDAQ-10,000 to 9,000 S&P-2,900 to 2,700

OMG A BEAR MARKET?

Since our SELL/SELL ISL #740 market letter of December 2021, the Dow has fallen from our suggest sell at 36,000 to 31,400, the NASDAQ from our suggested sell at 16,000 to 11,400, S&P from our suggested sell at 4,500 to 3,900, More importantly some 50% of NASDAQ stocks like First Solar are down 50% and 10% of NASDAQ stocks like Netflix are down 70%.  Also we suggested the sale of Bitcoin at $57,000, now $30,000. After 13 years of continuous up market, the new generations of investors expect an instant rebound to new highs. Not this time.

World debt $226 trillion up from $74 trillion in 2019

The market rise was due to low interest rates, cheap oil and unprecedented growth of debt. Now, high inflation is due to  low interest rates  and high gas prices are due to the war in Ukraine. With debt, we observed the largest one-year debt surge since World War II, with global debt rising to $226 trillion as the world was hit by a global health crisis and a deep recession. Debt was already elevated going into the crisis, but now governments must navigate a world of record-high public and private debt levels, new virus mutations, and rising inflation. Borrowing by governments accounted for slightly more than half of the increase, as the global public debt ratio jumped to a record 99 percent of GDP. Private debt from non-financial corporations and households also reached new highs. My concern is in the world’s ocean of corporate debt, worth $226 trillion up from $74 trillion 2019. US corporate debt has climbed during the same period from $18 trillion to $24 trillion. Two-thirds of non-financial corporate bonds in America are rated “junk” or “BBB”, the category just above junk. The growth in debt has now stopped, because suddenly bankers are worried.

US federal debt to GDP was in 1980  34.5%, 2000 57.9% and in 2021 127%.

The US Federal debt is over $30 trillion dollars and is growing. US Federal spending is $6.2 trillion and tax revenue is $4.2 trillion ($12,000 per person) for a $2 trillion deficit.  $30 trillion is a debt of $243,000 per tax payer and $91,000 per tax citizen. The US federal debt to GDP was in 1980  34.5%, 2000 57.9% and in 2021 127%. The unwritten rule is anything above $100% is dangerous! Total US and State debt to GDP is 142%. ANNUAL INTEREST ON DEBT; $450 BILLION AND RISING AS INTEREST RATES GO UPHere is the scariest statistic: OTC Derivatives are $600 trillion (10 TIMES WORLD GDP). $600 trillion is at about the same level that caused the 2008 trouble in the banking system.

This Time it’s Different,

See the book, This Time it’s Different, Eight Centuries of Financial Folly, by Carmen Reinhart and Kenneth S. Rogoff. This book is one of my favorites. It tells the story that each time after a catastrophe, such as the Great Depression or 2008, economists agree that it could never happen again. Who could be so stupid as to let debt go to 127% of GDP and let six banks control 70% of the US assets (too big to fail) and allow all the economic growth to go to the top 1%, (and then give them tax cuts creating huge budget deficits), while eighty people own 50% of the world’s wealth? Reinhart tells about lessons from history, to show us how little we have learned and that we should prepare for future economic challenges, which are bound to happen again.

The Federal government should sponsors a ‘Retirement Savings Fund’

If you read my blog page titled “In a time of universal deceit, telling the truth is a revolutionary act” which is a quote by George Orwell; you will see that I believe that the Financial Industry has not truly fully disclosed stock market risk to the investing public.  Instead the Financial Industry gives the false advice that, “on the long term, the stock market will always recover.” Keynes has a famous quote that states “in the long run, we will all be dead.” The point being, if you are older and depending on the stock market for retirement, the stock market may not recover from any decline, in time for when you need the money.  During the period between 2000 and 2008 the stock market went down more than 50% twice, which was devastating for people who were retiring or sending their children to college. If you invested in the Dow in 1998, it wasn’t until 2011, that you got your money back. Therefore, in full disclosure, I believe I should tell investors that investing in the stock market is dangerous and that most people, ‘the average American,’ should treat stock market investing only as a speculation and not as a form of savings. Simply stated, most people should not gamble with their savings in the stock market. It is like feeding anchovies to the sharks,

I would like to see the Federal government sponsor a ‘Retirement Savings Fund’ that guarantees a 3 ½% return. (The rate would go up if the Fed fund rate goes higher). A Federal government sponsor a Retirement Savings Fund is needed. It would really help with the average American and their saving planning and keep the ‘average investor’ out of the stock market.  This would make retirement planning a lot easier and safer.

HSI -Hang Seng China Index at a 10 year low

To the word China is the biggest growth story in history with annual GDP growth above 6% per year. Since 2012 the US stock market the Dow have gone from 12,000 to 36,000 and the NASDAQ has gone from 3,000 to 16,000. Yet the Chinese HSI index is at 20,120, below its level in 2012 at 21,000. Why? Is it because the authorial Chinless communist party has been too careless with it ‘s  loans to its insider corporations? Is it because their vaccinations don’t work and the country is in lockdown?  Something is wrong in China and I don’t believe current world stock markets  reflect the risk to world markets.

DOWNSIDE PROJECTIONS; DOW-28,000 to 27,000 NASDAQ-10,000 to 9,000 S&P-2,900 to 2,700

Dow 31,236,     NASDAQ 11,388    S&P 500 3,900 Expect rallies, but eventually new lows!

Carl M Birkelbach

5/19/2022

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com