Dow Outlook 12/27/2013
The Dow Jones Industrial Index has rallied into the 11th day from the low reaching 16529. The key resistance is still at 16650 and any breakout that will start to run to the upside will not unfold until we exceed that level, fall back to retest, and then run to test the 20,000 level.
Today is the 11th day up from the low and if we close lower, then there is a potential for a retest of support that begins at the 16375 level followed by 16175 where a close below that area will signal a retest of the 15950 area becomes possible. We should see volatility begin to rise in January.
Simply Running A Correlation On One Theory Produces False Positives
The study of Professor Miles Corak is being used to justify more Socialism to support the argument as proof positive that the American Dream has failed. The American Dream has been defined as economic freedom and in this light it is rooted in Adam Smith and Laissez-faire economics. It is essentially Equality of Opportunity that remains as the primary major goal of both liberals and conservatives. However, the American Dream when this billboard appeared was BEFORE income tax. Whatever you made was yours to spend freely until government decided they could do a better job with your money.
Unfortunately, Professor Miles Corak begins with a single dimension of economic mobility in the United States compared to other countries. Corak’s intergenerational economic mobility perspective looks at the advancement between fathers and sons. The assumption is that within a society with equal opportunity, a father’s income would have no relation to that of his son with a correlation factor of 0. On the other hand, a country where jobs and income transition from one generation to the next would have a correlation of 1.
This assumption is totally off base for if you step outside the office and actually observe society, you will find that the greater the father’s income, the higher education opportunity will become available to the son. The interpretation of the data illustrates the lack of global correlation. You cannot take a single assumption and then ignore the rest to the spectrum of economic activity and assume you have made some discovery. Everything is interconnected.
A great reason for the failure of the correlation is also the introduction of the Payroll Tax in 1937 that always begins as minimal – just 2%. The higher the taxation, the lower the living standard becomes and there is a serious decline in the ability of one generation to even maintain the same living standard as the previous. This is why under socialism we are seeing unemployment among the youth in Europe at over 60% in the southern region. The American Dream has been seriously disrupted by the lack of consistency in the tax rates. Politicians keep raising and lower taxes without any consideration that business needs to have a plan to even borrow money. They base their profit forecasts on current tax levels, and then politicians upset everything and alter the future with a pen stroke. More companies have level the USA by no means because of the tax level, but because of the inability to be able to project the future. Other countries are offering 20 year tax deals to attract companies for they need stability. This same trend is seriously altering society and the intergenerational economic mobility.
Far too often, the greater the income of the father, the less productive the son will be if the son is “spoiled” and not made to fend for himself to some extent. Rockefeller understood this and he would not leave money to an heir unless they proved themselves. He would match whatever a son made. In this manner, he instilled talent and drive.
The assumption that there would be zero correlation proving that the American Dream (economic freedom) would not flourish is dead wrong. That is not economic freedom. You see the highest correlation in developing countries because people are still climbing the ladder and the next generation is still building upon the previous. The more affluent a society becomes, the lower the birthrate and the less economic advancement takes place. The next generation has everything handed to them and thus expect more for less.
Hence, students in the United States continue to decline slipping lower in the international rankings amid all other nations in education. Of the 34 OECD countries, the United States ranked 26th in math. This is the normal trend and it is how empires fail. There is not a perfect correlation, but this idea that the next generation need not work as hard as the previous signals the peak in an economy.
American education is the real joke. Even Forbes Magazinereported that 60% of students cannot find a job in the field they majored in school for they are not really properly trained. The bulk of anyone;s worthwhile knowledge comes from EXPERIENCE not university. Forbes also reported that half of college grads are working jobs that do not require a degree. I myself have met a number of people working at Starbucks with degrees. We have totally failed in education and the taxes keep rising and more socialism is not the answer.
Only under communism would we reach a zero correlation for everyone earns the same. The very idea that the American Dream of economic freedom should lead to a Communistic state of perfection is dangerously absurd for the conclusion would then be more socialism. Ideally, each generation builds upon the previous and advances in the standard of living. However, this is the uptrend in the cycle and then society peaks with affluence, and the decline then begins. The cycle will not turn back up until the next generate expect nothing and go out and create their own future.
You cannot take a single assumption and yell – Eureka! You must still take that and run it against everything else to reveal that your assumption failed for it did not consider the myriad of interconnected relationships that create a complex dynamic world in which we live. You must also come to the realization that NO RELATIONSHIP is ever stagnant. It always has its own cyclical trend.
Will 2014 Crack the Euro?
The Euro officially began trading January 1st, 1999. That was an eventful year for its also marked the low in Gold. Now at the pre-Christmas Euro summit, the mood was rather grim and even Merkel is wondering if the Euro will survive. The Euro should seriously crack 17.2 years from its birth and that would bring us to 2016. However, the French virtual-communist at the head of the IMF,Christine Madeleine Odette Lagarde, may push the seizure of 10% of all accounts in Europe in 2014. The overvaluation of the Euro, thanks to deflation, will continue to cause the German economy to shrink and as goes Germany – there goes the Euro. The single currency is actually reducing the economic growth in Germany.
224 Year Collapsing Wave Structure Points to Breakup of USA
The CONFIDENCE in government is truly collapsing. The latestCNN Poll shows that 73% of Americans feel Congress has done nothing worthwhile. The approval rating for the Democrats has collapsed by 6% and this is all part of the process of shifting from a Public Confidence Wave to a Private Confidence Wave.
There are two types of waves on the 224 Year Cycle – theCollapsing Wave and theProtracted Wave. It appears that the USA is in the Collapsing Wave formation meaning that the 224 year runs from the birth to the peak with the total duration running minimum 296 years with the optimum being 309.6 years meaning the society splits and does not remain intact. A Protracted Wave is a society view where the wave is measured peak to peak totaling 224 years. The second Protracted Wave formation is where governments come and go, but society survives and reforms remaining intact. In the Collapsing Wave structure where it is 224 year from birth to peak, the overall duration appears to be is 296-309 years. for the conclusion whereby society breaks apart and fragmentation emerges..In the case of Rome, 309 years from the assassination of Julius Caesar in 44BC is 265AD where Rome broke apart and the Gallic Empire emerged under Postumus (259-268AD).
This Collapsing Wave structure that the United States appears to be in means it is a one-time-wonder and that the United States will break-up and the there will be no more “united” union. This is becoming self-evidence in the polarization of politics with tremendous differences in culture on a regional basis. The Obamacare is just one aspect revealing the undercurrent whereby one segment of society believes it has a right to force their views upon another group.
So unfortunately, the USA does not appear to be destined to remain intact otherwise we would have seen and overall structured wave of 224 years. We seem to be in theCollapsing Wave with the 224 years was from birth to peak with an overall duration of 309.6 years at best. This appears to be like the Collapsing Wave in Imperial Rome itself whereas from the assassination of Julius Caesar in 44BC to the peak in the glory of Rome and population in the city took place under Marcus Aurelius that was 224 years later in 180AD. The decline that followed brought total chaos, sovereign debt crisis, massive government seizure of capital, fragmentation of the Empire, and in the end, Rome was no longer the Capitol and that became Constantinople followed by the split of East and West. We are much more akin to the this type of Collapsing Wave formation whereby society collapses and breaks apart. Now we have theCycle of War turning in 2014 that appears to be focused within civil unrest at least initially.
We will be reviewing this aspect as well at the Cycle of War – Gold – Sovereign Debt Crisis Conference on March 21st in Philadelphia.
The Cycles of War & Sovereign Debt Crisis Conference is an important event because this cycle on civil unrest is turning up with a vengeance. The combination of a Sovereign Debt Crisis and Economics has a long history of creating civil unrest of a grand scale.
will include a special over-view of the Precious Metals and when will the next Bull Market actually begin. Those looking to attend only that conference in Philadelphia, March 21st, 2014, may sign up now. $250
Global Market Watch Dec 26th
The Global Market Watch has been posted for the close of December 26th, 2013.
Our own Economic Survey
As the U.S. economy enters its fifth year of expansion after the worst recession in seven decades, our own leading survey we conduct with retail merchants report on average that this has been the best year in retail business since 2006. It did not top the sales of 2006, but every year since. We will see how this shapes up with the national statistics when put together and released. So far, it appears the US trend is intact but should turn down after 2015.75.