Markets moved slightly higher in early trading Tuesday on the news that European Union leaders are taking steps to finally start delivering Spain a lifeline worth around $120 billion.
The EU says it will make more than $35 billion in emergency loans available to Spain by the end of the month to help shore up the banking sector in Europe's fourth-largest economy. Will the aid to Spain finally help move the needle to improve Europe's ongoing debt crisis?
David Kotok, chairman and CIO of Cumberland Advisors, doesn't think so. And as of 11:30 am ET stocks were indeed in the red. The S&P was down 0.19 percent, and the Dow lost 0.13%.
"This latest twist in Spain is a speck," says Kotok. "The problems in Europe are not being solved. The peripheral economies are contracting [and] you're still running deficits, which are expanding the debt."
Kotok has a history of being generally bullish in the face of stark headwinds. As recently as this spring, Kotok told The Daily Ticker that "weakness and turmoil" were good for stocks. But these days, he has grown more cautious as Europe continues to fall apart, the state of China's economy remains a question mark and most worrisome of all, for him, is the growing political uncertainty in the United States.
"These characters that we put in office in Washington give us no certainty and no confidence," he says. "They are busy squabbling with themselves. There is a reason Congressmen are as popular as scorpions."
As Kotok explains in the accompanying video, he turned bullish last fall but took a more cautious approach this spring when the global economy hit a "rocky period."
"We are holding a cash reserve right now because we think we are going to have some bargains ahead," he says. "I don't want to be fully invested when I believe a downdraft can provide entry opportunities."
Kotok is uncertain of where the S&P will end the year, but he's reaffirming his two-year price target of 1550 to 1600 by the end of 2014. "I still think we can see 1550 or 1600 two years from now if the idiots in Washington don't derail it," he says.
He also stands by his recommendation to overweight ETFs in consumer discretionaries and homebuilders, and now he's throwing the banking sector into the mix.
"This LIBOR scandal and other scandals have made banking, generally speaking, for sale at a fire-sale price," he says. "You can buy the whole banking system of the United States below tangible book value. There will be a banking system, and we will use it and it will make a profit."
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