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    • THE LONE BEAR LETTER #3
    • THE LONE BEAR LETTER #4
    • THE LONE BEAR LETTER #5
    • THE LONE BEAR LETTER #6
    • THE LONE BEAR LETTER #7
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Monthly Archives: August 2016

GOOD MORNING SUNSHINE-THE EARTH SAYS HELLO

21 Sunday Aug 2016

Posted by Carl M. Birkelbach in Uncategorized

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Good morning sunshine, the earth says hello!

I have recently been asked, why do I continue to write this blog? It may have something to do with my age. At seventy-six and with my father only living until eighty-six, I realize my time is limited. Six of my friends and immediate family members, have died within the last year. As a warning, I suggest that you do not read the latest best-selling book ‘Being Mortal‘.  Maybe my writing has something to do with a need I have to pass on my knowledge of the markets to the next generation?  However, as I look back at my life, I feel a great deal of satisfaction with my family. Mission accomplished! I  have helped raised four children, all with advanced degrees and all independent financially. Six of eight of my grandchildren are also on-stream for a successful life. Although, two of our eight grandchildren are in need of our guardianship, I believe they will also emerge, with our help, as successful adults. My oldest granddaughter just got married in July, so the cycle of life satisfyingly continues before my eyes.

I am no longer, on any organizations volunteer boards. I feel I have done my share. I was one of the founders of the International Mountain Biking Association, the Friends of the Forest Preserve of Cook County and of RIDE, Recreation for Individual Dedicated to the Environment. I think these three organizations have made a difference in the world, for the better. I was also the chairman of fundraising for our local public television station and was on the board Bradley University for twelve years and served as development chair for the Grant Park Music Festival or six years. Did that, done!

I don’t think my desire to write has anything to do with any of the above. I think it is simply that, I have to write. It’s part of who I am and is probably built into my DNA. Like Gene Kelly in the movie, Singing in the Rain , who sang “GOTTA DANCE”!   I HAVE TO WRITE! So, as my wife and I enter our ‘Golden Years’, which my father called his ‘Rust Years”, I suggest to those of you who don’t like me or my blog, to get on with your life with joy, love and compassion. Here are a couple of tips:

GOTTA DANCE and WRITE

The Fourth Noble Truth in Buddhism is that the path for cessation of suffering is found in the Eight Fold Path. I think it is important for the reader to know these feelings and to see that there is nothing revolutionary about these thoughts. Instead, I am speaking about the common sense of peace, love, understanding, tolerance and compassion as follows:

1) The Right View.  Wealth is only one component of success. If you base your success only on what you have, what you do for your wealth or what people think of you, you’re on the wrong path.  Ego based power will only last as long as the wealth or title.  Your attachment to possessions can actually become a burden. Also, there is a tendency to keep score by comparing yourself to other people’s possessions, which is non-productive.   You can certainly reward yourself and your family with things that celebrate your success. Wealth is a motivator, but if misused, it can also become a negative.  There is a difference about what you need and what you want. You only need a modest amount of wealth to provide for adequate shelter, food and the basic necessities. However, what you want can create desires that can become unfulfilling and cause suffering. There is always something better, bigger and different for you to desire. We are all vulnerable to seduction. How many times have we heard a person say, ‘I’ll be happy if only I have that house, the new perfect lover, or this much greater wealth?  However, when they get that house, that new supposedly perfect lover or that wealth, they are still unhappy and are already forwarding for their next possession. Want and desire cannot be confined to one thing, as improper wants and desires form a continuous chain.  And those chains can be wrapped around your neck, cutting off your energy and creativity. Look at the birds or the lilies in the field. They want not and yet they are provided for.

I suggest that we use our desires to cultivate the right desires by changing our desires from things, into desire for contentment, joy, happiness, gratefulness, fulfillment, respect, awareness, empathy, peace, good health and a loving and compassionate relationship with your family, friends and community.  That’s really what people want, isn’t it?  Wealth can provide for a nice life, but after that, wealth can create stress and anxiety. Even if you are obtaining wealth for a loved one or your family, the stress and anxiety created by the pressure to perform, can flow over into the relationship, causing a negative outcome.  Also, you may be creating expectations that you may not to be able to fulfill.  One never knows when fate will strike.  Better to base your relationship on love and compassion.  In addition, the constant striving for things can have negative effects of stress on your body can cause health problems and then nobody is happy. Look what happened to Job in the Bible. He did everything right and still he was tested by this unsympatric God. In the end of his trial, all he had was the strength of his inner self to gain fulfillment. Gods message from the Old Testament, ‘Shit happens! Deal with it.”

The Pharaoh’s of Egypt thought they could take their wealth with them.  They were very wrong. If we measure ourselves only in the physical material world, even our entire planet is a just a speck of dust compared to the vastness of the cosmos. The question of “who am I? and why am I here?’ can only be answered with our immersion into the ultimate spiritual values of life.  We are part of the creative force of nature and it is part of us.  Follow the universal moral laws like – Love your neighbor as you yourself –Love everyone you meet and for those, whom you cannot love, at least have compassion and empathy for them—Do on to others as you would have them do on to you, called the Golden Rule – So you sow, so shall you reap— Everybody you see is your mirror— for every Action there is a Reaction, for everything we do has consequences. Order does not have to change into chaos. We, as mortal humans, have the power to rise above this destructive force and with our actions, bring order out of chaos. We are organizers.  We have the power to bring solutions where things seem to be coming apart.  We can apply our organizational skills and direct the flow of our mission to do good things, which can counter chaos. Also, through your giving of love, compassion and empathy, we can connect with the creative forces that will give you internal fulfillment, and you will be rewarded with a resolute soul that can withstand adversity.

2) Right Intension. I believe that this path meant that should Be Motivated by Goodness. Being a miser or being motivated by greed will sap your energy and creativity, because you are out of harmony with the universe.  You might ask what about all those wealthy aristocrats who are greedy and have gathered their fortunes through power, lies, cheating and deceit.  This kind of a question has been bothering virtuous people throughout the ages.  Responding to the lament that virtue suffers, while vise flourishes, Jesus insisted that virtue nourish the soul, while vice turns men into animals, who can never achieve fulfillment.   Fortune has a two edged sword and that everyone at some time faces both sides of the blade.   Good Fortune cannot be trusted and can suddenly abandon you through bad health, misfortune or betrayal.  No matter what fate hands you, always have the intention to do good things. Go ahead; be in harmony with the universe. When you have good intentions, it somehow helps you reach fulfillment.  If you can’t listen to your mind, listen to your body.  If you are feeling anxiety in your chest and head, think about what positive things you can do.  Go see a sunset. Smell a flower.  Watch children play. Do something creative. Write a poem.  Compose a story.  Draw a picture. Get those divine creative juices flowing. Exercise!  Find out what gets your creative juices flowing.  Always, no matter what, be joyfully and grateful inside yourself. Volunteer to help someone. Pick up thrash instead of walking around it. Hug your loved ones.  Don’t get bogged down in greed.  Let your good intentions be your guide to internal happiness. The future is created in the now moment.

3)  Right Speech. Be Verbally Aware. Some people just can’t stop talking. All their internal energy is wasted in their hearing themselves talk. For many, conversations are really one way. The one who speaks, wishes to be listen to. However, when others are speaking rather than listening, most are thinking of what to say next. Therefore, be aware of listening. Engage in face-to-face contact and if possible, eyes to eyes contact. No one’s opinion is superior to anyone else’s.  So, listen to others opinion’s with respect. Be immune to criticism of your views.  Most are probably not ready to be open to other views other than their own.  Stay on the righteous path.  Do not speak harshly of others, “if you can’t say anything good about a person, don’t say anything at all.”  So, just be careful what you say and try to engage your brain before engaging your mouth.  We are likely to find some fierce opposition to our views. It is not our purpose to convince everyone, but to merely set in place the beginning of a New Awakening. Many are called, but few will choose to follow. Speak to everyone, with kindness, tenderness, empathy, compassion and love.

4) Right Action Be Non-Judgmental. Try to stop classifying, labeling and analyzing right and wrong, bad and good.   Everything is relative. You have to raise yourself above the turbulence of your view, as seen by your personal internal dialogue, which is usually ‘a wall of worry’.  We often see things not as they are, but as who we are. Once the tumblers of decision making fall into place, have the conviction to act on your decision.  You can always change your mind if you later think you made the wrong decision.  Be flexible.  We all make mistakes.  Be non-judgmental about your mistakes and others. Analyze your decision making process and try again. Discover what you did wrong and make plans to correct that flaw.  Without risk, there would be no reward. The future is uncertain.  And that is the exciting thing about it.  The future is in your hands. Embrace the mystery.  Be grateful for the challenges.  Be flexible like a tree in a storm. When you are judgmental, you are stagnant in a fixed ideological place.  Be open to change. When you combine the dynamic energy of non-judgment with the stillness of your internal mind, then you are ready for decision making.

 5) Right Livelihood. Follow The Creative Path: How can you earn a living in this completive world and still be true to your values?  In order to solve an immediate financial problem, the pressures of the outer world can cause you to alter your good intensions.  There are many demands on each of us.  It is easy to say that we will trade in our ambitions in exchange for a meaningful life.  However, taking the high road becomes more difficult when your family is hungry and wanting. Cheating on your principals becomes easy to justify when you feel you have been treated unfairly.   Then in your mind, you can just even the score a little. You’re not cheating, you’re just restoring fairness. This justification can start with a small infraction of your moral code.  This can be dangerous, because once you start breaking rules, your brain tends to find more circumstance that justify even more exceptions.  Your cheating at work can be looked at as just another hedge against failure.  However, cheating and being deceptive is a seductive force that once started, can become addictive.  Leading an un-genuine life will suck more and more energy from your life until you collapse either mentally or physically.  So if you have started, stop now. It is never too late to stop and redeem yourself by doing good things.

Everyone has a unique gift and a special talent for a service that others desire. There is a reason for your existence. Focus on what you have to give, rather on “What is in it for me.”  Ask “What can I give” and abundance should follow.  If one thing doesn’t turn out, look at it as though that just wasn’t for you and it was the universal force directing you to open a new door.  Don’t blame anybody and don’t feel like a victim.  These are negative forces that take away energy.  Just keep on concentrating on your creative forces.  When you find the right livelihood, you will know it, because you will feel the joy. Joy does not have to be experienced only on holidays or after work. Find a place where your livelihood brings you and others joy.  Don’t settle for less. If you don’t have this now, look at alternatives.  Follow your bliss.

6) Right Effort.  Look For Solutions.   You are not responsible for the world you are in. However, you may find that you want to become a more active participant in things in which you can make a difference and make the world a better place. The process to change things in the world is difficult, but not impossible. Search within yourself and draw from a divine universal consciousness which will tell you that, change starts with one person having a firm conviction that something needs to be changed.  If enough people, along with you, feel this conviction, it can overflow into the outer collective world, where a consensus is reached, resulting in the synergy and passion necessary to facilitate the change.  The world of today, as in the past, seems to be in a quagmire of dangerous polarization, without consensus.  However don’t let that stop you, go ahead and save the world. Please join my wife and I as we try!

When you are right don’t feel pride, excitement or euphoria.  When you are wrong, don’t feel anger, guilty or anxiety.  The outcome is nothing more than the outcome. Relinquish responsibility and guilt for the outcome. It should not affect your next decision. Keep your ego in check and solutions will come more easily.  There are times to celebrate, but specifically set aside a special time for that kind of occasion. There is nothing wrong with setting a goal and celebrating after you have achieved it. However, make sure the goal has ethical value and is high enough, so the celebrations are infrequent and special

7) Right Mindfulness   Be Aware Of Your Inner Connection to Everything! Mindfulness can be achieved with an understanding of our true spiritual nature. A baby is unable to distinguish from itself and the outer world.  So, in our early life, if we could re-remember that feeling, and part of our brain does, there was a time  for each us, when there was no difference between us and the rest of the world. We were one.  If we can search deep enough, our brain can find that time when we were connected to the whole.   This form of collective consciousness is available to all of us.  After all, how do we all know what beauty and quality are, when we see it?  That consensus is communicated to us without words and yet we recognize it when we see it.   It has to be experienced to be believed.  Look at this not as a problem to be solved, but a mystery to be experienced.  Some call this connection, divine intelligence, or some call this God.  The metaphor doesn’t matter.  What is important is that you get there.

Fear and anger will kill this connection.  When you feel vulnerable, fear and anger can neutralize the positive energy juices.  That’s when you can become immobilized.  You are here, but you’re not. Your ears don’t hear what they are hearing and your eyes don’t see what they are seeing. Never make decisions when you are in that stage. Find ways out of this depression, like we gave examples of in dealing with greed under #2 Right Intention, such as watching a sunset, exercise etc.. If you are feeling deserted and depressed, do one positive thing at a time. Every incremental positive change is important.  At least you can stop the downtrend. Find a place where you feel comfortable, either in your mind or a physical place. Be quiet. Find a place where you can hear the wind, feel the sun, see the stars and breathe fresh air.  Little by little, get the internal trends moving from fear and anger to hope. Expand your success outward to others through voluntary service, or help someone in need or just spread some wealth around in worthwhile places.  There are plenty of choices. When you are bathing in abundance, the water will keep flowing if you connect with your genuine communal self.

8) Right Connection. Awaken the Awareness of Your Higher Self. I see life moving through five phases.  Stage#1) Behaving:  As a child we must obey the rules of our household and are indoctrinated into our tribe’s beliefs.  Stage#2) Becoming: As we grow older we educate ourselves to other views and have ambitions and goals for ourselves and try to achieve them.  Stage#3) Belonging: There comes a time when we form a family and become a functioning part of society. Stage#4) Being:  Next, Some have the time to be more introspective and discover our inner self.  Stage#5) Beholding: This is the stage where some can rise above the everyday pleasures of life and discover our Higher Self, where the present moment is divine. Many are called, but few are chosen! This stage is our goal as it connects with the collective consciousness.  Here, truth is eternal and unfolding.  Here, matter is only a perception and we become aware of our potential for peace, love, and happiness. Here, we have a heightened appreciation of empathy, beauty and goodness. Here, altruism and tolerance flourish.  Here, you can at last love your neighbor as yourself.  Here, you just don’t obey the Golden Rule, but you are the rule. This is the logical and culminating but yet unfinished outcome of the process of evolution. It is our destiny.

Beholding is a level of consciousness and happiness that is there for the asking, ‘Ask and you shall receive’ or ‘Seek and you will find the truth’. There will be those special moments when you will be part of the underlying harmony of creation. It doesn’t last long, but these glimpses are indications that eternal bliss is reachable for you.  Keep trying! This desired state of mind is beyond verbal conceptualization and linguistic explanation. One has to taste the Orange, to know what it tastes like. This spiritual connection is eternal, infinite and shapeless.   Maybe this will help. What if the Divine Source can be thought of as a Dynamic Flowing Process of constantly moving energy, which your mind can experience more accurately as a verb, than a noun? Beholding is a level of consciousness and happiness that is there for the asking, ‘Ask and you shall receive’ or ‘Seek and you will find the truth’.

Let us Pray: Awaken now! In this time of no time, this is the time. Speak not of judgment and intolerance, but speak of the spirit of love and compassion.  Journey with me, from fear to hope and to a new awareness of your potential.  A new world of peace, love and joy awaits you. Think not of the battle fields of daily life. Lift up your hearts to that higher self within self, to dignity and compassion. Hallelujah!  We are all Divine spiritual beings. We have no concern for anger, greed, revenge, dogma or creed, for the spirit is with us. Together we can transcend everyday perceptions and lift the veil of suffering, to reveal ourselves as one with the divine universal collective source. Our separateness is an illusion.

Enjoy Life to its fullest. Stat now!

Carl M. Birkelbach

 

THE INVESTMENT SRTATEGY LETTER #714

19 Friday Aug 2016

Posted by Carl M. Birkelbach in Uncategorized

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AUGUST DOLDRUMS: MONEY MANAGERS ON VACATION WORLDWIDE

DOW TRANSPORTS DOES NOT CONFIRM NEW HIGHS: SELL SIGNAL?

I believe this is an election year created bubble!

Geopolitical risk and the US stock market at record high!

The US stock markets continue to edge up and making new highs! However, Bank stocks, particularly European bank stocks,are  close to new lows. I  expect Deutsche Bank now at 13.54 with a low of 12.48,to break into new ow ground and after the US election to go bankrupt. a clue to the markets weakness is retails store closings and  the reluctance of the Dow Transports to confirm new high

Sorry I haven’t written much lately. The markets seem in the summer doldrums. A Goldilocks market. Neither too hot nor too cold. US stocks are near all-time highs, with most Banks close to all time lows. The likelihood of a Trump presidency seem less likely, but the possibility still looms as a possibility, should terrorists acts become active. The economy continues to be lack luster, hardly growing in the first half of 2016. So, until something changes, I will remain silent for a while. All below is applicable.

7/23/16 Investors are very bullish even though the headlines are showing geopolitical risk at a record high, strife in the European Union, a coup attempt in Turkey, tensions in this South China Sea, numerous terrorist attacks and rhetoric from a presidential candidate giving authoritarianism  a full embrace. Investors seem convinced that economic prosperity and good corporate profits are just ahead of us. However, for the past four quarters earnings-per-share the S&P 500 have been falling by about 12% per the year prior. The falling dollar and cheap energy prices are hurting earnings. For instance, Coca-Cola’s global sales have risen in local currency terms, but have declined in dollars for the last two years. Dollar and oil prices have probably stabilized. The economy seems to be growing just fast enough to keep demand for products moving without much inflation. (Harley any growth for the first two quarters of 2016). A Goldilocks economy. Wages and labor costs have been rising at only  an annual rate of only 2.3%. However, there is now pressure for wages to grow faster. A 5% rise in wages could lower profits by about 15%.

The biggest risk in the market seems to be coming from a political climate that is frighteningly uncertain. Hillary Clinton has promised to put pressure on drug pricing which encompasses 14% of all profits the US. Donald Trump seems to be pursuing an agenda of global trade protection, large tax cuts, an expensive wall, restructuring projects, the deportation of 11 million consumers and workers, major punishment of corporations that are US-based  and want to leave the US Or have already left the US. In addition, HE is basically willing to scrap the NATO agreement. Markets don’t like uncertainty.

So where is the buying coming from??  US corporations are using my earnings and low interest rates to buy back  $165 billion a quarter of their own stock. In addition, Citicorp analysts have said that the Central Bank’s worldwide are buying stock, to prop up a sagging worldwide economy.

For the following reasons below, I believe this is a bubble that is being held up by corporate buy- backs, excessive Central Bank buying (don’t fight the Fed) and political considerations to keep the bubble fully blown during this US election period. I don’t think the markets will hold up that long, which will be good for Trump and bad for the world!

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.  now 1.50%.That is where the money is going. This means that INDIVIDUAL investors are very cautious. 

4). Donald Trump, the  nominee of the Republican Party, continues to blurt out dangerous statements.  He recently 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, which he could control. The market dislikes uncertainty and instability. The possibility of the Trump presidency, however unlikely, is still un- stabilizing to the markets. His quote of “fight fire with fire” will mean more meaningless and expensive wars~! His comments on NATO are based on financing not commitment or global strategy. This will encourage Putin.

5).I believe most of buying has occurred because of Central Bank stimulus, continued low interest rates (-0% some places) and corporate stock buybacks in the last 12 months  are a record $600 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, which 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 14.35 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 INTERFERENCE, WHICH WILL STOP AFTER THE ELECTION. CAN NEW HIGHS LAST UNTIL 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 8/19/16

CLOSE

Dow NASDAQ S&P 500
18,562 5,238 2,184
Short Term UP UP UP
Int. Term UP UP UP
Long Term ? ? ?
Foretasted Trends 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) 18,722 5,271 2,184
Short Term Down (Support) 17,140/ 4,594 1,978
Int. Term Up (Resistance) 18,722 5,271 2,184
Int. Term Down (Support)  16,865 15,484  /15,370 /14,688/ 13,377  4,267/4,209/3,986/3,294  1,850/1,560
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  L0W 1.37^ NOW1.5% Gold 1,348 Oil 26.59 low Now 48.38

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

THE INVESTMENT STRATEGY LETTER #713

04 Thursday Aug 2016

Posted by Carl M. Birkelbach in Uncategorized

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Tags

be, Bear market

A bit boring!

I believe this is an election year created bubble!

Geopolitical risk and the US stock market at record high!

Sorry I haven’t written much lately. The markets seem in the summer doldrums. A Goldilocks market. Neither too hot nor too cold. US stocks are near all-time highs, with most Banks close to all time lows. The likelihood of a Trump presidency seem less likely, but the possibility still looms as a possibility, should terrorists acts become active. The economy continues to be lack luster, hardly growing in the first half of 2016. So, until something changes, I will remain silent for a while. All below is applicable.

7/23/16 Investors are very bullish even though the headlines are showing geopolitical risk at a record high, strife in the European Union, a coup attempt in Turkey, tensions in this South China Sea, numerous terrorist attacks and rhetoric from a presidential candidate giving authoritarianism  a full embrace. Investors seem convinced that economic prosperity and good corporate profits are just ahead of us. However, for the past four quarters earnings-per-share the S&P 500 have been falling by about 12% per the year prior. The falling dollar and cheap energy prices are hurting earnings. For instance, Coca-Cola’s global sales have risen in local currency terms, but have declined in dollars for the last two years. Dollar and oil prices have probably stabilized. The economy seems to be growing just fast enough to keep demand for products moving without much inflation. (Harley any growth for the first two quarters of 2016). A Goldilocks economy. Wages and labor costs have been rising at only  an annual rate of only 2.3%. However, there is now pressure for wages to grow faster. A 5% rise in wages could lower profits by about 15%.

The biggest risk in the market seems to be coming from a political climate that is frighteningly uncertain. Hillary Clinton has promised to put pressure on drug pricing which encompasses 14% of all profits the US. Donald Trump seems to be pursuing an agenda of global trade protection, large tax cuts, an expensive wall, restructuring projects, the deportation of 11 million consumers and workers, major punishment of corporations that are US-based  and want to leave the US Or have already left the US. In addition, HE is basically willing to scrap the NATO agreement. Markets don’t like uncertainty.

So where is the buying coming from??  US corporations are using my earnings and low interest rates to buy back  $165 billion a quarter of their own stock. In addition, Citicorp analysts have said that the Central Bank’s worldwide are buying stock, to prop up a sagging worldwide economy.

For the following reasons below, I believe this is a bubble that is being held up by corporate buy- backs, excessive Central Bank buying (don’t fight the Fed) and political considerations to keep the bubble fully blown during this US election period. I don’t think the markets will hold up that long, which will be good for Trump and bad for the world!

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.  now 1.50%.That is where the money is going. This means that INDIVIDUAL investors are very cautious. 

4). Donald Trump, the  nominee of the Republican Party, continues to blurt out dangerous statements.  He recently 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, which he could control. The market dislikes uncertainty and instability. The possibility of the Trump presidency, however unlikely, is still un- stabilizing to the markets. His quote of “fight fire with fire” will mean more meaningless and expensive wars~! His comments on NATO are based on financing not commitment or global strategy. This will encourage Putin.

5).I believe most of buying has occurred because of Central Bank stimulus, continued low interest rates (-0% some places) and corporate stock buybacks in the last 12 months  are a record $600 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, which 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 14.35 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 7/23//16

CLOSE

Dow NASDAQ S&P 500
18,352 5,166 2,164
Short Term UP UP UP
Int. Term UP UP UP
Long Term ? ? ?
Foretasted Trends 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) 18,622 5,415 2,175
Short Term Down (Support) 17,140/ 4,594 1,978
Int. Term Up (Resistance) 18,352 5,231 2,131
Int. Term Down (Support)  16,865 15,484  /15,370 /14,688/ 13,377  4,267/4,209/3,986/3,294  1,850/1,560
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  L0W 1.37^ NOW1.50% Gold 1,366 Oil 26.59 low Now 41.74

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

 

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