Why is the market up when equity mutual fund liquidations are $130 billion this year?
Two reasons: 1) Central Bank STOCK buying and 2) $150 billion CORPORATE buy backS this year.
THIS IS A BUBBLE INDUCED BY ARTIFICAL BUYING before the US election!
HERE ARE 12 ITEMS THAT WORRY ME ABOUT THE STOCK MARKET
1) The US MARKETS ARE making new highs. Now, everything is OK again? Sure! A Citigroup analyst has reported buying is coming from Central Banks. They are creating a fantasy that all is OK, before the US election. the BEAR MARKET decline may take longer to develop than I first thought and I am extending my 2016 FORCAST TO 7/4/2017. See below
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 WENT TO 1.37% is a new low. That is where the money is going. This means that INDIVIDUAL investors are very cautious.
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 appoint 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. His quote of “fight fire with fire” will mean more meaningless and expensive wars~! REPUBLICAN CONVENTION SHOULD BE A NEGATIVE FOR THE MARKETS NEXT WEEK!
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 14.54 is down from its recent high of 19.46 and above its recent low at 12.60, Also see weak charts of BCS, CS, HBC.BE, BNP.PA WHY IS THE US MARKETS MAKING NEW HIGHS AND THE BANKS MAKING NEW LOWS? BECAUSE OF, I BELIEVE CENTRAL BANK INTERFERANCE, WHICH WILL STOP AFTER THE ELECTION. CAN NEW HIGHS LAST UNTILL THEN?
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. Rick Santelli of CNBC says “nobody says anything good about negative interest rates.” Central banks are helpless to stop deflation.
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. the Olympics will show what a disaster this is! What will happen to its Bonds that the banks hold?
12) Cyber theft at the banks can’t be stopped. $80 billion, another attack right after that. Soon there will be no confidence in on line banking.
My forecasts for next 12 months TO JULY 4TH 2017 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 7/14/16
|Foretasted Trends||DJIA||NASDAQ||S&P 500|
|Long Term||Bear Market||Bear Market||Bear Market|
|Breakout Points||DJIA||NASDAQ||S&P 500|
|Short Term Up (Resistance)||18,506?||5,136||2,163?|
|Short Term Down (Support)||17,140/16,865||4,594/4,267/ 4,209||1,978/1850/|
|Int. Term Up (Resistance)||18,352||5,231||2,131|
|Int. Term Down (Support)||15,484 /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 L0W 1.37^ NOW1.53%||Gold 1,334||Oil 26.59 low Now 45.47|
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