Another New High? After pausing for one day, (a record 23 days in a row up) the market is once again making all time new highs. Newly built homes and schools have boosted constructions in October to its highest level since May. The Commerce Department indicates construction spending is up 1.1% in October after declining in September. In Asia the Nikkei is close to making a seven year high. Apparently the bank of Japan might start buying exchange traded securities. European markets are mixed the Chinese market plunged 2.6% yesterday as police used pepper spray and clubs against protesters demanding democratic reform. This is typically time of year when the stock market goes up for mechanical reasons. Buying is done by hedge funds and pension funds that receive additional funds at this time year and try to get their performance to catch up to the market. We continue to believe that there are underlying negative factors that will affect the economy that have not shown up yet. Number one in that list of priorities is that all the income growth is going to the top 1% and leaving the middle class sucking air. Recent reports has shown that in the United States 40 people own approximately 50% of the wealth. Although job growth is up, most of that job growth is in the area of minimum wage jobs. The working poor sooner or later will have to capitulate and consumer spending, which drives our economy, will decline sharply. The other big problem I see, is that the 10 largest banks that owned 23% of the assets in the economy, during the last fiscal crisis, now have over 40% of the deposits. Too big to fail is getting dangerously close to causing another financial crisis. How long this bull market will last, no one can tell. The hype and hubris can continue into 2015. However, I believe is the time to lighten up and maybe even buy a little gold.
Carl M. Birkelbach 12/2/14