Oil Continues to Move the Market as Banks Flounder
Gary Kaltbaum is an investment advisor 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.
Running off at the yapper:
After the past week, please do not name any of your kids Fay. 4 days of a stagnant storm sitting over my house. Glad someone invented kayaks.
In the 1990-91 commercial real estate bust, the banks bottomed at .85 tangible book. Today, they trade for about 1.6x’s tangible book. Hmmm!
Osi is out for the season. I guess I will just have to now go and watch my Giants beat the New England Cheaters for the tenth time.
Ben Bernanke now says “a weaker economy is likely to bring inflation under control in the medium term.” This is amazing. First off, this is a man who said inflation was anchored up until about 6 months ago. Secondly, this statement is so far off base, it is not even comedic. A sinking economy has absolutely no influence on whether inflation slows. This is also the same man who said a shrinking dollar does not affect the average American because most do not buy goods overseas. I guess he forgot about what happens to commodity prices when the dollar heads south. I weep for the economy and the markets with this guy at the helm.
While on the subject of the Fed:
Willem Buiter, a professor at the London School of Economics and a former member of the Bank of England’s monetary policy committee, complained that the Fed had not demanded any quid pro quo from Wall Street in return for the enormous amount of liquidity it provided. He said the Fed had blurred the distinction between what was in the public’s interest and what was in Wall Street’s interest, describing the recent performance as “not very good at all.” Buiter said there was an acute concern that the Fed was subsidizing banks by taking their “pig’s ear” illiquid assets at “silk purse” prices. He also said the Fed has been “pathologically secretive” about the terms on which financial support is made available to struggling institutions and counter parties. THANK YOU!
Barack Obama said this:
“‘If you talk to Warren [Buffett], he’ll tell you his preference is not to meddle in the economy at all – let the market work, however way it’s going to work, and then just tax the heck out of people at the end and just redistribute it. That way you’re not impeding efficiency, and you’re achieving equity on the back end.”
HIDE YOUR WALLETS!
Cris Collinsworth interviewing Kobe Bryant:
COLLINSWORT: “Where does the patriotism come from inside of you?
BRYANT: Well, you know, it’s just our country is, we believe, the greatest country in the world. It’s given us so many great opportunities, and it’s just a sense of pride that you have, that you say, “You know what? Our country is the best.”
COLLINSWORTH: Is that a cool thing to say in this day and age, that you love your country and that you’re fighting for the red, white, and blue? It seems like sort of a day gone by.
BRYANT: Nah, it’s a cool thing for me to say. You know, I feel great about it and I’m not ashamed to say it. This is a tremendous honor.
WHEN DID IT BECOME UNCOOL TO LOVE THIS COUNTRY? I AM NOW A BIG KOBE FAN FOR BEING SO “UNCOOL!
Do you think Chris Cox is going to investigate the rumors that Lehman would soon be acquired by Korea Development Bank?
Do you think Chris Cox is going to investigate the short sellers that are plastering oil prices lower?
It’s just two more examples of selective targeting by the head regulator – where Chris Cox’s investigations target only rumors and things that do not fit the agenda! Be careful what you wish for!
More of the same in the market. OIL and COMMODITY PRICES continue to be the determining factor. As I have told you, OIL topped July 15th, the market bottomed July 16th. Last week was nothing more than a light volume “jello moving on the plate” fest… which remains very tough to play. Personally, I have done very little because my conviction is quite low on a daily basis. I am afraid to go home short because they gap you up the next day and afraid to go home long because they then gap you down the next day. The good news is that the major trends are still in place.
Notwithstanding bounces… and they had a vicious one this past week, COMMODITIES of all kinds remain in their own private bearish phase. This includes OIL, GOLD/SILVER, COAL, STEEL, FERTILIZERS, AGRICULTURE and the like. Longer term, I believe they are bullish but right now under pressure. I have been saying for some time that these areas are the TECH of the 80s and 90s.
On the other end, with COMMODITIES coming in, RETAIL, AIRLINES, RESTAURANTS and anything CONSUMER continue to have the relative bid. Off the lows, the good news is that these areas have played the 2 steps up, 1 step back routine. That had better continue. I can’t say as much for FINANCIALS.
While FINANCIALS had a better day Friday, overall, I believe they are now churning… and need to be watched carefully. I repeat… if they start gagging, the market will not have a chance. There are some names that continue to be on the morphine drip and need to be avoided… the same names I have been screaming about… Fannie Mae
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PowerRating), Freddie Mac
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PowerRating), Lehman Brothers
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PowerRating), National City Corporation
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PowerRating), Washington Mutual
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PowerRating) are at the head of the list. I am still amazed how so many invest in companies with such opaque accounting. I noticed Dodge and Cox took a 12% position in FNM. Methinks they should have called me first. But they are not the first. Many sovereign funds have been crushed buying into the financials as well as many other famous fund managers who are showing 25% losses this year.
WORLD MARKETS remain gross and continue to underperform our markets. Again, in bear markets, WORLD MARKETS most always do worse than us because they are less liquid than us.
I am taking my time. Volume is ridiculously light. Except for holidays, I believe Friday’s volume was the lowest in a very long time. This should not be on a 200-point day. But… the market has only rallied for 5 weeks. The last rally off a low lasted 8 weeks, so I would not argue that there may be more bounce to come. But if volume does not kick in, if leadership does not show up, it will be only a matter of time when the market heads back towards recent lows. Of course, this will happen while I am vacationing in Ireland in September.
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