50 YEAR PLAN FOR THE TOP TENTH OF ONE PERCENT ‘TO GET IT ALL’

The Elite’s .01% 50 year plan, to get all the money to the top, is working.   I will hereafter refer to this group simply as EL (the first two letters of elite).  Ancient deities known as EL include the supreme god of the Canaanite and the supreme god of the Mesopotamian Semites who worship the material world over the spiritual and has the bull as its symbol of God.  According to the EL’s 50 year plan, there is to be new era of great decline in economic equality, where the poor get poorer and ‘the rich take it all.’

The project began in 1968 under Johnson and later Nixon administration’s by eliminating gold as a backing for the dollar and for floating world currencies, which has now gotten the price of gold from $35 an ounce to above $1,200 an ounce. As the average citizen doesn’t hold gold, only EL has benefited. In the 1980’s EL and his allies on Wall Street, got to help commercial banks by eliminating the competition of the Savings and Loan industry. They did that purposely by selling the S&L’s junk bonds, which became worthless; causing the S&L’s to go bankrupt. To further help the commercial banks, EL and the Wall Street group got ‘branch banking’ approved, so that now banks are as convenient as your local coffee shop.  Before branch banking, deposits were held in thousands of small local banks. Now, only 10 banks control some 50% of total deposits.

EL’s plan has also worked to eliminate company Pension Plans and substitute a privatization plan for retirement, based on stock market performance. Except for municipalities, company pension’s plans are now toast and the private 401K retirement plans are the only alternative. This has taken the burden and expense of retirement off the corporate books and according to the plan, the public now associates their success with ‘Corporate America’.  Also according to plan, America’s corporations have become international entities, having no loyalty to their country or their workers and have priorities only for their officers, with CEO salaries 500 times the average worker. They are hoarding cash and profits and buying their own stock back, rather than expanding their business.  If corporations were people, they would be called sociopaths, which are only interested in their own gratification. On occasion corporations merge with each other, making huge buy-out profits for it officers, while reducing employees and creating more powerful and influential international corporations.  EL’s plan is for individuals to be basically only investing their retirement funds through mutual funds, which the banks now control.  Small brokerage firms have been eliminated and the financial industry is controlled by Wall Street’s large banks.

As planned and with the help of President Clinton, EL’s Wall Street group in 1999 eliminated the Glass Steagall Act that separated banks from investment banks. The 2007 plan; to get the individuals equity out of people’s homes and into EL’s pockets was very successful.  The banks liberalized their home loan policy, under a subterfuge of helping everyone to own homes, which in reality, they really couldn’t afford. Then Investment Bankers packaged these mortgages into worthless CMO’s securities and sold them to their clients and in anticipation of a Real Estate market collapse, and at the same time shorted these securities in their corporate account.  In addition, at the same time, they made profits and fees from mortgages they wrote and securities they packaged.  You say there should be a law against this outrageous breach of trust? There was. The law called the Glass Steagall Act.  This unethical strategy, because of the bad loans, eventually put the commercial bank’s balance sheets in trouble. However, as EL had planned, the government would not allow the banks to fail, as they are ‘too big to fail’ (and too big to jail), and put the burden for their relief on tax payers, further weakling the Middle Class.

Today, the stage is set for the final stage of EL’s plan to take all chips. The public is heavily invested in the stock market under ‘Wall Street’s’ and the financial Industries’ motto, ‘Holding for the long run, always works out.’ Trained like ‘Pavlov’s Dog,’ investors have full confidence in the stock market and its recovery attributes and the advantages of mutual funds. What is George Soros doing? He is one of 30 richest people in the world and has made most of his money in the markets. In 1992 he made a $1 billion profit by shorting the British Pound and predicted the 2008 crash. In January he said, “China has a major adjustment problem. I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.” What is he doing now? He has a $2.1 million ‘put’ on the S&P ETF, a $1 million ‘call’ on gold options and a $19 million purchase of Barrick gold. Soros is not EL, but he knows how to make money off of EL’s plan. The rigged financial industry has made sure the investing public has no popular vehicle for make money on the downside.

The middle class continues to take it on the chin. According to recent data between 2000 and 2014, the middle class shrunk from 55% to under 51%. It’s probably now below 50%. An economy based on consumer spending of the middle class, like the United States, cannot grow without a healthy middle-class. International corporations do well for a while, as they are now. But eventually, I feel the present economic environment will lead to a deflationary economy, which will hurt all economic levels. The central banks have done everything they can to stop inflation in Europe and in the United States, with the results that many corporations in Europe are issuing bonds and financing them at close to zero interest rates. What this means, is that central banks cannot stop deflation. If commodity prices and companies engaged in retail sales continue to suffer, their bonds will eventually suffer and therefore the banks that are holding securities will suffer. It will be 2008 all over again, only this time, no government bailout!

China continues to show lackluster economic growth. China’s rate of loans is far above the rate of money supply growth. China’s debt is 2.5 times its GDP. China is using its currency to buy as many companies in the West as it can, while it can. Just as has happened to Japan in the 1990’s, we expect the same deflationary scenario to begin to occur in China. China, has $1.3 trillion of corporate loans, one seventh of the total are owned by companies whose profits don’t cover their interest payments, a problem that could trigger banks losses equal to 7% of gross domestic product. Soros is worried about China, shouldn’t we be? The rating agencies think everything is fine. However, remember these very same agencies rated worthless CMO’s as AAA!

Trouble is coming from somewhere. I don’t know from where and I don’t know when, but whatever it is, it will probably come as a surprise. Maybe it will take years to happen. However, Soros and I see that the stage is set for a financial collapse and the average investor has little options to protect themselves.  Of course you are in the stock market; you can’t get a decent return anywhere else. Of course you’re in mutual funds; it is the most practical way to invest. For EL, it is like feeding anchovies to the sharks.

THE ABOVE WAS OF COURSE DONE TONGUE IN CHEEK. HOWEVER WHAT IF IT IS TRUE?

CARL

 

 

 

 

HERE ARE 11 ITEMS THAT WORRY ME ABOUT THE STOCK MARKET

1). The market is close to making new highs. However each time it nears the new high, it backs off and on low volume. The market leader Apple, is below its 52 week low!. This is not a good sign.

2). Retail stocks such as Macy’s, Disney and Sears are having trouble with their earnings. Store closings are commonplace today as people are buying online. This is not good for profit margins or employment. The economy could be stimulated with a backlog of infrastructure spending. Not a chance with this Congress.

3). Gold is making new highs, while the 10 year treasury and 1.74% is now close to its 1.60% low. This means that investors are very cautious. Cyber theft at the banks can’t be stopped. $80 billion last week, another attack yesterday. Soon there will be no confidence in on line banking.

4). Donald Trump, the expected nominee of the Republican Party, continues to blurt out dangerous statements. Yesterday he said, “why worry about Debt, we can print money.” That’s true, except that excessive printing of money turns into hyperinflation. If you don’t know the history of the Weimar  Republic in Germany you are likely to repeat history’s mistakes. Besides, it’s the Federal Reserve’s job to monitor monetary policy. Of course a dictator, can easily apoint flunkies at the Federal Reserve, that he could control.The market dislikes uncertainty and instability. The possibility of the Trump presidency, however unlikely, is still on stabilizing to the markets.

5).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  are a record $150 billion. If it were not this stimulus, I believe the market would be down some 20% at this point. Companies are not investing in production or innovation. this is bad for employment and the economy.

6). The middle class continues to take it on the chin. According to recent data between 2000 and 2014, the middle class shrunk from 55% to under 51%. It’s probably now below 50%. An economy  based on consumer spending of the middle class, like the United States, cannot grow without a healthy middle-class. International corporations  do well for a while, as they are now. But eventually, I feel the present economic environment will lead to a deflationary economy, that will hurt all economic levels.

7). If commodity prices and companies engaged in retail sales continue to suffer, their bonds will eventually suffer and therefore the banks that are holding securities will suffer. 2008 all over again, only this time no government bailout! The ‘canary in the mine’ Deutsche Bank at 16.94 is down from its recent high of 19.46 and close to making new lows at 14.78. When that happens, watch out below!!!!!

8). China continues to show lackluster economic growth. China’s rate of loans is far above the rate of money supply growth. Right now, China is using its currency to buy as many companies in the West as it can, while it can. Just as has happened to Japan in the 1990s, we expect the same deflationary scenario to begin to occur in China. . In China, for example, has $1.3 trillion of corporate loans, one seventh of the total are owned by companies whose profits don’t cover their interest payments, a problem that could trigger banks losses equal to 7% of gross domestic product.”

9). The central banks have done everything they can to stop inflation in Europe and in the United States with  the results  that many corporations in Europe are issuing bonds and financing them at close to zero interest rates. What this means, is that central banks cannot stop deflation. The ‘canary in the mine’ Deutsche Bank at 16.94 is down from its recent high of 19.46 and close to making new lows at 14.78. When that happens, watch out below!!!!!

10). I continue to believe that economic growth in the United States is being slowed by all the income growth going to the top 1%. A recent Economist Magazine showed the upper 1% standing on top of their money with the guarded by barbed wire fence around, with the title WINNERS TAKE ALL. This is a lose, lose policy for everyone, where all boats will sink.

11) Brazil and Petrobas its oil company($500 Bil debt) are going bankrupt because of corruption. What will happen to its Bonds that the banks hold?

5/1/16 CNN REPORTS 40 OIL COMPANIES LOST $67 BILLION LAST YEAR. The crash in oil prices last year caused combined losses in 40 publicly traded US producers of $67 billion. Many of these companies are exploring bankruptcy filing. These companies are highly leveraged and this may still mean trouble for the large banks that are still too big to fail. Exxon lost its AAA rating today. Saudi Arabia announces that is going to sell part of its stake in Aramco. The rats are leaving the ship.

The central banks have done everything they can to stop deflation. The results are that many corporations in Europe are issuing bonds and financing themselves at close to zero interest rates. Unilever ever sold bonds today at a zero coupon rate.  Sanofi SA sold over $500 million worth bonds maturing in 2019 with a yield close to zero. What this means is, central banks cannot stop deflation.

CNN MONEY ESTIMATES 1^ST QUARTER S&P EARNINGS TO BE DOWN 7.9%. First quarter GDP growth only 0.5% For the first quarter the S&P 500 companies are expected to plunge 7.9%. Wall Street is bracing itself for the deepest decline in earnings since 2009. This has the potential for upsetting a rather fragile applecart. Low-priced oil and a strong dollar deserve a chunk of the blame for this bleak profit outlook. However, even if energy earnings were excluded, S&P 500 profits are still expected to decline 3.7%. Tech companies are bracing for a 5.9% decline.

4/25/16 US MARKETS BACK OFF AT NEAR NEW HIGHS Nothing new has really happened in the last week. Markets in the US seem reluctant to break in the new high ground. Earnings continuing weak. Europe and China have somewhat stabilize. The Federal Reserve  seems more worried about world economies, than even I am. In spite of recent stabilizing moves by central banks and the calming of US and world markets, the Federal Reserve seems reluctant to increase interest rates. If they don’t do it in June, there is apparently something bothering them, that has not made the general news yet.

Teflon markets near new highs! It is possible that the US markets have dodged another bullet as it did in February 2016 and as it did earlier in August 2015. Since February lows, US markets have rallied 13%, (mostly on short covering.) Oil prices are once again above $40 and US markets are close to breaking above November 2015 high and their all-time high. European and Asian markets have recovered much less and are closer to their February lows then they are to their November highs. However, if the S&P 500 can break above 2,131 only 50 points higher than the current price, my Bear Market scenario may be in question. The breakout point for the NASDAQ is 5,231, and the current price is 4,944. The breakout point for the Dow is 18,352 with its current price at 17,920.

Solutions!

I believe we need to do three things. 1) Eliminate Citizens United and reinstate Glass–Steagall and enforce 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.

IN THE US It appears the economy in the United States is slowing down. Fourth-quarter 2015 showed almost a negative growth figure. First-quarter growth in 2016 has been reduced from above 3% to forecasts under 2% growth. Federal Reserve Chairman Yelled is obviously worried about slow US economic growth and problems in both Europe and especially China. We continue to believe that economic growth United States is being slowed by all the income growth going to the top 1%. Latest reports show that only one family the Waltons, have more wealth than the bottom 40%. The most recent Economist Magazine cover showed the upper 1% standing on top of their money with the guarded barb wire fence around it, with the caption, “WINNERS TAKE ALL“” The election is getting perverse with Republicans talking about each other’s wives instead of issues. Donald Trump has called for the use of nuclear weapons against Muslims and North Korea while stating that women who have abortions should be punished. It’s all going downhill fast.

CORPORATE STOCK BUYBACKS THIS YEAR, A RECORD $150 BILLION. Stock markets worldwide are up about 13% 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.

BANKS WORLDWIDE STILL TROUBLING! A US judge in Manhattan has rejected throwing out a rate rigging lawsuit against 14 largest banks. As reported by Reuters news, the judge refused to throw out a private lawsuit accusing the 14 banks of rigging an interest rate benchmark (ISDAfix) used in the $553 trillion derivatives markets. That’s right folks, I said the $553 trillion derivative markets. That dwarfs the problem of derivatives 2008, that almost brought the banks to their demise. The Credit Suisse bank has announced a 6000 employee layoff.  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, China and in Europe are holding billions of dollars of loans that will probably default. US 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. world wide, Russia is bailing out its national banks as it severely reduces it reserves and Brazil and Venezuelan are facing financial collapse! We are not done dodging bullets!

My ‘canary in the mine’ Deutsches Bank bottomed at $15.38 in February and went to a high of  $19.04 per share, 9 still down 70% in the last 2 years) is now at $18.29. The Wall Street Journal has reported that “When Donald Trump needs a loan, he chooses Deutsches Bank.” While most big banks have shunned Donald Trump the Deutsches Bank has been a steadfast financial backer of the Republican presidential candidate. Just one more reason to mistrust their judgment.

Investment strategy/Sell rallies

I don’t tell the market what to do. The market tells me what it is doing. The Dow Jones industrial average broke its August 25 low of 15,666 in February 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 their August 25 lows and we are officially in a BEAR Market.

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  (See previous market letters)

Current 5/13/16	Dow	NASDAQ	S&P 500
	17,535	4,717	2,046
Short Term	UP	UP	UP
Int. Term	DOWN	DOWN	DOWN
Long Term	?	?	?
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)	18,028	5,156	2,110
Short Term Down (Support)	16,865/15,845/15,484	4,468/4,267/  4,209	1,978/1850/1829
Int. Term Up (Resistance)	18,352	5,231	2,131
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 62%10,750 2008 LOW 6,627	50% 3,000 62% 2,555 2008 LOW 1,204	50%1,400 62% 1,177 2008 LOW 666
10 Treasury LOW 1.60%Now1.71%	Gold 1,275	Oil 26.59 low Now 46.28

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Carl 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. Carl , 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

HERE ARE 11 ITEMS THAT WORRY ME ABOUT THE STOCK MARKET

1). The market is close to making new highs. However each time it nears the new high, it backs off and on low volume. The market leader Apple, is below its 52 week low!. This is not a good sign.

2). Retail stocks such as Macy’s, Disney and Sears are having trouble with their earnings. Store closings are commonplace today as people are buying online. This is not good for profit margins or employment. The economy could be stimulated with a backlog of infrastructure spending. Not a chance with this Congress.

3). Gold is making new highs, while the 10 year treasury and 1.74% is now close to its 1.60% low. This means that investors are very cautious. Cyber theft at the banks can’t be stopped. $80 billion last week, another attack yesterday. Soon there will be no confidence in on line banking.

4). Donald Trump, the expected nominee of the Republican Party, continues to blurt out dangerous statements. Yesterday he said, “why worry about Debt, we can print money.” That’s true, except that excessive printing of money turns into hyperinflation. If you don’t know the history of the Weimar  Republic in Germany you are likely to repeat history’s mistakes. Besides, it’s the Federal Reserve’s job to monitor monetary policy. Of course a dictator, can easily apoint flunkies at the Federal Reserve, that he could control.The market dislikes uncertainty and instability. The possibility of the Trump presidency, however unlikely, is still on stabilizing to the markets.

5).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. Companies are not investing in production or innovation. this is bad for employment and the economy.

6). The middle class continues to take it on the chin. According to recent data between 2000 and 2014, the middle class shrunk from 55% to under 51%. It’s probably now below 50%. An economy  based on consumer spending of the middle class, like the United States, cannot grow without a healthy middle-class. International corporations  do well for a while, as they are now. But eventually, I feel the present economic environment will lead to a deflationary economy, that will hurt all ecnomic levels.

7). If commodity prices and companies engaged in retail sales continue to suffer, their bonds will eventually suffer and therefore the banks that are holding securities will suffer. 2008 all over again, only this time no government bailout! The ‘canary in the mine’ Deutsche Bank at 16.94 is down from its recent high of 19.46 and close to making new lows at 14.78. When that happens, watch out below!!!!!

8). China continues to show lackluster economic growth. China’s rate of loans is far above the rate of money supply growth. Right now, China is using its currency to buy as many companies in the West as it can, while it can. Just as has happened to Japan in the 1990s, we expect the same deflationary scenario to begin to occur in China. . In China, for example has $1.3 trillion of corporate loans, one seventh of the total are owned by companies whose profits don’t cover their interest payments, a problem that could trigger banks losses equal to 7% of gross domestic product.”

9). The central banks have done everything they can to stop inflation in Europe and in the United States with  the results  that many corporations in Europe are issuing bonds and financing them at close to zero interest rates. What this means, is that central banks cannot stop deflation. The ‘canary in the mine’ Deutsche Bank at 16.94 is down from its recent high of 19.46 and close to making new lows at 14.78. When that happens, watch out below!!!!!

10). I continue to believe that economic growth in the United States is being slowed by all the income growth going to the top 1%. A recent Economist Magazine showed the upper 1% standing on top of their money with the guarded by barbed wire fence around, with the title WINNERS TAKE ALL. This is a lose, lose policy for everyone, where all boats will sink.

11) Brazil and Petrobas ($500 Bil debt) its oil company are going bankrupt because of corruption. What will happen to its Bonds that the banks hold?

5/1/16 CNN REPORTS 40 OIL COMPANIES LOST $67 BILLION LAST YEAR. The crash in oil prices last year caused combined losses in 40 publicly traded US producers of $67 billion. Many of these companies are exploring bankruptcy filing. These companies are highly leveraged and this may still mean trouble for the large banks that are still too big to fail. Exxon lost its AAA rating today. Saudi Arabia announces that is going to sell part of its stake in Aramco. The rats are leaving the ship.

The central banks have done everything they can to stop deflation. The results are that many corporations in Europe are issuing bonds and financing themselves at close to zero interest rates. Unilever ever sold bonds today at a zero coupon rate.  Sanofi SA sold over $500 million worth bonds maturing in 2019 with a yield close to zero. What this means is, central banks cannot stop deflation.

CNN MONEY ESTIMATES 1^ST QUARTER S&P EARNINGS TO BE DOWN 7.9%. First quarter GDP growth only 0.5% For the first quarter the S&P 500 companies are expected to plunge 7.9%. Wall Street is bracing itself for the deepest decline in earnings since 2009. This has the potential for upsetting a rather fragile applecart. Low-priced oil and a strong dollar deserve a chunk of the blame for this bleak profit outlook. However, even if energy earnings were excluded, S&P 500 profits are still expected to decline 3.7%. Tech companies are bracing for a 5.9% decline.

4/25/16 US MARKETS BACK OFF AT NEAR NEW HIGHS Nothing new has really happened in the last week. Markets in the US seem reluctant to break in the new high ground. Earnings continuing weak. Europe and China have somewhat stabilize. The Federal Reserve  seems more worried about world economies, than even I am. In spite of recent stabilizing moves by central banks and the calming of US and world markets, the Federal Reserve seems reluctant to increase interest rates. If they don’t do it in June, there is apparently something bothering them, that has not made the general news yet.

Teflon markets near new highs! It is possible that the US markets have dodged another bullet as it did in February 2016 and as it did earlier in August 2015. Since February lows, US markets have rallied 13%, (mostly on short covering.) Oil prices are once again above $40 and US markets are close to breaking above November 2015 high and their all-time high. European and Asian markets have recovered much less and are closer to their February lows then they are to their November highs. However, if the S&P 500 can break above 2,131 only 50 points higher than the current price, my Bear Market scenario may be in question. The breakout point for the NASDAQ is 5,231, and the current price is 4,944. The breakout point for the Dow is 18,352 with its current price at 17,920.

Nothing but bad news, but still the markets are higher. 1)Bank of America and Wells Fargo Bank have posted lower quarterly earnings can announced that they have increased their reserves to cover them from the stress energy companies.2) The Fed and the FDIC has announced that most of the largest banks are still too big to fail and do not have adequate plans for a 2008 type economic disaster. 3) The Wall Street Journal has reported that there are approximately $147 billion in questionable loans that banks have on their books. Citicorp Bank of America J.P. Morgan Wells Fargo and Morgan Stanley have over 50% of these loans unfunded. 4) As an example of the problem, the largest  coal producer Peabody Energy, has just filed bankruptcy. There have been similar filings by Arch Coal Incorporated, Alpha Natural Resources, Patriot Coal Corp and Walter Energy Incorporated. 5) The IMF is worried about splitting risks in emerging markets. I quote from the April 14 Wall Street Journal, “the ballooning debt of giant companies in fast-growing economies is of particular concern, because of their close ties to banks as well as national governments. In China, for example $1.3 trillion of corporate loans, one seventh of the total are owned by companies whose profits don’t cover their interest payments, a problem that could trigger banks losses equal to 7% of gross domestic product.”

 Solutions!

I believe we need to do three things. 1) Eliminate Citizens United and reinstate Glass–Steagall and enforce 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.

IN THE US It appears the economy in the United States is slowing down. Fourth-quarter 2015 showed almost a negative growth figure. First-quarter growth in 2016 has been reduced from above 3% to forecasts under 2% growth. Federal Reserve Chairman Yelled is obviously worried about slow US economic growth and problems in both Europe and especially China. We continue to believe that economic growth United States is being slowed by all the income growth going to the top 1%. Latest reports show that only one family the Waltons, have more wealth than the bottom 40%. The most recent Economist Magazine cover showed the upper 1% standing on top of their money with the guarded barb wire fence around it, with the caption, “WINNERS TAKE ALL“” The election is getting perverse with Republicans talking about each other’s wives instead of issues. Donald Trump has called for the use of nuclear weapons against Muslims and North Korea while stating that women who have abortions should be punished. It’s all going downhill fast.

CORPORATE STOCK BUYBACKS THIS YEAR, A RECORD $150 BILLION. Stock markets worldwide are up about 13% 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.

BANKS WORLDWIDE STILL TROUBLING! A US judge in Manhattan has rejected throwing out a rate rigging lawsuit against 14 largest banks. As reported by Reuters news, the judge refused to throw out a private lawsuit accusing the 14 banks of rigging an interest rate benchmark (ISDAfix) used in the $553 trillion derivatives markets. That’s right folks, I said the $553 trillion derivative markets. That dwarfs the problem of derivatives 2008, that almost brought the banks to their demise. The Credit Suisse bank has announced a 6000 employee layoff.  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, China and in Europe are holding billions of dollars of loans that will probably default. US 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. world wide, Russia is bailing out its national banks as it severely reduces it reserves and Brazil and Venezuelan are facing financial collapse! We are not done dodging bullets!

My ‘canary in the mine’ Deutsches Bank bottomed at $15.38 in February and went to a high of  $19.04 per share, 9 still down 70% in the last 2 years) is now at $18.29. The Wall Street Journal has reported that “When Donald Trump needs a loan, he chooses Deutsches Bank.” While most big banks have shunned Donald Trump the Deutsches Bank has been a steadfast financial backer of the Republican presidential candidate. Just one more reason to mistrust their judgment.

Investment strategy/Sell rallies

I don’t tell the market what to do. The market tells me what it is doing. The Dow Jones industrial average broke its August 25 low of 15,666 in February 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 their August 25 lows and we are officially in a BEAR Market.

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  (See previous market letters)

Current 5/11/16	Dow	NASDAQ	S&P 500
	17,711	4,760	2,064
Short Term	UP	UP	UP
Int. Term	DOWN	DOWN	DOWN
Long Term	?	?	?
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)	18,028	5,156	2,110
Short Term Down (Support)	16,865/15,845/15,484	4,468/4,267/  4,209	1,978/1850/1829
Int. Term Up (Resistance)	18,352	5,231	2,131
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 62%10,750 2008 LOW 6,627	50% 3,000 62% 2,555 2008 LOW 1,204	50%1,400 62% 1,177 2008 LOW 666
10 Treasury LOW 1.60%Now1.74%	Gold 1,278	Oil 26.59 low Now 45.99

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

 

NEW MUST READ BOOK: THE END OF ALCHEMY 

Mervin King, the former governor of the Bank of England argues that, 7 years after the worst economic crisis since the Great Depression, “nothing fundamental has changed.” Most academic and media narratives, he writes, focus on symptoms, of swelling personal debt, the housing bubble, misdeeds of banks. However, the underlying PROBLEM is a system of banking greed to convert riskless deposits into long-term risky investments (loans to oil companies for example, See below), all the while assuring depositors that they can redeem their money at any time. King points out that, in the 19^th and 20^th centuries, banking crisis’s occurred almost once a decade. Preventing the next one “requires radical reforms”  including obliging major banks to maintain enough equity to stay losses without taxpayer support.

 CNN REPORTS 40 OIL COMPANIES LOST $67 BILLION LAST YEAR. The crash in oil prices last year caused combined losses in 40 publicly traded US producers of $67 billion. Many of these companies are exploring bankruptcy filing. These companies are highly leveraged and this may still mean trouble for the large banks that are still too big to fail. Exxon lost its AAA rating today. Saudi Arabia announces that is going to sell part of its stake in Aramco. The rats are leaving the ship.

The central banks have done everything they can to stop deflation. The results are that many corporations in Europe are issuing bonds and financing themselves at close to zero interest rates. Unilever ever sold bonds today at a zero coupon rate.  Sanofi SA sold over $500 million worth bonds maturing in 2019 with a yield close to zero. What this means is, central banks cannot stop deflation.

CNN MONEY ESTIMATES 1^ST QUARTER S&P EARNINGS TO BE DOWN 7.9%. First quarter GDP growth only 0.5% For the first quarter the S&P 500 companies are expected to plunge 7.9%. Wall Street is bracing itself for the deepest decline in earnings since 2009. This has the potential for upsetting a rather fragile applecart. Low-priced oil and a strong dollar deserve a chunk of the blame for this bleak profit outlook. However, even if energy earnings were excluded, S&P 500 profits are still expected to decline 3.7%. Tech companies are bracing for a 5.9% decline.

4/25/16 US MARKETS BACK OFF AT NEAR NEW HIGHS Nothing new has really happened in the last week. Markets in the US seem reluctant to break in the new high ground. Earnings continuing weak. Europe and China have somewhat stabilize. The Federal Reserve  seems more worried about world economies, than even I am. In spite of recent stabilizing moves by central banks and the calming of US and world markets, the Federal Reserve seems reluctant to increase interest rates. If they don’t do it in June, there is apparently something bothering them, that has not made the general news yet.

Teflon markets near new highs! It is possible that the US markets have dodged another bullet as it did in February 2016 and as it did earlier in August 2015. Since February lows, US markets have rallied 13%, (mostly on short covering.) Oil prices are once again above $40 and US markets are close to breaking above November 2015 high and their all-time high. European and Asian markets have recovered much less and are closer to their February lows then they are to their November highs. However, if the S&P 500 can break above 2,131 only 50 points higher than the current price, my Bear Market scenario may be in question. The breakout point for the NASDAQ is 5,231, and the current price is 4,944. The breakout point for the Dow is 18,352 with its current price at 17,920.

Nothing but bad news, but still the markets are higher. 1)Bank of America and Wells Fargo Bank have posted lower quarterly earnings can announced that they have increased their reserves to cover them from the stress energy companies.2) The Fed and the FDIC has announced that most of the largest banks are still too big to fail and do not have adequate plans for a 2008 type economic disaster. 3) The Wall Street Journal has reported that there are approximately $147 billion in questionable loans that banks have on their books. Citicorp Bank of America J.P. Morgan Wells Fargo and Morgan Stanley have over 50% of these loans unfunded. 4) As an example of the problem, the largest  coal producer Peabody Energy, has just filed bankruptcy. There have been similar filings by Arch Coal Incorporated, Alpha Natural Resources, Patriot Coal Corp and Walter Energy Incorporated. 5) The IMF is worried about splitting risks in emerging markets. I quote from the April 14 Wall Street Journal, “the ballooning debt of giant companies in fast-growing economies is of particular concern, because of their close ties to banks as well as national governments. In China, for example $1.3 trillion of corporate loans, one seventh of the total are owned by companies whose profits don’t cover their interest payments, a problem that could trigger banks losses equal to 7% of gross domestic product.”

 Solutions!

I believe we need to do three things. 1) Eliminate Citizens United and reinstate Glass–Steagall and enforce 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.

IN THE US It appears the economy in the United States is slowing down. Fourth-quarter 2015 showed almost a negative growth figure. First-quarter growth in 2016 has been reduced from above 3% to forecasts under 2% growth. Federal Reserve Chairman Yelled is obviously worried about slow US economic growth and problems in both Europe and especially China. We continue to believe that economic growth United States is being slowed by all the income growth going to the top 1%. Latest reports show that only one family the Waltons, have more wealth than the bottom 40%. The most recent Economist Magazine cover showed the upper 1% standing on top of their money with the guarded barb wire fence around it, with the caption, “WINNERS TAKE ALL“” The election is getting perverse with Republicans talking about each other’s wives instead of issues. Donald Trump has called for the use of nuclear weapons against Muslims and North Korea while stating that women who have abortions should be punished. It’s all going downhill fast.

CORPORATE STOCK BUYBACKS THIS YEAR, A RECORD $150 BILLION. Stock markets worldwide are up about 13% 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.

BANKS WORLDWIDE STILL TROUBLING! A US judge in Manhattan has rejected throwing out a rate rigging lawsuit against 14 largest banks. As reported by Reuters news, the judge refused to throw out a private lawsuit accusing the 14 banks of rigging an interest rate benchmark (ISDAfix) used in the $553 trillion derivatives markets. That’s right folks, I said the $553 trillion derivative markets. That dwarfs the problem of derivatives 2008, that almost brought the banks to their demise. The Credit Suisse bank has announced a 6000 employee layoff.  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, China and in Europe are holding billions of dollars of loans that will probably default. US 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. world wide, Russia is bailing out its national banks as it severely reduces it reserves and Brazil and Venezuelan are facing financial collapse! We are not done dodging bullets!

My ‘canary in the mine’ Deutsches Bank bottomed at $15.38 in February and went to a high of  $19.04 per share, 9 still down 70% in the last 2 years) is now at $18.29. The Wall Street Journal has reported that “When Donald Trump needs a loan, he chooses Deutsches Bank.” While most big banks have shunned Donald Trump the Deutsches Bank has been a steadfast financial backer of the Republican presidential candidate. Just one more reason to mistrust their judgment.

Investment strategy/Sell rallies

I don’t tell the market what to do. The market tells me what it is doing. The Dow Jones industrial average broke its August 25 low of 15,666 in February 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 their August 25 lows and we are officially in a BEAR Market.

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  (See previous market letters)

Current 5/2/16 close	Dow	NASDAQ	S&P 500
	17,891	4,817	2,081
Short Term	UP	UP	UP
Int. Term	DOWN	DOWN	DOWN
Long Term	?	?	?
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)	17,918	5,156	2,110
Short Term Down (Support)	16,865/15,845/15,484	4,468/4,267/  4,209	1,978/1850/1829
Int. Term Up (Resistance)	18,352	5,231	2,131
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 62%10,750 2008 LOW 6,627	50% 3,000 62% 2,555 2008 LOW 1,204	50%1,400 62% 1,177 2008 LOW 666
10 Treasury LOW 1.60%Now1.86%	Gold 1,296	Oil 26.59 low Now 44.92

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