IF THEY DON’T STOP, EVENTUALLY THE MARKET WILL STOP THEM, PART 5

For the past 2 years, I have been writing reports with the same title on several occasions. Simply put, if they didn’t stop the deficit spending, there would eventually be a tipping point…and it will be the markets that stop them. It is my take that the markets have finally had enough. Politicians around the globe kept taunting the markets with their out of control spending ways…we may now be seeing the outcome. This is not just about the U.S. but around the globe. It is my take that the recent debt ceiling shenanigans finally showed the markets that nothing was going to get done. Let’s spend $10 trillion more over the next 10 years and then cut $2.4 trillion and call that cutting spending? I DON’T THINK SO. But it doesn’t matter what I think. It matters what markets think. Markets are fighting back across the globe. Debt hurts. Gargantuan debt that can never be paid back…killls! It amazes me to watch some say we haven’t spent enough. They need to be muzzled. Again, please recall that Lehman, Merrill, Wamu, Countywide and Bear did not go out of business.

The markets put them out of business.

As far as the markets, I have been telling you for months that there was a good chance we were in a big topping process. But nothing bad happens until the 50 day gets taken out. It was taken out. I then told you that if the 200 day gets taken out, it would invite heavy selling indicating the market was giving up. It was taken out and as you can see, it invited heavy selling…with hardly any let-up. I have also told you I expected a 15-20% drop from the highs akin to what happened last year…but would re-evaluate if we get there. We are getting there. I must now tell you that due to the market having a bull phase of over 2 years, that just may be it for the cycle and a “Wall Street” bear market will occur. For me, a bear market starts when indices break the 200 day. Most of Wall Street use the 20% threshold. No thanks.

The tape is a mess. Except for GOLD, everything has tuned down and turned down badly. Again, at any moment’s notice, the market will experience violent bounces, some last hours, some lasting days. We saw one yesterday. Be very wary of those calling the bottom on every up day. They did it in the last bear…and they will do the same again. The market will decide when it wants to turn back up…not someone’s opinion.

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.