U.S. Stock Indices Continue to March Higher: May 31, 2016

The U.S. stock indices continued higher and are now approaching their recent highs after a brief shallow retracement of 3-4 weeks.  All indices showed up strong in this past week with the Nasdaq Composite (3.44%) edging out the Nasdaq 100 (3.43%) and the Russell 2000 (3.43%), all with a burst higher on Tuesday based on a positive home sales report and a continuing rise in oil prices.  Also thought to be weighing in the continued advance is the Fed’s belief that the economy is strong enough for multiple possible interest rate hikes this year.   Individual sector standouts included PHLX Semiconductor (4.60%) and Biotech (4.17%) with the DJ US coal sector leading the charge at 12.76%.  The biggest laggards were the DJ US Gold Mining sector (-4.49%) followed by the DJ US Mining sector (-2.08%).

The oil price continues to climb and has been the real basis of this stock market rally since mid-February.  That oil has continued to climb despite the U.S. dollar also rising over this recent four week period demonstrates the strength of this move in oil.  Both the U.S. stock and oil markets should continue to move higher as long as energy prices continue to show strength, which appears likely at this point. Oil demand is still at a relatively high level and supply going forward should be severely curtailed due to the large decrease in drilling, large decrease in other capital expenditures related to production, and unexpected production disruptions.

The dollar has been grinding higher over the last four weeks.  As I have stated before, this just looks like a relief rally before the resumption of the main trend which appears to be down.  For there to be a final confirmation that the downtrend is in place, the dollar has to take out its recent prior low of 91.88 on a closing basis.  Last week the dollar closed at 95.72 so we have some time before we approach that level again.  The continuation of the decline of the dollar will again fuel the recent commodity rally so you will probably see those sectors significantly add to their recent gains, if and when that happens.

Gold finished hard down last week and it looks ready to break out of its 15 week range to the downside.  It needs to close below $1206 to confirm the downside breakout and it closed last week at 1215.3.

As I said last week, I think the Federal Reserve is seeing data behind the scenes that they are not sharing with the public as for the real reason that multiple interest rates hikes are becoming more probable this year.  I would expect to see a rise in the long term (10 and 30 year) Treasury yields before the Fed reacts to it by raising the short term fed funds rate.  The press will probably say that the long term rates are rising in expectation of the Federal Reserve raising rates soon but it will be the reverse.  The long term rates rising will drive the Fed to react and raise rates to make it appear they still have control of the interest rates.  This series of events will really be a sign of the market taking control away from the Fed and back unto itself where it belongs.

There have been numerous reports over the last year of Russia and China selling their U.S. securities and Saudi Arabia will likely not be far behind due to their increasing budgetary and fiscal mismanagement problems.   Governments like the U.S., Saudi Arabia, and other western vassals like the EU and Japan think they can just continue on with their endless spendthrift ways that includes continuously poking their noses into places it does not belong without any life-threatening repercussions.  In the case of Saudi Arabia, their increasing monetary misfortunes are due to the prolonged low oil price environment while maintaining high levels of spending on things that do not improve the nation such as large weapons purchases, unnecessary wars, strict control of its people, and support of global extremism.  The same and much more could be said about the actions and spending habits of the U.S. government.  The EU is more concerned with supporting their major banks than in rectifying the continual economic decline of Greece and Italy.

At some point the endless printing and spending of paper money in the U.S., EU, and Japan will start to drive up interest rates to where rates will represent the real risk of these hugely indebted governments.  You cannot keep printing money endlessly, exponentially running up huge sovereign debts, and keep interest rates below or at zero forever.   There will come a time when the SHTF no matter how big your military is, how many lies your government tells you to cover things up for a while longer, or how long you can keep these insolvent major banks and governments propped up.

Russia and China know that day is coming and it is not that far off.  That is why Russia and China have shown extraordinary restraint each time the U.S. and its vassals have tried to provoke these countries into a passive aggressive response that would make them easy to portray by the western mainstream media as the bad guys.  The U.S. is looking to destabilize Russia and China and sabotage its efforts over the last several years to establish an alternative currency network that will replace the dollar when it collapses.  The U.S. in its now signature covert way has undermined and toppled the leadership of Brazil, one of the primary BRICS nations supporting the new and much more equitable system that has been set up to a large degree by Russia and China.   Check out Dr. Paul Craig Roberts website, http://www.paulcraigroberts.org/, for more in depth coverage of this action.  Russia, China, and other countries have prepared an alternative currency network along with associated institutions such as development and investment banks for its members.  They have seen what is being played out by the U.S. and its vassals before, in the 2008 economic collapse that almost eliminated the major U.S. and EU banks as well as the existing international currency system itself.  Even Canadian banks required secret bailouts by the Fed due to the 2008 financial crisis.

This time Russia, China, and their cohorts will be prepared and some will even benefit by the demise of the dollar based world currency system that is the last remnant remaining of a once mighty country.  The dollar has been used as a club to beat, threaten, and coerce other countries as well as its own citizens to kneel down and swear fealty to the tyrannical U.S. government.

The U.S. government as do all governments invest a lot of their paper money and power into propaganda, controlling the school system, and mainstream media to portray themselves as the good guys who know what they are doing.   Governments need the support of the people to a large degree for their system to work effectively despite their overwhelming weaponry, wealth, and power that these governments and their cronies illicitly acquired to a large degree.  It is not a level playing field because if it was then the government would be answerable to the people.  The government and its cronies like their exclusive, perpetual hold on power and wealth without checks and balances and without representing or answering to the citizen’s interests and concerns. This subversive, perpetual condition of covert oppression and control is becoming more evident to the citizenry as the system continues to degrade and grossly fails a growing number of them.

In the U.S., you get two hand selected pro-establishment/pro-status quo candidates to choose from.  One or more of them may be made to look like “outsider” candidates but they are at heart more of the same with maybe a few twists.  Trump is made to look like a true “outsider” that is independently wealthy and is his own man so to speak.  The two key power groups in the U.S., the military industrial complex and the big banks have nothing to fear from this guy getting into office.   Trump has already said he wants to build up our military into the biggest, baddest military in the world.  Has not that already been the overriding theme and goal since World War II.  Where has that gotten us? It has gotten us into a lot of unnecessary wars, it has greatly contributed to the humongous debt burden, and supports and conducts a number of secret, destructive (that is what a big, bad ass military does- it destroys stuff as well as forcefully takes over regions and people, it is not about spreading freedom and democracy or even defense at this level) programs being conducted.

The big banks helped make Trump.  Big banks love real estate developers who they can make huge loans to.  They have real collateral that the banks can often sell in many cases if the developer goes bankrupt.  In a country with a growing population with a half decent economy, well planned real estate loans are probably some of the safest big loans to make.  The problem with the U.S. and many other places, is we do not have a half decent economy anymore (and have not had one for a long time) but we do have a growing population that is economically left behind.  Even Trump, a seasoned businessman, has been bankrupt a few times, demonstrating the scarcity of economic opportunities and the riskiness of taking on large economic endeavors in a failing economic state.

I believe the Deep State and its economic oligarchs realize this rigged game is about over and that they need a presidential candidate schooled in business to try to right the ship before or after it goes down.    This period is somewhat similar to when Jimmy Carter was President and the U.S. experienced prolonged economic stagflation, high interest rates, gold went to $800 in early 1980 (the year of the election against Reagan), and the failed Iranian hostage rescue attempt (which Carter later said was the primary reason he did not get re-elected).

Right now we have a stagnate economy with little if any growth other than high priced areas that the 1% can afford; interest rates have not risen because central banks are doing everything in their power to suppress rates to keep the heads of these highly indebted governments above water, the major banks solvent, and this zombie economy going; and gold has already had a historic bull run from about 2002 till its top in 2011.  Inflation has been seen in selected areas such as college education, healthcare, beef and other food prices but not in a across the board fashion that is likely still to come.   Asset and financial markets have seen extreme price inflation over the last seven years beyond what any reasonable fundamental valuations would typically support without QE 1-3 and bank bailouts.

Practically the only positive economic reports that come out are released by the government and those reports have been constructed and/or tailored to portray the healthiest economic picture possible.  Other independent economic reports including quarterly company earnings reports paint a much different and much more ominous view of the economy, both domestically and globally.

The gold price has obviously been suppressed to a large degree through paper contracts on the Comex and LBMA when you see high physical demand over the last year but until early this year a gold price that continued to decline.    You will see gold turn up (I do not think this latest rally is the beginning of the renewed bull market in gold as the dollar is still strong so TPTB still have firepower left to manipulate the markets to keep this rigged game going for a little longer).   A large rise in the gold price is a sign that the markets are losing confidence in the government(s) and their fiat currencies (they go hand in hand).  The government(s) who have the most to lose in this Ponzi, fiat money system will do everything in their power to keep the system alive for as long as they can.  The U.S. and many of its vassal states have been successful so far through market machinations and money printing in keeping this dying system on life support since the 2008 crash but the end is getting much closer.

To get back to the elections, I think Clinton will not be allowed to be elected to the Presidency just like Carter was not allowed or positioned to be re-elected by the Deep State (the failed Iranian hostage attempt failed because it was designed to fail to make Carter look weak and incompetent-do not have time to expand on that right now).   The Deep State needs the economy to be rejuvenated in some form if this fascist system is to be resurrected once it totally hits the skids.  Corrupt, career politicians just do not have any knowledge about how a thriving, vibrant economy should work (although they become very well-schooled early on in how to make the system work for them in gaining wealth, power, or at the very least a high paying cushy job somewhere).   I think you will see before the election that Hillary will be purposely torpedoed by the DS in her efforts to gain the Presidency.  She has so many vulnerabilities due to her crooked/criminal past that it is hard to choose just one that will end up doing her in.

Another thing is if Trump is elected, watch who is selected for vice president.  When Reagan was first elected, the Deep State engineered one of their own in that position, ex-CIA head, George H.W. Bush.   Then 61 days into Reagan’s first term, he was shot with Bush taking over much of the agenda from that point on.  Other key posts would be the cabinet level positions.  Also, part of Reagan’s agenda was to increase the defense budget and outspend the Soviet Union into oblivion which the U.S. did while running up a huge amount of debt.  Reagan’s goal was to end the Cold War, which is not what the Miltitary Industrial Complex or Big Banks wanted, so that is probably why he was shot.

The huge military-industrial complex always needs an enemy to justify the huge size of its expenditures and its department.  To make the far-fetched idea of Islamic based terrorism seem like a plausible substitute for the Cold War with its purported nuclear implications (more so for the U.S. to be the instigators of a first strike use of nuclear weapons rather than the Soviets) they had to do something extraordinary and within the U.S. to make its citizens react emotionally with fear and patriotically while gaining huge support for its military.   Thus the 9/11 was an inside job and did just that for the military industrial complex while at the same time allowing the government to “legally” take away more of its citizenry rights through the euphemistically named “Patriot Act”.

The U.S. government does not have the economy or the room to run up debts at that rate any longer.  Large amounts of money, that the U.S. does not have to give any longer, taken to support a huge military that we have never needed if its purpose was to provide just defense, will just further add to the problems (this is a huge understatement) when the dollar is no longer the world’s primary reserve currency.

The sad thing about this whole election process is that it is evident that the American citizens are waking up on some level but still think that this election will make a significant difference in their lives and the country at large.  American citizens are starting to realize that they are getting severely screwed by this system although they probably do not have a good grasp of how innately evil and criminal this system actually is.  Many still want to believe that the system can be reformed or is not purposely out to get them.  The system is purposely out to get them, oppress and suppress them, and use them for fodder to make profits and war for the benefit of a largely self-selected few who gain exorbitantly from this criminal system.  Not everybody who gains from this system is a crook or criminal but the main players are – military-industrial complex including many of the 3 letter agencies that have grown and prospered over the decades, big money center banks, and crony big corporations (particularly some in the pharmaceutical industry as many of their products and drugs disastrously affect the health of the populace in many critical ways).

The citizens are so vested and dependent upon this system that it is extremely difficult for them to see through the propaganda and indoctrination.  They need Medicare, Social Security, food stamps, unemployment/disability benefits, government jobs, government spending, and government contracts to survive on a long term basis.  A populace that is so dependent can be easily frightened or coerced by the government to believe or at least to go along with anything the government tells them.  The citizens are hoping against hope, when in no prior elections, did the elected politicians do anything to successfully reform this criminal fascist system in any significant manner.  The system will have to collapse, which it is getting ready to, for there to be a chance of significant change and progress for the citizens.

If the American public continues to look to the politicians and ultimately the DS for solutions when the economic collapse comes then more than likely you may get just another down-sized version of the current system.    You need to get rid of the central banks and fractional reserve banking for there to be a chance for real, sustainable change that benefits everybody instead of a self-selected few.  Anybody who has a monopoly on creating money out of thin air will have a decided and long term advantage over those that do not have that ability, which is the citizenry at large.  There are no real checks and balances on power and profits for those who possess that capability with their cronies who support them next in line to benefit.  This system ends up being largely the modern version of a feudal system whereby the rulers have developed and used technology/pharmaceuticals to underhandedly control and oppress the citizenry for their own gain, to prevent competition, and to keep the status quo in place.

U.S. Stock Market Getting Ready to Fall Again: May 23, 2016

The major U.S. stock indices held their ground last week and even finished the week with gains.  The Nasdaq 100 and Nasdaq Composite led the way for the week with gains of 0.84% and 1.10% followed by the S&P 500 with a gain of 0.28%.  The U.S. stock indices still look vulnerable over the near term with a decline likely to occur soon.   The tech oriented Nasdaq indices look the most likely to lead the decline despite their relative strength this week.  That is understandable since the S&P 500 has less exposure to the tech sectors and more exposure to the energy and commodity sectors which led the way in the recent rally.  These latter sectors are holding on to their gains very well even though the Nasdaq-related sectors out-performed them last week.  After this expected short swing down, the U.S. stock market looks ready to continue up with many stocks holding onto their recent gains or setting up for future gains.  I would still expect the Nasdaq 100 stocks to lag with the energy and commodity sectors continuing to lead.

Banks got a big boost mid-week when the Fed announced that a possible interest rate hike is still on the table for its June meeting.  The Fed thinks the economy is firming up somewhat but they must be looking only at government provided statistics to believe that.  The U.S. economy is in terminal decline as far as this regime is concerned.  The U.S. dollar is in danger of losing its world reserve currency status and when that happens the last remnants of the false facade of normalcy is torn away.

There is nothing of real value that remains behind the once mighty U.S. dollar.  Warmongering and empire building cannot replace a once vibrant but now hollowed out economy as the primary occupation of a country and render sustainable good outcomes for its people.  The country is now constructed to serve the interests of government and its crony oligarchs with the people to be treated as livestock to be managed and butchered as necessary.  The people have been indoctrinated and propagandized to think their way of life is the new normal in the modern age with endless streams of paper money provided by the government to perpetually sustain life.  America has been living on borrowed time for a long time and the end is much closer than the public thinks.

The American people are told they are exceptional and because of that they should bully and push their way through the world and forcefully tell everybody else what to do and how to do it.  What is so frickin exceptional about having almost 50 million people on food stamps, close to 100 million able adults not even in the labor force, and military forces causing hate and discontent everywhere they intervene with no positive results to show.  Our population is the most heavily incarcerated population in the world, largely due to the excessive number and inanity of the laws.  Our economy cannot even provide enough decent paying jobs to prevent a very large percentage of working Americans from having to work two or more jobs to make ends meet.  As long as the government and its oligarchs can keep the financial markets artificially elevated then everybody can continue to deny reality and keep the empowered and monied ruling elite at the top of the pyramid for a while longer.

To be clear, I am not against making money, I just think we should all have a shot at the brass ring if we so choose and in any way we deem to do it as long as you do not transgress against another or their property.  This fascist system is rigged to benefit the relative few at the expense of the many primarily through central banks, fractional reserve banking, and almost unlimited amounts of fiat money.  But there are limits even to their paper money printing as there are serious repercussions to continually running up huge levels of debt that will never be repaid with money of similar value.

Mother nature does not like to be ignored for as long as these criminal gangs called governments have done with their artificial money and their artificially constructed house of cards. Nature will eventually cleanse the system in which the people do not have the courage, integrity, or intelligence to do so.  Ignorance is no excuse, especially at this late date.  The evidence is becoming too overwhelming that these governments and their system at the very least do not represent the people’s interest.  At most they are diabolical devils in sheep’s clothing out to largely destroy and take advantage of those that are not in their elite club.  Some lucky and energetic few find cracks in the system and have prospered, which is great, but that is not the reality shared by most due to this fascist system.  This system targets, conditions, and oppresses the majority of its citizens, at varying levels, to fail to a large degree.

People think government largess is a good thing but the government is providing its citizens with much more than they admit to and the majority of it is evil.  It also comes with a huge price tag that the government and their cronies do not tell you about – the control of your life to a much larger degree than you realize.   So there is food and beer in the fridge and there is a big game or concert this weekend, all is good right.  Those who continue to think this way are up for a very rude awakening in the near future.    This system is going down and there is no fixing it at this point.  Experience is a hard teacher and there will be hard lessons for all of us to learn soon.

As far as interest rates, this economy cannot stand a rise in rates.  The December rise of only a quarter of a point temporarily tanked the stock market until the dollar started falling which triggered a rally in commodities.   A rise in rates would hit the auto and house sales hard.  Consumer, corporate, and government debt are all extremely high which are primary reasons that interest rates have been kept artificially low by the Fed.   This makes me think that there is something going on behind the curtain that the Fed is not telling the public that may raise interest rates in the future.

There have been many reports from Zerohedge in the last year of China and Russia selling large amounts of Treasuries. There was a report this week from Bloomberg that Ireland, Belgium, and Luxembourg have been buying large amounts of U.S. Treasuries. Japan have been big Treasury buyers. But how long can that continue with the financial states of the EU and Japan.  The Fed can take up the slack but that would probably devalue the dollar as we have recently begun to see evidence of before the past two week relief rally in the dollar.   We might be near the point where the Fed is running out of bullets to maintain low interest rates.  They may be trying to appear they are out in front of and still in control when interest rates do start to rise in the future due to large creditors dumping Treasuries in mass.  So I tend to think this announcement by the Fed is more than continuing rhetoric to make the public think the economy is recovering and can withstand an increase in rates.

The slight December increase in rates shows that the economy cannot hold up under an increasing rate scenario.  I would keep an eye on long term interest rates and not be surprised if they started to rise significantly over the next several months.  It will not take that much of a rise in rates to blow this sucker up with not only the egregiously high levels of debt across the board but the unseen icebergs of derivatives residing within the major U.S. money center banks.  The dollar will probably go down in tandem with Treasuries going down or precede the start of the decline in Treasuries with them eventually moving in tandem.

U.S. crude oil continued higher and finished the week at $48.48.  U.S. natural gas is trading in a four week range and finished the week slightly lower at $2.046.  The strength of crude oil leads me to believe that the dollar will continue to fall spurring the further rise in oil and other commodities.  Oil inventories are still very high as reported by the Wall Street Journal and Zerohedge and will take some months to work off the excess.  Production going forward will be greatly reduced due to large decreases in capital expenditures and the continuing rise in bankruptcies of former shale producers.

A wildcard that is starting to become a constantly reappearing story is the continued and increasing financial instability of the Saudi Arabian regime.  Another story appeared this week in the WSJ with the American credit rating agencies downgrading Saudi Arabia’s credit rating.  Every week there is a new story relating to the dwindling financial resources of the Saudi regime.  If Saudi Arabian finances or their ruling monarchy suffers a serious downfall, the uncertainty of the event would probably send the oil price much higher.

Precious metals look like they may be finally rolling over.  Gold has been trading in a 14 week range and finished the week strongly down as did silver.   We will have to wait for further evidence to confirm the downward breakout of gold from its the trading range.

Junk bonds appear weak and may retest recent highs before rolling over.  The continued and increasing bankruptcies in the shale oil sector should start having an effect on junk bond trading levels.  The recent rise in junk bonds has been primarily due to the rise in the oil price but many of the marginal shale companies have gone and will continue to go bankrupt.  The junk bond rise has also been fueled by investors looking for pockets of yield in this extremely low interest rate environment.   But this is analogous to picking up nickels and pennies in front of an oncoming steamroller. Marginal companies in all sectors will continue suffer as the economy continues to decline.  Retail is another sector that has several bankruptcies and store closings.

The economy is continuing to narrow as fewer and fewer companies are able to generate a profit in this declining domestic and global economic environment.   The WSJ had an article this week that the top 25 cash holders, about 1% of the companies, control 51% of the total cash, an increase from 38% five years ago.  The 1% had their cash grow by 15% in 2015 and have a cash to debt ratio of 153%.    The remaining 99% had their debt rise by 730 bln while their cash declined by 40 bln.   Their cash to debt ratio is 15%, the lowest in ten years.   When interest rates rise, the problems will accelerate and greatly compound the problem of the declining economy.  The S&P 500 companies had declining earnings for the fourth straight quarter.  There are no real economic indications that the economy is getting better despite what our beloved government keeps telling us.  The U.S. stock market is not indicating the health of the economy. It is only an artificially elevated artifice intended to make the public think that things are okay and the government has everything well in hand.  Even the insider Wall Street banks that create money out of thin air cannot make much money in this dismal economy as evidenced by their latest earnings reports.  There is not an economic recovery coming this way in the foreseeable future as the dollar economy is really only a dollar printing machine that is on the verge of breaking down with no way to repair it under the current system.

The U.S. Markets are Down Again But Not Beaten: May 16, 2016

The S&P 500 and the Dow Jones Industrials finished the week down for the third straight week while it was the fourth straight week of losses for the NDX 100 and Nasdaq Composite. The S&P 500 (-1.64% over the last 4 weeks) has held up the best of these indices which is not unexpected since it led the recent rally up fueled by the commodity related stocks, particularly energy stocks. The S&P has given up relatively little of its gains from its explosive run off its 11 February bottom which bodes well for more gains in the future. The worst indices during this latest four week period have been the Nasdaq indices (-4.77% & -4.47%) which are much more technology oriented indices. Even the Russell 2000 (-2.52%) smallcap index has outperformed the Nasdaq indices over this same period. The much maligned banking sector has held up even better than the broader indices and is down only -1.05 over the last month. The major U.S. banks led off the earnings season with terrible earnings reports but were nonetheless well received by the market and their stocks performed surprisingly well over their two week reporting period in mid-April.

S&P 500 earnings decreased for the fourth consecutive quarter which has not been seen since Q4 2008 through Q3 2009, which was the tail end of the 2008 financial crisis and the first several months of the current bull market that started in March 2009. Comparing the U.S. stock markets over these two periods just further confirms my suspicions that TPTB are doing everything they can to hold the U.S. financial markets together because they know this is the endgame for this debt fueled, U.S. dollar-based Ponzi scheme. The financial crash should have arrived by now under more normal circumstances as no one in their right minds would be buying stocks at these high prices with earnings on such a sustained downtrend over the last year.

The smartest, big money usually sells before it becomes obvious from company earnings reports that the economy is tanking. But this time you have the buyer of last resort stepping in, the central banks. Zero Hedge has been publishing reports for quite some time that hedge funds has been big sellers during this recent market rally. Zero Hedge also published a recent report that as Carl Icahn has now sold all his Apple shares, the Swiss National Bank has greatly enlarged their holdings of Apple over similar time periods.

The major central banks, for the most part, are still aligned with the U.S. based system although China started to show significant independence when they de-pegged their currency, the Yuan, from the dollar in August 2015. The central banks are the last line of defense for this fascist system that protects the status quo as they have already hollowed out the meat of their economies and not allowed many new companies to start, grow, and replace the deadwood as well as start new areas of growth. Paper money is what built this rapidly deteriorating and ultimately destructive system. The ability to create money out of thin air and to have that ability monopolized in the hands of the central banks and fractional reserve banks have increasingly concentrated the power and wealth into the hands of the few, many of whom are very willing to doing anything to keep this system in place despite the increasingly obvious destructive tendencies of this system.

Many in the U.S. government have purposely designed and implemented destructive programs and methods to intentionally oppress and suppress its own citizens as well as those of other nations to rule over us as a dictator who can do anything it wants. Some of its main weapons include secrecy, deception, covert activities, and deceit to hide the real intent as well as the true perpetrator of its many criminal and destructive actions. The government spends huge amounts of money not only to develop and implement these criminal actions but huge amounts of money to propagandize and control the message that is given to its own citizens. The government wants to maintain its image as the good guy looking out for its citizens and the world when nothing could be further from the truth. The ability to give its citizens a lot of freebies is also an effective tool to buy the loyalty and votes of many in the public. The only way the government and its cronies can get away with all of this is with huge amounts of paper money created by its central banks and fractional reserve banking.

The U.S. government has run up too much debt and is continuing to do so in a futile effort to maintain this criminal, corrupt system that has given them and their cronies way too much power and profit. The authorities in power know that the next financial crash is the end of the U.S. dollar as the world’s primary reserve currency. The almighty dollar is all that remains of the former greatness of the U.S. as a country whose government and much of the leadership in the major banks/corporations have morphed into an extremely corrupt, criminal gang that will do anything to maintain the status quo including destroying its own country.
Back to the markets. The most likely course over the next two to three weeks is slightly down with choppiness. The S&P 500 looks like it will continue to hold its position as market leader going forward and thus probably continue to hold onto its gains better that the Nasdaq 100 type of stocks. I would not expect the market to turn back up until sometime in June.

The U.S. dollar continued to bounce back up for the second week in a row. I think it is likely to continue to rise in a choppy fashion for another week or two but there is not the look of a sustainable rise at this point. Some are expecting the dollar to break out to new highs in the future as it is still considered as the safe haven currency by many. I am not one of those who think that (at least not yet) as many things have happened in recent years to suggest things are not going to go in the dollar’s favor this time around. I have explained those things many times in past posts so I will not repeat them again here. If the dollar continues to decline as I think is the most likely intermediate and longer term courses, then commodity related stocks will continue to outperform the general market.

Gold has continued to trade in a range for the 13th consecutive week. Although gold set a new market high about three weeks ago, it never fully broke out of its trading range and is back within that range now. I still think the most likely direction is down and once it starts in that direction, then the trend is likely to carry it below $1000. As long as the U.S. dollar is in pretty good shape from a market price aspect, then I expect the gold price to be suppressed from here by the paper kings.

The energy markets are holding up very well over the last few weeks. Both oil and natural gas have not given up their gains off their February bottoms with both trading near recent highs. There will be a lot less future production due to the decreased capital expenditures for 2016 as a result of the prolonged low price environment before entering this recent rally. Two more shale oil companies went bankrupt this week, Penn Virginia and Linn Energy so supply is dwindling from that respect as well. Exco Resources, another shale producer is exploring bankruptcy as reported this week. Financial Times reported in April that Venezuela, owner of the world’s largest oil reserves, has declining production that may get significantly worse due to infrastructure and power problems. Wall Street Journal reported this week that the global oil markets are moving much closer to balance in the second half of 2016 despite the strength of Iran’s rebound due to unexpected disruptions in production in Canada and Nigeria. Inventories are still high but the amount of oversupply to the market at this point is questionable and may be marginal.

Junk bonds look vulnerable at their current position are likely to start falling within the next few weeks.

U.S. Stock Market Continues to Correct: May 8, 2016

All the major U.S. stock indices continued to correct this week. The Nasdaq 100 and Nasdaq Composite were down for the third week in a row while the S&P 500 and Dow Jones Industrials declined for the second straight week as company earnings reports continued to be released for the first quarter results. While the pullback in the stock indices may be attributed to various reactions to the recently released earnings reports, the U.S. stock market has been overdue for a pullback after a 10 plus week rise in the S&P 500 (9 plus weeks for the Nasdaq indices). Some more choppiness is to be expected in the near future until we put the uncertainty of the earnings season behind us and of course, can restart the buyback engine once companies have released their earnings reports.

As I have been pointing out all along, the real driver in this bull leg has been the decline of the dollar. This has propelled energy and other commodity related stocks off their February bottoms. Since commodities are primarily priced in dollars they will rise as the dollar falls. The dollar looks very likely to continue its decline but may take a momentary break for now. Last week, the low of the dollar reached 91.88, its lowest since mid-January 2015 before it reversed slightly to end up for the week at 93.83. The dollar is now sitting on the edge of a long trading range dating back over a year and it will not take much to push it down to the 89 area where it will hit its 200 week exponential moving average that should provide some temporary support.

The dollar is not only in very bad shape from a technical point of view but the fiscal fundamentals of its government and economy are terrible with no relief in sight. So the U.S. stock market will resume its last march higher and continue to be led by energy and commodity related stocks until the dollar falls below a level that ends its reign as the primary world’s reserve currency. Then commodities will probably no longer be priced in just U.S. dollars or probably not in U.S. dollars at all but in new, stronger currencies. That will be the time when the U.S. economy and probably its government to a large degree will have to reorganize and start back from square one. This last statement vastly understates the turmoil and dislocation that this event will cause before any efforts can be made to get back on a track that resembles stability and progress.

To note, it would be funny if the impending results would not end up being so disastrous that the U.S. stock indices rose during the two weeks when the major U.S. banks reported such bad earnings in April. On the face of it, one would think that things must not be so bad at these major U.S. banks if their stocks and the major U.S. stock indices rose after the release of the big bank earnings. Do not believe this ruse for a minute as this was orchestrated to make the public think everything is okay with these banks and the economy at large. This is despite what the terrible earnings numbers at these banks are telling you. These big banks are ticking time bombs, each with a boat load of off balance sheet financial derivatives (that are not even addressed or considered in their official earnings reports) compounded by distressed loans in the energy and other failing sectors of the U.S. economy that are on the verge of setting off a financial firestorm the likes of which have never been seen. These major banks are more overleveraged than they were in 2008 when they required bailouts from the American taxpayers.

The big banks will not be alone in this coming financial Armageddon as the U.S. government will run the U.S. dollar into the ground creating a hyper-inflationary event that has never been seen in the U.S. in modern times. Concurrently you will at some point also see the long term interest rates start to rise that will contribute to fall of the dollar as the Fed and Treasury print more dollars in a futile effort to stem the rise of interest rates. The Fed and other major central banks are gradually losing more and more control of the financial markets. The first financial market to go has been the major currency markets as major currencies other than the dollar have declined significantly over the last few years. Now it is the U.S. dollar’s turn to catch up with the other major currencies and it has started to decline since late January although technically you could say the decline started at the end of November 2015.

The reason the major currency markets have been the first financial markets to show signs of stress is currency is a government’s and their cronies primary tool in their efforts to keep the other financial markets in their required place to keep this Ponzi scheme alive if only on terminal life support. Massive currency expansion is needed to keep interest rates low in the extremely over-leveraged and high debt predicament that governments, major banks, and many large corporations find themselves in. In addition, massive currency expansion is also needed to keep the stock markets near highs or at least from entering a bear market to make the public think the economy is in reasonably decent shape. It is also imperative to keep interest rates low to support a few large areas of the economy that have shown some growth or are needed to support the consumer based economy such as the home/commercial loan/building, auto sales, and consumer credit. These areas are only barely functioning due to interest rates being at these historically low levels. There are already economic figures that show these sectors are starting to turn down as it now stands. When interest rates and inflation rise the decline will only accelerate.

The shale oil sector, one of the few areas of the U.S. economy that demonstrated real organic growth has already taken a major hit due to the unexpected decline in oil prices. This was despite the historically low interest rates that gave these energy companies access to extremely cheap capital. Interest rates for this sector have risen and have contributed to the decline in this sector along with low oil prices. This is just one example of the fragility in the U.S. economy, as well as most major world economies. The extreme debt loads of governments and companies result in a substantially decreased ability to handle even typical economic headwinds that naturally occur from time to time. The government’s continuing dependence on increasing debt to fund their daily operations demonstrates the rapidly increasing instability of our political and economic system.

This will not end well and it will not take much longer to reach the end of rapidly deteriorating economic and political system. The huge U.S. government infrastructure has been built up over the decades on the basis of a reasonably productive but increasingly dysfunctional economy and the U.S. dollar as the primary world’s reserve currency. One quasi-economic area that has flourished under this regime is the military-industrial complex. War is not a productive nor creative endeavor and as such is not a true area of economic activity. The U.S. government has made expansion and maintenance of its foreign empire its primary concern at the expense of its own nation as well as at the expense of the nations that it forcefully meddles in under false pretenses.

The U.S. government and their cronies have hollowed out the U.S. economy in a hugely parasitic manner that leaves little of substance going forward for the majority of the American public. The economy has become very dependent on government expenditures and the output of a relatively few large corporations, that increasingly want to move their headquarters overseas to escape the high U.S. corporate tax rate. This is after they have moved many of the formerly U.S. jobs overseas.

Government’s impact on the economy will be greatly decreased once the dollar is toast. That will cause a great amount of misery and devastation on an economy that is largely dependent on the government and its currency being the world’s primary reserve currency. One of the most egregiously negligent actions in this ongoing collapse is the U.S. government will not take even the slightest action to warn its own citizens of what is about to happen much less take action to do anything to dampen its effects. They will say afterwards that no one could have foreseen such an occurrence of events which will just be more lies from the criminal gang called the U.S. government.

Gold is still trading in a range that is now twelve weeks long. I would expect gold to roll over later this week after it first makes another marginal high early in the week to trap the breakout crowd and trip the stops on those short. As I have been saying, the TPTB are not about to throw in the towel to this Ponzi scheme as long as their main tool/weapon, the U.S. dollar is still standing. The game continues on until the dollar declines to its all-time low of around 70 and maybe then some. At least that looks like the most likely scenario at this point. That means the price of gold cannot continue higher, for the time being. Precious metals will experience a bull market of historic proportions but the TPTB will delay it for as long as their paper based construct can continue to deceive and maintain their empire.

Things are just too good at the top of this rigged game for the self-appointed overseers to just give up or to magically start trying to do the right things. This government and system has never been about trying to do the right thing or about being just. It is about acquiring, maintaining, and expanding power and profit for themselves and their cronies at the expense of the public. This system can work in no other way nor was it designed to work in any other way. The longer this fascist, soft-core totalitarian regime lasts the worse it will become for the American public because in the end the system was purposely designed to favor the few at the expense of the many. They need to control, oppress, and suppress the many (the public) for this system to work in their favor. This system is very good at destabilizing individuals as well as countries through a vast array of nefarious means as key methods to maintain their positions of power and profit and gain control over others. Those in charge do not want independent, self-reliant citizens that have little need for this type of government and that may become competitors to their current positions of power and profit in the future.

Finally, junk bonds look about ready to roll over which is bad news for marginal companies, particularly in the energy sector. This may also be an indication that the rise in long term Treasury interest rates will not be far behind. The rise in long term rates would signal much more large scale and ominous implications for the economy and government.

Tech Earnings Increase Stock Market Volatility: May 2, 2016

The U.S. stock market was provided with increased volatility as major U.S. tech companies released earnings this week. Apple, Facebook, Amazon, and Gilead all reported earnings with varying results that drove their stock prices vigorously higher or lower in their aftermath. For the week, Apple was down on 11.39% on decreased sales and earnings, Facebook was up 6.35% due primarily to increased sales and profits in its mobile advertising, Amazon was up 6.30% due primarily to increased earnings in its cloud based services, and Gilead was down 13.46% due to decreased sales in one of its major drugs.

The Nasdaq Composite (-2.67%) and Nasdaq 100 (-2.97%) led the way down this week due to the overall negative market responses to tech earnings. The S&P 500 was down only -1.26% as the earnings reports of energy companies were perceived in a positive light even though many reported losses for the most recent quarter. The general perception in the energy sector is that things are improving with the oil price closing on Friday at its highest level since October 2015. Even in a down week for the major U.S. indices, we see the same recent pattern holding. Energy stocks have led the U.S. stock market up since the oil price bottomed on February 11th and continue to hold on to those recent gains better than the overall market as the market goes through a short term correction.

The energy and commodity sectors have risen since the February 11th bottom in the oil price due to the decline of the U.S. dollar. The rise in the commodity sectors has not been due to an increase in economic activity in the global economy nor in any specific economy. The U.S. GDP number released on Thursday was 0.5%, so even the highly vaunted U.S. economy is teetering at the no growth level as indicated by the officially distorted government figure. The prolonged low oil and commodity price environment that preceded this year’s recent rise has forced or induced the miners, producers, and suppliers to cut production and capital expenditures for the current year and going forward. This decreased supply is starting to be seen in oil and will start to be seen in all commodity sectors in the not too distant future if not already visible. This decreased supply will then start to be felt in areas with a strong base demand such as oil over the next several months and exacerbate its move higher as the dollar continues to decline. I think we may see a few weeks of choppiness in this area due to extent of the recent rise and the overhead resistance we are now meeting.

The U.S. dollar has continued its downtrend this week and is on the precipice of falling significantly further without any support until we reach the 89 area. Then once through 89 it could quickly reach the 80 level. Things look increasingly ominous for the U.S. dollar and its ability to retain its current value going forward. The most likely scenario is the dollar goes much further down from here. At first this move down will probably be hailed as a good thing for U.S. exports, making our products cheaper for customers abroad to buy. But if it gets to its all-time low of the 71 area, then it is in immense danger of losing its status as the primary world reserve currency. If that occurs, and at this point, it is my most likely scenario, the U.S. government and its central bank will no longer be able to print almost infinite amounts of paper dollars to fund its government, pay for its exports, buy off its citizens, and positively affect its domestic economy (this last ability is almost gone as it now stands). In addition, it will no longer be able to coerce, harm, and destroy through financial warfare uncooperative target countries or countries that refuse to play the part of a vassal in the U.S. world empire.

The reason I say the U.S. dollar will probably fall below its all-time of about 71 is the U.S. debt (about 18 trillion) is over 100% of GDP even when you do not include the unfunded liabilities of Medicare and Social Security which are anywhere from 87 trillion to 221 trillion depending who is providing the numbers. The federal tax revenue barely pays the interest expense on this. This is at the current all-time low interest rates. If (much more like when not if) interest rates rise anywhere close to historical norms then head for the nearest fox hole because hell in a hand basket is on its way. The U.S. stock market will probably continue higher while the dollar declines from its present value of 93.025 to about 71, continuing to be led by the commodity sectors. Commodities are mostly priced in dollars so they will rise in price when the dollar declines in value. Some selected tech companies look positioned to do well over that period as well. See Current Recommendations for their names.

Precious metals have been on a tear during this past week and its looks like they could be experiencing an intermediate term blow off top. The gold bugs are still cheerleading and saying we at the start of a new bull market in precious metals. I say not yet, but it is coming in the not too distant future. I have been calling for a reverse in the gold trend during the last several months as gold has traded in a range during that time for 11 weeks now. Even with last week’s new recent high of 1299, it is still just above the recent range high of 1287.8. I think you will have to see the dollar decline to its all-time low level of around 71 before you see gold truly bottom and start to rise for start of another extended bull run.

The uptrend in junk bonds looks about totally expended at these levels. Oil prices are still not high enough to save the marginal U.S. producers and banks are much less willing to lend to them going forward until we see significantly higher oil prices for an extended period of time. Time is not an ally of these marginal oil companies and they will continue to go under over the next few months.

A start in the decline of the junk bond ETFs (JNK & HYG) will probably also be a signal that Treasury rates are ready to rise in the near future as well. Treasury rates look close to putting in a bottom and if long term rates start to rise, there is nothing the Fed or any other central bank will be able to do. The rise in long term Treasury rates will be the sign that the Fed and central banks have lost total control of the financial markets and the financial markets will be on their own then. The economics underlying these artificially propped up financial markets are bad on their way to horrible so do not expect good things to happen once interest rates rise a couple of percentage points.