This Bull is charging ahead! There is no way I can fault the action.

Let's look at some 5 Year BEV Charts from the Dow Jones Total Market Indexes that go back to 1989. The data are weekly closing prices. Usual BEV Charts look back to their last all-time highs, but 5 Year BEV Charts take the high of the last 5 years for their reference point.

The Financials had a -40% Bear from 1989-90, but during the Bear Market of 2000-02, they managed to keep the BEV -30% line as a floor. As the financial industry was a co-conspirator with Congress in the 2000-07 "affordable housing" fiasco, and they didn't manage to dump their portfolio's toxic mortgages on the unsuspecting public by June 2007, I'm not surprised to see their 2009 declines at Great Depression levels. They've come back nicely in the past 5 months. But if their partner in crime (Congress) had not bailed them out with almost a trillion fresh-crisp dollars, newly printed from the Fed, many of these companies would now be gone.

If financial companies' share prices are currently doing so well, it's mostly due to official sector support, and one hell of an effort by the financial media in promoting these shares to the public. So if you're one of the cowboys riding this Bull, good job! On a weekly closing basis, they are now up 112% from the lows of March. Just know when to jump off.

Congress never considered bailing out the Basic Material companies, and their few supporters rarely see the light of day in the financial media. Unloved and unwanted, they are still up 77% from their March lows. I understand that if the recession doesn't lift, these companies will have problems. But that reasoning is never applied to financial companies, and it should be.

The Banks are up 166% from their March lows. Impressive! There are good companies in this group, but many of these banks fear marking their assets to the market, like Dracula fears a wooden stake pointed at his heart. Every week we see new banks being taken over by the FDIC. Expect more to come.

The Fed assumed many mortgage-related "non-performing assets", from "favored institution" since last October. But most of this toxic waste is still masquerading as assets for financial companies' balance sheets. Which ones? Federal Government's regulators have turned their blind eye to this, so don't expect them to tell us! As a whole, it seems this sector is living on the edge, as it can only do well as long as interest rates cooperate.

As we can see below, currently interest rates are co-operating.

Non-Ferrous Mining is up 86% from its March lows. Looking at the BEV Chart, it appears that N-F Mining has outperformed the Banks. But BEV Charts are based upon their last all-time, or with these chart, their highest price in the last 5 year. So they give us the Bear's Point of View. Bulls look at the lows of a data series. From the lows of last March, the banks have appreciated more than the N-F Mining shares, and BEV Charts are poor at picking this up this bullish behavior.

Again, this is a sector with no support from Washington, or the financial media. We should assume that Washington is placing downward pressure on the price of metals to "contain" CPI Inflation. When the price fix breaks, metal prices will go to unbelievable new all-time highs in US dollar terms, but that may bring economic activity in the US to new all-time lows. This would be bad business for these companies, unless China and the rest of world can pick up the slack - which might just happen.

Gold Mining Shares are up 10% from their March lows. But Gold Mining was largely unaffected by the 2009 Bear's bottom. The lows in these shares occurred in October of 2008 during the peak in the credit crisis. That makes no sense, unless you accept that the financial markets are managed by the "policy makers." Inflationists hate seeing gold and silver rise in price as it's a failing grade for their "monetary policy."

Last October, the whole world watched as the US Treasury Secretary swore that life as we know it was slipping into the abyss! So gold, silver and the companies that mine these metals went down on this dollar-negative news? Well surprise - they did. Since last October, they are now up 78%.

As the DJIA moves up, the 8-Count has fallen down to zero. That's how it has been since 1900. For 109 years, good bullish moves do so with a lack of 2% Days.

Well in this Bear Market Report I have to report that the Bear is nowhere in sight. Who knows what tomorrow will bring? Odds are higher stock prices. But if you read my piece below on Electrical Power Consumption, you will probably guess I expect the Bear's absence is only temporary. But how long is temporary?

The Step Sum is an indicator of market sentiment. When the underlying sentiment is bullish, the Step Sum will rise. When bearish, it falls.

Think of the "Step Sum" as the sum total of all the up and down price "steps" in a data series over time; an Advance - Decline Line for a data series derived from the data series itself. Logically, bull markets will have more net up days, while bear markets will have more net down days. Understanding the Step Sum is no harder than that.

I started tracking Electrical Power Consumption, (EP) last November in Wk58's Report, just as EP's 52Wk M/A had dropped short of breaching its BEV -2% line. Since 1930, a 2% drop in EP's 52Wk M/A is a rare event. In subsequent reports, I've published EP's BEV Chart every time its plot crossed another BEV 0.5% line. EP just dropped below its BEV -3.5% line in Wk93. Now only two weeks later. in Wk95, EP has dropped another 0.5% to its BEV -4% line. It seems EP's rate of decline is accelerating.

For the benefit of new readers, I'm including an explanation for my BEV (Bear's Eye View) Plot.

Each new all-time high is recorded as a zero in a BEV Chart. Prolonged periods of expansion in a data series, are recorded as long flat lines on the Zero Line in a BEV Chart. The last zero of a Bull Market (or the last new all-time high in the data series such as EP) is called the "Terminal Zero." All other data points, not new all-time highs, are registered as a negative percentage below their last all-time high. Over decades, there are many Terminal Zeros in a BEV Plot, as we can see below. The BEV Chart strips away decades of monetary inflation, or in the case of EP, expansion of capacity serving the growing needs of the American economy. The BEV Plot below displays every decline in EP's 52Wk M/A, as seen from its last all-time high, in precise percentage terms, from 1930 to 2009.

As I've mentioned before, EP is an excellent metric for measuring economic expansions and contractions. There is an interesting historical note on how I came to appreciate this.

Shortly after the Berlin Wall came down, 1989, a network television program interviewed a CIA analyst who predicted the economic collapse of the Soviet Union. The question being examined was: if American economists were wrong on the Soviet Union's economy, (i.e. as taught in Paul Samuelson's text book for Economics 101) how did you get it right?

I never forgot his answer. Economists, he said, believed the statistics published by the Soviet Union's were accurate, while he was studying the Soviet's economic activity by scrutinizing their electrical power consumption. The Soviet published economic figures were going up, while their EP was collapsing. He placed his faith in the Soviet's EP, and was proven correct.

I understood how easy this data could be gathered by the CIA. Attaching an ammeter to a barbed wire fence, or any metallic object beneath a high-voltage, power transmission line, at strategic locations, far from cities, is all it would take. My EP data for the United States was harder to gather, but I'll admit, not as dangerous. I had to search through 4174 issues of Barron's.

So is America's EP collapsing? Well, it's about to take out its lows of the recession of 1980-83. That was a stiff recession where the prime interest rate peaked at 21%, and the US Treasury had to offer new bonds with double digit coupons. One 20-year, US T-Bond had a coupon of 15.75% (it was delisted a few years ago). But the US T-Bond of 2014 Aug 15 is still trading and has a coupon of 12.5%. This is a 30 year bond from August 1984. The Wall Street Journal's bond table provides us with a window to view past interest rate environments we should all be aware of. After all, given similar economic circumstances, what has happened with yields and prices can happen again.

Below is a chart with EP's 52Wk M/A in a BEV Plot, with the Prime Rate as published. The Prime Rate is a base rate used in commerce, an appropriate interest rate to compare with EP.

It's alarming to see our current EP decline 4%, while our current Prime Rate is only 3.25%, and the latest US Treasury's 30 Year Bond, (2039 May 15) issued only a few months ago, has a coupon of only 4.59%. This bond now has a current yield of around 4.50%. Such low interest rates should be good for business. But in August of 2009, that is not the case.

Diving EP levels, during a period of low interest rates, strongly suggests the US's economy burden of debt has become unsupportable. This means America's interest and principal payments, are consuming our national income. Our economic decline, (EP's decline) will accelerate when interest rates begin to climb up to, and past 10%.

Few, if any, financial commentators are thinking along this line, but no past recession was ever terminated before the Fed, and the markets, forced interest rates to rise. And why were interest rates so high 29 years ago?

The extreme interest rates of the early 1980s were the result of the monetary and government's fiscal follies from the 1950-70s. American politicians refused to act responsibly for three decades. Politicians created ever larger government that reached into the private lives of individuals and private business. Keynesian social and political "scientists" supplied Washington the intellectual justifications for doing the economically unjustifiable. President Johnson in the 1960s used to tell people: "the more money we spend, the more money we'll make." Doesn't that sound familiar!

In Washington fifty years ago, (as is true today) one hand washes the other as the media sticks to the party line marginalizing dissident voices. Eventually, the Prime Rate soared to 21% as the US Dollar's "Reserve Status" was questioned in the currency markets. Barron's readers, from the 1950-80s, understood exactly what was happening.

EP declined 4.12% in 1983. The economy was in terrible shape from decades of "policy abuse" by Washington's political class. As our current problems flow from the same fountainhead, why should we not expect a similar economic crisis, one with rising interest rates? I'm just shocked seeing EP declining by 4% (and falling) before the interest rates increases are even on the horizon.

So today's situation is quite similar to our 1950-70s experience, with one exception. The internet has broken the news media's monopoly on political and economic information. I hope people reading my reports take the time to share my charts, or entire articles, with their elected representatives and national news networks. It's worth your time asking these people hard questions, questions they would rather not answer.

Holders of high office need to be put on the record, and not be allowed to plead ignorance after the crisis is in full bloom. These people are very aware of social trends, even when it appears they are ignorant of current goings on. Believe me, incoming mail & faxes from constituents is an important measurement of the public's sentiment. For things to change it takes grass-root pressure from informed citizens, who've made an effort to contact their elected public officials.

Barron's Pulse of the Economy provides data to evaluate the economy during good times and bad. I use an Excel spreadsheet to store my data, and for my graphics. Barron's publishes both GDP and EP data. I remember what that CIA analysis said about Soviet economic statistics. So I closely follow EP, but I still track GDP data in my files.

Let's dig a little deeper into the EP data. Below is the chart of EP, (Blue Plot) with its 52Wk M/A (Red Plot) as published in Barron's. The Red Plot is the data I use for my EP BEV Charts above.

Barron's began publishing EP statistics in August 1929, just before the crash. As I use a 52Wk M/A in my BEV Charts, I lose the first year, so I start the 52Wk M/A data series in 1930. It's a shame Barron's didn't publish this data starting with its first issue on 1921. Still, this is an important historical data series for US Economic activity. It's so simple! What doesn't run on electricity? Idled factories' assembly lines, the lights and appliances in vacant, or foreclosed real estate, and other items that people have walked away from because interest and principle payments cost to much to keep.

Why do I use a 52Wk M/A? Because there are 52 weeks in a year. Since the 1960s, the load on electric utilities began to include seasonal factors, such as air conditioning and electrical heating. For decades, American EP has seen peaks in power demand each winter and summer, and troughs in the spring and autumn. The 52Wk M/A smoothes out these seasonal variations.

If the peaks and troughs in EP are compared to NOAA's Weather statistics, I suspect it indicates that since 2006, the average temperature in the US has fallen. Note how the summer peaks in 2007&08 fell as the 52Wk M/A was still rising. Academics will go to the Greenland Icecap for core samples for global warming data, but somehow they have missed this.

Below we see the US electrical grid before universal air conditioning. Power consumption in the 1930s & 40s was almost exclusively for industrial and commercial purposes. In the 1920-30s, America was still a rural nation. It was not unusual for people living outside of large cities, on farms and in small towns, to use kerosene lamps at night for lighting. Our generation takes much for granted.

My last two charts on EP include a plot for US Currency in Circulation (CinC). The US broke its link to gold in August 1971. With the exception of World War 2, EP & CinC increased at about the same rate from 1930 to the early 1970s. By freeing the "monetary policy makers" from the gold standard, we see how the money supply increased faster than actual economic growth. So, more money did not produce more economic activity. However it did produce more stock market and real estate millionaires, who discovered that a million dollars didn't buy what it once did.

The Bush and Obama Administrations were, and are, Keynesian in their approach to managing the economy. Whenever a problem arose, they had dollars printed and passed them out to their political supporters on Wall Street or elsewhere. The large 2008 spike on CinC's tail end was intended to stimulate the economy. It failed.

The EP & CinC Chart below plots this data from 2003 to 2009. We can see the Law of Diminishing Returns was operating from 2003 to September 2008. After September 2008, Washington flooded the American economy with dollars as EP actually declined.

In the above charts, you must understand that as CinC increases, (Red Plot) total debt in the United States also increases as the dollar is backed by debt. Remember, since August 1971, the US went off the gold standard and is now backed by the "Full Faith & Credit of the United States Government", which is beginning to sound less impressive as the US Treasury now sells T-Bonds in the tens or hundreds of billions in a week.

Here is the problem in a nutshell. Using debt to back the dollar, it's very easy for the Fed to increase the money supply. It simply supplies the banking system with credit, at low interest rates, for bank loans. But it's not so easy for heavily indebted companies, or consumers, to service these bank loans' principal and interest payments. This is because these loans do not create wealth: they actually consumed it. There is a limit to how much debt the above Blue and Green Plots can service.

Examine the CinC & EP Plots around 1981. Only 10 years after the US Broke the dollar's link to gold, the money supply and total debt still had some connection to economic reality. In the two charts above, economic reality is represented by EP's Blue and Green Plots. So it was possible for Fed Chairman, Paul Volcker, to raise the Fed Funds and Prime Rate to 21% in 1981 without causing another Great Depression.

The above chart, spanning 1930 to 2009, also explains why the rise in the Prime Rate to 8.50% in 2006 caused an identical EP contraction as experienced in 1983: too much wealth-draining debt was (and is) being serviced by too little real economic activity. The Obama Administration's and Congress's attempts to stimulate economic activity with stimulus legislation only increased the national debt massively, while producing no real economic benefit. At best, our "policy makers" are totally ignorant of our current economic reality.

It's not just me saying this! From the Mineweb, here's a quote by Morgan Stanley.

"With policymakers around the world throwing massive conventional and unconventional monetary and fiscal stimuli at their economies, we think that it is worth exploring the black swan event of very high inflation or even hyperinflation. While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view."
-Morgan Stanley research note, via Financial Times

Increases in CinC & debt (Inflation) will eventually result in higher interest rates. Higher interest rates will result in higher unemployment and decreased economic activity, and lower consumption of Electrical Power. Following EP will provide us hard economic data of how much damage Washington's politicians and Ivy-League "economic advisors" have inflicted upon us, and our economy.

Dow Jones -40% Declines From 1885 to 2008 is the article that inspired this race of 1929 & 2007 Bear Markets. You may want to read that article to understand my "BEV Chart."

Dow Jones Industrials Average Market Volatility is the source for my volatility studies.

The Lundeen Bear Box and Step Sum is the source for my Lundeen Bear Box and Step Sum Chart

Note For the Record: Mark Lundeen does not want a devastating bear market in the next two years. However, in full view of Congressional Market Oversight Committees and under the supervision of Government Regulatory Agencies, things were done that I believe will make a historic bear market inevitable. If you have a problem with this bear market, contact Washington, not Mark Lundeen.