TWO DAY STATS

BELOW FEB LOW: Deutsche Bank -13.4%, Credit Suisse Bank – 24.8%, BNP.PA -23.4% BARCLAYS -33% (TOO BIG TO FAIL( HA! )

Below 6/16 inter day low: DJIA -4.9%, NASDAQ -6.52%, S&P 500 -5.4%

NEW LOW: 10 year T-bond 1.46% (THAT’S WHERE THE MONEY IS GOING)

Japan -5.4%, China -3%, DAX -9.8%, Russia -6.4% Emerging Markets-7.1%, Oil-2.9%

Gold $1,327 +62.10

Pound -12%. Lowest level in 35 years

To blame: Brexit? WRONG! Read below:

There appears to be a dichotomy between US stock markets and world markets, as US markets are close to a new high, while foreign markets are closer to new lows. Also, US Treasury bond yields are at new lows. What does this mean? Trouble! Investors are leaving stock markets worldwide and buying US treasuries as fast as they can. Also troubling markets is a recently US jobs report and 38,000 which is the lowest since 2010 and a possible exit of Britain from the common market to be voted on June 23. Our Federal Reserve will probably not raise interest rates this week because of worries in China, Europe, and Japan. Most troubling to me, are European banks. Most Bears think next problem that will sink the markets will be China and its precarious situation with dubious loans. However, I believe the problem that will finally sinks the markets, may come out of European banks. Once again as in 2008, the problem may lie with too many derivatives. It is estimated Deutsches Bank alone has $75 trillion in potential derivative exposure. That is 20 times larger than the GDP of the entire German economy. HSBC bank is not far behind with large derivative exposure. Too big to fail is now called Strategically Important Financial Institutions, (or SIFI’s).  A recent article from INVESTOPEDIA, it is estimated that European SIFI’s banks have more derivatives than the GDP of the entire world economy.

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 to allow the banks to own $500 trillion in derivatives, let six banks control 70% of the US assets (too 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!

We are not done dodging bullets!   As reported by Reuters news, the judge refused to throw out a private lawsuit accusing the 14 banks of rigging an interest rate benchmark (ISDAfix) used in the $553 trillion derivatives markets. That’s right folks, I said the $553 trillion derivative markets. That dwarfs the problem of derivatives 2008, which almost brought the banks to their demise. The Credit Suisse bank has announced a 6000 employee layoff.  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, China and in Europe are holding billions of dollars of loans that will probably default. US 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 trillion 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. World wide, Russia is bailing out its national banks as it severely reduces it reserves and Brazil and Venezuelan are facing financial collapse!

My ‘canary in the mine’ In my opinion remains Deutsches Bank at  $13.87  today (52 week low WAS 14.78), down from a recent  high of $19.50  per share in April, (down 70% in the last 2 years). The Wall Street Journal has reported that “When Donald Trump needs a loan, he chooses Deutsches Bank.” While most big banks have shunned Donald Trump the Deutsches Bank has been a steadfast financial backer of the Republican presidential candidate. Just one more reason to mistrust their judgment. In addition to the above Deutsches Bank is facing a class action lawsuit. There shares are now selling below BOOK VALUE! Watch out below!

STILL Problems still in China. The Federal Reserve chair Yellen, has called for a more cautious forecast for the economy and therefore it appears that any additional interest rate increase will be delayed. The markets loved it, as treasury yields dropped and stocks rose. Yellen appears to be worried about the world economies especially China, where debt has gotten out of hand at 2.5% of GDP. Of course, China’s premier Lie Kegiaing has said publicly that China’s growth rate is secure. In reaction, Pen Am securities announced that the government is relaxing its decree against short selling. Since then, the, Chinese stocks have fallen. The continued weakness of China is the unknown factor. China is a controlled society, socially and economically. One third of its industry’s is directly government controlled, with the rest under the threat of the direct control. For instance, the person in charge of regulating the Chinese stock market Xiao Ganghas, has just been fired. He is being blamed for the 40% drop in the Chinese stock market and criticized the People’s Bank of China when they said that they would let banks sell trouble loans to investors. Moody’s and S&P have cut China’s credit rating to negative over debt concerns. The People’s Bank of China has warned that lending to corporations is on the high side, compared with the overall size of the Chinese economy. China’s corporate debt has been on a spending binge.  I believe this is unsustainable and the reported growth of China is unreliable.

China’s total debt now stands at 2.5 years of GDP. As stated above, Moody’s and now S&P have changed the ratings on Chinese government bonds from neutral to negative. In addition there is a warning about the viability of China’s credit rating. China has been decreasing its bank reserve requirements five times in a row. Government debt is now 40% of GDP up from 32% and foretasted to rise to 43% of GDP. (as above total China’s total debt now stands at 2.5 years of GDP.) Foreign-exchange reserves are down $1 billion. Cash outflows are estimated to be about $1 trillion as Chinese investors scurry away from their homeland. China continues to be a continued problem in world markets. Their growth rate of 6% is being questioned. China’s three largest state banks reported no earnings growth and big jumps of 40% in nonperforming loans. this has the potential for a full blown world wide crisis. Is the breakdown of their economy, an indication that the worldwide economy will start to break down?

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  (See previous market letters)

Current 6/24/16 1:00 PM EST	Dow	NASDAQ	S&P 500
	17,140	4,594	2,000
Short Term	UP	UP	UP
Int. Term	DOWN	DOWN	DOWN
Long Term	?	?	?
Foretasted Trend	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)	18,028	5,156	2,110
Short Term Down (Support)	16,865/15,845/15,484	4,468/4,267/  4,209	1,978/1850/1829
Int. Term Up (Resistance)	18,352	5,231	2,131
Int. Term Down (Support)	/15,370 /14,688/ 13,377	3,986/3294	1,560
Long Term Up (Resistance)	18,352	5,231	2,134
Long Term Down Fibonacci Support	50%12,000 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 NEW L0W 1.46%	Gold 1,327	Oil 26.59 low Now 46.61

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

MARKETS CELEBRATE 7 YEAR ANNIVERSARY OF BULL MARKET/SELL

7 YEAR CYCLE WARNING

EUROPE PANIC! CUTS RATES BELOW 0. US reacts Dow down 1%

In the last seven years since March 9, 2009, the Dow has risen 160%, the S&P 500 up 194% and the NASDAQ up 311%. This is the third longest running Bull Market since World War II. Earnings for the S&P 500 are only up 148% compared to the 194% rise of the S&P index. Earnings in the fourth quarter of 2015 for the S&P were down 32% or $23.25 and were only up $7.52 in the first quarter of 2016. US markets made their all-time highs in May 2015. Since then there were two drops of over 10%. Since May of 2015 US markets are down 7%, Chinese markets are down 40%, European markets down 16%, Emerging market markets down 21% and commodity prices down 21%.

There appears to be a respite in our bear market predictions. Oil prices are back to thirty-eight dollars a barrel and banks have admitted the problem of unsecured debt by oil and natural resource companies. China has reduced its growth predictions and Europe seems to once again be stimulating its economy. Many think that the worst is now behind us. However, we believe that this rest period will be temporary.

ELLIOTT WAVE 7 YEAR SELL SIGNAL

Here’s a quote  from the issue of the Elliott Wave Theorist:

“The March 2004 issue of EWT postulated a 7-year crisis cycle going back to 1973 and used it to predict another crisis in 2008. Here are the table and the forecast from that issue:

 —1973: Arab oil embargo, with spillover into 1974 stock market low of wave IV.

—1980: peak in the inflation rate; top in gold, silver and mining stocks, interest rate spike, stock-market “massacre” and low of wave 2.

—1987: stock market crash and low of wave 4.

—1994: “Republican Revolution;” suspicion of government due to Waco attack (1993), “black helicopters,” etc.; stock market breaks uptrend line at low.

—2001: successful terrorist attack on the World Trade Center; low of wave (3) of 1 [actually 3 of a]. Seven years after 2001 is 2008, so that is the next year to look for an extreme in social fear.

There was certainly a crisis and plenty of social fear in 2008, so this cycle performed as it should have.”

With the last market low at March 9, 2009, it appears that our seven years is up for another surprise.

European Central Bank Panic! Cuts interest rates to zero.

In a continued worry about deflation, Europe has cut its refi  rate from 0.07% to minus  0.5%. They also cut their deposit rate from 0.1% to -0.4%. Once again,’central banks are running out of ammunition to stop deflation.’ We continue to believe that this is a losing battle. Pew research has indicated that the public trust in government in 1960 was at 75%, now is only at 20% rating. See past market letters for our continuing scenario.

3/2/15 WORLD STOCK MARKETS RALLIES                                          Investment Strategy: it’s a Bear Market! Sell rallies!

Moody’s rates China government Bonds negative. Moody’s has changed the ratings on Chinese government bonds from neutral to negative. In addition there is a warning about the viability of China’s credit rating. China has been decreasing its bank reserve requirements five times in a row. Government debt is now 40% of GDP up from 32% and forecasted to rise to 43% of GDP. Foreign-exchange reserves are down $1 billion. Cash outflows are estimated to be about $1 trillion as Chinese investors scurry away from their homeland. China continues to be a continued problem in world markets. Their growth rate of 6% is being questioned. Is there breakdown of their economy an indication that the worldwide economy will start to break down?

2/24/16 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 trillion 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.( UPDATE 3/10/16In a major breakthrough for artificial intelligence a Google computer called Alpha Go beat the world champion South Korean in the ancient board game of Go Long. This game requires a complex strategy and intuition, which means that computers are gaining the upper hand on humans.)
• 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)

 

Current noon	Dow		NASDAQ	S&P 500
	16,837		4,613	1,971
Short Term	DOWN		DOWN	DOWN
Int. Term	DOWN		DOWN	DOWN
Long Term	DOWN		DOWN	Down
Foretasted Trend	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)	16,912		5,057	2,062
Short Term Down (Support)	15,845/15,484 /15,370		4,468/4,238/  4,209	1850/1830
Int. Term Up (Resistance)		18,352	5,231	2,134
Int. Term Down (Support)		/15,370 /14,688/ 13,377	3,986/3294	1,560
Long Term Up (Resistance)		18,352	5,231	2,134
Long Term Down Fibonacci Support		50%12,000 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 LOW 1.60% Now1.94%		Gold 1,267	Oil 26.59low Now 37.58

 

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach 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. Mr.Birkelbach , 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

 

 

 

MAJOR WORLD MARKETS DOWN TODAY

THE ECONOMIST MAGAZINE COVER “THE WORLD ECONOMY; OUT OF AMMO?

JP Morgan doubles it reserve to $1.3 bil, Not enough. Down 2.2%

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

Europe is down 15% today. China down ½%. US markets down 1%. 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.

2/19/16 The stock markets worldwide have rallied over the last couple of days. The Nikkei was up 15%. Chinese markets were up 5% and European markets are up 3% points. Most world markets rallied because oil temporarily went above thirty-two dollars a barrel. Today oil is below thirty dollars a barrel and I believe that it is headed for the teens! Is the worst over? NAH! Japan announced its economy in the fourth quarter was down 1.4%. IF China was honest about its economy, it would probably show the same decline. It is now common knowledge that the banks in Europe and emerging nations are in trouble. Some analysts are reasoning that this troubling situation is now discounted in current prices. Deutsches Bank was up 12% now back down 7%. Are there troubles over? NAH! The Russian markets were and the emerging markets index is up 3% now down 1%. Are there troubles over? NAH! American banks have announced that they have more than enough capital to offset any problems with unsecured debt in the oil and material service industry. J.P. Morgan  was up 8%. Are there troubles over? NAH! 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%, industrial  loans are between eight and 12% ( 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!’, Also, As I have said several times this year, I didn’t expect my downside objectives to be met all in one or two months. In my opinion, the downside is yet to be played out and this rally will probably end up to be no more than a dead cat bounce!

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)

 

Current noon	Dow		NASDAQ	S&P 500
	16,,461		4,520	1,926
Short Term	DOWN		DOWN	DOWN
Int. Term	DOWN		DOWN	DOWN
Long Term	DOWN		DOWN	Down
Foretasted Trend	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)	16,912		5,057	2,062
Short Term Down (Support)	15,845/15,484 /15,370		4,468/4,238/  4,209	1835/1810
Int. Term Up (Resistance)		18,352	5,231	2,134
Int. Term Down (Support)		/15,370 /14,688/ 13,377	3,986/3294	1,560
Long Term Up (Resistance)		18,352	5,231	2,134
Long Term Down Fibonacci Support		50%12,000 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 1.76%%		Gold 1,226	Oil 26.59low now 31.76

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach 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. Mr.Birkelbach , 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

 

DOW INDUSTRIALS SURGE, UP 600 POINTS IN TWO DAYS.

THE BEAR MARKET IS OVER? (NAH!)

The stock markets worldwide have rallied over the last couple of days. The Nikkei was up thousand points were 7%. Chinese markets were up 3% and European markets are up  3 percent. Is the worst over? NAH! Japan announced its economy in the fourth quarter was down 1.4%. IF China was honest about its economy, it would probably show the same decline. It is now common knowledge that the banks in Europe and emerging nations are in trouble. Some analysts are reasoning that this troubling situation is now discounted in current prices. Deutsches Bank is up 12% today. Are there troubles over? NAH! The Russian markets are up 2.4% today and the emerging markets index is up 1.7% today. Are there troubles over? NAH! American banks have announced that they have more than enough capital to offset any problems with unsecured debt in the oil and material service industry. J.P. Morgan is up 8% today. Are there troubles over? NAH! 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 consumer 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%, industrial  loans are between eight and 12% ( 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!’, Also, As I have said several times this year, I didn’t expect my downside objectives to be met all in one or two months. In my opinion, the downside is yet to be played out and this rally will probably end up to be no more than a dead cat bounce!

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 have now broken below the August 25 lows and are officially in a BEAR Market.

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. Here the only problem is, once Artificial Intelligence has access to unlimited knowledge in the cloud and is able to reproduce itself, silicon intelligence will not need us. 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 worlds 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 4,506 to 3,000 and the S&P 500 to be as low as 1,560 to 1,400 because of three factors.!)

1)As If oil prices continue lower, as the charts show ($17-19), countries like Russia (markets down 80%, Venezuela (ALMOST BANKRUPT), Nigeria (oil 90% of government revenue) Brazil (politically corrupt), Iraq ISSIS), Mexico , etc. and even Saudi Arabia could have problems with their sovereign debt. States like North Dakoda, Kansas, Oklahoma and Texas depend on higher oil prices to support their State budget. In addition, approximately 10% of the S&P 500 are made up of companies that depend upon higher energy prices and natural resource prices. These corporations have issued hundreds of billion dollars of debt, which may default, if oil prices and commodity prices stay at these levels. The banks hold these bonds and more speculative derivatives than ever.  I believe the Canary in the mine are bank stocks, particularly  Deutsches Bank (DB),now, $15.57 (down 4%), down from a high of 52.  Deutsches Bank has approximately $7 billion of sub-prime automobile loans, many on Volkswagen. Bad debt, in my opinion, will lead to a banking crisis larger than we had 2008. That is because in 2008, the government was willing to bail out the banks with trillions of dollars of taxpayer money. This time, Congress is in no mood or politically structured to save the banks and the Fed is out of bullets and hold trillions of dollars of high-yield bonds that they purchased during quantitative easing. They can’t stop deflation. That’s why European banks and now the Bank of Japan banks offer interest rates below -0. Once again, Greece, Italy and Spain are all in trouble! Watch out below!

2)  For the last twenty years all the income growth has gone to the top 1% in the US and in the World only eighty people own 50% of the wealth (they won’t stop until they get the other 50%). I conclude, that on a worldwide basis, a consumer oriented and market oriented economy is unsustainable under these circumstances. Those that have an ideology of a libertarian and are saying they are pro-business, free markets, less taxes and less regulation, I believe are naturally motivated by greed and are causing  unstabilizing forces between capital and labor.Richard Fink, chief strategist for the Koch’s family, was quoted in a recent article in the New Yorker Magazine saying, “We want to decrease regulations so we can make more profits. We want to cut government spending so we pay lower taxes.” In my opinion, corporations are not individuals. If they are, they are sociopaths! I conclude, that the balance between capital and labor has been tilted in such a way, that it is unstabilizing US and world economies and that all boats could sink.

3) What has gone on in Flint Michiganis both scary and typical of what is going on in our country. The Republican governor cut taxes by billions of dollars for the high income 1% and corporations, and then cut the budget for the poor and public. To save $15 million, they changed the water system to allow dangerous lead into the homes of Flint Michigan residents. What he did was criminal and in my opinion should be put in jail. He has endangered the health of hundreds of thousands children, for which there is no remedy. Flint Michigan residents are primarily poor and are mostly African-American. Why are they being ignored and marginalized? They don’t write the checks for the governor. Since Citizens United, that declared corporations are people (If they are people, they are sociopaths), most changes in government are dictated by donors and election contributions. Everyone agrees that we need to spend on US infrastructure .However, 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 flat-lined. ‘Donor power,’ has taken over the rights of ‘We the people’.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach 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. Mr.Birkelbach , 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

 

 

WHAT’S WRONG WITH THE MARKETS? 1) DEFLATION 2) THE TOP 1% 3) FLINT MICHIGAN!

Most markets in the US and in the world have broken below their August lows, except for the Dow Jones Industrial Average. The following miscellaneous averages, indexes and stocks now appear to be in a Bear Market: NASDAQ, S&P 500, The Dow Jones Transportation index, Apple, the London FTSE, the DAX, the Shanghai, FX I index and HSI index, the Nikkei, the Russell 2000, Russia, Brazil, Venezuela, Mexico, various bank stocks including the Deutsches Bank, high-yield corporate bonds, the XL Industrials, the EEM Emerging Markets Index and oil.

In market letter 683, I outlined two factors (see below) that I used to widen my 2016 market projections lower as follows: 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 4,506 to 3,000 and the S&P 500 to be as low as 1,560 to 1,400 because of two factors. I now want to add a number three reason.

3) What has gone on in Flint Michigan is both scary and typical of what is going on in our country. The Republican governor cut taxes by billions of dollars for the high income 1% and corporations, and then cut the budget for the poor and public. To save $15 million, they changed the water system to allow dangerous lead into the homes of Flint Michigan residents. What he did was criminal and in my opinion should be put in jail. He has endangered the health of hundreds of thousands children, for which there is no remedy. Flint Michigan residents are primarily poor and are mostly African-American. Why are they being ignored and marginalized? They don’t write the checks for the governor. Since Citizens United, that declared corporations are people (If they are people, they are sociopaths), most changes in government are 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 flat-lined. ‘Donor power,’ has taken over the rights of ‘We the people’.

The infrastructure of the United States cities is deteriorating and is being ignored by the thirty-one states run by Republican governments. For example: Scott Walker in Wisconsin has given big tax breaks to the wealthy while cutting back on education and trying to destroy unions. Scott Brownback of Kansas has done the same thing and almost bankrupted the State. The newly elected Matt Bevin of Kentucky has just eliminated Obama care and left 3 million people without health care alternatives. In my opinion, those that have an ideology of a libertarian and Conservative Republicans, are saying they are pro-business, free markets, less taxes and less regulation, I believe are naturally motivated by greed and only want less regulation and less taxes so their corporate and rich donors can make more profits. That’s the nature of the animal.

I conclude, that the balance between capital and labor has been tilted in such a way, that it is unstabilizing the US and world economies and that all boats could sink. Nobody can stop this except the voters. Up until now the disenfranchised middle class and poor have voted against their own self-interest and in favor of the top 1% and been sidetracked by issues like gun control, women’s birth control rights, immigrants, Muslims and gay rights.  Unless a balance is reestablished, we are headed back to the Middle Dark Ages, where the NEW Royally owns everything and the rest of us are serfs. In the World today, only eighty people own 50% of the wealth and they won’t stop until they get the other 50%. In the long, this is also against their self-interest. It is better to have all boats rise, than to have of all boats sink. None of the Republican candidates in my opinion offer NO solutions or answers except for a stronger military confrontation and bigger military budgets. The leading candidate, Donald Trump acts as though hubris is all we need to be great again. I don’t think so! Even his fellow Republicans dislike Ted Cruz and the former Speaker of the House called him,” a horses ass”

The ground swelling support of Bernie Sanders is an indication that voters are looking for progressive answers AND THAT WE NEED A CHANGE IN OUR CULTURE THAT PROMOTES INCOME EQUALITY, EDUCATION AND HEALTH CARE AND IS RELIGIOUSLY NEUTRAL . I first liked Bernie, because I thought he would push Hillary Clinton more to the left. However, it now appears that Bernie actually has a chance of becoming the Democratic nominee. As he moves from the hypothetical to a real candidate, many questions have to be answered. For one thing, it is obvious that Bernie is a Democratic Socialist and not a pure socialist. Pure socialism calls for the takeover of all industries such as automobiles, steel, etc. Bernie has to explain this and has not as of yet, done so. He should also be able to explain how his business plans will be good for small business owners and entrepreneurs that are being pushed out a business by the large corporations. He must also explain how it will cost the average taxpayer in addition $5000 a year to get single-payer health insurance, but will probably save $10,000 a year on insurance premiums. America does everything in increments and a direct change to single-payer could be softened by starting with insuring all children under twelve, such as we do in Medicare. College for all that can qualify theoretically sounds like a great idea. However, how will we pay for this? In the long run, educating our poor will benefit the country by their ability to be bigger consumers and for our incarceration costs and police protection costs to diminish. So, Bernie has a lot of explaining to do. The big question of course remains, that with a Republican Congress which is guaranteed for reelection by gerrymandering, how can any aggressive legislation be passed? For the time being, I don’t see an answer to gridlock in Congress or candidates for the presidency that will be able to solve our problems. In my opinion, it may take a market crash and possibly a revolutionary furor to shake our present intransigent political system to adjust to a new reality! Sorry, don’t kill the messenger!

1/27/16 I DIDN’T EXPECT TO MAKE MY 2016 DOW LOW OF 14,688 ALL IN ONE MONTH!  I am widening my 2016 projections lower. If the Dow Indu and the NASDAQ can hold above their August lows for the next couple of weeks, markets could once again begin going higher for a little while. However, I believe risks for a big drop are higher this year than last year and I am widening my downside projections as follows: 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 4,506 to 3,000 and the S&P 500 to be as low as 1,560 to 1,400 because of two factors.

• If oil prices continue lower, as the charts show, countries like Russia, Venezuela, Brazil, Mexico , etc. and even Saudi Arabia could have problems with their sovereign debt. In addition, approximately 10% of the S&P 500 are made up of companies that depend upon higher energy prices and natural resource prices. These corporations have issued hundreds of billion dollars of debt, which may default, if oil prices and commodity prices stay at these levels. The banks hold these bonds and more speculative derivatives than ever. , I believe the Canary in the mine are bank stocks, particularly  Deutsches Bank (DB),now, below 19 dollars a share, down from a high of 52.  Deutsches Bank has approximately $7 billion of sub-prime automobile loans, many on Volkswagen. Bad debt, in my opinion, will lead to a banking crisis larger than we had 2008. That is because in 2008, the government was willing to bail out the banks with trillions of dollars of taxpayer money. This time, Congress is in no mood or politically structured to save the banks and the Fed is out of bullets and hold trillions of dollars of high-yield bonds that they purchased during quantitative easing.
• For the last twenty years all the income growth has gone to the top 1% in the US and in the World only eighty people own 50% of the wealth (they won’t stop until they get the other 50%). I concluded that on a worldwide basis, a consumer oriented and market oriented economy was unsustainable under these circumstances. Those that have an ideology of a libertarian and are saying they are pro-business, free markets, less taxes and less regulation, I believe are naturally motivated by greed and are causing  unstabilizing forces between capital and labor.Richard Fink, chief strategist for the Koch’s family, was quoted in a recent article in the New Yorker Magazine saying, “We want to decrease regulations so we can make more profits. We want to cut government spending so we pay lower taxes.” In my opinion, corporations are not individuals. If they are, they are sociopaths! I conclude, that the balance between capital and labor has been tilted in such a way, that it is unstabilizing US and world economies and that all boats could sink.

 

Current noon	Dow	NASDAQ	S&P 500
	15,980	4,490	1,888
Short Term	DOWN	DOWN	DOWN
Int. Term	DOWN	DOWN	DOWN
Long Term	SIDEWAYS?	DOWN?	Down?
Foretasted Trend	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)	16,912	5,057	2,062
Short Term Down (Support)	15,484/15,370	4,328/4,116	1816
Int. Term Up (Resistance)	18,352	5,231	2,134
Int. Term Down (Support)	/15,370 /14,688/ 13,377	3,986/3294	1,560
Long Term Up (Resistance)	18,352	5,231	2,134
Long Term Down Fibonacci Support	50%12,000 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 2.01%	Gold 1,118	Oil 26.59low now 31.44

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach 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. Mr.Birkelbach , 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

 

ONE GOOD DAY, BUT THERE ARE STLL TROUBLES AHEAD

• Today, markets were up in the US, Europe and Asia. However, US stocks had its worst quarter in four years. The decline in September have all the major averages in the US, Europe and Asia in a severe downtrend and  the Russell 2000 is below its August low, along with the DAX, the HIS and Nikkei indexes.
• The Chicago business barometer was issued today and came out at 48.7, the lowest level since July 2009. Although manufacturing only accounts for 12% of GDP, a strong dollar, slowing emerging market economies and lower commodity prices indicate there is economic trouble ahead
• Carl Icahn issued a statement today in the Wall Street Journal about his 15 minute Danger Ahead video. Wall Street Journal said, “Mister Icahan warned that the US is headed towards another financial collapse.”
• The Wall Street Journal also indicated that once the Federal Reserve begins to raise interest rates,” the odds of one or more banks stumbling over new ground are high.”
• Glencore stock has fallen some 75% this year. The Wall Street Journal indicates, “concerns that the $18 billion in short-term loans is riskier than the companies says.” Commodity price declines are devastating the Corporation and government debt that depends high commodity prices.

9/28/15 Look at the new warning signals

1) Deutsche Bank, today is at 26.53, is down 3.2% and has broken below its support at 27.34. To me, this indicates that there will be a larger fallout from the Volkswagen car emission test cheating. Today the DAX index Is at 9492 down 2% and very close to breaking into new low ground at 9426.

2) Today’s headline in the Wall Street Journal is “US bonds flash a warning signal! “With a sub title of “corporate debt yield spreads have climbed, which could signal economic trouble.” The spread between investment grade corporate bonds/ over treasuries is 1.6%. In the past this kind of spread foreshadowed economic problems. Watch where the money goes, not the HYPE you hear from analysts.

3) Brazil national bonds and their corporate bonds are in trouble. Brazil’s economy depends very heavily on oil prices, which are down severely. Also, a new problem is Brazil’s sugarcane price which is at an eight year low. A Brazilian sugarcane company has missed a bond payment for February and has not been able to renegotiate the terms of its debt. A Fitch analyst has said “the company is likely to seek bankruptcy protection.” This is just the beginning and the tip of the iceberg of problems with high-yield debt that  are attached to commodity prices.

4) John Bonners resignation as speaker of the house will make matters worse in the House of Representatives, as radical right wing Republicans and no government advocates, continue to be an obstructionist Congress. The tail is trying to wag the dog. As quoted from Paul Krugman in today’s New York Times, he said, “Mister Bonner is quitting because he found himself caught between the limits of the politically possible and a base that lives in its own reality… Cry for America, which must find a way to live with the GOP gone mad.” They would rather shut down the government, than govern.

5) Baghdad, Iran and Syria have agreed to work with Russia in combating Islamic state extremists. These countries border Russia and they are trying to regain their influence in the area. The deal is another challenge to US influence in the area. This is a major shift in geopolitical power, that has negative implications to the United States.

9/24/15 The DAX Index has broken below its Aug 2015 low!

The DAX Index has fallen below its August low of 9,648 and is now 9,427. At 27.34 Deutsche Bank has broken into hew low ground. The Japanese Nikkei August low is only 180 points away from making a new low. The FTSE is only 70 points from breaking into low ground. What this means is, the markets worldwide are becoming more vulnerable. Any further drop in any of these indexes and could probably lead the world markets lower.

Trouble with illiquid bonds

The Wall Street Journal has been issuing reports on the bond market. One of the things  that they point out, is that US mutual bond funds have invested over 15% or more of their money in rarely traded securities. This practice runs counter to long held SEC guidelines. By the Journal’s count, 10 of the 18 largest bond mutual funds have invested meaningfully in corporate debt that have significant holdings in bonds that are seldom traded. Bond buyers are concerned that the funds could cause market turmoil, if they tried to sell these ill liquid investments to meet redemption requirements. The crux of the problem is that mutual funds own more bonds that seldom trade than ever before, but they still promise to pay out investors within 7 days of redemption of the shares. John Ramsey, acting director of the SEC’s trading in markets division from 2012 to 2014 has said “in some sense, we have a crisis waiting!” If liquidation in bond funds begins to increase beyond a certain limit, fund managers will have to sell their more highly liquid grade A bonds in order to meet liquidation requirements. The Walls St., Journal mentions several bond funds and the percentage of bonds the fund would have trouble selling in 7 days as follows: Vanguard high quality corporate bond fund 40%, American funds American high income trust 39%, Vanguard long-term investment grade 39%, Dodge and Company income 31% and Lord Abbott short duration income 29%. According to the Wall Street Journal these bond funds hold approximately $132 billion of illiquid securities. Ponds connected to the price of oil trouble already, particularly Brazil.I wonder how many trillion dollars worth of illiquid securities the Fed owns?

9/18/2015 THE FED IF FRIGHTENED! – THEY CAN’T EASE AND THEY CAN’T TAPER!

The Federal Reserve decided to hold to their zero interest rate policy. They are concerned that if they raise rates, the economic crisis in the world will go mainstream. There only tool is to use monetary policy, as there is no fiscal policy collaboration with the do-nothing Congress.The primary driver of our present financial bubble in the United States has been the Federal Reserve. Through quantitative easing and zero interest rates, they have tried to encourage inflation, which has remained close to zero. They mention in this report that international considerations have influenced their decision, which for the first time is not unanimous. China is definitely part of a bigger problem. In today’s Wall Street Journal James Chanos said “As long as China adds credit faster than its growth, the real story is months and years ahead.” The Fed has done everything it can to bolster inflation. However, nothing yet has worked. The Fed says that it will delay any interest rate rise until December or 2016. This may give the stock market one more short-term boost. This will only delay the inevitable. Zero interest rates and overnight lending has directly created debt bubbles in numerous areas. The Fed QE1,2,3,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 “Whe’re 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%? 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 can’t taper . We are ……!

Current	Dow	NASDAQ	S&P 500
	16,284	4,620	1,920
Short Term	DOWN	DOWN	DOWN
Int. Term	DOWN	DOWN	DOWN
Long Term	Down?	Down?	Down?
Forecasted Trend	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)	18,352	5,231	2,134
Short Term Down (Support)	15,855/	4605/4,545	1970
Int. Term Up (Resistance)	18,000	5,157	2,131
Int. Term Down (Support)	/15,370 /14,688/ 13,377	4,116/ 3,986/3294	1,820 /1,560
Long Term Up (Resistance)	18,352	5,231	2,134
Long Term Down Fibonacci Support	50%12,000  62% 10,750	50%2,958  62% 2,555	50%1,390 62% 1,177
10Treasury 2.12%	Gold 1,133	Oil 44.75

Look at the new warning signals

1) Deutsche Bank, today is at 26.53, is down 3.2% and has broken below its support at 27.34. To me, this indicates that there will be a larger fallout from the Volkswagen car emission test cheating. Today the DAX index Is at 9492 down 2% and very close to breaking into new low ground at 9426.

2) Today’s headline in the Wall Street Journal is “US bonds flash a warning signal! “With a sub title of “corporate debt yield spreads have climbed, which could signal economic trouble.” The spread between investment grade corporate bonds/ over treasuries is 1.6%. In the past this kind of spread foreshadowed economic problems. Watch where the money goes, not the HYPE you hear from analysts.

3) Brazil national bonds and their corporate bonds are in trouble. Brazil’s economy depends very heavily on oil prices, which are down severely. Also, a new problem is Brazil’s sugarcane price which is at an eight year low. A Brazilian sugarcane company has missed a bond payment for February and has not been able to renegotiate the terms of its debt. A Fitch analyst has said “the company is likely to seek bankruptcy protection.” This is just the beginning and the tip of the iceberg of problems with high-yield debt that  are attached to commodity prices.

4) John Bonners resignation as speaker of the house will make matters worse in the House of Representatives, as radical right wing Republicans and no government advocates, continue to be an obstructionist Congress. The tail is trying to wag the dog. As quoted from Paul Krugman in today’s New York Times, he said, “Mister Bonner is quitting because he found himself caught between the limits of the politically possible and a base that lives in its own reality… Cry for America, which must find a way to live with the GOP gone mad.” They would rather shut down the government, than govern.

5) Baghdad, Iran and Syria have agreed to work with Russia in combating Islamic state extremists. These countries border Russia and they are trying to regain their influence in the area. The deal is another challenge to US influence in the area. This is a major shift in geopolitical power, that has negative implications to the United States.

9/24/15 The DAX Index has broken below its Aug 2015 low!

The DAX Index has fallen below its August low of 9,648 and is now 9,427. At 27.34 Deutsche Bank has broken into hew low ground. The Japanese Nikkei August low is only 180 points away from making a new low. The FTSE is only 70 points from breaking into low ground. What this means is, the markets worldwide are becoming more vulnerable. Any further drop in any of these indexes and could probably lead the world markets lower.

Trouble with illiquid bonds

The Wall Street Journal has been issuing reports on the bond market. One of the things  that they point out, is that US mutual bond funds have invested over 15% or more of their money in rarely traded securities. This practice runs counter to long held SEC guidelines. By the Journal’s count, 10 of the 18 largest bond mutual funds have invested meaningfully in corporate debt that have significant holdings in bonds that are seldom traded. Bond buyers are concerned that the funds could cause market turmoil, if they tried to sell these ill liquid investments to meet redemption requirements. The crux of the problem is that mutual funds own more bonds that seldom trade than ever before, but they still promise to pay out investors within 7 days of redemption of the shares. John Ramsey, acting director of the SEC’s trading in markets division from 2012 to 2014 has said “in some sense, we have a crisis waiting!” If liquidation in bond funds begins to increase beyond a certain limit, fund managers will have to sell their more highly liquid grade A bonds in order to meet liquidation requirements. The Walls St., Journal mentions several bond funds and the percentage of bonds the fund would have trouble selling in 7 days as follows: Vanguard high quality corporate bond fund 40%, American funds American high income trust 39%, Vanguard long-term investment grade 39%, Dodge and Company income 31% and Lord Abbott short duration income 29%. According to the Wall Street Journal these bond funds hold approximately $132 billion of illiquid securities. Ponds connected to the price of oil trouble already, particularly Brazil.I wonder how many trillion dollars worth of illiquid securities the Fed owns?

9/18/2015 THE FED IF FRIGHTENED! – THEY CAN’T EASE AND THEY CAN’T TAPER!

The Federal Reserve decided to hold to their zero interest rate policy. They are concerned that if they raise rates, the economic crisis in the world will go mainstream. There only tool is to use monetary policy, as there is no fiscal policy collaboration with the do-nothing Congress.The primary driver of our present financial bubble in the United States has been the Federal Reserve. Through quantitative easing and zero interest rates, they have tried to encourage inflation, which has remained close to zero. They mention in this report that international considerations have influenced their decision, which for the first time is not unanimous. China is definitely part of a bigger problem. In today’s Wall Street Journal James Chanos said “As long as China adds credit faster than its growth, the real story is months and years ahead.” The Fed has done everything it can to bolster inflation. However, nothing yet has worked. The Fed says that it will delay any interest rate rise until December or 2016. This may give the stock market one more short-term boost. This will only delay the inevitable. Zero interest rates and overnight lending has directly created debt bubbles in numerous areas. The Fed QE1,2,3,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 “Whe’re 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%? 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 can’t taper . We are ……!

THE REPUBLICAN DEBATE In my opinion the world is headed for an economic catastrophe and the Republican debate didn’t give us any SOLUTIONS. They are all on the same page when it comes to immigration, Planned Parenthood worth shutting down the government, gay marriage, abortion, Obama-care, the cancellation of the Iran deal, being tough with Russia, less regulation, lower taxes, denial of climate change, more drilling for oil and gun control. They all want a bigger defense budget and for our military to take a more active role. We already have a $700 billion defense budget that is larger than all the military budgets of other economies put together. Cary Fiornia was the biggest hawk, suggesting a process for an increased militarily to directly confront Russia that would once again take money away from social programs and infrastructure. There are consequences for military intervention which in most cases are more negative than positive There were no solutions given about how Trump is going to take care of women, what is the alternative to Obama care, how do we obtain a promised 4% growth in our economy and how we can prevent the demise of the middle class.The answer the Republicans gave to any foreign-policy problem was to use the military. The answers they gave to help the economy was that anything that helped the rich is capitalism and anything that helps the poor Is socialism.

They did all agree with each other as though they were taking a litmus test. as follows:1) Send 11 million of our undocumented workers and 4 million children back to Mexico and build a wall. This will make the current refugee problem in the Middle East look like a trickle. I suggest they all see the movie “A Day without Mexicans” where the earth stood still in the United States. A deportation plan and the wall would cost trillions and our economy would be crippled without Mexican workers. As the debate was at the Reagan Library, they could’ve taken the advice from Reagan, who offered amnesty during his administration. During the Obama administration, Mexican immigration has stopped to a trickle. We could use some legislation, but the Republicans are resistant to collaboration. 2)  They claimed the Planed Parenthood video was shocking. The video taking body parts from a fetus was not a Planned Parenthood video. Lies, if said often enough do no make them true! What is more shocking than the video, is the insistence of the Republican Congress that we shut down the government in October on this issue.3) Abortion, if you don’t like it, don’t have one. I am also pro-life, but I will not insist that my religious values he thrust on others. That’s what Islamic Shari law does. Family planning avoids unwanted children. In California birth control is public and is the only state where unwanted pregnancies have almost disappeared. There is no other alternative to abortion and birth control except to take care of those children that are unwanted through governmental public care, educational and health programs  that would be very costly and are unwilling to be paid for by evangelistic capitalists. If you promote unwanted children, in my opinion, then you have the complete responsibility of taking care of them 4) What’s the alternative to the insistence that Obama-care be canceled. What are they going to do about the 15 million people that now have health insurance? The uninsured have gone down by 50% because of Obama-care. It’s a success. Don’t break what is not broken! 5) The Iran deal is an international agreement. Is there’s something  the tea party Republicans don’t like about the ‘strategic arms limitation treaty’, the ‘anti-ballistic missile Treaty’, and the opening of diplomatic relations with China? That all seemed to work out. And as Reagan said, when he dealt with Gorbachev to reduce nuclear weapons from 36,000 warheads to the mere 2000 we have now, “trust but verify.” The alternative is war with Iran.  If you haven’t noticed, it borders Russia. All the Republicans want to be tough with Russia. As their position with Iran. How brave of them. The’re not talking about their lives, we’re talking about the lives of our troops. Diplomacy is an alternative to military action, which should always be the last alternative. 6) All the Republicans are unified against gay marriage. 50% of American marriages end in divorce. Let’s see how much they like it. Love is love. Sex when viewed by the third-party can be vulgar. Judge not that ye shall not be judged.7) All the Republicans want less regulation. The Glass Steigle Act would have kept us out of the 2008 debacle. Enforcement of the Dodd/Frank could keep this out of the next debacle. However, with the influence of Citizens United, our Congress (republicans and democrats) are bought and sold to big business. If corporations are people, then in my opinion, corporations are sociopaths, and should be institutionalized under government care. Both capitalism and socialism has tendencies to be selfish and only government overseers can keep the playing field level. Which if you read my LONE BEAR LETTER ABOVE, you will find that labor and capital are out of balance and are due for either collaboration or mutual destruction. 8). Lowering taxes? Kansas tried it and now they’re bankrupt. Taxes have to be lowered for the middle class and increased for the top 1%, so that educational programs, social programs and infrastructure programs can be initiated to make this country great again. Even Trump agrees. 9) The Republicans not only deny climate change, they say even if it is true, we can’t afford to do anything about it. The Defense Department said, “if climate change continues at its present course they will not be able to defend this country.” This year is the hottest year on record since records have been kept in 1880. Scientist’s consensus is that CO2 levels are causing climate change. Why is that so difficult to understand and to deal with? The government has a great history of denial; Atmospheric A-bombs tests do not cause damaging radiation, smoking does not cause cancer, lead in paint and gas is not dangerous, Iraq had weapons of mass destruction and fracking does not cause earthquakes in Kansas.  The era of wood is over, the area of steam is over and the era of oil is over. The sooner the better, for the Middle East countries 10) Congress he is beholding to the gun lobby. There are enough guns in each one of our cities to sink a battleship. How many murders and attacks will it take for common sense to prevail and for collaboration to reach a reasonable compromise without endangering the public.

Current	Dow	NASDAQ	S&P 500
	16,101	4,596	1,898
Short Term	DOWN	DOWN	DOWN
Int. Term	DOWN	DOWN	DOWN
Long Term	Down?	Down?	Down?
Forecasted Trend	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)	18,352	5,231	2,134
Short Term Down (Support)	15,855/	4605/4,545	1970
Int. Term Up (Resistance)	18,000	5,157	2,131
Int. Term Down (Support)	/15,370 /14,688/ 13,377	4,116/ 3,986/3294	1,820 /1,560
Long Term Up (Resistance)	18,352	5,231	2,134
Long Term Down Fibonacci Support	50%12,000  62% 10,750	50%2,958  62% 2,555	50%1,390 62% 1,177
10Treasury 2.12%	Gold 1,133	Oil 44.75