July 12,2013 The amount of USA debt that QE3 puts on the Fed’s balance sheet pales in comparison to the enormous USA debt banks hold. Currently the bank regulators are planning to double the US bank’s reserve requirements which will mean the amount banks can loan will be cut in half. It could be an enormous credit crunch and interest rates will surge even more than the effects of ending QE. The Fed already plans to let rates drift higher and approximately twice as fast as seen in the 1950’s. If a bond pays out 5% per year you get your money back within 20 years so you would be willing to buy stocks with PE’s of 20. If the rate is 10% it takes only 10 years or a PE of ~10. And that higher rates are higher competition and that is why Jim Cramer is confused and does not understand why PE ratios are not going to rise now.

Higher interest rates hurt the stock market and also increase the cost of doing business. So business income drops as rates rise plus you get the double whammy of bonds competing with stocks and especially dividend paying stocks. Note that Gold prices only peaked in 1981 when interest rates and inflation peaked. Gold prices have a long way to rise. See:
http://research.stlouisfed.org/fred2/series/TB3MS/

July 11, 2013 U.S. stocks rose and bond yields fell today as Bernanke’s comments reassured investors that the days of loose U.S. monetary policy aren’t over. Bernanke let it be known that the FED would determine its actions from real data not the stuff the administration shovels out through the media. Greenspan earlier had said that the markets would dictate rates not Bernanke. Then on that queue the average U.S. rate on the 30-year fixed mortgage was reported today to have risen to 4.51 percent, a two-year high. http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=2y;compare=;indicator=sma+volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The broader NYSE is in agreement with all the European stock markets and they tell us the welfare state with it free wheeling spending like QE3 is killing the economies of the western world.

FTSE 100 Index is close to its upper resistance level reached previously in 2000 and 2007.
http://finance.yahoo.com/echarts?s=%5EFTSE+Interactive#symbol=%5Eftse;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The German market is close to its upper resistance level reached previously in 2000 and 2007.
http://in.finance.yahoo.com/echarts?s=%5EGDAXI#symbol=^gdaxi;range=1y;compare=;indicator=sma+volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The French market indicates stagnation since year 2000. It still is down 50% from 2008.
http://in.finance.yahoo.com/echarts?s=%5EFCHI#symbol=^fchi;range=1y;compare=;indicator=sma+volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The Swiss market indicates stagnation since 2007. http://finance.yahoo.com/echarts?s=%5ESSMI+Interactive#symbol=^ssmi;range=my;compare=;indicator=sma+volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The NYSE is similar to the British and Swiss and indicates stagnation since 2007 given in excess of 15% inflation since then and no similar market advance. The NYSE index is too big to manipulate legally. It has 300 stocks just starting with the letter A.
http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=my;compare=;indicator=sma+volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

Only manipulated indexes (such as the DJI which has 30 carefully selected stocks) are not warning that this run-up in prices is over. And sometimes they won’t even let you see "ALL" the data. It is manipulated at least two ways. First the stocks in the index tend to be added when they are in the rapid growth stage and removed when they reach the mature stage. The second way is they are considered safe stocks and get high recommendations that are self fulfilling because they are then well known, trusted and heavily bought.
http://finance.yahoo.com/q/bc?s=%5EDJI&t=1y&l=off&z=l&q=l&c=

July 10, 2013 Less than three months ago MSNBC Pravda told investors that reports REITs could threaten U.S. financial stability were misleading and spun it as though higher bond rates were good when in fact they were due to selling of bond assets. Since then shares of the companies, which borrowed money to make credit market bets, have dropped about 19 percent but the value of their assets has plunged much more as Federal Reserve signaled plans to slow quantitative easing and then liquidate their balance sheets of debt. Now funds are forced to continually sell to maintain the amount of borrowing relative to their net worth. This is only beginning to sink in to the owners of the bonds who happen to be the most risk intolerant of all investors. The panic has not yet begun and the stock market has indicated it is not at a major cyclic resistance level.

High interest rates will ravage the stock market and destroy bond values. Money market bank accounts will become the safe haven for risk intolerant investors as they were at the end of the Jimmy Carter fiasco.

July 8, 2013 Today, Monday July 8, 2012 we got an official stock market sell signal. It was similar to the ones we had in April of 2010 and August of 2011. We estimate that the next good buying point is at lease 8% lower than the July 2 market level and more likely 15% lower. May 21 was probably the high for this year and we are currently about 5% lower than that.   We offer opinion and publicly reported information  only and no advice.  The problem with all information and predictions is that the socialist running our government continuously produces misinformation (they tell lies or make irrelevant comparisons) because socialists are schooled highwaymen, and looters who want to take the money from productive people. It works for about 50 years until as Winston Churchill pointed out the socialists achieve equality of poverty. Then the tyranny of the looter democracy collapses and free enterprise re-emerges as it did in Eastern Europe in 1989. Sometimes the cycle takes 4000 years as it did for China.

Our computations indicate that virtually roughly 40% of the cash that flowed out of the market from 7-19-07 to the 3-9-09 bottom flowed back in by the recovery high of 4-23-10. By 7-6-10 roughly half the money that flowed in at the bottom flowed back out and we were then down roughly 75% of the original outflow from the peak. By 5-2-11 we rallied and were only down only about 50% of the cash of the original outflow that ended 3-9-09. But at the end of July 2011 to about 10-2-11 all the cash that flowed in with the premature announcements of recovery had flowed back out and the cash invested was back down to the 3-0-09 level. That was an excellent time to get 100% into the market. By 5-21-13 half the money that was out of the market on 3-9-09 and again out on 10-2-11 was back in. That being said it appears half the money that left the market since 7-19-07 appears to be used in timing the market and the other half are out completely or have possibly lost virtually everything and so 50% of the cash is being timed in and out and 50% of the cash lost appears lost permanently and will require a new generation of investors to recover. The recent market decline was on a movement of about 25% of the active cash flow that is being used for timing or in other words 25% of the 50% used in recent market timing. Some of that was recovered last week but the market timers will likely sell off soon and we predict the NYSE decline from the recent high could exceed 20% in average market index price if all if all the market timers pull out.

A sense of the hopelessness of socialism is descending on America. 40 million indigents are about to get all the free heath welfare they can take for nothing. The President announced young employees would not be forced to buy unneeded health coverage that was supposed to force the young to keep the plan solvent. On the other hand there is no system in place to verify the identity of the 40 million legal indigents and keep the other 20 million illegal immigrants and other unqualified indigents from busting the budget. In England and Scandinavia the line of welfare people in waiting rooms is so long it takes two or three hours to see a Doctor. It has become so bad in socialist European countries that professionals like lawyers and doctors have unionized because the labor unions seem to own the streets and the government.

World Economies
http://www.bloomberg.com/news/
http://www.foxbusiness.com/index.html
Italian 10-year bond yields 0.02 percentage point, to 4.47 percent Wednesday. That caused the bond value of the 4.5 percent security due in May 2023 to declined 1.25 euros per 1,000-euro face amount, to 100.63. The yield on similar-maturity Spanish bonds climbed one basis point to 4.82 percent, while Portugal’s 10-year rate increased 13 basis points to 6.90 percent.
The report from the General Administration of Customs in Beijing showed that China’s exports fell 3.1 percent and imports dropped 0.7 percent in June from a year earlier. Both declines are adding to concerns that the slowdown in China is intensifying amid weakness in both external and domestic demand as the government begins restructuring the banking system that is out of control with high risk loans from "government favored" corrupt borrowers who then loan to newly budding crime organizations where the money is laundered and sent overseas. A crackdown on corruption is looming.
Japan is not a good investment for Americans because since beginning quantitative easing in 1990 they weaken their currency faster than they expanded their economy.
http://finance.yahoo.com/q/bc?s=%5EN225&t=my&l=on&z=l&q=l&c=

American Economy
Jul 8
Consumer Credit May $19.6B up from $11.1B
Jul 10
MBA Mortgage Index 07/06 -4.0% down again -11.7% ----
Wholesale Inventories May -0.5% declined from 0.2% ++
Crude Inventories 07/06 -9.874M decreased again -10.347M –
Jul 11
Initial Unemployment Claims 07/06 360K rose sharply from 343K ---
Continuing Claims 06/29 2977K also up sharply from 2933K ---
Export Prices ex-ag. Jun -0.2% declined again after -0.7% -
Import Prices ex-oil Jun -0.3% declined again after -0.3% +
Natural Gas Inventories 07/06 82 bcf improved slightly from 72 bcf
Treasury Budget Jun $116.5B increased with tax receipts from a deficit rate of -$59.7B -
Jul 12
PPI Jun 0.8% o r 9.6% per year, up from 0.5% or 6% per year. That is well over the Fed requirement for ending QE3-----
Core PPI Jun 0.2% does not make much sense again 0.1% -
Mich. Sentiment Jul 83.9 down from 84.1 --

The Markets July 12, 2013
The manipulated stock indexes are even beginning to tread water now. When was the last time MSNBC/Pravda dared show any broad average exchange index like the NYSE? They have not because the broad American indices are just like the broad European indexes and show that the American stock markets stalled out at the same levels they had in years 2000 and 2007.   That said, it means that investors today have gained nothing since the year 2000 because dividends only covered their costs.  And even though the American manipulated market indicators hit their 2000 and 2007 highs, our cash flow analysis indicates there is no more money in the market than there was in the early summer two years ago before the sharp August 2011 decline. Thursday’s opening was only one example of how it is done. To move the market sharply higher the double the share bought at the opening and get a 1% gap-up gain at very little cost. Then as others join in they very slowly sell so that most of the gain is kept for the day and the profit and are back into cash and ready to use the same game again on good news. Sometimes however they get so far from reality the market takes over and the manipulators leave it alone. Ultimately there is a reckoning day for all market manipulation and Greenspan said the market not Bernanke will put an end to QE3+.

We anticipate the current decline started in the last month will be doubled or tripled this summer. The myth that the collapse of bonds will inflate the stock market is about to be shattered. 2-yr bonds are about as much as investors should risk.

The recent Bulls- Bears indicator. More bulls than bears means more exuberance or topping. It is still a bearish sign that as the market breaks down small investors have remained bullish!
http://www.martincapital.com/index.php?page=graph&view=investors_intel

World trade has been dead for four years (flat lined). Look at the last 5 years! It still looks close to zero growth.
http://www.bloomberg.com/quote/BDIY:IND/chart
Earnings have stagnated and do not support current prices.
http://www.martincapital.com/index.php?page=graph&view=div_earns_payout

Bernanke is pushing on a string. The FED has run out of leverage at close to 0% short term interest rates.
http://www.martincapital.com/index.php?page=graph&view=target

The VIX indicates the worst is about to come. The VIX would normally top out above 30 or even 70 before the bear market ends.
http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c=

World market updates:
http://finance.yahoo.com/intlindices?e=europe
http://finance.yahoo.com/intlindices?e=asia