MARKET UP 10% FROM FEBRUARY LOWS/Sell rallies!
CORPORATE STOCK BUYBACKS THIS YEAR, A RECORD $150 BILLION.
Stock markets worldwide are up about 10% from their February lows. I believe most of buying has occurred because of Central Bank stimulus, continued low interest rates (-0% some places) and corporate stock buybacks this year that are a record $150 billion. If it were not this stimulus, I believe the market would be down some 20% at this point. Problems continue in China where the People’s Bank of China said that they would let banks sell trouble loans to investors. China’s corporate debt has been on a spending binge. In order to keep China’s economy humming, China’s total debt now stands at 2.5 years of GDP. I believe this is unsustainable and the reported growth of China is unreliable.
AN IMPORTANT ELECTION.
Today’s primary election in Ohio, Illinois and Florida, will probably determine if Donald Trump becomes the Republican candidate. If this happens, I believe it could have a negative effect on the markets worldwide. It appears that Mister Trump has united groups that are anti-governments and hate other groups everywhere equally. Unfortunately, he speaks for the quiet conversations that probably go on between older Republican white folks. He has taken the lowest road to the highest office. One of his followers, Mary Lou Brenner sixty-eight, who is running for the State Board of Education in Texas, claims that President Obama has worked as a gay prostitute in his youth, the United States should ban Islam, that the Democratic Party had John F. Kennedy killed and that the United Nations had hatched a plot to depopulate the world. Can it get any worse than this? Unfortunately, the answer is yes. The 1968 Democratic Chicago political protests will probably be nothing to compared to what will occur in Cleveland, if Trump is nominated.
Today’s primary also holds the fate of Bernie Sanders in its hands, as Ohio and Illinois become necessary wins for Mister Sanders. Most polls show that Bernie could beat any of the Republican candidates in a national election, whereas with Hillary, the election would be closer. I believe that a Hillary presidency would be the same as the Obama presidency. Republicans would continue to obstruct any progressive legislation. The difference with Bernie? He would treat it as an outrage and not calmly acquiesce as Obama has done. We need to get his young followers running for Congress
I believe we need to do three things. 1) Eliminate Citizens United and reinstate Glass–Steagall and inforce Dodd Frank . The corporations and Wall Street are running this country. A recent survey has shown that even if 100% of the population believes in an issue, it is only the donor influence that matters. 2) Eliminate gerrymandering. Today in Congress there are actually one more million votes for Democrats than Republicans. However because of gerrymandering Republicans rule and are assured of being reelected. 3) Start four year election terms for the House of Representatives and set term limits. Maybe there is a #4 which is to speak out as I did below.
I must take issue with statements from Kim McGahey, Summit County Republican Chairman, in a letter posted in the Summit Daily News on Friday March 11, in which she questions liberal progressive values, asks us to “vote for truth” and gives the Bible and the Constitution as sources rejecting that the “government is obligated to” help the poor “at taxpayer expense.” Republicans, during this election year seem to live in a fact free world. In fact, the Constitution states to promote “the general welfare” and the message of the New Testament can be summarized as one of “love and compassion.” In our capitalistic and market place society, there are winners and losers. However, the top 1% wants it all and leaves nothing for the bottom 50%. The facts are, as stated by the recognized world standard measurement of social progress, the 2015 Social Progress Index (https://en.wikipedia.org/wiki/List_of_countries_by_Social_Progress_Index), the United States, as ranked against other nations, ranks 35th in meeting basic human needs, 39th in basic education, has the highest first day infant mortality rate and the highest child poverty rate (21%) among industrialized nations. That’s one in every five children living in poverty! As a Great Nation, we can do better than that. The 1960s Great Society drove down the general US poverty rate from 23% to 13%, but it is now back up to 16%. How do we combat all of the growth and income going to the top 1% and eighty people owning 50% of the world’s wealth? In my opinion, voters are looking for progressive answers, which calls for a change in our culture that promotes income growth equality, quality education, affordable healthcare and is religiously neutral. Feel the Burn!
3/10/16 MARKETS CELEBRATE 7 YEAR ANNIVERSARY OF BULL MARKET/SELLIn the last seven years since March 9, 2009, the Dow has risen 160%, the S&P 500 up 194% and the NASDAQ up 311%. This is the third longest running Bull Market since World War II. However, there is an Elliott Wave 7 year cycle to worry about that calls for a market top now. Earnings for the S&P 500 are only up 148% compared to the 194% rise of the S&P index. Earnings in the fourth quarter of 2015 for the S&P were down 32% or $23.25 and were only up $7.52 in the first quarter of 2016. US markets made their all-time highs in May 2015. Since then there were two drops of over 10%. Since May of 2015 US markets are down 7%, Chinese markets are down 40%, European markets down 16%, Emerging market markets down 21% and commodity prices down 21%.
There appears to be a respite in our bear market predictions. Oil prices are back to thirty-eight dollars a barrel and banks have admitted the problem of unsecured debt by oil and natural resource companies. China has reduced its growth predictions and Europe seems to once again be stimulating its economy. Many think that the worst is now behind us. However, we believe that this rest period will be temporary.
European Central Bank Panic! Cuts interest rates to zero.In a continued worry about deflation, Europe has cut its refi rate from 0.07% to minus 0.5%. They also cut their deposit rate from 0.1% to -0.4%. Once again,’central banks are running out of ammunition to stop deflation.’ We continue to believe that this is a losing battle. Pew research has indicated that the public trust in government in 1960 was at 75%, now is only at 20% rating. See past market letters for our continuing scenario.
3/2/15 WORLD STOCK MARKETS RALLIES Investment Strategy: it’s a Bear Market! Sell rallies!
Moody’s rates China government Bonds negative. Moody’s has changed the ratings on Chinese government bonds from neutral to negative. In addition there is a warning about the viability of China’s credit rating. China has been decreasing its bank reserve requirements five times in a row. Government debt is now 40% of GDP up from 32% and forecasted to rise to 43% of GDP. Foreign-exchange reserves are down $1 billion. Cash outflows are estimated to be about $1 trillion as Chinese investors scurry away from their homeland. China continues to be a continued problem in world markets. Their growth rate of 6% is being questioned. Is there breakdown of their economy an indication that the worldwide economy will start to break down?
2/24/16 The big news is that J.P. Morgan is doubling its reserve oil loan losses $1.3 billion. I do not believe this is nearly enough. However it does give an indication of the changing landscape of the way the public is looking at loan losses from energy-related companies. The news is out. The banks the United States and in Europe are holding billions of dollars of loans that will probably default. Banks have built up their assets due to differential between low interest rates and the rates they can charge the public. As I have said in previous market letters, “ Banks have built up their assets on the backs of the middle class. In cooperation with the Federal Reserve, Interest rates are at virtually at zero, penalizing savers and retirees and weakening the middle class as banks make huge profits from consumers who pay high rates on credit cards and small businesses on loans. Because banks can borrow at almost nothing, whatever they charge above zero is pure profit. Auto and mortgage rates are 3% or 4%,( there are $1 trillion of subprime auto loans), industrial loans are between eight and 12% (growth down 11% this year ) and credit cards are anywhere from 15% to 29%.This is high-way robbery and this is weakening middle-class consumers, small businesses and retirees, with the result, as I have said many times, ‘All boats will sink!” This loan reevaluation by J.P. Morgan is just the tip of the iceberg.
I don’t tell the market what to do. The market tells me what it is doing. On Thursday the Dow Jones industrial average broke its August 25 low of 15,666 by closing at 15,660. This was the last major index or average to not break below August lows. All major indexes and averages worldwide have now broken below the August 25 lows and are officially in a BEAR Market.
Investmet Strategy: sell rallies!
FOUR NEW BOOKS and ONE CLASSIC TO READ
- The Age of Stagnation by Satvajit Das. This book explains the failures of central banks to stop an economic and financial catastrophe. His solution is austerity, which seems unlikely to happen
- The Only Game in Town by El-Erain. He believes that central banks cannot avoid a financial catastrophe with monetary policy alone and needs fiscal policy to aid the economy. With Republican Congress, this does not seem possible.
- Dark Money and the rise of the radical right, by Jane Mayer. This book explains how economic growth is unsustainable if eighty people own 50% of the world’s wealth and 1% of people own more than the 90% of wealth in the US. (dah!)
- The Fourth Industrial Revolution by Klaus Schwab. This book shows what a wonderful world of technological wonders awaiting us once we get through this economic and financial catastrophe. EVENTUALLY, the only problem is, once Artificial Intelligence has access to unlimited knowledge in the cloud and is able to reproduce itself, silicon based intelligence will not need carbon based intelligence The next step in evolution?. However, that’s a problem for another day.( UPDATE 3/10/16In a major breakthrough for artificial intelligence a Google computer called Alpha Go beat the world champion South Korean in the ancient board game of Go Long. This game requires a complex strategy and intuition, which means that computers are gaining the upper hand on humans.)
- Don’t’ forget the classic THIS TIME ITS DIFFERENT by Carmen Reinhart: It tells the story of eight centuries of Financial Folly. Each time after a catastrophe, such as the Great Depression or 2008, economists agree that it could never happen again. Who could be so stupid as to let six banks control 70% of the US assets (to big to fail) and allow all the economic growth to go to the 1%, while eighty people own 50% of the world’s wealth? NAH!
2/12/16 THREE MAIN REASONS FOR THE DECLINE
My forecasts for 2016 call for the Dow Jones Industrial average to be as low as 14,688 to 12,000, the NASDAQ to be as low as 4,000 to 3,000 and the S&P 500 to be as low as 1,560 to 1,400 because of three factors! (See previous market letters)
|Current noon||Dow||NASDAQ||S&P 500|
|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)||17,300||4,800||2,062|
|Short Term Down (Support)||15,845/15,484
|Int. Term Up (Resistance)||18,352||5,231||2,134|
|Int. Term Down (Support)||/15,370 /14,688/ 13,377||3,986/3294||1,560|
|Long Term Up (Resistance)||18,352||5,231||2,134|
|Long Term Down Fibonacci Support||50%12,000
2008 LOW 6,627
2008 LOW 1,204
2008 LOW 666
|10 Treasury LOW 1.60% Now1.96%||Gold 1,232||Oil 26.59low Now 36.21|
| ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com