“The sea was angry that day my friends, like an old man trying to send back soup at a deli”
To set the record straight, the market didn’t just top out in the past few days. The market had been topping out for weeks as more and more stocks and sectors started breaking down…as the leading indices, the NASDAQ and the NDX led down…as earnings and sales growth were anemic…as many glamour names were cracked…as more and more stocks “blew up” after reporting earnings…and just recently, as a few groups that were holding up, namely the FINANCIALS finally fell under the weight of the ugly.
To get the short term out of the way…markets are stretched, extended and oversold here. Put buying has spiked indicating finally, many are turning bearish. The permabears are now coming out of the woods. So…shorter term, a bounce is overdue…even a strong bounce. Keep in mind, a bounce does not have to happen and keep in mind, oversold can just become more oversold…and so far, bounces have last hours…not even days. But the norm is for the market to work off these conditions by bouncing, making people feel better…and then after the oversold conditions are relieved, the selling continues. But the important point is that the short term is the “trees”. The more important is the “forest” and that is the major breaks in the market. Every major index is now clearly below the all-important 200 day average. Volume has been heavy on the down days, light on the up days. Frankly, we can go on with the negatives but the main point, the market remains in a corrective mode and would not fight it…but shorter term, would not rule out a decent bounce. A lack of a bounce just tells you things are REALLY weak.
That leads us to the con game.
To be about as blunt as possible, we continue to be amazed at how this administration is getting away with getting others to perceive they have no fault in the fiscal situation this country is in. Ok…yes we do. It is the paws in the air, panting lapdogs of a con artist national media that has no use with the facts…just in the protecting of an administration…and it is sickening to watch.
We have told you for a few years that the con game was to spend us into oblivion first and then come for the money second. We have told you that massive government spending enabled by a maniacal fed, combined with the inevitable plea for higher taxes based on the “fair share” syndrome will only serve one purpose…and that is to put up massive headwinds in front of the economy and to block the ability of this economy to reach its full potential. The anemic economic numbers prove this all out and watch what happens if they get their tax policies passed. You are now seeing a doubling of the ‘ask” as proposed tax increases just went up 100%. On top of that…THERE WILL BE NO SPENDING CUTS! There will only be a cut in the rate of the growth in spending. This is the con game foisted upon us not just by this administration but by both parties. This administration has just perfected it. There is no tax problem in this country. Revenues into the treasury are back to almost all-time highs from 2007-08…but spending is up over $800 billion since 07-08…accounting for most of the yearly deficit. Of course, you can thank the Obama stimulus as it was just added to the other con game…baseline budgeting where the numbers never go down.
So…bottom line…there is nothing good about higher taxes and higher government spending. Telling the country you will cut $4 trillion in spending in the next decade but not noting that spending has already been marked automatically to go up over $10 trillion is the con game. Only in Washington is that called a cut.
We have told you we do not want to be in the market when it decides to ignore Mr. Bubble (Bernanke). We have told you that anti-business, higher tax policy would just taunt markets until markets finally pull out a certain finger and raise it into the air. Notwithstanding bounces, we think the reaction may just be at hand.
As usual, we have no clue how long a bear phase lasts or how deep it goes. We just know when we are in one…and just sit back and look for signs that the market is first defending itself and then shows the juice to make a big turn…and not just a bounce. Maybe Mr. Bubble will announce QE50…print $50 trillion and just buy up the whole S&P.
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.