July 5, 2013 Do you long for a trickle down free enterprise economy as opposed to the current government orchestrated fat crony capitalist economy? Under the Obama administration the stock market soared but only the hedge fund hogs profited by buying one market segment at a time and then abandoning them to slow moving pension funds that got on board at the peaks. Under the Obama administration the wealthiest 7% are now 26% richer and the other 93% are 6% poorer. The IRS lady in charge of harassing conservatives and organizations with names that included words like liberty was paid a salary alone of $180,000 per year and she refused to testify on the grounds that it might incriminate her. Obama has made about 6 cronies millionaires by appointing cronies as GM presidents to boost their resumes and make them rich. But there are fewer people employed today in full time jobs than when the socialists were elected. And while civilization for centuries favored the core family of a mother and father, today the dysfunctional octomom family is favored and the dysfunctional family is producing more crime, porn, and poverty. America is in more danger now of rotting from the core than being attacked by communists. Even Putin is worried about the fate of the world’s last peacekeeper.

July 3
A sense of the hopelessness of socialism is descending on America. The American markets have been limited now on the up side and cash is being removed from the market. 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. The problem 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.
Hitler and Stalin were hateful humans who held democratic elections and always won democratically. That is what the American Founders warned us could be the "tyranny of democracy" that exists under the socialist exploiters of creative and productive people. Socialism destroys free enterprise when looters first invade corporations and their looting skills and government corruption provides the connections needed to loot the nation through the use the government contracts, spying, and insider information. That is the crony capitalist stage of the downfall of free enterprise. The socialists become the heads of corporations and contribute heavily to other socialist political campaigns just as Bloomberg, Soros and other prominent socialist do. That gets them access to special government treatment, information, contracts, and government harassment of honest people who survive that long.

The Supreme Court’s decision July 2 to uphold the California governor’s veto of a popular referendum which was a re-affirmation of the social contract of marriage marks the end of the hope of American free enterprise and compassion ever bailing out our allies’ much less fallen future National and International socialist governments. It marks the end of the incentive for American parents had to bond in the interest of a stable family raising intelligent, compassionate, and confident children who are willing to take risks to make the world better. The breakdown of the family in the inner cities has created a generation of uneducated disadvantaged children and that will now grow more rapidly. It comes on the heels of former Cuban refugee supporters of free enterprise who in the last election sided with the socialist crony capitalist looters and joined in support of illegal immigrants.
Every educated intelligent person knows that the stock market becomes irrelevant under socialism because the government makes all the decisions. When we visited Eastern Europe in 1991 we discovered that while government buildings were maintained the living quarters of people had not even been painted for 50 years and people did not have oranges to eat for about 10 years before the collapse. All of the cities and towns in Eastern Europe looked like slums. In the Soviet Union trucks would arrive at appointed buildings and drive inside their garages in the middle of the night so that local government officials could get turnips and basic foods that the other local people never saw. The Berlin Wall fell because the East Germans were literally starving to death and could no longer be placated with government disinformation and shallow promises.
A jump in job cuts in the computer and education sectors drove an increase in layoffs at U.S. firms in June.
The private sector added only 188K jobs in June but normal American free enterprise used to provide almost 1 million new jobs a month. The percentage of Americans working or owning a home has declined under the socialist Obama administration. The socialist corporate looters have infiltrated the health care and alternative energy sectors and their stocks are about 200% overpriced. It was announced last week that one looter in the Obama health care sector will get a $150,000,000 pension when he retires after 20 years work. That is three times higher than the previous highest pension in the history of America.
July 2
When the stock market is rising the 65-day moving average tends to be the lowest level where the market bounces to rise once again. When a market is in decline the 65 day moving average tends to be the highest level where the market hits and bounces down to resume the decline. When you switch from to the other you know the market has reversed. If you look at the market averages shown in the Wall street journal and Barons this week you see that the 65 day moving average says we have begun a bear stock market usually of one to two months and up to 20 to 25% total decline. The markets are already down about 8% but the final leg of the decline is the steepest. This could be just a decline in a one year upward cycle. But it could also be a four or more year bear market, the last one of which in 2008 involved a 55% drop. We are now five years into this bull market and it is getting long-in-tooth (a very old bull market). Four years up and one down is about the average business cycle since WWII.
High interest rates will hurt the stock market and destroy bond values so a maximum of 2-yr bond life is advisable. We believe Obama is even more incompetent than Jimmy Carter was and Jimmy carter gave us a misery index that hit about 24% (inflation rate plus unemployment). The Money Market paid small investors 16% interest and gold had risen from $60 to $1000 by the time Reagan defeated Carter.
The world’s Fed bankers have just two options. The world can continue to have the recession like Japan has had since 1990 with their experiment with socialism. Or governments can bite the bullet and let interest rates rise making debt expensive and have a recovery like the Union of 1989 liberated East Germany with 1945 liberated West Germany unleashed when they dropped socialism in favor of governments that are republics not dictatorships of the majority. Even China has seen the benefits of private enterprise which requires freedom and is stifled by government bureaucracies. China still has a tyranny of the majority but free enterprise is growing while the socialist government has shrinking influence. China has had 4000 years of government tyranny and still has the option of free enterprise and prosperity. But if we are going to have a free enterprise recovery we need to end QE3 and pay down the socialist welfare debt. Therefore by definition gold which is worthless under socialism will rise in price as worthless socialist money declines if the world shifts to free enterprise and prosperity.
It is fashionable argue against the use of market timing and the hawkers of worthless or overpriced investments hate it when investors say prices are historically high vs. the corporate/economic fundamentals. Those people who always say buy "Know nothing" said Jim Cramer in 2008 when it was already 25% too late to bail out. But now with prices much higher they all say stay in, don't sell, and don’t take profits because that is called market timing. The hawkers think it is ok to be wiped out for one reason; their salaries depend on investors buying. Very few of the hawkers actually ever made profits in the investments they hawk.
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.
World Economies
http://www.bloomberg.com/news/
http://www.foxbusiness.com/index.html
Egypt's military on Monday issued a 48-hour ultimatum to the Islamist president Morsi to "meet the people's demands" or it will intervene to put forward a political road map for the country and ensure it is carried out. Morsi was democratically elected and then illegally changed the constitution to create an Islamic Sharia law dictatorship which their Supreme Court immediately rejected. The military ultimatum, it said, was a "last chance." The mass protests on Sunday brought out millions of Egyptians demanding President Mohammed Morsi's ousting as "glorious." The military said protesters expressed their opinion "in peaceful and civilized manner," and that "it is necessary that the people get a reply ... to their calls."
The latest Nokia $76 internet access phones let users connect to speedier third-generation networks.
The European Commission said thirteen banks were charged with blocking Deutsche
Boerse and the Chicago Mercantile Exchange from entering the credit derivatives market in the last decade in breach of EU antitrust rules. The group which includes Goldman Sachs shut out from the CDS business between 2006 and 2009. Credit default swaps (CDS) are over-the-counter contracts that allow an investor to bet on whether a company or country will default on its bonds within a fixed period of time. It allows banking institution hawkers to sell junk like "liar loan tranches" and then bet against their own clients.
Chinese companies are no longer in the ranks of the world’s 10 biggest stocks by market value for the first time since 2006 amid a cash crunch, slower growth and hostage taking of an American factory owner for ransom.
http://www.csmonitor.com/World/Asia-Pacific/2013/0626/Meet-the-American-factory-owner-held-for-ransom-in-China
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=
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=^ftse;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/q/ta?s=%5EGDAXI&t=my&l=on&z=l&q=l&p=&a=&c=
The French market indicates stagnation since year 2000. It still is down 50% from 2008.
http://in.finance.yahoo.com/q/bc?s=%5EFCHI&t=my&l=on&z=l&q=l&c=
The Swiss market indicates stagnation since 2007. http://finance.yahoo.com/q/bc?s=%5ESSMI+Basic+Chart&t=my

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. http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=my;compare=;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
The SandP is parabolic at old inflation adjusted resistance levels which were set in 2000 and 2007 and at this level it has not even matched inflation. Simple mathematics says that after a 66.6% drop in value it has to go up 300% from the low to get back to breaking even. The market (accounting for inflation) was lower in 2007 than in 2002 and is lower now in 2013 than in 2007. And MSNBC/Pravda says we are recovering because we are at the same stock market level we had in early 2000 before the Clinton recession, the Bush election and 911.
http://finance.yahoo.com/q/bc?s=%5ENYA&t=my&l=on&z=l&q=l&c=
American Economy
July 1
ISM Index Jun 50.9 up from 49.0 +
Construction Spending May 0.2% down from 0.4%-- This is corrected for the administration subtracting 0.3 from last month and adding it to this month to pretend last month was only 0.1% and this month is 0.5%. Making downward revisions after reporting is how socialist make depressing news look better than it is because the public never sees the final number because it is not news. That is why all during election year they reported 2% to 2.5% growth and predicted this year would be 3% and now they say last year the American economy grew in fact 1.5% last year.
July 2
Factory Orders May up 2.1% up from 1.3% + off a very low baseline.
General Motors saw sales rise by 6%, Chrysler was up 8%, and Ford was up 13%, led by truck sales.
Jul 3
MBA Mortgage Index 06/29 -11.7% sharply down from -3.0% ----
Challenger Job Cuts Jun 4.8% up sharply from -41.2% -----
Rather than make irrelevant comparisons here is what we should compare Obama’s numbers to.
ADP Employment Change Jun 188K very weak should been at least 800K -----
Initial Claims 06/29 343K should be no more than 100K
Continuing Claims 06/15 2933K hides actual unemployed at a record of about 4000K ----
Trade Balance May -$45.0B down from -$40.3B, But should be at least break even at 0% ---
Jul 05
Nonfarm Payrolls Jun 195K flat from 195K we need 1million/more for recovery and more than 200k to keep payrolls from declining further as people leave the work force and go on entitlements.
Nonfarm Private Payrolls Jun 202K down from 207K
Unemployment Rate Jun 7.6% flat at 7.6%
Hourly Earnings Jun 0.4% up from 0.1% or 4.8% inflation
Average Workweek Jun 34.5 no change 34.5 just inflation beginning
The Markets July 5, 2013
The disappointment of Justice Roberts on the Supreme Court underlines the fact we are now in Obama’s perpetual socialist economic depression. We now have socialist control of all three branches of American government. But remember that JP Morgan made his fortune as America entered a depression. You can also make yours. He left tremendous wealth to a foundation he hoped would further American free enterprise. He would be disappointed if he knew that today his wealth would be in the hands of socialist foundation administrators. That should be a warning to those entrepreneurs who do not restrict the use of their foundation funds to productive rather than destructive ends. A sense of the hopelessness of socialism is descending on America. Quantitative Easing is en economic opiate and Obama/Bernanke has gotten America hooked.
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. 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.
Obama is employing the same near sighted policies that Carter employed but for different reasons. Carter thought we were running out of fossil fuels and Obama thinks we are just burning too much fossil fuel. One thought there was too little and we had to conserve. The other thinks there is too much and we need to cut back. Both have been wrong and apparently understand very little about energy and thus created unemployment and misery during their terms in office.
http://news.investors.com/ibd-editorials/061511-575513-return-of-the-dreaded-misery-index.htm
Carter thought we were running out of fossil fuels. The environmentalists then were predicting we would exhaust the world’s oil resources be 2020. They fabricated their data as they always do and environmentalists are the inventors and perpetuators of "Junk Science." They made a movie entitled Fahrenheit 450 where the atmosphere gets so hot that paper bursts into flame and people must live in air-conditioned bubble cities. The environmentalists can’t help it that they were born stupid and without integrity just like politicians except they are also devoid of any personalities.
It was not until 1990 that the environmentalists finally figured out how to fabricate the historical data needed to claim global warming was caused by humans. They did it by removing the data from the 1800’s during the Industrial Revolution when coal was burned before oil was discovered… because temperatures were lower then even though people actually died in some cities like London due to the asphyxiation from everyone burning coal. Oil burning cleaned up the environment but the normal glacial cycle was still in the warming stage regardless of CO2.
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