JUST LETTING YOU KNOW
While I was gone on vacation, the emails I got were 9 to 1 asking about the Fiscal Stiff. Many were asking about waiting to invest until the Fiscal Stiff was fixed up. And I just emailed back to everyone the same words: “Can’t blame you for sitting tight.”
Because if you think about it – if the Fiscal Stiff did not get signed, the market was probably going to react negatively. And in fact, in the days leading up to where it got done, the markets were getting hit pretty decently. Understandable.
And it’s also understandable that we all realize that we are dealing with forces in the markets that we’ve never dealt with before and on magnitude that we have never dealt with before…being the trillions of dollars of printed money. And all this stuff coming out of Washington…the constant interference…the making of crises in order to further agendas. It’s not an easy go.
So let me just cover this for a moment:
- The Republican Party has been neutered. As I have stated on my radio show, they are not Republicans. They are RepubliCONs. Even Paul Ryan, the supposed savior, voted for a deal that raises taxes and does not any do any spending cuts.
- There is a bottom line to all of this. Taxes are going up on everyone. Don’t believe it’s just on the wealthy. It’s everyone. In fact, in case you didn’t know, the payroll tax that was reduced to 4.2% in 2011-12 just expired. That’s $1000 extra tax to everybody.
- Part of the deal was supposed to be spending cuts and as I have told you on my radio show, there will be none. Now, the Republicons could have been smart and said, “Listen, you said $3.00 of cuts for every $1.00 in whatever. Where are they? We’re not signing until you do it. But the Republicons were scared of their own shadow. They signed on to anything. And the most amazing thing to watch where I was, is that the President made fun of the Republicans – even before it was signed. He spit in their face? Why? They should be. They wussed out.
- The outcome will be this: We will be in the 20s in deficits over the next four years, if not more. And more money will come out of the earners and be placed in Washington DC’s hands.
And that’s it.
The poor will not get any richer because of it.
The middle class will not get any better because of it.
It’s a scam. The amount of money they raised will run government for 3 days.
But ha! The kicker…
Remember what I’ve told you about all of this. And it was easy. If they are allowed to raise tax rates once. They are going to be chomping at the bit and they’re going to after it and there’s going to be multiple tax increases going forward.
The same day that Obama, my president, felt comfortable that this deal would be done, he was out there stating, and by the way, I’m not done yet.
He said it!
And they he blamed the Republican congress for the deficit — just completely made up.
So we have a president that has completely taken himself out of the equation that he’s been no part of the debt and has had nothing to do with the deficit. He’s at the top of the mountain overseeing everybody and you’re the ones screwing up and I’m here to save the day.
And the Republicons let him get away with it.
I applaud the President as a politician – the best I have ever seen. But, at the same time, he’s the worst I have ever seen plus Boehner (who I have been blasting on my radio show), and the rest.
So my biggest worry is that we do not have any checks and balances now because the Republicons and neutered. And they’re going to go for it.
And unfortunately, you’re going to see tax rates continue to go higher for everybody because you cannot take Federal spending from $2.7 trillion to $3.7 trillion overnight with the government never taking in more than $2.4 trillion.
Guess what they’re going to try and do?
And they’re getting it done and it will not change a thing.
Spending looks to be going up to over the next 10 years to $5 trillion a year.
So you got me on what the end game is. You got me on what the goal is.
But that’s where it stands.
Elections have consequences.
We headed into the Fiscal Cliff. The market was getting hit. The worry had to be, man if they don’t get something done here, this markets going to get hit.
Well they go something done. Don’t ask me why…the market wanted to go higher obviously. And you had a little be of a moonshot in the past day and half.
Today the market gapped up 200 and something, sat around all day until 3:30p and then it had one little mark on close at the end.
Now let me just tell you some of the things that happened today:
- The New York Stock Exchange broke out into new high ground…now approaching the highs of April 2011. Keep in mind that the New York Stock Exchange is basically in a two-year base building and looks like it’s going to attempt to break out. In the other words, the New York Stock Exchange has been hardly up in the past 23 months.
- The Russell 2000 – same thing. The Russell 2000, which finished at 873, was there in April 2011 and is now moving in to new high ground…or at least getting close.
- It’s very important that you look at weekly charts because a breakout from a 2-year range is meaningful.
- The Midcap 400 breaks out into new high ground. And again, the Midcap 400 has done nothing – you have to go back to March 2011, almost two years. So you have a two-year base breakout in the midcaps. Now the reason why the midcaps the NYSE are doing better is because they have a lot of commodity and foreign stocks in there. And guess what? Foreign markets have become strong. There is better relative strength in foreign markets than ours and they’re leading us now.
- The Smallcap 600 – same as the Russell.
- The Nasdaq – not there yet. Coming up the right side of a base. The Nasdaq is overall, stronger than most others. While all those other major indices are basically flat, the Nasdaq is up about 6% to 7% in the past 22 months. Same goes for the Nasdaq-100.
- The Dow – also on the verge. Needs a little more work also.
- The Financials broke out. Go look at the weeklies of the XLF and the IYF.
- Go look at the Foreign markets. FXI, which is the Xinhua China 25 Index, breaks out today from a 1-year range.
- The Emerging Markets, EEM, breaks out today from that one-year range.
- The EFA, breaks out today from the one year range. Those foreign markets had a lot of resistance overhead from March 2011, but they’re going to try.
I’m reporting to you news. You get to decide for yourself. But leave no doubt, I thought the market had a chance two weeks ago to make this move. And the Fiscal Cliff took it down. Now it is making the move. All we can do is keep our fingers crossed. It’s a start.
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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.