BULL MARKET OVER FOR DAX,FTSE,CHINA HSI, DOW TRANSPORTS AND BOND MARKET 

I believe that the Bull Markets of the above-mentioned indexes HAVE ENDED. IN MY OPINION THE INTERMEDIATE TREND OF THESE INDEXES IS NOW DOWN. However, the Dow industrials, the NASDAQ and the Standard & Poor’s 500 continue in a narrow trading range in what technical chart readers may call Distribution. One of the main topics of contention is, when will the Federal Reserve increase interest rates and will Greece meet its financial obligations? According to Diane Swank of Mesrow Financial, she believes short-term rates are headed up and in September. This is much earlier than the market investors are contemplating. As far as the Greece situation is concerned, we have been consistently negative and believe that all alternatives are just kicking the can down the road to Greece’s inevitable default. How long will the major indexes hold up in their current Bull Market? There’s an old saying, “it is’nt an over, until it’s over.”

Maybe, you haven’t heard the news yet, but the bond market is crashing. Yields on the 10 year bond are up .55 basis points. That corresponds to approximately a 30% increase in yields for the 10 year bond. Maybe the Federal Reserve isn’t ready to increase interest rates, but investors sure are.

The fabric of the economy continues to be ripped apart by events that hurt the Middle Class and the poor. Pew Research have 30 States cutting budgets in health care, senior care, city government and universities, At the same time wages are dropping and upward mobility is suffering. Add to this, is a recent decision by the Supreme Court to not protect individuals who have second mortgages in bankruptcy. Meanwhile Jamie Dimon becomes a billionaire.  Watch out below!

KEEP AN EYE ON THE CHART BELOW FOR BREAK OUT POINTS BELOW RESISTANCE OR ABOVE SUPPORT AREAS. Particularly  watch for a breakout below Dow 17,147/17,000, NASDAQ 4605/4545, S&P 500   1991/1973. That would change the Intermediate trend to DOWN

THE BULL MARKET CONTINUES

Gross Domestic Product fell in the first quarter almost 1% below initial estimates at negative 0.7%. The majority of the slowdown can be attributed to slow buildup in inventories, lackluster consumer spending and stronger imports. Second-quarter GDP is estimated to grow at a modest 2% gain and the economy is expected to grow at about a 1% pace for the first 2015. Not very impressive! At the same time income growth rose 0.4% in April. However much of what individuals are earning they are saving. Inflation continues to decelerate, or as I would call it, the economy has deflationary tendencies. Statements from Fed board members are indicating that the Fed should exert caution in patients before increasing interest rates for the first time in nearly a decade. To me, this indicates that all is not well in Mudville.

However,  Bull Market continues to have a life of its own and so far, wants to just go up. There is an old saying on Wall Street, “don’t fight the tape.” I see longer-term negative implications because of deflation in Europe, slowing economies of China and Japan, the effects of lower oil prices and the effects of continued income inequality.

INCOME INEQUALITY.  COMMENTS: on The New Yorker Magazine entitled RICHER AND POORER

Economic inequality has been measured on a scale, from 0 to 1 with an index known as the Gini index. If all the income in the world are earned by one person and everyone else earn nothing, the world will have a Gini index of one. If everyone in the world earned exactly the same income, the world would have a Gini index of zero. In 1928 the Gini index was at a high of .476, just before the stock market collapsed, with the top 1% earning 24% of all income. In 1944 the top 1% earned 11% and now in 2013, the top 1% once again earned 24% of all income and the Gini index is back to .476. Is there a correlation between the Gini index in 1928 before the stock market collapsed and the current situation? Income inequality in the United States is greater than any other democracy in the developed world.

Last year Thomas Pickety’s book, Capital In the 21^st Century, became a bestseller. Basically the book explained that income inequality and economic growth could not go hand in hand after reaching a critical point. This book was followed by a book entitled The Unstable American State and a world version of this argument, entitled Inequality Matters in a report by the United Nations and a book by economists Joseph Stiglitz called The Price of Inequality, all of which indicated that income inequality is not good for economic growth on a worldwide basis. Last year, Pew research Center conducted a survey about which of the five dangers people in 45 countries considered to be the greatest threat in the world. Most countries polled had religious extremism and ethnic hatred at the top of their list. But most Americans and Europeans chose inequality as the number one problem. Capitalism may be the best system in the world, but it creates winners and losers by its very nature. And capitalism as Karl Marx pointed out;  can choke on its own success, as capital dominates the workers, causing wages to shrink beyond the ability to keep all boats afloat.

As stated in the Lone Bear Letter:  In the US 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%. It is estimated by Oxfam America that the top 1% in the world own 99% of total world wealth and most of that belongs to the 0.01%, as worldwide only 80 billionaires control 50% of the global wealth (they own more than 3.5 billion people in the bottom half). There is nothing wrong with accumulating wealth; however, the excessiveness of wealth accumulation could have a stifling effect on the US and world consumer based economies and could make future economic growth unsustainable. The cause of this great wage slowdown and shifting of assets to the very rich has several main causes: 1) Globalization has forced many American and Developed Country’s workers to compete with worldwide poorer workers, who are willing to accept lower wages. 2) Computers and modern machines are replacing human labor in numerous ways. 3) The rest of the world has become more educated and more highly skilled than the US, which ranks 39^th in basic education, according to the latest Social Progress Index. 4) Economic and political power (through political contributions) has been switched away from workers and toward billionaire entrepreneurs, corporations and high paid executives. 5) The very nature of the Internet makes pricing extremely competitive and thereby squeezes profit margins, causing companies to trim work force expenses in order to maintain competiveness. The proposals that the President made at his State of the Union Address on 1/20/15, for ‘Middle Class Economics’ have in my opinion, no chance of passage in the Republican Congress. Because of these factors, instead of all boats rising, this scenario isn’t good for anybody and it is possible that as in the 1930s depression, all boats will sink. After all, how many bars of soap and how many cars can each of the wealthy people buy? These excessive conditions, in my opinion, are taking the breath out of the economy, are shaking its base and have yet to be seen in the metrics.

In another book written by Robert Putnam entitled Our Kids The American Dream in Crisis an attempt to set statistics aside and instead tell a story. Our Kids, is a heartfelt portrait of four generations of Putnam’s fellow 1959 graduates and their children in the town of Port Clinton on Lake Erie. The world obviously changed and Port Clinton changed with it. Putnam states that most of the downtown shops of his youth now stand empty and derelict. In the 1970s the town’s manufacturing base collapsed. Between 1999 and 2013 the percentage of children in Port Clinton living in poverty rose from 10% to 40%. Wealthy newcomers began arriving in Port Clinton in the 1990s and built their mansions and golf courses and gated communities next to the trailer parks. A comment of one of the higher income residents to Putnam was, “If my kids are going to be successful, I don’t think they should have to pay other people who are sitting around and doing nothing for their success.” As income inequality expands, kids from the more privileged backgrounds start and probably finish further and further ahead of their less privileged peers. Putnam sees the American dream in crisis. He states, “Americans used to care about other people’s kids and now they only care about their own kids.” The situation is even getting worse. In states where Republican governors have cut taxes, they find they also have to cut educational expenditures.

The latest Social Progress Index has just been announced. The US ranks 16th overall, ranks 70th in health, 69th and in echo systems sustainability, 39th in basic education, 34th in access to water and sanitation and 31st and personal safety. Even access to cell phones and the Internet ranks us at a disappointing 23rd, partially because one of Americans in five lacks Internet access. The winners are New Zealand number one, followed by Switzerland, Iceland, the Netherlands and Canada. All are somewhat poorer than America per capita, yet they appear to do a better job of meeting the needs of their people, including free healthcare and reasonably priced colleges. Some politicians who propose cuts in Medicare and ending Obama Care and reducing food stamps and public services believe that such trends could boost America’s competitiveness. However, looking at this report, it seems that the opposite is true. In America, capitalism spiritual home, a survey conducted in 2013 found that just 54% had a positive view of the term. This seems to be the case because the benefits of capitalism have recently only gone to the top 1%. There seems to be a crisis in confidence as the Supreme Court has a ranking of only 30% public schools 26%, the criminal justice system 23% and Congress 7%. The recent election showed just how unsatisfied people are. They voted for change, but change is unlikely to come. Since Citizens United, that declared corporations are people, most changes in government is dictated by donors and election contributions. A recent Princeton study has shown that public opinion has no effect on the outcome of an issue in Congress, whether there is 0% approval or 100% approval, the line of accomplishment is flatlined. Donor power has taken over the rights of ‘we the people’. The current illusion that voters are being heard and are connected will soon diminish in my opinion. The risk now is that voters of both parties may pursue policies which damage the common good.

What’s new about the chasm between the rich and the poor in the United States is that American politicians are now all climbing on the bandwagon and talking about it. In a recent January forum sponsored by Freedom Partners (the Koch brothers), GOP presidential candidates Ted Cruz, RAM Paul, and Mark Rubio battled over which one of them disliked inequality more. At the end of Pres. Obama’s State of the Union address he said “let’s close the loopholes that lead to inequality by allowing the top 1% to avoid paying taxes on their accumulated wealth.” Speaker of the House John Bayner countered that with “the president’s policies have made income inequality worse.” The causes of income equality are much disputed. What is no longer in disputed, is that income inequality is bad for the economy and could eventually lead to its stagnation and the sinking of all boats.

WHO ME WORRY?

SELL SELL SELL

KEEP AN EYE ON THE CHART BELOW FOR BREAK OUT POINTS BELOW RESISTANCE OR ABOVE SUPPORT AREAS. Particularly  watch for a breakout below Dow 17,147/17,000, NASDAQ 4605/4545, S&P 500   1991/1973. That would change the Intermediate trend to DOWN

Today’s New York Time said about the riots in Baltimore “Our real crisis is the denial of opportunity based on skin color and zip code”

After making all time new highs, the stock markets have shown some weaknesses. Today the Nikki is down 2.7%. DOW DOWN 195, NASDAQ DOWN 1.6% S&P DOWN 1%.Yesterday the DAX was down some 3.21% , the Nikkei down 1.5% and the 10 year yield on treasuries up 3.1%,  The economy in the first quarter was only up .02%, where is it was forecast be up at least 1%. So there are some surprises.I have been asked to comment on what kind of surprises I worried about? So, here goes!

WATCH THE LEADER APPLE

APPLE.S STOCK IS NOW IN A DOWNTREND

CLASS WARFARE:  There is an old saying that because of events in Baltimore and Ferguson Missouri needs repeating. “RIOT IS THE LANGUAGE OF THE UNHEARD”. Although the media has referred to the two above-mentioned events as racial strife, I am of the opinion that it has everything to do with the wide gaps in our economic social structure. The capitalistic system has many advantages. However by definition, capitalism, because of its competitive nature, there are winners and losers. As it now stands, the winners, some 10,000 billionaires control most of the wealth in the world and therefore the political power. All economic growth has gone to the top, leaving the bottom (47% as Romney identified them as nonpaying taxpayers) called do nothings and worthless. In the poor areas of cities and many rural areas, the kind of manufacturing jobs that brought dignity to the working poor, are not available. In addition, there is lack of education and training in these areas. This situation has pretty much been ignored, as the crime in these areas has been confined to these areas, and perpetrated on the poor by the poor. Yes, we should all be motivated to achieve our own individualized success. However if a Las Vegas gambler had to put his money down on the success possibility of someone being born in a blighted poor area of the city, with maybe only one parent, under nourished, poorly educated, surrounded by violence and without any role models, the odds would be well over 1 million to one. Therefore, it is surprising that the kind of riots that are now taking place in Baltimore and other cities have taken so long to occur. Most people will condemn the action of those who are rioting. Yes, those people should be held responsible for their actions of looting. However, the condemnation of their actions should also be viewed on a larger scale. When 4 Kent State students were gunned down by National Guard troops in 1970 antiwar protests, only 11% of Americans polled thought the National Guard overreacted. In the long run, the Vietnam War as it turned out the protesters were right. The Vietnam War’s outcome was not worth the precious lives of troops, as the entrepreneurial Vietnamese now welcome tourists to sun themselves on China Beach. The protesters helped end the war. The current protesters are trying to end inequality. However, those black men shot down for questionable circumstances, are still dead and there is a resentment and a deep-seated anger lying just below the surface of our beautiful high-rise cities. As long as this inequality of opportunity continues in these blighted areas, there is no telling when and to what extent these kinds of eruptions will occur.  How long can this kind of inequality continue? We have asked this question before ,some 50 years ago.

How many roads must a man walk down
Before you call him a man?
How many seas must a white dove sail
Before she sleeps in the sand?

How many times must the cannonballs fly
Before they’re forever banned?
The answer, my friend, is blowing in the wind
The answer is blowing in the wind

How many years must a mountain exist
Before it is washed to the sea?
How many years can some people exist
Before they’re allowed to be free?

How many times can a man turn his head
And pretend that he just doesn’t see?
The answer, my friend, is blowing in the wind
The answer is blowing in the wind

How many times must a man look up
Before he can see the sky?
How many ears must one man have
Before he can hear people cry?

How many deaths will it take till he knows
That too many people have died?
The answer, my friend, is blowing in the wind
The answer is blowing in the wind

SUNG BY Peter, Paul & Mary – Lyrics BOB Dylan| MetroLyrics

Banks:  I’m worried about the banks. If the economy slows bank will have some of the same problems they had in 2008. Whereas most banks let’s say 75% of them are theoretically in good shape, the 10 or 12 largest banks in the world I believe are under capitalized and have taken on enormous risks by issuing derivatives. In today’s stock market in Europe bank stocks are down 1 ½%. There is concern about in a strong dollar, low oil prices, and US Fed policy. Then of course there is Greece, and its potential for bringing chaos to the European economic system. In the other problem in Europe is its ability to handle Muslim immigrant, who are coming into their borders by the millions. This is a long-term problem, but is just one more problem that Europe seems not be able to solve.

Cyberspace attack: Today’s New York Times has an article entitled Preparing for Warfare in Cyberspace. Just as we were unprepared for 9/11 the Pentagon doesn’t want to be left flat-footed again and has issued a new 33 page cyber security strategy to prepare the United States to retaliate, if necessary, against cyber attacks and is developing weapons to do so. The strategy document provides some transparency about the problem for which the military is expected to increase 6200 workers in a few years to help prepare us. As cyber threats have been increasing in severity and sophistication this report seems to be closing the barn door after the horses of already escaped. In my opinion, this effort is too little and too late and should be viewed as a global issue, not just a US problem.

Spoofing, And then of course we have our unintentional homegrown terrorists that manipulate markets, which can contribute to such disasters as the flash crash of May 6, 2010. Navinder Sarao, a British trader, working out of his parent’s home outside London, disrupted markets worldwide, by using spoofing techniques, or placing orders that he intended to cancel before they were filled. This is high-speed strategies  that exploits the fragmented nature of our trading system to make profits purely on time and speed. If this kind of damage can be done by someone who unintentionally damaged our marketplace,think of what kind of harm could be done intentionally with a cyberspace attack.

TERRORIST SURPRISES Recent events in Paris, added new uncertainty to the marketplace. We have all heard of the Black Swan. THE BLACK ELEPHANT is similar to the Black Swan, as it is something we had not expected. The differences is that THE BLACK ELEPHANT, was there the whole time right in front of us for all of us to see, but we choose not to see it.( More properly it should have been called  ‘the gorilla in the room’ but the New York Times coined  BLACK ELEPHANT). The markets so far have chosen to ignore some really negative factors that I see so plainly and so far the market just goes higher!

The radical Muslim world, has found a new way to terrorize the ‘infidels’ in the West. Rather than staging huge terrorist acts, such as 9/11, this new activity of random terrorize acts in various places throughout the globe could unstablize  our Western economies. Events such as the savagery of ISIS, beheadings, the Boston marathon attack, the female genital mutilation’s, the abduction of girls in Nigeria, the execution of the  innocence in Iran, the slaughtering and enslaving of Christians in Egypt and Africa, and various other crimes against humanity committed by those who claim to represent Islam, have so far seemed at a distance from most of us. However, the recent events in Paris could happen anywhere: in our local grocery stores or theaters or sporting events. If these kind of events persist or increase, economic disruptions may occur. Then there is the ‘gorilla in the room’ and the ultimate BLACK ELEPHANT that everyone one is thinking about, but not talking about and that is the use of a ‘dirty nuclear devise” in a major city. Sorry, but in my opinion, I have to mention that the possibility of this occurring is high!

Dirty Bomb or Worse!  It is no secret, that building a bomb such as we exploded over Hiroshima  is a matter primarily of obtaining the right kind of plutonium. Once obtained, a critical mass and explosion can result by just dropping half the required product on the other half.  Radical religious fanatics and the nuclear age are not a good combination. So, is very important that weapons grade uranium stay out of the hands of terrorists. All of our, the US, weapons grade uranium, is fabricated and stored in Oak Ridge Tennessee in a facility called Y – 12. As you would imagine, this facility is guarded with extreme care for by some 500 security officers authorized to use lethal force within its protected area. Y – 12 is called the Fort Knox of uranium storage. However, as reported in a March 9, 2015 New Yorker  Magazine article, three people,  belonging to the Plowshares organization ( inspired by the legendary pacifist  Dorothy  Day) were able to elude all these defenses and on July 28, 2012 spray-painted the storage facility. What makes this breach of security even more unbelievable is that all three people were elderly and one, was an 82-year-old nun named Macon Rice. If this is how insecure our plutonium is, one can only imagine what it is like in places like Pakistan and Russia.

In the Economist Magazine dated March 7, 2015 their cover picture had to intercontinental missiles in flight. Entitled the new nuclear age. They indicated that every nuclear power is spending lavishly to upgrade its atomic arsenals; Russia’s defense budget has grown by over 50% of which a third is devoted to nuclear weapons. France and China are adding to its stocks and investing heavily in submarine and mobile missile batteries. Pakistan is amassing dozens of battlefield nukes to make up for its inferiority to India. The United States has asked for $350 billion to undertake a decade-long program of modernization of America’s arsenal. The new arsenal includes low level tactical nuclear delivery systems. Why is this happening?  Some countries want nuclear weapons to prop up a tottering state. Others want nuclear weapons not to freeze the status quo but to change it. China’s nuclear expansion is designed to give them a chance to retaliate using a second strike, should American attempt to destroy its arsenal. Taiwan could escalate alarmingly. According to the Economist Magazine, using nuclear weapons in a limited way is being reconsidered as an alternative to conventional military weapons.

‘CLIMATE CHANGE’, OR AS I LIKE TO CALL IT ‘GLOBAL WARMING’!

Whereas there is a wide scale difference of opinion of what causes climate change, there seems to be no question that is happening. Even Pope Francis has announced that he is going to issue an encyclical about our responsibilities to deal with this problem on a worldwide basis. From the church that burned Bruno at the stake and threatened to excommunicate Galileo, historically this is quite a nod to the advantage of scientific method, discovery and problem solving. According to many scientists, the effects of global warming, because of increased carbon dioxide in our atmosphere, is now inevitable. Most people believe that global warming will not affect our generation. However California, our agricultural Eden, is quickly turning into a desert. Without the irrigation from a diminished Colorado River our food sources would be cut in half. Expect surprises.

THE BLACK SWAN

As our once Secretary of Defense Rumsfeld said,” it’s not what you don’t know, it’s what you don’t, know that you don’t know.” All the other problems above are problems that we recognize. However sometimes, there are problems that are not on our radar screen and unexpected that can occur. What comes to mind first, is a meteorite or excessive volcanic disruptions? When one is younger, one tends to dam the torpedoes. However, as one ages, one realizes that the veil that covers civilization is very thin and can be disrupted easily. I have been an optimist my whole life. But I have not in my lifetime experienced such hubris and overconfidence. In a current book by David Brooks entitled Road to Character, he is concerned about the percentage of high school students within A average or better that  have increased by more than 80% in two generations. In a Gallup poll from 1950 high school students were asked if they considered themselves very important. In 1950 the average was 12% while by 2005 the figure was 80% and a more recent survey of middle schoolgirls nearly twice as many said they wanted to be a personal assistant to a celebrity, than to be the president of Harvard, and the person they most wanted to be like was Jennifer Lopez. The scenario I am pointing out will appear as impossible to the new generation. They have very little experience in handling problems by themselves as they have had everything handed to them by their hovering helicopter parents. The struggles of the depression, world war, equal rights and gender rights are not part of their upbringing. However, It is my hope, in facing any disastrous future events; they will rise up as have past generations, to the heights and become the new ‘Greatest Generation’.

Carl M Birkelbach 4/28/15

WHO ME WORRY?

After  yesterday’s  comments in the Investment Strategy Letter about my concern about a unexpected event, I have been asked to comment on what kind of events am I worried about? So, here goes!

Banks:  First of all, I’m worried about the banks. Whereas most banks let’s say 75% of them are theoretically in good shape, the 10 or 12 largest banks in the world I believe are undercapitalized and have taken on enormous risks by issuing derivatives. In today’s stock market in Europe bank stocks are down 1 ½%. There is concern about in a strong dollar, low oil prices, and US Fed policy. Then of course there is Greece, and its potential for bringing chaos to the European economic system. In the other problem in Europe is its ability to handle Muslim immigrant, who are coming into their borders by the millions. This is a long-term problem, but is just one more problem that Europe seems not be able to solve.

Cyberspace attack: Today’s New York Times has an article entitled Preparing for Warfare in Cyberspace. Just as we were unprepared for 9/11 the Pentagon doesn’t want to be left flat-footed again and has issued a new 33 page cyber security strategy to prepare the United States to retaliate, if necessary, against cyber attacks and is developing weapons to do so. The strategy document provides some transparency about the problem for which the military is expected to increase 6200 workers in a few years to help prepare us. As cyber threats have been increasing in severity and sophistication this report seems to be closing the barn door after the horses of already escaped. In my opinion, this effort is too little and too late and should be viewed as a global issue, not just a US problem.

Spoofing, And then of course we have our unintentional homegrown terrorists that manipulate markets, which can contribute to such disasters as the flash crash of May 6, 2010. Navinder Sarao, a British trader, working out of his parent’s home outside London, disrupted markets worldwide, by using spoofing techniques, or placing orders that he intended to cancel before they were filled. This is high-speed strategies  that exploits the fragmented nature of our trading system to make profits purely on time and speed. If this kind of damage can be done by someone who unintentionally damaged our marketplace,think of what kind of harm could be done intentionally with a cyberspace attack.

TERRORIST SURPRISES Recent events in Paris, added new uncertainty to the marketplace. We have all heard of the Black Swan. THE BLACK ELEPHANT is similar to the Black Swan, as it is something we had not expected. The differences is that THE BLACK ELEPHANT, was there the whole time right in front of us for all of us to see, but we choose not to see it.( More properly it should have been called  ‘the gorilla in the room’ but the New York Times coined  BLACK ELEPHANT). The markets so far have chosen to ignore some really negative factors that I see so plainly and so far the market just goes higher!

The radical Muslim world, has found a new way to terrorize the ‘infidels’ in the West. Rather than staging huge terrorist acts, such as 9/11, this new activity of random terrorize acts in various places throughout the globe could unstablize  our Western economies. Events such as the savagery of ISIS, beheadings, the Boston marathon attack, the female genital mutilation’s, the abduction of girls in Nigeria, the execution of the  innocence in Iran, the slaughtering and enslaving of Christians in Egypt and Africa, and various other crimes against humanity committed by those who claim to represent Islam, have so far seemed at a distance from most of us. However, the recent events in Paris could happen anywhere: in our local grocery stores or theaters or sporting events. If these kind of events persist or increase, economic disruptions may occur. Then there is the ‘gorilla in the room’ and the ultimate BLACK ELEPHANT that everyone one is thinking about, but not talking about and that is the use of a ‘dirty nuclear devise” in a major city. Sorry, but in my opinion, I have to mention that the possibility of this occurring is high!

Dirty Bomb or Worse!  It is no secret, that building a bomb such as we exploded over Hiroshima  is a matter primarily of obtaining the right kind of plutonium. Once obtained, a critical mass and explosion can result by just dropping half the required product on the other half.  Radical religious fanatics and the nuclear age are not a good combination. So, is very important that weapons grade uranium stay out of the hands of terrorists. All of our, the US, weapons grade uranium, is fabricated and stored in Oak Ridge Tennessee in a facility called Y – 12. As you would imagine, this facility is guarded with extreme care for by some 500 security officers authorized to use lethal force within its protected area. Y – 12 is called the Fort Knox of uranium storage. However, as reported in a March 9, 2015 New Yorker  Magazine article, three people,  belonging to the Plowshares organization ( inspired by the legendary pacifist  Dorothy  Day) were able to elude all these defenses and on July 28, 2012 spray-painted the storage facility. What makes this breach of security even more unbelievable is that all three people were elderly and one, was an 82-year-old nun named Macon Rice. If this is how insecure our plutonium is, one can only imagine what it is like in places like Pakistan and Russia.

In the Economist Magazine dated March 7, 2015 their cover picture had to intercontinental missiles in flight. Entitled the new nuclear age. They indicated that every nuclear power is spending lavishly to upgrade its atomic arsenals; Russia’s defense budget has grown by over 50% of which a third is devoted to nuclear weapons. France and China are adding to its stocks and investing heavily in submarine and mobile missile batteries. Pakistan is amassing dozens of battlefield nukes to make up for its inferiority to India. The United States has asked for $350 billion to undertake a decade-long program of modernization of America’s arsenal. The new arsenal includes low level tactical nuclear delivery systems. Why is this happening?  Some countries want nuclear weapons to prop up a tottering state. Others want nuclear weapons not to freeze the status quo but to change it. China’s nuclear expansion is designed to give them a chance to retaliate using a second strike, should American attempt to destroy its arsenal. Taiwan could escalate alarmingly. According to the Economist Magazine, using nuclear weapons in a limited way is being reconsidered as an alternative to conventional military weapons.

‘CLIMATE CHANGE’, OR AS I LIKE TO CALL IT ‘GLOBAL WARMING’!

Whereas there is a wide scale difference of opinion of what causes climate change, there seems to be no question that is happening. Even Pope Francis has announced that he is going to issue an encyclical about our responsibilities to deal with this problem on a worldwide basis. From the church that burned Bruno at the stake and threatened to excommunicate Galileo, historically this is quite a nod to the advantage of scientific method, discovery and problem solving. According to many scientists, the effects of global warming, because of increased carbon dioxide in our atmosphere, is now inevitable. Most people believe that global warming will not affect our generation. However California, our agricultural Eden, is quickly turning into a desert. Without the irrigation from a diminished Colorado River our food sources would be cut in half. Expect surprises.

THE BLACK SWAN

As our once Secretary of Defense Rumsfeld said,” it’s not what you don’t know, it’s what you don’t, know that you don’t know.” All the other problems above are problems that we recognize. However sometimes, there are problems that are not on our radar screen and unexpected that can occur. What comes to mind first, is a meteorite or excessive volcanic disruptions? When one is younger, one tends to dam the torpedoes. However, as one ages, one realizes that the veil that covers civilization is very thin and can be disrupted easily. I have been an optimist my whole life. But I have not in my lifetime experienced such hubris and overconfidence. In a current book by David Brooks entitled Road to Character, he is concerned about the percentage of high school students within A average or better that  have increased by more than 80% in two generations. In a Gallup poll from 1950 high school students were asked if they considered themselves very important. In 1950 the average was 12% while by 2005 the figure was 80% and a more recent survey of middle schoolgirls nearly twice as many said they wanted to be a personal assistant to a celebrity, than to be the president of Harvard, and the person they most wanted to be like was Jennifer Lopez. The scenario I am pointing out will appear as impossible to the new generation. They have very little experience in handling problems by themselves as they have had everything handed to them by their hovering helicopter parents. The struggles of the depression, world war, equal rights and gender rights are not part of their upbringing. However, It is my hope, in facing any disastrous future events; they will rise up as have past generations, to the heights and become the new ‘Greatest Generation’.

Carl M Birkelbach 4/28/15

SELL SELL SELL

There are ongoing concerns that Greece and its creditors are struggling to find a deal that can keep the country from defaulting on its debt. I continue to believe that Europe is just kicking the can down the road for Greece and eventually it will not make its payments to the International Monetary Fund due in May. Also an oncoming problem is our corporate earnings for the first quarter. Honeywell international fell 2% after reporting disappointing first-quarter results and American Express revenues fell short of expectations and drove the stock down more than 4%. Investors are concerned that disappointing corporate earnings for the Standard & Poor’s 500 are expected to report earnings down 1.6% from a year earlier. That would be the first quarterly drop since 2009. There was also worrisome news from China. After markets closed in Asia, Chinese financial regulators issued warnings about that countries soaring stock market. Regulators said they will tighten rules on borrowing to buy stocks. The Shanghai stock market has more than doubled in the last 12 months. Chinese regulators recognize that it could have created a bubble and now it is trying to rein back speculation.

US PRIMACY ON WOLD ECONOMICIS IS SEEN EBBING

The above title is not mine but that of the New York Times headline on Saturday, April 18. Below the title is the subtitle of “concerns expressed as world leaders meet.” The article begins, “as world leaders converge here for their semiannual trek to the capital of what is still the world’s most powerful economy, concerned is rising in many quarters that the United States is retreating from global economic leadership just when it is most needed.” The article indicates that there is a chaotic global shift, especially toward China which the Obama administration appears helpless to stop. For years, China has threatened to establish institutions to rival those dominated by the West, like the IMF, World Bank and Asian development Bank and even to establish its currency as a reserve currency to rival the dollar. In the meantime, the United States has had problems securing a 12 nation Pacific trade agreement has set off perhaps the biggest fight of his presidency within his own party with trade unions, environmentalists and liberal’s activities lining up in opposition to the White House. Even the Export Import Bank a lending institution could be killed by June, by a concert by conservatives in Congress. A former Obama treasury official now with Peterson Institute said “we’re withdrawing from the central place we held on the international stage.” Failure to bolster the IMF and other institutions could weaken the West’s  hand in the confrontations like the one with Russia over the Ukraine, and fears that the IMF and World Bank will be unable to rebuild the shattered countries in the Middle East. Sen. Tim Kane Democrat of Virginia said “the network of international rules and institutions is a peculiar US creation that has helped foster peace and prosperity for decades. The US has built this up not only for our own benefit but for the world. That we are now stepping back from a leadership role is highly problematic.”

KEEP AN EYE ON THE CHART BELOW FOR BREAK OUT POINTS BELOW RESISTANCE OR ABOVE SUPPORT AREAS. Particularly  watch for a breakout below Dow 17,147/17,000, NASDAQ 4605/4545, S&P 500   1991/1973. That would change the Intermediate trend to DOWN

THE STOCK MARKET HAS BEEN IN A TRADING RANGE ALL YEAR

Since the beginning of the year the US stock markets have been in a close trading range. For the Dow the top of the range is 18,288 and a bottom of the range at 17,147; and for the NASDAQ the high is 5042 and a low of 4605 and for the Standard & Poor’s 500 the high as 2120 and a low of 1991. Soon one of these areas is going to be broken either on the top or on the bottom. As this is and continues to be a Bull Market, it is most likely that the breakouts will be on the top. However, we continue to believe that the forces on the negative side are strong and will eventually win out. In the meantime, enjoy the bull market until it breaks below the bottom range that we have indicated.

There are ongoing concerns that Greece and its creditors are struggling to find a deal that can keep the country from defaulting on its debt. I continue to believe that Europe is just kicking the can down the road for Greece and eventually it will not make its payments to the International Monetary Fund due in May. Also an oncoming problem is our corporate earnings for the first quarter. Honeywell international fell 2% after reporting disappointing first-quarter results and American Express revenues fell short of expectations and drove the stock down more than 4%. Investors are concerned that disappointing corporate earnings for the Standard & Poor’s 500 are expected to report earnings down 1.6% from a year earlier. That would be the first quarterly drop since 2009. There was also worrisome news from China. After markets closed in Asia, Chinese financial regulators issued warnings about that countries soaring stock market. Regulators said they will tighten rules on borrowing to buy stocks. The Shanghai stock market has more than doubled in the last 12 months. Chinese regulators recognize that it could have created a bubble and now it is trying to rein back speculation.

US PRIMACY ON WOLD ECONOMICIS IS SEEN EBBING

The above title is not mine but that of the New York Times headline on Saturday, April 18. Below the title is the subtitle of “concerns expressed as world leaders meet.” The article begins, “as world leaders converge here for their semiannual trek to the capital of what is still the world’s most powerful economy, concerned is rising in many quarters that the United States is retreating from global economic leadership just when it is most needed.” The article indicates that there is a chaotic global shift, especially toward China which the Obama administration appears helpless to stop. For years, China has threatened to establish institutions to rival those dominated by the West, like the IMF, World Bank and Asian development Bank and even to establish its currency as a reserve currency to rival the dollar. In the meantime, the United States has had problems securing a 12 nation Pacific trade agreement has set off perhaps the biggest fight of his presidency within his own party with trade unions, environmentalists and liberal’s activities lining up in opposition to the White House. Even the Export Import Bank a lending institution could be killed by June, by a concert by conservatives in Congress. A former Obama treasury official now with Peterson Institute said “we’re withdrawing from the central place we held on the international stage.” Failure to bolster the IMF and other institutions could weaken the West’s  hand in the confrontations like the one with Russia over the Ukraine, and fears that the IMF and World Bank will be unable to rebuild the shattered countries in the Middle East. Sen. Tim Kane Democrat of Virginia said “the network of international rules and institutions is a peculiar US creation that has helped foster peace and prosperity for decades. The US has built this up not only for our own benefit but for the world. That we are now stepping back from a leadership role is highly problematic.”

KEEP AN EYE ON THE CHART BELOW FOR BREAK OUT POINTS BELOW RESISTANCE OR ABOVE SUPPORT AREAS. Particularly  watch for a breakout below Dow 17,147/17,000, NASDAQ 4605/4545, S&P 500   1991/1973. That would change the Intermediate trend to DOWN