THE INVESTMENT STRATEGY LETTER
The continuing saga of looking for a top in the markets
WE ARE NOT NUMBER ONE, BUT WE COULD BE
The markets are once again pretty flat with the exception of Japan which was down 3% yesterday. The S&P index made a lethargic new all time high by rising 1.5 points. This dullness of our markets is not a good sign, particularly because hedge funds usually do buying toward the end of the year to increase their profits. My concerns have been voiced over the last week or so of market comments. I continue to be concerned that the market is topping. It’s not that earnings are bad or that there are any major problems. It’s just something that happens every now and then when the lack of momentum can set off a decline that has trouble stopping. However,there are some academic pitfalls that are accumulating, such as the breath that I see leaving the market, by all income increases going to the top 1%. That negative may show up at any time.

The latest Social Progress Index has just been announced. The US ranks 16th overall, ranks 70th in health, 69th and in echo systems sustainability, 39th in basic education, 34th in access to water and sanitation and 31st and personal safety. Even access to cell phones and the Internet ranks us at a disappointing 23rd, partially because one of Americans in five lacks Internet access. The winners are New Zealand number one, followed by Switzerland, Iceland, the Netherlands and  Canada. All are somewhat poorer than America per capita, yet they appear to do a better job of meeting the needs of their people, including free healthcare and reasonably priced colleges. Some politicians who propose cuts in Medicare and ending Obama Care and reducing food stamps and public services believe that such trends could boost America’s competitiveness. However, looking at this report, it seems that the opposite is true. In America, capitalism spiritual home, a survey conducted in 2013 found that just 54% had a positive view of the term. This seems to be the case because the benefits of capitalism have recently only gone to the top 1%. There seems to be a crisis in confidence as the Supreme Court has a ranking of only 30% public schools 26%, the criminal justice system 23% and Congress 7%. The recent election showed just how unsatisfied people are. They voted for change, but change is unlikely to come. Since Citizens United, that declared corporations are people, most changes in government is dictated by donors and election contributions. A recent Princeton study has shown that public opinion has no effect on the outcome of an issue in Congress, whether there is 0% approval or 100% approval, the line of accomplishment is flatlined. Donor power has taken over the rights of ‘we the people’. The current illusion that voters are being heard and are connected will soon diminish in my opinion. The risk now is that voters of both parties may pursue policies which damage the common good.

Carl M. Birkelbach 11/18/14