Margaret Thatcher Was Right
Gary Kaltbaum is an investment adviser 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 click here or call 888.484.8220 ext. 1.
“The problem with socialism is that you eventually run out of others people money.” – Margaret Thatcher
For all the talk about the “Scamulous” bill, I find a couple of things very interesting.
Not one of the people who are being interviewed, whether in government, whether in this administration or the whether in punditry land…got the economy right over the past couple of years. Not one of these people that are making decisions on this “Scamulous” bill saw any of this coming…but now they are geniuses on what is needed? Have any of you looked at this bill? It is nothing more than a massive expansion of government? Government is the con man and you are the target and they are getting away with it. Why? That leads me to part 2 of my thoughts.
I noticed one question not being asked. It is a simple question. It is an easy question. A question that should be asked whenever someone goes on a spending binge. WHO AND HOW ARE YOU GOING TO PAY FOR THIS? Why isn’t this question being asked? After all, this is the only question that matters. Here is the easy answer…and you are not going to like it. Regardless of what Obama says, all of our taxes are going up…and they are going to go up farther than anyone imagines. You are going to see tax rates back into the 50% plus range. You are going to see them go up under the guise that “we have no choice!” These decisions are being made by lifetime government imbeciles that brought us to where we are. These are the same people who voted to allow the investment banks leverage up 30-1 and higher. These are the same people that defended FNM and FRE while they were bankrupt. These are the same people who forced banks to lend more and more to people that could not afford payments. These are the same people who voted on the TARP plan to nowhere. These are the same people who for the most part, have never run a business or balanced a checkbook…or paid their taxes! We were all warned about this many years ago. Thomas Jefferson had it right. I expected this out of the Dems. They have to fall in line behind Obama. Senators Collins, Spector and Snow should just hang it up.
I never usually write on a Friday unless I see something change. At the beginning of the week, things were dicey as many stocks were breaking down. When I started to see things hold, I took notice. When I started to see the COMMODS turn up again, I took notice and when I saw the employment numbers not hit the futures, I knew something was up.
Currently, the DOW is down approximately 41% during this bear market. Both the NASDAQ and S&P 500 are down 45%…these are amazing numbers…and even more amazing because major indices had a very good week. During this bear market, we have seen AIG, FANNIE MAE, FREDDIE MAC, LEHMAN, BEAR STEARNS, WACHOVIA, MERRILL LYNCH and INDYMAC go bye-bye. Arguably, CITIGROUP, MORGAN STANLEY, BANK OF AMERICA and others would have followed if not for government intervention. We have also seen GM and FORD shrink to next to nothing. We have seen the big casinos drop 95% under a mountain of debt. We have seen preferred and corporate bonds of these companies drop markedly. We have seen GE drop to near single digits because of their massive leverage. We have seen COMMODITIES drop anywhere from 75-90% along with their underlying stocks. We have seen CIRCUIT CITY close…BENNIGANS shut 600 restaurants, STARBUCKS close 1000 stores…and on and on and on.
Estimates are such that 100,000 plus retail stores will shut in ’09. We have seen millions of jobs lost. We have seen the curtains come down on many criminals like the Madoff saga. We have found out that many so-called pundits (booyah!) were nothing more than media creations. We have seen it all. The best news for us is that the market saw it all coming in advance and this action gave me a head’s up.
I suspect we will continue to see bad news for the foreseeable future…but for the past 18 weeks, the market as a whole is no longer plunging on all this bad news. Is this good news for the market? Potentially yes. As I have told you on numerous occasions, I know that bottoms in bear markets happen over time and near the same price. In other words, a process. For the past 18 weeks, the market has been hit with a barrage of this bad news but the 8000 DOW, 1450 NASDAQ and 800 S&P continue to hold. On top of that, I am now starting to see the average stock start to outperform the indices which is often a precursor for higher prices.
The market is now in a confirmed rally and for the first time in what seems like a very long time, my ears are pinned back and now looking for things to do. Remember, the market saw all the bad coming before the bad hit. There is no doubt in my mind, the market will see the good coming before the good happens. In no way am I calling a final bottom or a bottom…just letting you know that the market continues to defend itself at support.
I am watching COMMODITY stocks closely. My thought process is one-fold. If COMMODITY stocks go up, the market has a chance. If they don’t, the market has no chance. This is because higher COMMODITIES would mean the economy is slowly coming out of its doldrums. Time will tell. I am also paying close attention to the FINANCIALS for obvious reasons. I have never seen a good market without FINANCIALS participating. Remember, it was the underperformance of the FINANCIALS in early to mid ’07 that clued me in that something was amiss. I do think BAC was on the verge this week…and then news of the latest bank save was leaked out.
I am also watching the fact that the NASDAQ is outperforming which is potentially a good thing as I have always believed the NASDAQ is the leading index…but right now, I am watching everything because there is so much going on underneath the hood. I know we are now in the midst of the scamulus, I mean stimulus package…as well as another save for the ailing banks. I know markets are going to be news-driven which will continue to cause gyrations based on all this nonsense. I will be paying more attention and close attention to the supply/demand equation that did not let me down in the bear market. Let’s hope support holds and let’s hope this market has factored in all the bad that is out there and is to come. It is about time.
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