We have posted an end of year webcast. All proceeds will go to the Boys and Girls Clubs of Central Florida. To receive the link, sign up at garyk.com. The webcast describes and defines the year 2015 and goes through all the bearish action we are seeing while showing all the calls we made on all the bear market areas that showed up this year. Do not miss it.
“JANET YELLEN IS WAY BEHIND THE CURVE”
By Gary Kaltbaum
Fox News Business Contributor
“The first thing that Americans should realize is that the Fed’s decision today reflects our confidence in the U.S. economy!”
We were amazed. We could not believe it. After months and months of teasing, after months and months of going back and forth, after months and months of saying maybe, possibly, could be, Janet Yellen takes this time to announce that she is finally confident in the U.S. economy. Why amazed? It’s because while Ms Yellen has become her most bullish on the economy, markets are their most bearish on the economy. This simply reminds us of Mr. Bubble Bernanke and all his protestations in 07 that housing was fine, the economy was sound and subprime issues were contained.
Let us be clear on this: WE BELIEVE THE MARKET IS A LOT SMARTER THAN ALL OF US. THAT INCLUDES YOU, ME AND JANET YELLEN. Unfortunately, Ms. Yellen depends on her “data dependency” which simply means ” we really don’t know but when the numbers finally come in, we will let you know!” The problem with that is by the time the numbers come in, it is usually too late.
While Ms. Yellen is now an economic bull:
For 18 months, we have been telling you commodities of all stripes were in a bear market indicating a worldwide slowdown in demand. This is no longer a garden variety bear market. This is the definition of a deflationary bear market.
For the better part of a year, we have been telling you that the average stock had topped out, indicating a narrowing of the market.
For nine months, we have been telling you that the advance/decline figures in the market had topped out.
For six months, we have been telling you that retail was now in a bear market. For lack of a better word, retail stocks are crashing. Something is not right when so many retail names are down 30-50%!
For 10 months, we have been telling you that the Transports had topped out and are now in a bear market. They continue to melt down even though oil prices continue to melt down. Transports should be benefitting from lower oil prices.
For nine months, we have been telling you that the junk-bond market had topped out and have now entered a bear market indicating the bubble had popped. Easy credit conditions are now not so easy. We had been telling you for two years that the biggest central-bank distortion was in this area.
For seven months, we have told you that the China bubble had popped as the last move up was a classic climactic move. China continues to try and keep markets up by threatening, manipulating and actually arresting those who do not follow the script.
We can go on and on. The fact is the market is speaking loudly and clearly about the shape of things to come while NOW Janet gets bullish on the economy. There is just no way to spin what we are seeing in important areas like the Transports and Retail and square them with a strong economy. Over 70% of the market is already in a bear market. Bear market areas are commodities, air freight, rails, truckers, farm machinery, industrials, everything retail, construction, machinery, autos, hotels, housing, everything healthcare, metals, mining, steel, copper, aluminum, coal, manufacturing, fertilizers, finance, leisure products, restaurants, drug stores, gaming, electronics, investment banking, media, broadcasting, apparel, utilties, agriculture and many others. We did not even come close to mentioning all the bear market areas nor the bear market countries.
We do not pretend to be Milton Friedman but we are damn good at understanding what markets are telling us. We believe the markets are telling us the economy has topped. We believe the markets around the globe are saying the same thing. On top of that, we believe sales and earnings will continue to head south and be suspect. We believe valuations are too high. We believe aggressive accounting and too many buy backs have made things better than they really are. We believe deficits are out of hand. We believe government spending is a joke. We believe there are problems that are rotting underneath the surface but Janet is now bullish. With any and all due respect, we believe Ms. Yellen is totally behind the curve about what markets are saying. We do not think it mattered much, if at all, that she raised rates but think it matters that markets are sniffing out that they do not have much of a clue and are now losing control of asset prices.
Our big worry has always been that these maniacs at the central banks are great at two things…creating bubbles…and creating meltdowns which are the outcome of bubbles. We are worried that each Fed bubble is bigger than the previous as they have to continue to cover their arses…and the pop of the bubble worse than the last. We are worried with so many areas deflating, it’s just a matter of time before the bubbled up asset prices do the same. What has been a somewhat stealthy bear market may be getting very close to making itself more apparent. All it would take now is for the major indices being held up to break down…and late last week, they started that process.
Watch these levels: S&P 1993, NASDAQ 4870, RUSSELL 1108…all last week’s lows. A break below leads to more ugly.
Small caps and to a lesser extent, mid caps continue to woefully underperform the large caps. This has been going on for a while.
The narrowness continues to remind us of the “nifty-fifty” 72-73 market and not unlike 1999 and 2007. Narrow markets are not bullish.
We have not had a decent bear market since 08. This is too long between bear markets telling you how much influence 0% rates and the printing of trillions has. The longevity of the bull has caused excessive froth and speculation, too many IPOs and secondaries, assinine mergers and of course, too much leverage and debt.
The Transports are actually at closing yearly lows.
There are hardly any sectors that remain in good shape. Recent strength has been in defensive areas like beverages, household products, water utilities and the like. These are the recession-resistant areas. Excited?
New high/new low figures have been horrendous. When the NDX was in new highs recently, there were over 300 new lows. As we stated, we are not sure we have ever seen such a divergence.
Financials are starting to roll over badly. This is to be watched closely. If they go, market goes.
We are starting to see some toppy action in the narrow names that have led. If they go, market goes. We are talking the Amazon, Google, Netflix and all that stuff.
We are now heading square into the holiday with markets somewhat oversold after the past couple days nauseating drop. Bounces can happen at any time during this supposed seasonally strong period. But with so much damage being done, we expect any rally to be at best, a “C” rally! Our bigger interest lies with January.