Too much money chasing too many stocks: Kramer

Kramer Capital Research's Hilary Kramer tells Reuters' Fred Katayama she sees some sell signals in the market. But she says bank stocks are still reasonably priced and poised for further gains.

Video Transcript

FRED KATAYAMA: Stay-at-home stocks driving the NASDAQ north to yet another record Monday. How much higher can they run? Well, let's ask Hilary Kramer, Chief Investment Officer, Kramer Capital Research, and the author of this timely new book on companies with game-changing technologies or disruptive technologies, a book called "GameChanger Investing." Welcome back, Hilary, and belated happy new year.

HILARY KRAMER: Oh. Fred, thank you.

FRED KATAYAMA: Well, Hilary, you know, stocks-- they just keep going higher and higher. We've got GameStop going crazy today, jumping up from $65 to $144 a share at one point before settling back. What is going to keep this market on this upward trajectory? Or is it time for it to take a plunge?

HILARY KRAMER: The Federal Reserve has committed to keep those rates at 0, like, for infinity. OK, so as long as it's rates at 0 forever, we're going to still see that stock market continue to rise. Ultimately-- and we're seeing all these warnings coming out from the big investment banks, from sell-side research, which is the big story really of the day, which obviously is in lockstep with the Bed Bath and Beyonds and the Fizz sodas and, of course, GameStop.

But the stock market will see the bubble come out. Something always happens, and the froth will come out. Ultimately, we all have higher targets on the year than we stand right now. And we see where we're going to come back. But the market just naturally has to, you know, shake off all of this irrational exuberance, to take a great line from the great Greenspan. That will happen.

Now, we've seen this rotation back to tech and out of value for the past two weeks-- even out of financials, which were doing great. That is a sign of some concern in the market that the confidence isn't necessarily there. Also, the 10-year US Treasury-- everyone really needs to watch it. It seems like what does it really mean, but it means a lot. We were almost at 1.2%, and now we've come back down. So that means that's also a sign-- there's a little concern in the market out there that there might-- because people are buying the US Treasury, so the yield goes up, and the price goes up. And people start buying, which they're doing.

The problem, though, is that there is just too much money out there chasing too many stocks. So for the investor, you just can't try to jump on the horse while it's running loose out of the corral. And that's what's going on. You're going to get thrown off.

FRED KATAYAMA: So at this moment, do you see any outright sell signals?

HILARY KRAMER: I do. And not talking technicals, even though we do technicals. The sell signal is when truly everyone in the world, including the person who is doing my hairstyling, you know, in every store, walking down the street-- I just came back from both Colorado and California, and people are coming up to me on airplanes talking to me about stocks they should buy. A lot of them are $1.57. That means the market is at a high, and you have to be careful.

The biggest concern to me that will be, that will ignite, you know, the deflation of this balloon is when President Biden announces true corporate tax increase. When that happens, that changes all of our models. It just literally means the value of stocks will go down. And the reason that tech stocks stay high and go up is they always find a way to avoid paying as much corporate taxes than other kinds of companies, you know, that have real cost of goods sold.

I mean, there's a big difference between 3M and Honeywell and Apple and Microsoft. And talking about them, we have Apple and Microsoft reporting later in the week, and that's going to be very important. Apple just hit another 52-week high on expectations of new gadgets coming out in 2022. But that's going to also lead the market or bring the market down, depending on what they report.

FRED KATAYAMA: Hilary, after this huge appreciation we've seen both in value stocks as well as tech stocks, if you've got money on the sidelines, are there any sectors or particular stocks that you can afford to buy now that's reasonable?

HILARY KRAMER: I say buy those financials. Buy Citigroup. See, we think that that has taken a step down. JP Morgan, JPM-- the banks are making money. Now, Goldman Sachs, which you and I have been talking about--

FRED KATAYAMA: Your favorite.

HILARY KRAMER: You know, you've never gotten bored having me end every segment saying, buy Goldman Sachs, buy Goldman Sachs. And that's been going on 123, 150, 170. You know, and now it's double of where we started talking about it, but there's still opportunity with Goldman Sachs-- GS. Get the dividend yield, and Goldman Sachs should hit $300 a share because the banks are in that sweet spot. With all the money, you know, trade-- all that money out there, trading volumes are up. Financing is up. Mergers and acquisitions are rising. All of these SPACs, these special investment vehicles, and then, of course, the restructuring-- I think Goldman Sachs and the big banks are going to benefit incredibly from restructuring-- it means there's going to be bankruptcies out there.

FRED KATAYAMA: All right, Thanks a lot, Hillary. And yes, you've been consistent on Goldman Sachs. If the one word I get, it's financials. Thank you. Well, thanks to Hilary Kramer of Kramer Capital Research. I'm Fred Katayama in New York. This is Reuters.