All time high of 26,617 projected in 2011

I finished writing my book entitled investment Handbook for Volatile Markets on September 17, 2011 (see the post online above). The Dow Industrial Averages, were at that time at 11, 485. My original thought was that the market would go up to around the 18,000 area and then stop. That’s why I wrote my Lone Bear Letter on January 23, 2015 when the Dow industrials was at 17, 672. I was right for a while. However, after the Trump election, the markets went up over 25% without my approval. As noted below my projections (Fibonacci) on September 17, 2011 were for the Dow to go as high as 26,701. Well, it did go to as high as 26, 617 before correcting. Sorry, I missed picking the all-time high in 2011, by a mire 84 points. Not that bad huh? However is it an all time high?


Fibonacci projections made 2011 in the Investment Handbook for Volatile Markets

1st Resistance 2nd Resistance 3rd Resistance 4th Resistance  5thResistance
14,198 14,198 14,198 14,198 14,198
-6,470 -6,470 -6,470 -6,470 -6,470
=7,728 7,728 7,728 7,728 7,728
X38.2% X50% X61.8% X 100% X1 61.8%
=2,752 3,864 4,776 7,728 12,503
+14,198 14,198 14,198 14,198 14,198
=17,150 18,062 18,974 21,926 26,701

  Will the Dow high of 26,701 become an All Time High?

Yes, I believe the markets have topped, for the same reasons that I gave in ISL #717 through #719. The Federal Reserve still has for a $$Four and a half trillion dollars of bonds to sell back to the marketplace (quantitative tightening)and the  banks still have $350 trillion in derivatives ($65 Trillion in 2008). This has been like a bomb ready to go off. In addition there have been financial problems with the (yet to be determine)  XIV volatility Index (down 93% today). Everyone is blaming the sell off on higher interest rates. I don’t think so. My hunch is that we are reaching a Constructional Crisis with the Trump Russia Investigation!

The markets will tell us. A bear market acts like this: down 500 on Friday, Panic on Monday down 1,200, recovery on Tuesday, volatile on Wednesday and Thursday, then if this pattern repeats, watch out below. My current first phase downside Dow, projection is down to 17,000 –18,000, then to 13,000. This would bring a huge Democratic victory in November.

This is what the democrats should say about the State of The Union!

The State of the Union is polarized with partisanship, while our citizens are in danger of losing their upward mobility and an equal opportunity for success.  For many, the “American Dream” is quickly fading and so is the prospect that our children will be better off than us. Many cannot afford health care or college and are paid a wage that cannot provide for their family’s stability.  The nation is also facing a moral decay, where tweets have replaced diplomacy, spin has replaced integrity and hubris has replaced compassion.

Many of our citizens are struggling!  This is why! 1) Between 1980 and 2017, most of the income growth has gone to the top 1%. This process has transferred approximately $1 trillion a year from the bottom 90% of income earners, to the top 1%. One family, the Walton’s who underpay their employees; earn more income each year, than the bottom 40%, or 130 million people. 2) With productivity up, there have been little increase in working wages and yet CEO pay has gone up from 65 times, to 250 to 500 times the average worker’s pay. 3) Small businesses and entrepreneurs, who employee 90% of the nation’s people, are being squeezed out of business, by unfair advantages given to large corporations. 4)  With student debt above $1.3 trillion dollars, our young graduates have become indenture servants to their debt. 5) In addition, Middle-Class consumers have taken on almost $1 trillion in credit card debt, with ‘Big Banks’ charging exorbitant interest rates of 15% to 25%. This must stop!

The current Republican Administration and Congress cares little about what the public needs, or what is the right thing to do. They consider their big money donors, as their constituency.  Donor power now rules over public opinion and the only changes that have been made are to make the rich richer! The top 1% and large corporations, through their lawyers, accountants and the exploitation of the political system, have formed an oligarchy that has built up powerful defenses against competition and income equality. If things don’t change, the billionaires will become trillionaires and our large corporations will eliminate most small business completion and will operate without borders and become independent of the marketplace and regulations. Thus, we are quickly becoming ‘The Land of Only the Privileged’.”

We must face this reality: ‘Big Business’ has been created to earn a profit from the public, not to benefit the public. That is their nature Therefore; we need to eliminate the ‘Citizens United’ ruling, where Corporations, as political donners, are to be treated like people. If Corporation are people, most lack a conscience and are only concerned about profit.

It will not be easy to level the playing field, as the ruling oligarchy reaches deep into our political system. This is not what our Founding Fathers intended. This winner-take-all attitude has created justifiable anger and threatens our jobs, civility and our economic system. We live in a consumer oriented society, driven by a healthy Middle Class. However, how many tooth brushes and cars can each of the top 1% buy? Not enough to keep our economy growing and stable.

We need to make these political changes. 1) We need to correct the gerrymandering of voting districts.  Gerrymandering is the manipulation of voting boundaries favoring one party over the other. With a database, politicians can create a district where they can predict the voting behavior of each potential district. This must be corrected. 2) We need to set term limits for our Senators, Congressmen and for the Supreme Court, for the same reason we have a two term limit for the Presidency; power tends to corrupt. 3) We need to bring back the Glass Stiegel Act. Without it, banks can act unethically between their banking and Investment Banking functions. 4) We need to pass legislation to regulate automatic weapons, recognize global warming and regulate our banks so as to prevent them from getting the world into another 2008 type financial crisis. 5) We need to expand the Voting Rights Act, to make it easier for citizens to register and to vote.

Fortunately our Founding Fathers gave us these words; ‘We hold these rights to be self-evident, among which are life, liberty and the pursuit of happiness’.  It is time to fulfill this promise of ‘Life’ with Medicare for everyone. This can be done incrementally, first by giving Medicare to children up to age 12 and also by lowering the beginning of Medicare to age 55.  All the industrialized nations have universal healthcare for their citizens, so can we! To fulfill the promice of ‘Liberty’ of equal opportunity and upward mobility, we need to level the playing field by offering our children a first-rate education. The United States currently ranks only thirty-sixth among the world’s developed nations in education. We can do better. Additionally, for those who qualify, we should offer two year’s free tuition to a community college or a choice of trade or technology school training. Let’s invest in our children’s and in our nation’s future.  To fulfill the promice of the ‘Pursuit of Happiness’, we must offer employees a decent wage that can support the enjoyment of a family life. We now have many people working at a minimum wage of $7.50 an hour, making them virtually slave labor. We need to set the minimum wage at $15 an hour. Increasing the minimum wage should increase consumer spending, thereby creating jobs and a stable economy.

Many of the costs of increased benefits of education and health care will be offset by individual saving for these expenses. However, we will need to increase the taxes of the rich, who actually pay a smaller percentage of their income taxes than those below them and Corporation must pay their fair share. We can also reduce defense spending. Simply put, we must change our priories to what is good for the common good.

Today the United States, as ranked against other nations, is 35th in meeting basic human needs, has the highest first day infant mortality rate and the highest child poverty rate (21%) among industrialized nations. That’s one in every five of our children living in poverty! As Great Nation, we must do better. Welcome to the Democratic Party’s ‘New Era of Opportunity’! We have to change from stressing our differences, to opening up to our connectedness.  It is time to heal our wounds. We have to be aware of our potential, both individually and as a great nation. A new era of globalization, multiculturalism, multiracialism, automation and a carbon free economy is descending on us. We must address these challenges, as an opportunity!

This ‘New Era of Opportunity’ is ready to emerge. The current political setbacks are the last vestiges of a backlash to policies of the past and are a motivator for a change to benefit the common good. It is a typical cycle of decay and renewal. Never give up ‘hope’!  If you do, the dark forces win. Stay in the light. Make ‘hope’ a verb and a call for action. Get out of the grandstands as a spectator and get on the playing field and become activated. Vote in 2018 to welcome in the ‘New Era of Opportunity’. Vote democratic!  You can make a difference! Vote!

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.

Carl M Birkelkbach