Forecasts for 2016 and why I am negative!

Goldman Sachs is forecasting 2015 S&P 500 earnings at $109 down 3% from 2014 $113. Original forecasts in December of last year called for an 8% increase. They were wrong!  2016 S&P 500 earnings are foretasted at $130 down from $231 a year earlier. 2017 are forecast at $129 down from $241 a year earlier. I believe earnings for 2016 and 2017 will be lower than forecasts from Goldman Sachs. My forecasts call for the Dow Jones Industrial average to be as low as 14,688, the NASDAQ to be as low as 4,506 and the S&P 500 to be as low as 1,560. Goldman Sachs calls for markets to be up approximately 8%. I disagree

I am not a negative person. I understand, however, that there are two sides to everything. The hubris and the hype that has made America a very positive force in the world, can sometimes ignore the very obvious, as was done in 2008. One of the reasons I have become The Lone Bear is because I don’t see anybody else talking about caution or concerns. Believe me; I would rather be talking about how wonderful Americans are, how great our market economy is and how kind our people are to one another. However, there is a lot we have to worry about and somebody has to talk about it.

An Adverse Political Environment

It’s no secret, that our political system in Washington is a shambles. Washington seems paralyzed by 40 Tea Party members that are not doing what is best for the general welfare and has the tail wagging the dog. Congress’s only concern seems to please their benefactors, which benefits the top 1%, gun advocates, anti-gender freedoms and a phobia about immigrants and terror. Tonight’s Republican debates recognized that people do not feel safe because of radical Islam terrorist attacks worldwide. However, their solution is war, war and war. They must have used the word ‘WAR’ a hundred of times. As Rubio said about a no fly zone for Russia, “If you want World War Three, you have your candidate.” Carpet bombing suggested by Ted Cruz will create enemies faster than we can kill them.  It’s mathematics, violence breeds violence through collateral damage. We have a $700 billion defense budget. We spend more than all the other nations combined and yet the Republican debates talked about reestablishing our military dominance. I agree with Trump on this one, every dollar spent on the failed Iraq war, was one dollar that we do not have to spend on educating our youth, giving medical care or rebuilding our infrastructure. In my opinion, the only thing that will defeat the Islamic states on the long run, as it defeated communism, is the equal opportunity in our economic system. The Statue of Liberty symbolizes our benevolence to refugees. The Islamic countries are failures economically, because of Sharia law. Thirty percent of their youth are unemployed. The refugees are running away from a system that doesn’t work. In addition, we destabilized the area when we attacked Iraq. When we left, Al Qaeda very simply faded into the population. If we put troops on the ground, they will very simply disappear into the population again and reemerge when we leave. This is a Middle East problem that can only be solved internally by Muslims.

This common and general statement is, “We want to take our country back.” Back to where, a Vietnam type war, no rights for women, no Social Security, no health care, no pollution control laws, no regulations on banks, no rights for gays, no civil rights, no labels on tobacco or lead in paint, no ban against atmospheric nuclear testing and of course I could go on. Congress’s majority is anti-government. We need politicians who have the general welfare of the entire nation as their first priority. This is a nonpartisan complaint. Both sides don’t get it. The middle class is shrinking and our current government’s response is unsustainable. Increasing our already huge military will take us in the wrong direction. I’ve outlined my scenario again and again and will continue to do so in hope that changes can be made.

Additional Dangers in 2016

The dangers of 2016 are as I have stated in the Lone Bear Letter and the market letters. However, there are some additional things that I’m concerned about that are non-economic issues, but which could have a devastating effect on our economy. They are as follows: 1) Since the attacks in Paris, US citizens are frightened of terrorists attacks in public places. The Republican debate tonight, talked about unlimited war in the Middle East and even confrontation with Russia, without considering the repercussions. The radical terrorists, of the Islamic state, have put themselves in a position to radicalize the US voting public. If there is a major terrorist act, like 9/11 or worse, they could affect who becomes the next president of the United States. Remember, it was the burning down of the German Parliament building that brought Hitler to power. Of course,. In my opinion, a Trump nomination, and possible election could skew all economic and political forecasts into a reckless future. 2) There is also the possibility of a mass cyber attack on US that could come from other than the Islamic state, but which could paralyze our economy. I heard a statement from Ted Koppel, on Sunday mornings NBC Meet the Press that struck a chord with me. He said, “There are two kinds of companies, those that have had cyber attacks and those who do not know they have had a cyber attacks.” With banking online as common, a cyber attack into our checking accounts could paralyze the economy.

One more thing: Happy New Year!

 Current Dow NASDAQ S&P 500
17,524 4,995 2,043
Short Term UP UP UP
Int. Term UP UP UP
Long Term SIDEWAYS? SIDEWAYS? SIDEWAYS?
Foretasted Trend DJIA NASDAQ S&P 500
Short Term Down Down Down
Int. Term Down Down Down
Long Term Bear Market? Bear Market? Bear Market?
Breakout Points DJIA NASDAQ S&P 500
Short Term Up (Resistance) 17,919 5,156 2,110
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
 10 Treasury 2.16% Gold 1,075 Oil 35.70

 

 

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