BY GARY KALTBAUM- JANUARY 18, 2021
We did not want to title this missive “the worst of all worlds” so we just called it an update. But let’s describe what is happening in real time.
The same people who created massive bubbles which started popping last February are still running the show. These same people do not even think there was bubbles and that there still are bubbles.
The same people that printed trillions of dollars, screwing savers while bubbling up crazy asset prices are still running the show.
The same people that created a lot of the inflation you are seeing are still running the show.
The same people that said inflation was not a problem are still running the show.
The same people that said inflation was transitory are still running the show.
The same people that are a major cause and now watching oil prices skyrocket and longer term rates go vertical are still running the show…and still haven’t made the moves necessary.
A president that actually proposed the idea to tax unrealized capital gains is still running the show. Unrealized capital gains? Yeah…that will work.
A president that initially proposed a whopping $6 trillion of new spending is still running the show.
A president that proposed massive tax increases as we try to come out of a pandemic is still running the show.
A president that slows and jawbones oil production here but begs OPEC to raise production is still running the show.
A treasury secretary…don’t get us started on this treasury secretary…the supposed guardian of our treasure.
And back to those same people who have boxed themselves in like mixed nuts. A man that every time markets gets in trouble, he eases. But this time, he can’t. He can’t ease because that would just fuel inflation even more. Boxed in like mixed nuts because he is the creator of all this. We warned you almost 2 years ago about what could happen if he was forced to fight the distortions he created with tightening. We may be at the moment where he has to tighten into a major slowdown.
On both last Monday and Friday, the market defended itself with big reversals. The all-important NASDAQ reversed off the longer term 200 day moving average. It had better not break as it would just add to the market’s woes. Today’s open will be another test.
ENERGY and FINANCIALS remain the relative strength with ENERGY more than just emerging. Not sure ENERGY prices going skyward is a good thing. REGIONAL BANKS the strongest of the FINANCIALS with some important names gagging on earnings. Goldman being the latest.
10 year up to 1.825 % this morning, forcing Mr. Powell’s hand even more. Higher rates are not a good thing at this moment. The man should have already stopped printing and already raised rates.
SEMICONDUCTOR-equipment ridiculously strong on a relative basis but others in the group not so much. You already know about the obliteration of higher beta growth names while recently, the market has finally come after most of the mega-cap names that have so much influence on the indices. The DOW amazingly remains above the 50 day but in range. The S&P is just below. Small caps remain dead.
Earnings season. We suspect some good will turn bad and some bad will turn good. We’re still in January. Again, today’s open another test, most importantly in the NASDAQ. We can never predict strong reversals but know strong reversals have occurred on a number of occasions from bad opens.