That Was No Correction
Gary Kaltbaum is an investment advisor
with over 18 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
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or call 888.484.8220 ext. 1.
In answer to all the questions why I am writing
less right now, it is simple. I do not have much to say as the market continues
to do its thing. In fact, my last report can be today’s report. In my last
report, I stated the market was due for a correction. In that report, I cited
several reasons. First and foremost was the ridiculous amount the DOW was
extended from short-term moving averages. Secondly, I highlighted the
underperformance of small-caps…specifically the RUSSELL 2000. Thirdly, I
highlighted two areas that remained weak…the RETAILERS and the REITs. Well,
the DOW is still extended, the RUSSELL 2000 refuses to budge and THE REITs and
the RETAILERS remain in suspect shape…especially the RETAILERS which have been
breaking down badly. So how has the correction done? Since that report, the DOW
is up 2.5%, the S&P is up 1.5%, the NASDAQ is up 1.5% and the RUSSELL 200 is up
1.5%. I know corrections. Corrections are a friend of mine. That was no
correction.
The bottom line is that so far, the market
continues to inch higher in the face of lower GDP, in the face of
HOUSING…which has not bottomed yet, in the face of horrid RETAIL sales and in
the face of the mortgage mess. The bears are out every day telling everyone that
all these negatives will eventually grab the market. My take…as always, I will
let the market decide. I still remember crappy internet companies with billion
dollar market caps…still double and trouble even though they did not have any
sales. If the market decides one day to react to all these “negatives,” we will
know it as major indices will break support and or moving averages…and will
not rally back.
I did want to talk about all this “bubble” talk
we have been hearing about when it comes to the market. Either these people are
doing the double hits on the bong or nipping at the rum candy. First off, I have
never seen a bubble that was talked about so much. But more importantly, our
market is up 6% this year. I repeat…6%. From the 02 lows, it is averaging in
the mid-teens. How this equates to a bubble is beyond me. If you want to know
where I believe the bubble is…it’s in all the “private equity” buyouts we have
been seeing as well as the crooks coming out with their “rumor du jour” of the
next buyout. I use the term “private equity” loosely. It is just a marketing
term for what really is a leveraged buyout…piling on debt to buy out
companies. There is so much money being sent into these buyout firms that they
dont know what to do with it. Even the buyout firms are now going public. How’s
that for hypocrisy? I believe in a few years that we will look back at all this
private equity buying as the dumb money and the Sam Zells of the world as being
the smart money. These people are now buying up companies with a fervor 5 years
off of a market low. Where were all the STEEL buyouts when they were 80% lower
than they are today? And what will happen to all these debt-laden companies if
the economy one day goes into a recession? Just food for thought!
Gary Kaltbaum