JUST LETTING YOU KNOW
I was in my office today and there was a special news report where they cut to them bringing back the four people who were murdered in Libya. And now we are watching – I don’t even know how to describe what we are seeing – people running into the street burning our flag, chanting death to America.
What did we do? They’re blaming it on a movie. I can’t fathom what these people are doing or thinking or what the deal is. But I got to tell you something. If this president wins again, in 53 days—he probably is going to have to reevaluate—what’s next?
It never changes. I think was 13 years old when I read a story about terrorism in the Middle East and about people wanting to destroy Israel. And we’re many years later and we’re reading the same story. Only the players have changed.
I don’t know.
This was an interesting market. Let’s review. Bernanke was telegraphing the fact that he was doing more printing of money and little did we know that he would take the nuclear option which was to not only print more money, but to print a massive amount. And he use term “open-ended” almost like forever.
This simple did one thing: Juice assets. When you have a fixed amount of assets, but an increase the amount of money that chase those assets, the asset prices go up. It is a face of life. And that’s what you have here. The stock market is an asset.
The Fed is still printing $45 billion a month on this operation Twist, so it’s $85 billion a month. I don’t think I or any of you can fathom how much money we’re talking about and that’s affecting markets. But it is.
And it’s my contention that markets were going to break down until the Fed and the European Central Bank stepped in.
I got a lot of emails today:
Do you think we can get a stock bubble?
Let’s define “bubble.” 1999 was a bubble. Housing was a bubble. What is a bubble? It’s when everybody will sell everything else to buy that area because they know it will never drop. They do not care about price, time, or valuation. They care about nothing except the fact that something’s on the move and they will buy even though it’s tripled…quadrupled already. And they pile on and pile on. That’s bubble. I’m not so sure we’ll get it. Keep in mind valuations on the market are reasonable I think. And it takes a lot. I’m not sure the conditions are there. But I will say this. We’re now going into the 13th year of the secular Bear and that may be enough.
As I have told you, the secular bears last up to 16 years. Some of them lasted only 13. So maybe, we’re starting a new secular bull.
Fundamentally, I don’t see how we can based on $16 trillion in debt, which will be $21 trillion in four years. Just my opinion. The maybe big time inflation coming. Maybe it’s already here. But we’ll see.
Last week the market broke out of range. This week, because of the Fed, the market extended those gains and had what I would call, “a panic buy commodities” – the worst areas of the market.
And let me be clear on something. If the Fed had done nothing, I think we would have been down 400 to 500 points.
Again – fixed amount, print new month – prices have to go up. And that’s why it doesn’t help the economy. If commodity prices go up, the cost of everything to do everything goes up, especially oil prices prices, which today were $99.
So when you see $4 a barrel…blame Bernanke. Simple as that.
Can turn into something bubblicious? Well this week was a bubble. The moves we saw in some of these commodity names were bubblicious. And of course you had some moves in housing and financial. Why? Because you can keep interest rates at zero, but you can lend at a certain level and if you’re being told it’s going to continue for years, it helps your margins.
By the way, in case you didn’t know, the bond market was trashed today. Yields skyrocketed today which is the opposite of what Bernanke wants.
The good news is that we’re still at 1.87% on the 10-year and 3.088% on the 30-year and that remains very low. The job right now is ride this out for all its worth. Watch for distribution. Watch for changes. Watch for things which are not keeping up with the market and acting poorly. And stick with leading relative strength and growth areas.
We’re having a contest. Name the Dow at the end of the year. We’ll give out a $1000 in cash to the three. You’ll have until next Tuesday night. You just have to email me at GaryK.com what you the Dow will be at, at the end of the year. I just need your name and the city you’re emailing from. That’s it. If you want to put your phone number, that’s fine.
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Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.