A review of last week's daily Dow Jones Industrial Average shows it has reached short term support at the 13,000 level. We may see a rally in the coming days... but..
{Someone once said, "Watch out for the 'big but'"}
The weekly Dow shows there is a lot of downside. It appears long-term support is somewhere near 11,800.
There are major problems worldwide that have not been dealt with. The United States and much of Europe is bankrupt. We cannot continue deficit spending at our present pace. The current posturing in the Middle East between Israel and its enemies is still always a concern. Fanaticism and religious persecution persist worldwide.
Specifically for the United States: There is no industrial base on which the United States can turn to lift itself out of a recessionary mode. Historically, the economy started to improve as factories called workers back to work. Today, much of its once mighty industrial base has been dismantled and sent overseas. A service economy is not broad enough to put enough workers back to work in order to make any meaningful difference. "Job creation" based on adding transfer payments to an already over burdened system will not work. The U.S. dollar remains the world's reserve currency and safe haven. This has been the primary reason we are not seeing the high levels of inflation which gold and other commodities are telling us.
Major social upheaval awaits the United States as the current generation has only known the concept of self-gratification. Most of the population in the U.S. considers it a "crisis" if their cable TV goes out. I attended a conference recently where the speaker stated "In ten years the population of the United States will be ungovernable and practically illiterate." They are totally unable to deal with any significant obstacles from which they have been protected from all of their lives. And the level of moral decay is shameful.
Specifically for Europe: The government-based social programs which take care of people "from the cradle to the grave" have grown so large that they are unsustainable. We are already seeing rioting in many parts of Europe as attempts are made to reduce some of these entitlement programs. Also, the European Union is barely holding together as hundreds of years of different cultural, social, and economic beliefs divide its membership.
In a few days the U.S. voters will go to the polls to select their candidate for the next four years. The United States is at a crossroads. Its people will either take the path toward further socialism with the present administration; or, a new administration will be chosen to attempt to jump start free enterprise and entrepreneurial thinking. Regardless of which party or set of ideals wins the election there is still rough sailing ahead.
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