Gary Kaltbaum is an investment adviser with over 25 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investors Edge. Mr. Kaltbaum is also the host of the nationally syndicated radio show “Investors Edge” on over 50 radio stations. Gary is also editor and publisher of “Gary Kaltbaum’s Trendwatch”… a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary’s Daily Market Alerts click here or call 888.484.8220 ext. 1.
Greetings from beautiful Kauai. Wish you were here. As usual, whenever I travel, the market is smoked. Sorry…not my fault. But before I get into the market, as usual, I must discuss things outside of the market.
You see, markets are about confidence…and frankly, I am not so sure there is much confidence right now around the globe. For sure, there is a clear lack of confidence on our shores.
It is bad enough that Europe is in disarray. The fact is they have finally figured out you cannot pay people to retire at 60. You cannot pay people to have 3-4 weeks of vacation. You cannot just give out bucks from cradle to grave. They are finally figuring out you need the bucks to do all this and the bucks have run out.
The good news is that Europe is figuring these things out. They are taking the measures that must be taken…and that is to balance the books before spending. Not sure if that will do the trick but they are on the right track.
Unfortunately, this country is going the opposite way as this administration has been actually lecturing others about spending more. Almost too funny. So you want to know about confidence? Here is confidence…OR LACK OF!
Since day one, this administration:
Has put down almost every aspect of business. Doctors perform procedures that do not need to be performed because they want to make more money…insurance companies doing nothing more than ripping you off…banks are just out to squeeze everyone dry…Wall Street is corrupt…oil companies rig the oil markets in their favor…Wal-Mart treats employees badly…police racial profile people…I can go on and on.
According to many in this leadership and administration, all business is corrupt…except if you give enough campaign bucks. You get the hint. But of course, at the same time this nasty rhetoric is yelped, they tell us how pro-business they are.
How about shutting Gitmo? That was a done deal. Nope…now saying not until much much later.
Anti-war? Nope…30,000 more troops.
The most transparent administration ever? I won’t even go there.
The most ethical? (cough!)
“We are fiscally responsible!” Sure you are! Yeah…that’s the ticket!
A health care bill costing $1 trillion…THAT WILL CUT THE DEFICIT? (Doubling over in pain!) Of course, not one legislator even read the bill…
How about this great quote on the recent banking bill?
“It’s a great moment. I’m proud to have been here, No one will know until this is actually in place how it works. But we believe we’ve done something that has been needed for a long time.”
That awe-inspiring quote comes from the almighty Chris Dodd. Gee…I feel better.
And how about tax policy? Well…tax rates going up…dividend rates going up, estate tax going up, capital gains going up, state rates going up. How about all the floated trial balloons which I gather will be on the table after the fake deficit commission comes out with their findings?…of course…AFTER the November election.
How about a VAT tax, millionaire tax, millionaire surtax, bank tax, cigarette tax (oops, that’s already happening in some states)…a tanning tax…Medicare tax on passive income…cell phone tax…tax on driving…limiting deductions on charitable contributions and others…I am sure somewhere in there, a social security tax was mentioned. How about Hillary [Clinton] going to a South American country and saying the rich don’t pay their fair share? Yes…that will instill confidence.
Then we get good old Steny Hoyer!
“Tax cuts that benefit the middle class should not be ‘totally sacrosanct’ acknowledging that it would be difficult to reduce long-term deficits without breaking President Obama‘s pledge to protect families earning less than $250,000 a year.” Yes Steny…that will instill confidence. You mean under $250,000/year will also be called the “privileged few?”
And that leads me back to the President because he was out in force in the past week instilling more confidence at the G-20 meetings…saying he was serious about tackling deficits…yes…at the same time telling Europe to do more deficit spending. Huh? Is there any wonder confidence continues to wane?
That leads me to the last and most ominous part…and that is what the President also said while mentioning he was serious about tackling deficits, he added that it would involve presenting Americans with “some very difficult choices” next year.
Kids…hold on to your wallets as unfortunately, everything I told you…is now occurring. They spend recklessly into massive deficits and then AFTERWARD, they come after us. They are going to try and raise taxes in a major way and the market knows it.
Confidence is a huge huge huge intangible for the markets and for business. Business has very little confidence because of the uncertainties of higher taxes, massive regulations and mandates. Markets have no confidence because markets have ears, eyes and a mouth. The mouth is talking about how you shouldn’t spend recklessly and for sure, you should not be taxing recklessly at times like this.
And did I forget to mention the laugher…cap and trade (tax)…which does nothing for no one…oh yes, except for the Goldman’s of the world who get to trade carbon crap.
As far as the markets:
In my last report, by rule, the market was in a confirmed rally but I took pains to tell you that it would not be easy…that to expect more nauseating gaps and reversals…that many stocks and sectors were still in bad shape…that any move up would be narrow…but that it would be respected until distribution rears its ugly head.
Well…in the past few days, just that has happened as distribution has shown up leading to this lovely Tuesday. On Tuesday, markets were obliterated on a supposedly weakening China and a plunge in guess what? Consumer confidence! Looking back, all markets did on the recent move up were to move up into the declining 50-day moving average where they all failed badly.
Many stocks and many sectors are now moving back into new low ground…some breaking down out of bearish flag patterns. The 50-day moving average has crossed below the 200day on the NYSE and is approaching the same on all other major indices. NEW LOWS picked up markedly on the day. It is scary for me to see how all the important CONSUMER areas continue to be bludgeoned to the downside here…as this tells me the economy indeed hit a wall recently and is now going south again.
The most important numbers you need to know are DOW 9750-9800…S&P 1040…NASDAQ 2140…which was taken out Tuesday. A serious close below and look out…potentially inviting big money technical selling. This would be the 4th time the 1040 area was visited and typically and unfortunately, the more tested, the eventual will break below as support gets worn down.
I wish I had better news but it is what it is. Confidence counts. I am afraid the latest people in power have earned no confidence whatsoever. I have said on many occasions…watch what they do…not what they say. I do not like what they are doing. Most importantly, business and markets do not either.
At this point and as stated in last report, about the only group (area) hanging in is GOLD…which is more of a defense trade. A couple of other defense areas also hanging in there like AUTO PARTS RETAILERS but that’s about it.
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