THE INVESTMENT STRATEGY LETTER

Another Quiet Day/ But No New Highs
It was another quiet day of trading all the major averages barely punched as did the DAX China and Nikkei markets. I continue to feel that the market is entering a topping process. Nobody has a crystal ball as to know exactly if this is a top, or when exactly the market will start to fall. My main concern continues to be that the growth of income continues to be sucked up by the top 1%. This is neither good for those on the bottom or the top. Senator Bernie Sanders was heard today on National Public Radio. He felt that the Democrats did not accurately conveyed their policies. He thought the Democrats should have concentrated on the question, Do you still have upward mobility? For the working poor and those working for minimum wage, a decent lifestyle and college for their children is out of reach.  Both parties are immobilize to make any significant changes, so my worries about the consumer and the economy continues!

Apparently, markets were boosted yesterday by the healthcare sector. The New York Times reported that the Affordable Care Act has evolved into a powerfully mutual beneficial partnership and has led to a profitable increase in enrollment.At the same time health care cost are decreasing. United Healthcare group even helped the administration repair the government website. Insurers and the government have developed a symbiotic relationship, nurtured by tens of billions of dollars that flow to the medical insurance industry. Just think of how more successful Obama Care could be if the Southern states and various other Republican dominated states, had joined the union.
Because stocks are surging corporations are ambitious. Also debt is reasonably cheap. The result is that mergers and acquisition transactions are being booked at about $1.5 trillion, so far this year. This is the largest amount of mergers and acquisitions since the year 2000 during the.com bubble and in 2008 just before the financial crisis. The other thing that corporations are doing, is buying back their own stock, as treasury stock. Corporations are doing everything they can to spend their money on anything except creating new employment. This kind of exuberance for mergers and acquisitions, is usually unsustainable.
Just as a side note, China’s inflated and highly leveraged Real Estate prices are beginning to fall.

Carl M. Birkelbach 11/19/14

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