THE BIG PICTURE REMAINS UNSUSTAINABLE
As I watch the political debates and economic reports on CNBC, I realize that they all are missing the main point. What is the main point? Rather than using my own words I will quote from Robert Reich’s recent book Saving Capitalism. “Over the last three decades, the rules have been shaped by large corporations, Wall Street, and very wealthy individuals in order to channel a large portion of the nation’s total income and wealth to themselves. If they continue to have unbridled influence over the rules, and they gain control of the assets at the core of the new wave of innovations, they will end up with almost all the wealth, all the income, and all the political power. That result is no more in their interest than in the interests of the rest of the population, because under such conditions and economy in a society cannot endure.” For example, the wealth of the Walmart heirs is as much as the US bottom 42% combined. Hopefully as Abraham Lincoln said in the Gettysburg Address. “that this nation, shall have a new birth of freedom — and that government of the people, by the people, for the people, shall not perish from the earth.”
Sorry, I have not been updating this blog, as there are several unexpected health problems in my family.
Market has trouble close to old highs!
The Bulls and the Bears have been slugging it out close to new all-time highs. I am actually quite amazed that the market has been able to rally this much since the August lows. Until the last couple days, it seemed that nothing has bothered the market, not even low oil prices, the oncoming fed interest rate rise, lower manufacturing production, the unrelenting success of terrorists in the Middle East, problems with the bond market or failure of Volkswagen to solve its problems. One telltale stock that may be telling us that things are not as rosy as they seem is the Deutsche Bank. The stock has just gone below its August low of 26.21 and is now at 26.01. This may indicate that Europe is in more trouble than appears obvious. Also with the price of oil going back down to forty-two dollars a barrel, it could be very difficult for oil companies and related countries dependent on high oil prices to prosper. In addition Exxon has been caught with tampering with information that global warming does not have a scientific basis. This reminds me of the period during the 1950s when the cigarette companies produced their own scientific findings showing that smoking was not dangerous to your health.
Markets continue to ignore negative news, so far! Watch the Hang Seng down 2% on Friday.
Why a stock market rally? As I said once before ‘It’s three men in a tub, rub a dub dub, nobody wants to pull the plug. There is talk, the Fed wants to delay increasing interest rates because of an unsure economy. Monetary policy, in my opinion, seems useless. The only thing, I believe can save this economic bear market scenario, is a progressive fiscal policy. This under current conditions will be impossible to execute.
I continue to see corporate earnings as weak, the bond market as dangerous, banks as a house of cards, and international emerging market growth as negative and my Bear Market deflation scenario as on track.
|Foretasted Trend||DJIA||NASDAQ||S&P 500|
|Long Term||Bear Market?||Bear Market?||Bear Market?|
|Breakout Points||DJIA||NASDAQ||S&P 500|
|Short Term Up (Resistance)||17,400||4,960||2,021|
|Short Term Down (Support)||15,881/ 15,651||4487//4506||1879/1867|
|Int. Term Up (Resistance)||18,352||5,231||2,134|
|Int. Term Down (Support)|| 15,651/
/15,370 /14,688/ 13,377
|4,506//4,116/ 3,986/3294||1,867/ /1,560|
|Long Term Up (Resistance)||18,352||5,231||2,134|
|Long Term Down Fibonacci Support||50%12,000 62% 10,750||50%2,958 62% 2,555||50%1,390 62% 1,177|
|10Treasury 2.32%||Gold 1,082||Oil 41.59|
close to old