About 6-8 weeks ago, I started to believe the economy was stalling out. A couple of weeks later, the commodity areas topped leading me to believe I was correct. Since, we have received nothing but worsening news on the economy…and may I say, the numbers may be worse than I even thought. This morning’s employment numbers were flat out horrid for this part of the cycle.
During this time, I have been telling you the internals of the market had topped leading me to write reports entitled “THE LEDGE!” I just did not believe markets could take too much more distribution without buckling into a bigger correction, akin to last year’s 12-20% downdraft. I stated this every day on my radio show as well as my Fox News and Fox Business appearances. Several times, the market held support. We then came into this week with a big gap to the upside and a good finish Tuesday. Well, that was nothing more than an end of month mark up as the market immediately was sold off. Futures are now way down this morning and we will once again get to see if the market gets defended. Needless to say, the worsening outlook trumped the falling dollar. As I have told you, the Fed has a weak dollar policy in order to bubble up assets. It has worked on the market but unfortunately, has had other repercussions.
The ledge is cracking…simple as that. The big big worry is that the FINANCIALS continue to act like they did in 07. I do not think it is ever good when FINANCIAL stocks are getting hammered. I want to stop it there on the markets. You have an idea what I am thinking. I would rather talk about my worries. I think there is so much bad out there that has been ignored because the markets have gone higher…thus the title of this missive.
I remember telling Neil Cavuto back in 06-07 that the bear market in housing would last a good 10 years. After all, the last bear lasted 10 years. The problem this time is that we are coming off the biggest housing and construction bubble in history…thus this one may take even longer. It does not help that the dimbulbs in Washington continue to come up with programs that do no good and only forestall the inevitable. Imagine, lowering principle and giving out taxpayer dollars to buy houses. Jefferson would have loved that.
Where and how did we get to the point where a politician who wants to cut the deficits is called an extremist? How did we get here? I blame a lapdog mainstream media who call people racist, stupid extremists just because they disagree with an administration that has no intentions of doing anything about $14 trillion in debt…$5 trillion of that number because of this administration’s pen. Of course, I also blame most of the 535 politicians that have been in office and causing the deficits to swell. We all now know there has been no accountability in both parties. It has just been a cesspool of lobbying, cronyism, waste and everything else that goes along with it.
$800 BILLION DOWN THE DRAIN
That ridiculous spending program couldn’t stimulate a moose in heat. All stats bear this out. It is normal to have 5,6,7% GDP numbers coming out of recessions. We had one 5% number because of inventory build and nothing but lower numbers since. The spending did nothing to grow the economy and is now something that has to be paid back. It makes me ill every time Krugman opens his yapper saying we need more spending. Of course, when Bush was Pres, he said deficits will kill the country. He had it right the first time.
EMPLOYMENT…OR LACK OF
Why would anyone hire when they hear the President say he will raise taxes next go round? Why would anyone hire when they don”t know what the cost of hiring will be? Why would anyone have confidence in a healthcare bill when the Pres. lets all his buddies out of the bill? Why would anyone hire when they see that the regulatory books have gone up markedly? These are simple but important questions.
THE FED…OR SHALL I SAY THE KEYSTONE COPS
Let me get this straight. Let’s keep rates at zero so consumers get zero on their savings. Because you keep rates at zero, the dollar is squashed. Because the dollar is squashed, commodities soar…which in turn makes consumers pay more for everything. So…pay more for everything while receiving nothing on your money. Now that is a recipe’ for success.
This guy is a Treasury Secretary? Let’s forget the fact Geithner was the man who was overseeing all of Wall Street before they imploded. Let’s forget his tax problems. That’s all in the past. What is not in the past is what this man said in the past couple of weeks about raising the debt ceiling. And I paraphrase…Mr. Geithner stated our standing in the world and our debt rating would be better if we raised the debt ceiling. I repeat…this man believes more debt helps your debt rating. And you wonder why I am worried.
At the risk of being called a racist with the millions of others who believe government should be accountable and deficits lowered, this President is everything I was worried he was. He is a talker…he promises but does not deliver. I could go through a litany of things but the short form is that he stated he was fiscally responsible, would not treat taxpayer dollars as monopoly money and believes in free enterprise. Unfortunately, he is the opposite. His policies are the opposite of what has made this country great. He is a big government politician, the biggest in history. I warned anyone who listened to beware of those who spend us into deficits and then come knocking at the taxpayer’s door. Well, we are there.
The bottom line is that there are not enough taxpayer dollars to cover all the wishes of these out of control spenders. They want to and have literally turned this country into a nanny state where half the country pays for the other half. The incentive is to stay out of work because they will take care of you (with taxpayer dollars) when the incentive should be to work. They have designed things to where they make enough people believe they can never get along without government largesse.
Well…all this largesse crowds out the real engine of the economy…private business. Capital is flowing away from the private sector into the government’s coffers…where they do one thing well…waste. It is not a reach to believe what I have been saying. All these over-the-top policies will eventually affect markets in a not-so-thrilling way. I stand by my mantra. If they don’t stop, eventually, the market will stop them. So far, none of this has been an issue because markets have gone up. It will be an issue if markets go down. THE LEDGE! I will have more on the market on Monday. I want to see how today finishes. I recognize the Fed is still out there with their funny money.
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.