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)

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

Shanghai down 6.4% today

BI: What’s your take on the current situation in China? Paul Krugman: “China scares me. China has a huge adjustment problem. They have an economy that is based upon unsustainable levels of investment and needs to radically shift from investment to consumption. They don’t seem to be managing it. They have a large internal debt problem and a government that doesn’t seem to be thinking clearly about it. At this point their response to economic difficulty seems to be to crack down on the financial press and to tell them to write happy stories.”

Europe up 2%

BI: Turning to Europe, what do you think about Brexit? Paul Krugman:” It would be disastrous for the European project. In the end it would hurt Britain quite a lot. The case for close economic integration within Europe is huge. For Britain to be pulling out of that is a bad thing economically. The European project of peace and prosperity through integration is critical. Even if the currency was a bad idea. The broader project is still very critical. Britain needs Europe and Europe needs Britain.

BI: You are especially critical of Germany’s austerity policy. What was this policy’s worst effect? Paul Krugman: The European economy as a whole has been very weak with catastrophic effects on Southern German Chancellor Angela listens during joint news conference in Berlin I would argue that the ramifications run very deep. It’s not just that there’s a huge cost in terms of lost output and lost jobs. Years of terrible economic performance have also done enormous damage to the European project and have basically left Europeans no longer believing in the whole message. The cost has been enormous. Once the bubble burst, there was going to be a difficult time for the Euro, regardless. But it’s been far worse than it needed to be and Germany bears some of the responsibility because of turning what should have been viewed as essentially a technical economic problem into a morality play. That has been a very unfortunate story.”

Investment Strategy: it’s a Bear Market! Sell rallies!

The big news is that J.P. Morgan is doubling its reserve oil loan losses $1.3 billion. I do not believe this is nearly enough. However it does give an indication of the changing landscape of the way the public is looking at loan losses from energy-related companies. The news is out. The banks the United States and in Europe are holding billions of dollars of loans that will probably default. Banks have built up their assets due to differential between low interest rates and the rates they can charge the public. As I have said in previous market letters, “ Banks have built up their assets on the backs of the middle class. In cooperation with the Federal Reserve, Interest rates are at virtually at zero, penalizing savers and retirees and weakening the middle class as banks make huge profits from consumers who pay high rates on credit cards and small businesses on loans. Because banks can borrow at almost nothing, whatever they charge above zero is pure profit. Auto and mortgage rates are 3% or 4%,( there are $1 trilllon 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.

Once again, Congress has shown how uncompromising it is with the Obama administration. Harry Mitch McConnell, has said his main goal is to assure that the Obama administration will have as few accomplishments as possible, rather than putting the country first. The latest gridlock is the nomination of a new Supreme Court justice to replace Scalia. Scalia pioneered ’ orginalism’, which is a theory holding that the Constitution should be interpreted in line with the beliefs of white men, many of them slaveowners, who ratified it in the late eighteenth century. Justice Samuel Alito interrupted one of Scalia’s ratings of a lawyer by quipping, “I think that what justice wants to know, is what James Madison thought about video games.” On social issues, where the court has the final word, real problems for conservatives is that they are out of step with the rest of the nation. The public wants diversity not intolerance, gay rights, a broader interpretation of women’s rights for contraception and choice, a broader and more encompassing view of voters rights, fewer execution, the demise of Citizens United, less money in politics not more and the end of gerrymandering congressional districts. The president has the right to make a nomination. The public gave him that right with more than 2 million more votes than his Republican counterpart in the last election. For Mitch McConnell to say, he will not consider any candidate, no matter how well-qualified, speaks of the uncompromising nature of the Congress and its inability to deal with a future financial crisis, which in my opinion is about to hit this Congress will a blast, before the end of the year.

I don’t tell the market what to do. The market tells me what it is doing. On Thursday the Dow Jones industrial average broke its August 25 low of 15,666 by closing at 15,660. This was the last major index or average to not break below August lows. All major indexes and averages worldwide have now broken below the August 25 lows and are officially in a BEAR Market.

Investmet Strategy: sell rallies!

FOUR NEW BOOKS and ONE CLASSIC TO READ

• The Age of Stagnation by Satvajit Das. This book explains the failures of central banks to stop an economic and financial catastrophe. His solution is austerity, which seems unlikely to happen
• The Only Game in Town by El-Erain. He believes that central banks cannot avoid a financial catastrophe with monetary policy alone and needs fiscal policy to aid the economy. With Republican Congress, this does not seem possible.
• Dark Money and the rise of the radical right, by Jane Mayer. This book explains how economic growth is unsustainable if eighty people own 50% of the world’s wealth and 1% of people own more than the 90% of wealth in the US. (dah!)
• The Fourth Industrial Revolution by Klaus Schwab. This book shows what a wonderful world of technological wonders awaiting us once we get through this economic and financial catastrophe. EVENTUALLY, the only problem is, once Artificial Intelligence has access to unlimited knowledge in the cloud and is able to reproduce itself, silicon based intelligence will not need carbon based intelligence The next step in evolution?. However, that’s a problem for another day.
• Don’t’ forget the classic THIS TIME ITS DIFFERENT by Carmen Reinhart: It tells the story of eight centuries of Financial Folly. Each time after a catastrophe, such as the Great Depression or 2008, economists agree that it could never happen again. Who could be so stupid as to let six banks control 70% of the US assets (to big to fail) and allow all the economic growth to go to the 1%, while eighty people own 50% of the world’s wealth? NAH!

2/12/16 THREE MAIN REASONS FOR THE DECLINE

My forecasts for 2016 call for the Dow Jones Industrial average to be as low as 14,688 to 12,000, the NASDAQ to be as low as 4,000 to 3,000 and the S&P 500 to be as low as 1,560 to 1,400 because of three factors! (See previous market letters)

LONE BEAR LETTER #8

INTEREST RATES ARE A SHORT TERM PROBLEM, WHICH IS DISTRACTING INVESTORS AWAY FROM THE LONG TERM PROBLEM! The Federal Reserve has been punishing savers and retirees at the expense of a higher stock market. They are the primary driver of this massive financial bubble now in place and most of the world’s markets. Most of this was accomplished with a zero interest rate policy. Zero interest rates and overnight lending has directly created debt bubbles in numerous areas. They bought $4 trillion worth of bonds and flooded the economy with dollars and still, they couldn’t stir up inflation.  CPI in August was down -0.1% and is only up 0,2%in the last year. They are out of bullets to help the economy. All they can do is delay or slow reverse tapering. If oil goes down anywhere close to the $20 a barrel, as forecast by Goldman Sachs, it will have the same effect as the mortgage debacle, when mortgage bonds defaulted causing another financial crisis. Oil-producing nations have bonds that will be in trouble. Jim Flores the vice chairman of Free Port McMoran said “where all going to get wet. A few people are going to drown” Oil-producing companies have bonds that will be in trouble. The banks hold more derivatives on these trouble securities than they did of mortgage bonds in 2008. Once again, the banks are a house of cards. If the economy is doing so well, why is the capacity utilization rate at 77%? Before the recession it was at 80% and during the 1990s averaged 82%? The shrinking middle class cannot hold up their consumer’s end of the market, as all income increases have gone to the top 1%. Bernie Sanders has got it right; it’s all about income inequality. The big corporations and top 1% think they are immune to the worries of the shrinking middle class. Not so! Commodity prices are down 20% across-the-board.  Inflation has become unsustainable.  The problem with that is; deflation is unacceptable. S & P 500 earnings for the 3rd quarter are down -4.4% and more worrisome, revenue is down -2.9%. What is the real unemployment rate of those who have stopped seeking employment or have settled for poverty wages? the economy is in trouble and without fical policy changes from the do-nothing Congress, the Fed is at the opposite end of the Fed funds spectrum to help. Another quantitative easing will just make the end game worse, as the Fed already owns $4 trillion worth of questionable securities. They can’t ease and they cant’t taper .As I have repeatedly said, the markets fall first, and then when he find out why.

SORRY ABOUT THE BAD NEWS: You can’t believe how hostile everybody is to my position.  Is it unpatriotic to be negative about the US stock market? Nobody wants to hear the bad news. Negative economic reports in Muslim countries, Russia, China will get you jailed. Recently an analyst Nirhin Mangle in India was put in jail, because he wrote a negative report on an Indian firm. It was George Orwell, of 1984 fame who said: “Anyone who challenges the prevailing authority can find himself suddenly silenced,” I don’t like being the messenger! However, I’m not attached to the financial industry and its success and I am out of stock market, so I don’t have to feed on the Kool-Aid the hype and positive mental attitude. Yes, you need to be positive to be great and this is a great nation. However, sometimes the hubris is nothing more than an illusion. And yes, I want this nation to be great again. We were great in the 1950s when big labor, big government and big business were in balance. Now big business, through Citizens United runs and will ruin everything. We are being governed by those elected  that are beholding to big business and big money. Unless the balance is restored between labor and capital, I believe all boats will sink. Capitalism has an Achilles heel. Read Thomas Piketty’s ‘ CAPITAL IN THE 21ST CENTURY. However, maybe everyone is so involved with the hype, that thing will just keep on going on. After all, the money in our pockets is nothing more than paper, which gets passed on in full acceptance. Illusion works if everybody believes it. It’s three men in a tub, rub a dub dub, nobody please pull the plug.

However, here are some facts that are hard to ignore: 1) It is estimated by Oxfam America that the top 1% in the world own 99% of the world wealth and most of that belongs to the top 1/10 of 1%. 2) Only 80 billionaires control 50% of the global wealth. They own more than the 3.5 billion people in the bottom half. 3) In the United States all income growth in the last 15 years has gone to the top 1% of the economic ladder whereas wages, adjusted for inflation are down 4.3%.  4) It has been estimated that in the United States, the top 1% own 90% of the total wealth of the country. 5) Home ownership in the United States has gone down from 48% to 32%. Upward mobility is gone. The middle class can no longer afford a modest house, college education for their children and healthcare for their family. This is ‘class warfare’ where in my opinion; everybody in the long run will lose. 6)  It is estimated at only 400 families control over 50% of the wealth in the United States. How many bars of soap and how many cars can each of these wealthy people buy? 7) Corporate CEOs are getting 500 times the average wage of their employees and hedge fund managers are getting 5000 times the average wage of an employee and paying low taxes. When the CEO gets $42 million a year in wages, in my opinion, they appear to be more of a gangster and interested in their own self interest, rather than a corporate representative of their company. At least Capone and dictators take all the money they can blatantly using violence. Our CEOs and hedge fund managers hide behind the pretense of respectability. These excessive conditions, in my opinion are taking the breath out of the US and world economies that has not yet been seen in the metrics or in a reaction from the working poor.

I am reminded of the time when labor did rise up and ask for its share of the pie. Just to name a few instances: In 1886 there was a riot in Chicago’s Haymarket Square for the eight hour workday where there were 4 deaths and 72 injuries, the 1894 Pullman strike for union recognition, were there were 30 deaths and 70 injuries, the 1937 Republic Steel Memorial Day massacre were 10 were killed and 37 were injured for proper working conditions and pay. Labor was out of balance with capital and rather than government playing the role, the workers took to the streets in protest. The process eventually righted itself and the United States became the most prosperous nation in the world and its working middle class prospered. We have not yet heard the old shout of“workers unite.” Instead, we have had the perpetrators of union demise, like Scott Walker of Wisconsin, received public support from those that are suffering. There’s the old saying, that those who do not learn from history are cursed to repeat its errors. There are solutions. The Bernie Sanders agenda calls for a government run health care program that covers every American, plus large sums to rebuild roads and bridges and the expansion of Social Security and tuition free at public colleges. How much will this cost? Probably $10 trillion, over 10 years. However, that the a lot less than the demise and disruptions in our government, should we not take this route. In my opinion, the adjustment in the re balancing of labor and capital will occur in one of two ways. The redistribution of wealth can occur violently as I fear, or politically. As of now, the political solution seems unlikely. There is nothing wrong with the accumulation of wealth. However, the excessiveness of our current wealth accumulation, I believe, will have a stifling effect on the US and world consumer-based economies and could make future economic growth unsustainable. To me, it makes common sense to fix it if we can.

However, part of the problem that we are now facing, cannot be fixed.Times have changed because globalization and technology  as follows: 1) Globalization has forced many Americans and well-developed countries and their workers to compete with worldwide poor workers who are willing to accept lower wages.2) Computers and modern technologies are replacing human labor in numerous ways 3)  Basic education outside the US is quickly progressing, giving competition also in a high level jobs 4) Outsourcing has replaced many jobs and cut employees free without a safety net.5) The very nature of the Internet and high-technology makes pricing extremely competitive and will thereby continue to squeeze profit margins, causing companies to trim their workforce in order to maintain competitiveness.

I believe that as happened in 2000 and 2008, the so-called experts will tell you it’s only a correction. I believe it’s much worse than a correction. I believe it’s going to take a major readjustment of our capitalistic system to upright the sinking boats and to get them all to rise again together. The whole world has moved Left, to universal healthcare and affordable education. Here, our evangelistic home schooled children are being taught that the earth was created 5000 years ago and science has nothing to do with evolution or global warming. The United States is ranked number 39th in the world on basic education. We are behind the times and we’re falling further behind.  Every President at the end of the speech has to say, And God bless America. If you believe in the Christian God, that’s wonderful for you. But in my opinion evangelist ideologies are over influencing our political system. The tail is wagging the dog and that’s not good for the general welfare of everyone in this colorful nation of ours. That could not happen in Europe, where Tony Blair had to play down his Christianity in order to be electable. We have to be pragmatic to solve our problems. God and prayer will not save us from this shaky economic situation.

People are frightened! There is a very dark nasty side to the current environment that includes racial slurs of our black president, hateful remarks about our Mexican immigrants and their anchor children and frightening fear of Islamic people and African American people in cities. It reminds me of the fear that caused Nazism. The economic and social fabric of this country is being weakened by these verbal abuses. In the next 25 years it is estimated that over 70% of people in the world will live in cities. We will have to learn how to coexist. Most wealthy people in the United States, move from monochromatic suburb to one that looks just like it outside of another city. I was grateful for such an existence, but now that I live in the city, I see textures black and white and various other colors  that need to blend together to become the United States of America. We are not a Christian nation, we are secular nation, which by our Constitution does not repress or judge those of different faiths or different ideas or atheists. WE HE PEOPLE need couple of things 1) A level playing field. 2) Upward mobility 3) The right to a good education 4) Access to universal healthcare. And  Social Security. I have a great deal of faith, that no matter what happens, it will all happen for the best and in the end the United States will be stronger, more unified and the pursuit of happiness will be more equalized. However, the process may be painful.

The economy increased at a revised +3.7% pace in the second quarter. That is almost 1.5% percent stronger than initial estimates for that period. Personal disposable income rose 0.4% after adjusting for inflation in the month of July. That is faster than consumer spending, which instant edged up 0.3% during the month. All good news! Then why is the market so weak? Harry Truman, is quoted as saying, “There is nothing new in the world except the history you do not know.

Read the book book: This Time Is Different, Eight Centuries of Economic Folly by Carmen M Reinhart.

“Remember the Markets went down in 2000 and 2008 before the bad news became public. The market’s current weakness, I believe is telling us something. It is telling us that there are weaknesses that have not yet been revealed. I have talked about those weaknesses over the months in The Investment Strategy Letter. SEE BEAR MARKET LETTERS 1,2,3,4,5,6,7,ABOVE

EVERYTHING’S COMING UP ROSES IN THE ECONOMY.

THEN WHY IS THE MARKET WEAK?

The economy increased at a revised +3.7% pace in the second quarter. That is almost 1.5% percent stronger than initial estimates for that period. Personal disposable income rose 0.4% after adjusting for inflation in the month of July. That is faster than consumer spending, which instant edged up 0.3% during the month. All good news! However, remember the Markets went down in 2000 and 2008 before the bad news became public. The market current weakness, I believe is telling us something. It is telling us that there are weaknesses that have not yet been revealed. I have talked about those weaknesses over the months in The Investment Strategy Letter.

I believe the markets will now calm themselves down for AWHILE. There could even be a rally halfway up the decline. This is the kind of action reaction of a Bear Market. However, by October and maybe sooner, the markets will be back in the downside breaking into low ground. The advice below continues to be valid.

8/26/2015 After six record sessions on the down side, the market finally rallied . This kind of rally was pretty much expected and overdue. However, a lot of damage has been done. In a very short time the Dow made our Intermediate downside objectives of 15,370, NASDAQ Intermediate downside objective of the 4,116 and the Intermediate downside objective of the S&P 500 1,820. All these downside intermediate objectives were given to you in The INVESTMENT STRATEGY letter, before the decline. Our next downside objective for the Dow is 13,377 and then 10,000!

Read the book book: This Time Is Different, Eight Centuries of Economic Folly by Carmen M Reinhart.

Now what? I would imagine that for a while the technical damage will be ignored and so will the possibility of problems occurring because of my bearish scenario. It will be interesting to see what happens on Friday, when traders have to face another weekend of uncertainty. Before the market collapsed, Chinese stocks reached a market capitalization close to 10 trillion, making it the second most valuable exchange. Once  governments encourage an equity bubble, it will collapse. However, China’s markets were not the only ones that collapsed. The Brazilian stock market is down 45%, Russian bonds down 43%, Indonesia equities down 26%, Turkish and Korean equities down 25%, Mexican equities 22%, the Australian stock market down 20%.

If you want to see how crazy this is getting, just look at the chart below. In 1990 China had the capacity to manufacture 1 million tons of steel. That figure today is 1.1 billion tons of steel, which is almost twice the amount of annual demand for steel.. The price of oil has gone down from 140 dollars per barrel to below 38 dollars a barrel. The price of iron ore has gone down from $200 per ton, to fifty dollars per ton.The prices of other commodities are down 50% such as copper, zinc, tin, nickel and molyddenum. The falling price of COMMODITIES  such as iron and the price of oil per barrel is the canary in the mine, when we’re looking at a deflation scenario.

I have heard some comments from my readers that believe I am against capitalism.

That’s not true. Capitalism and free markets are definitely the way to go. However, there are inequities within the capitalistic system that create inequalities between capital and labor. When capital and labor are out of balance, drastic economic and market volatility occurs. That’s not good for anybody. Both capitalism and socialism are selfish. The answer lies somewhere in between with bipartisan solutions. It is discouraging for me to see  no bipartisan cooperation and 24% of the Republicans following a radical ideological huckster.

8/25/2013

The markets are collapsing and the bad news hasn’t even been announced yet

Today, 8/25/15, markets unsuccessfully tried to rally. The Dow had 661 points between its high and low. Investors are nervous and blaming the decline in the weakness Chinese market. However, in my opinion, that’s not why the markets are going down. Wait till the bad news does come out. That’s when you’ll really see the market drop. As of now, corporate earnings (except for oil related issues) are doing very well. Today, research reports came out recommending the Bank of America and J.P. Morgan. The banks are not the solution to the problem; they are part of problem . So, in my opinion, investors still don’t get it yet. They believe that this is just another correction. I don’t think so!

Read the book; This Time It’s Different, Eight Centuries of Economic Folly. The problem as I see it is an unsustainable economy with half the population unable to afford basic human needs. If upward mobility is over, because consumers cannot sustain a viable economy, then prices will go down. If it is a deflationary economy, then real estate prices and oil prices go down. If real estate prices and oil prices go down, then the debt backed by his entities will be in trouble. If bonds and mortgages are in trouble, then the derivatives that speculate on these entities will be in trouble. If derivatives are in trouble, then the banks are in trouble. If the banks are in trouble, then the Federal Reserve will be helpless, as they have no plan to deal with deflation. With QE 123, purchases of bonds, they will hold trillions of dollars of worthless paper. If the Feds are in trouble and the banks are in trouble, then the US economy is in trouble. If the US economy is in trouble, the world and its stock markets have a problem. Dow support at 15,336, 13,377,10,000/6,666

All this won’t happen at once. ‘The Panics’ are just beginning!

Read the book book: This Time Is Different, Eight Centuries of Economic Folly by Carmen M Reinhart.

The Fed is not prepared deflation. Today oil prices were down to $38.35 a barell. Lower commodity prices are down worldwide by 20%. Smart investors are galloping into US Treasuries. The 10 year yield is now 2% down 2.8% for the day and the five-year yield is 1.36% down 5.5% for the day. Not an attractive rate, but it is better than seeing your capital shrink by 50% or more. We should see a rally in the next couple days, as some support areas held today. However, I don’t believe the support areas will hold and I look for much lower levels. this is just the tip of the iceberg! Europe is on vacation. Wait till they get back in September. October is usually the worst month for the market. Use rallies for selling and buying US treasuries. It can get a lot worse!