Mr. Stupid was on Kudlow's show last night and Kudlow agreed with him.

Market forces September 17

Mr. Stupid said there were no 10% corrections in previous bull markets and this market will go straight up. Kudlow thanked him and said he agreed with him and "this was a "V" shaped recovery." That is GE/MSNBC/Pavda the voice of socialism speaking of course.

In truth though… corrections are seldom more than a 50% loss of the previous market gain and the average historical run up occurs four times a year. Since the average stock market yearly gain has been less than 10% per year that makes an average four mini cycle gains about 5% each followed by a 2.5% corrections for a total of four 2.5% net advances per year. So yes, 10% corrections are very rare. They occur when there are rallies that are greater than 20%. A 50% correction of a 20% rally would be ten percent. When a 50% correction does not occur immediately there is usually a massive correction later. We have had two 5% market corrections this year and that is very small considering the 40% advance thus far. China had an 80% advance and only a 20% correction thus far. These types of quarterly bubble run-ups are usually followed up with a major correction a year later. Longer term annual run-ups are usually followed by the major bear market corrections we see every four to six years.

The stock market advances we are seeing right now are unsustainable bubbles.

We need to remember that FDR and Obama inherited recessions and then imposed socialist programs that caused the first "Great Depression" and Obama is still working hard at causing the second "Great Depression." In the first "Great Depression there was also a 50% DJI rally the first year followed by a decline that bottomed the second year wiping out the entire first rally of that depression. It is clear that the rally we are in right now is a bubble and it is dangerous because some think socialist nationalization and taxation may actually help the economy. We could have a second "Great Depression" thanks to Obama.

Cuba is an excellent example of socialist central planning and socialist equality of poverty. The United States has been the engine of free enterprise innovation and competition that has kept our own socialist allies from becoming like Cuba and the other socialist states that resist American innovation and the American culture of generosity and free enterprise. The nations that hate our American culture universally live in poverty. China is rising now because President Nixon and Kissinger opened Red China up to the American culture of generosity and free enterprise. Japan has declined because they decided to reject American creative destruction of old technologies and jobs and instead went the route of socialist guaranteed life employment just when they were starting to catch up with America in the mid 1980's.

Mr. Kudlow and Mr. Stupid on GE/MSNBC/Pavda think the people with $3 Trillion in money market funds will now buy stocks and will sustain the stock market rally because the stock market bubble is so attractive. But Mr. Kudlow and Mr. Stupid do not realize how stupid that idea is. The money markets, treasury bonds, and corporate bonds are what finance almost everything. Equities are used mostly for capital formation of new business and products. The recession has killed the initial public stock offering (IPO) business that is the primary purpose for having a stock market. Mr. Kudlow and Mr. Stupid are mistaken in thinking that the purpose of the stock market is the creation of stock market bubbles just as Obama was mistaken in thinking the stock market was just an economic indicator.

A congressman on Kudlow's show went on to explain that Obama is not engaged in protectionism of America's tire industry because first of all our trade agreement allows protectionism, and secondly because we are actually just protecting Japan that makes 95% of American tires. He is one of many "Mr. Stupids" that Mr. Kudlow loves to listen to.

Market Outlook

A falling dollar and a China trade war now loom in the early stages. The stock market continues to bubble upward. The Wall Street risk appetite is high and a record number of rank amateurs are now betting with and against the market with puts and calls and now the "day traders" are back like they were in 2000 at the height of that bubble.

We expect relatively good housing and economic news because GE/MSNBC/Pavda continue to miss-inform. For instance if sales dropped 5% last September and actually declined 4% again this September they report sales improved 1% this September. Most people will not grasp that things actually got 4% worse again and only the slope of the decline is 1% less than last year.
A sharp market decline is now possible at any time because many leveraged funds are fully invested, have hair-trigger stop sell orders in at about -3%. Our strategy now is to continue to take recent profits and wait for future buying opportunities. Buying opportunities occur when a sector is rotated out of hedge fund popularity.

Asian markets were up last night, China up 2%, Hong Kong up 1.7%, Japan up 1.7%, and India up 0.3%.

European markets are currently up from 0.3% to 0.6% this morning about half way through their day.

US market futures are flat at 7:00 AM EST before the opening today.

The current market bubble is dangerous. The market PE is now higher than last year before the steep decline because stock prices have been recovering even as earnings have been declining all year. Our indicators say the market has topped again. But markets have been known to bubble up irrationally for years. An irrationally high PE does not mean a correction will happen anytime soon. It means it is time to diversify out of stocks or be prepared to exit fast. Jim Cramer reminded people that "pigs get slaughtered."

Tax and spend socialists now run Congress and will likely bankrupt America for the first time in our history. Debt is unrelenting but the process of bankrupting a nation still takes several years.

Under socialism, democracy is just a license to steal and eventually to murder. Once the thieves have a majority… tyranny takes over. The worker/producers then become the slaves of the tyrants. If you protest your enslavement you go to the Gulag or concentration camp to die. Hitler, Lenin, Stalin, Robert Mugabe, and Sadam Hussein were all famous democratically elected socialist dictators. Sadam Hussein claimed a 99% majority in his last Iraqi election after gassing his countrymen. Democracy only works in a free society and a free society has free enterprise not redistribution of wealth to an indigent/corrupt/maniacal majority. Socialism grows by taking from a few to give to the masses. The tipping point occurs when the masses of the corrupt, indigent, and lunatic left become the majority and the socialist dictator gets elected on his promises to change things. Hitler's Nationalist Socialists and Lenin's Communists did indeed change things and millions of Germans and Russians were murdered because they opposed the changes. Sadam Hussein loved to throw protestors off rooftops and to dissolve his enemies in vats of acid. Sadam did not trust the military and created a "new army," his own Personal Guard with power over the Iraqi military. Obama is the name of the flying beast that they say brought Mohammed to Jerusalem when Mohammed died. Hussein Obama, Jimmy Carter, the DNC, and the ELCA seem intent on turning Israel over to the Hamas organization.