Weekend report!

It is that time of the year when we think of others during the Thanksgiving season. The 13th annual Kaltbaum family Blessing’s Banquet will be held this Wednesday, November 16th at the Universal Club of the Boy’s and Girl’s Clubs of Central Florida. We will be gladly serving another 400 youth a bountiful Thanksgiving dinner that mostly otherwise would not have one. We are not 100% sure but we do believe our rusty abacus says we will go over the 5000th meal served. For those living in central Florida, if you would like to join in and volunteer for this great event, you can email me at gkaltbaum@kaltbaum.net.

When last we left you, major averages responded very well to the election of Donald Trump. We outlined for you those areas. From our last report:

“THAT HAS NOW ALL CHANGED. Instead of higher taxes, the economy awaits lower taxes. Instead of more regulations, the economy awaits less regulations. Instead of more uncertainty about what is next to hamper growth, there will be certainty that policy will only give growth a tailwind. Instead of business owners worried about their expense side, they can now think about their growth side. Instead of the whole business world worried about the continued sucking sound of the government’s vacuum, it now thinks about government being a partner by getting the hell out of the way.

We believe the economy has already changed for the better. Business owners have heard the message from the new administration…polar opposite of the previous administration and the polar opposite of what was to come from the next administration. We are already on the way. Just ask the market.

As far as markets, we will not say definitely because markets are fluid, but so far, markets are voting with both hands.  Every sector that we have told you that were being preyed on by government, had their biggest week in ages…IN SPITE OF ALL THE DIRE WARNINGS FROM 370 CELEBRATED ECONOMISTS AND SOME MARKETS WRITERS WITH AGENDAS. Financials on the thought of the assinine Dodd Frank going by the way of the Dodo…Pharma/biotech because of freer markets, construction/industrials because of the hopeful promise that someone will actually come through on the upgrading of infrastructure and on a stronger economy…defense stocks on the rebuilding of the military…restaurants on the relief of the threat of more mandates on health care and wages…coal which speaks for itself as the effort to destroy the industry was non-stop. We still know markets have a lot to deal with but this was a good start.”

Before we get to talking the good again, one must recognize that this market is about “what good is very good but what is bad is very bad!” On the bad side, major weakness continues in the bond market as long rates continue to skyrocket. This has kept everything interest-rate sensitive in their brutal bearish phase. This includes utilities, reits and housing. On top of that we continue to be bearish on the consumer staple area (but not drugs anymore as the election changed that). This includes food,beverage,tobacco and household products. On top of that we remain bearish on gold/silver as they have now broken even the longer-term 200 day moving average support. We also remain bearish on many other areas including Apparel,chemicals,gaming, a ton of other healthcare, a bunch of retail though there has been improvement with this recent move higher.

On top of that, emerging markets are submerging. Emerging market debt and junk debt is being sold. We have been bearish on bonds for many weeks as bonds turned down back in June.

We remain bearish on bigger cap tech/internet as the beloved names of Amazon, Google, Facebook and quite a few others remain under pressure and have seen nothing yet to change that stance. This has caused the Nasdaq/NDX to underperform.

As far as the areas that benefited the most from the election:

Financials of all stripes are extended and are in need of a pullback. Doesn’t mean they will as Friday, they all opened lower and closed higher. This includes big banks, medium banks, small banks, S&Ls, lenders, brokers and the like. The Russell jammed to the upside as it is laden with smaller banks.

Defense stocks also jammed to the upside. All extended and in need of a pullback.

The same for machinery, industrials and insurance. All need pullbacks but again, we may have seen a giant sea change here and with most these areas dead for a long while, we may just be seeing the early stages of a move in these areas. As usual, we will let the market decide.

The Semis had a huge day Friday but on earnings. They remain bullish. If financials and semis remain strong, there is little chance major indices get in big trouble. Just realize this is about as bifurcated (hate that word) market as we have seen in a long time. Stay on your toes.

Lastly, we have been saying for 24 months that the Fed would not raise rates and only once was disappointed. We now believe it is almost a lock rates are raised in December as the market as well as longer-term rates have given them the go-ahead.