Thanksgiving week tends to be seasonally strong for equities but that is not the case this year. As of Tuesday, U.S. stocks erased the bulk of the gains for 2018 and bitcoin crumbled to the lowest level in more than a year. At least the New York Giants won two in a row.
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As we discussed back in December 2017, despite high profile fans and some talking head investors who say the virtual currency is a long term fundamental story, we don’t buy it. In fact, some of these frequent cable talkers may have been touting this con all the way up and all the way down.
Unfortunately or fortunately, the "bitcon" is unwinding again. We took pains in telling you since last December that all these coins would turn to dust. Yes, we used the word "dust." Of course, a bunch of scammers came out with more and more coins, adding up to about 2,500 coins. You knew there was trouble when the Democratic bastion of Venezuela came out with a coin or how that great investor former NBA baller Dennis Rodman came out with the "Potcoin." No, we did not make this up. Of course, that coin is down about 97 percent and try selling any of these coins. Most coins are now down in the 90s with a bunch already going bye-bye. On top of that, most of the bull crap companies that changed their names or mission statement to crypto are no longer trading.
Kids, this was just another Fed-induced con/bubble that was always going to crack. It was just a matter of time. All one had to ask was what economic value did all these coins have? It is not the first con/bubble and won't be the last. It is your job to recognize it the next time it occurs. As we have said time and time again, these tout artists will put a bid on a leaf from a tree and tell you to buy it. There is no conscience.
Unfortunately for bitcoin and other assets, broader markets have worsened again. The hope by many pundits and strategists is now starting to dwindle, always an outcome of falling asset prices.
The biggest problem markets continue to face is the continued meltdown in everything that bid the market up for so long. As we head into the Thanksgiving holiday, the Dow Jones Industrial Average and the S&P 500, are now negative for the year, with the Nasdaq Composite right behind. Market leaders, such as Apple, now sit in a bear market, off about 20 percent from the October record.
Everything continues to trade below all longer-term support. Foreign markets are also being compromised. Before the rest of the market cracked in early October, we were telling you for months how almost half the market was already bearish. It is these narrow markets that are the most vulnerable when the real selling shows up. We are now seeing the outcome.
We are also now seeing what the market telegraphed in advance. Not only are some foreign countries announcing contractions, such as Germany which just reported third quarter GDP that contracted 0.2 percent. We are now getting some serious downward guidance out of corporate America biggies as well. Take Target for example. Shares lost over 10 percent on Tuesday after its same-store sales fell shy of some estimates, despite the holiday season teeing up.
In commodities, things look bleak. U.S. WTI oil prices took a 7 percent chop, perhaps another sign slowing of demand.
Despite the piling up of bearish signs, there may be a light at the end of the tunnel. The Federal Reserve will be done in December despite what they’ve said about rate hikes planned for 2019 and the "data they are so dependent on" will likely force their hand or not?
Looking for money ideas? Defensive areas continue to have the best relative strength while the “risk” areas continue to sell off. In bearish phases, Dow-types and defensive areas will hold up better, but even they will not be immune as we go through the nausea process. We continue to urge caution and to not listen to all the "cheap, value, overdone, capitulation" crowd.
Price is much, much, much stronger than opinion and price continues to speak loudly and clearly. In fact, price is now shouting...unfortunately. And lastly, a memo to President Trump, Larry Kudlow and Steven Mnuchin...if you are going to comment on the markets...just say "corrections do occur and fundamentals longer term are fine"...and then shush!
Gary Kaltbaum is a registered investment advisor with more than 30 years of experience in the markets. He is owner and president of Kaltbaum Capital Management, a financial investment advisory firm headquartered in Orlando, Florida. He is a Fox News Channel Business Contributor regularly appearing on Fox News Channel and the Fox Business Network. Gary is the author of the book “The Investors Edge” and is also the host of a nationally syndicated radio show with the same title “Investors Edge” which is broadcast on numerous stations across the U.S.