Where is the market going in 2013?

Dear Mr. Berko:
 I am convinced the Standard & Poor’s 500 is headed to 1600 or higher this year. I’ve completed these (enclosed) detailed calculations, concluding the S&P 500 will earn $107.42 and trade at 15.1 times earnings. Then by extrapolating these numbers, I place the Dow Industrials at about 15,864. My calculations agree with the top analysts at Goldman Sachs, Citigroup and Bank of America, each of who believe the S&P will top 1,600 this year. Since you did not present your usual forecasts for 2013, I’d like to know if you agree with our projections.
GH: Gainesville, Fla.

Dear GH:
You conspicuously used the words “our projections.” Am I to conclude you’re collaborating with Citigroup, Bank of America and Goldman Sachs, three of the deadliest snakes on Wall Street? I’m not making a prediction for 2013 because I can’t read the tealeaves as clearly as you and those friends. But “thanx” for your mathematical construct, which is too impressive for my linear thinking.
My dad used to say: “Son, don’t think you are so smart! Thousands of years before our ancestors began to have afternoon headaches from trying to think, the lowly turtle had a streamlined body, a hard top, a mobile home, a retractable landing gear and lived twice as long as the average human.” Amen.
Your numbers may be on the mark. I remember when growing revenues and earnings moved stock prices higher. Today the primary reason for higher prices is that the FED is engorging the economy by purchasing $85 billion of Treasury bonds and mortgages every month. This massive influx of cash into the banking system has gone into the stock market, precisely what the administration and Helicopter Ben ordered. They figure a rising market will give business and consumers enough confidence to spend and grow our GDP by 3 percent or more in 2013.
The FED believes it can inflate the economy to health, thinking that rising tides lift all boats. So it continues to create more money, realizing if the printing presses stop, the economy will sink (think of bailing a leaking life boat) deeper into recession. Ben and the administration recognize:

(1) Consumers account for 71 percent of our GDP.

(2) Consumer debt has reached record numbers and is perilously high.

(3) New jobs are paying less and most family incomes are lower today than in 2007. So except for taking on additional debt, American families have little spending room left.

(4) This economy is facing a social crisis, a debt and tax crisis, a Congressional crisis, a Social Security Medicaid and Medicare crisis, municipalities are teetering, our infrastructure is in stages of serious disrepair, real unemployment is over 10 percent, pension plans can’t keep their promises and our welfare system is dangerously wobbly due to an inexorable public demand.

(5) It’s becoming apparent that the costs of Obamacare will bankrupt the economy.

(6) Our largest trading partners – Europe and Japan – are in a recession and China is floundering. European workers are hurting; their income and safety nets are imploding, causing U.S. exports to decline.

(7) The administration won’t pull out of Iraq or Afghanistan because returning troops will swell unemployment numbers.

(8) The Mid-East, a trouble spot for 5,000 years, may erupt into a major conflict.

Finally, (9) solutions to avoid the fiscal cliff will be temporary and political rather than economic and permanent. This cowardly shifts the problems to the next administration.
Ben and the administration are mindful of this. They know falling stock prices will devastate consumer confidence and voters will stridently blame Congress for the economic mess. So they continue feeding new money to a sick economy, because the economy can’t feed itself. I doubt this feeding frenzy can ever stop.
Therefore I believe the averages could rise to your numbers. At some point these trillions of new dollars will inflate our currency so that a 15,864 DOW will actually be a 9,000 DOW in today’s dollars. That’s very scary!

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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.
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