No One Has Learned Anything
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.
I am an optimistic person. I am a positive person. I am a jubilant
person…with everything but Wall Street…and as an aside, with the Mets’
bullpen. As you know, I have been and am always suspicious of the goings on…on
Wall Street. It is still clear in my mind that Wall Street brought a bunch of
“no revenue internet companies” public even though they knew it was all crap.
Why? Because they knew they could make money. They did not care about you…the
investing public. I remember when many mutual funds changed their name to
include the words “internet” or “net” in their name. I remember when the
internet went out of style, those monikers were taken off. I remember how Wall
Street watched the accounting industry turn into nothing more than attorneys for
the companies they covered…instead of monitors of the companies they covered.
I remember every famed strategist on Wall Street telling you to buy every dip
while the market went into its worst bear market in 70 years. I have marveled at
how Wall Street parades these same people out 7 years later telling you what to
do. I remember how we were told the analyst community would change but continue
to see the buy-hold ratio at 9-1…and that’s being nice. I remember AOL
insiders saying the poor economy was not affecting their business…while their
business was heading south and the insiders sold en masse. I remember how not
one of them paid the piper on it. I remember the absolute scam that was Global
Crossing and not until years later did anyone pay any price. The list goes on
and on. I remember it all. Frankly, I may have to write a book.
No one learned any lessons from the past.
I start with the rating’s services. They are basically acting like many
accountants did in the late 90s. Instead of being the defenders of the investor,
they are becoming, if not already, the attorneys for the companies they follow.
I do not need to name names. You know who I am talking about. I found the timing
amazing last week when Bear Stearns had to defend themselves…and no more than
5 minutes later did a rating’s service come out to tell everyone everything is
A-OK in the brokerage industry. Who do these rating’s services care about
more…and who exactly are they working for?
Next…I must mention Bernanke and Wall Street. All I heard over the weekend
was how Bernanke has performed so admirably…and that the Fed has been terrific
the past few years. Yes…and Pacman Jones should get the Man of the Year award.
What am I missing? The same people who gave you subprime lending…who enabled
subprime lending…who enabled trillions in derivatives…who told you they were
good for the economy…who told you there wasn’t a problem…who have been
calling a housing bottom every 2 weeks…who waited and waited to the problem
bubbled over…are now being complimented by Wall Street…and for what?
Spending a crapload of money to save the day? Who are they now bailing out?
Yup…all the mutthounds that leveraged themselves into oblivion. Oh yeah…and
for those calling for a housing bottom, why am I finding insider selling in a
couple of homebuilding names AFTER a monstrous drop?
How about mentioning Paulson and Wall Street? How can the man who is the
poster child for leverage…continue to tell us the system is fine? Is everyone
missing the major conflict of interest with this man and where he came from?
Does everyone believe the ties have been cut? Am I the only skeptic? Only on
Wall Street is it custom to have a blind eye.
How about Beazer Homes telling everyone that the rumor of a bankruptcy was
untrue? No way…can’t happen…and a week later…whoops…accounting
irregularities. The point…they were so sure there were no problems…a week
later…yonk!
How about Goldman? Yes the almighty Goldman…everything is fine…everything
is ok…when rumors came up that one of Goldman’s funds was having big
losses…Goldman came out to say that rumors of big losses at their funds were
unfounded. Initially, when the rumor surfaced, the stock market, which was up
180 points…swooned 190 points. When Goldman came out to deny, the market
rallied 150 points in minutes. Fast forward to this weekend…WHOOPS!…Goldman
just announced a 26% loss in a huge fund. No way…no one at the almighty
Goldman would lie…would they? Nah! So…what penalty did Goldman pay for this?
What does Wall Street do? Is Wall Street investigating? Nope! Goldman just
announced another $3 billion investment into that fund. Only on Wall Street! I
am out of business if my accounts drop 26%.
Now…finally, the SEC is moving to investigate the books of a number of Wall
Street Brokerage firms…duh! Where have they been? Yes…I am sure they do
their normal investigations…but are you telling me the SEC has been fine with
the leverage we are now hearing about? Are you telling me the SEC never checked
the arbitrary pricing of some of the investment vehicles that were out there?
Gee…now let’s investigate. Now let’s investigate margin that I am now hearing
was 15-1 in some cases. Now let’s decide it is time to get to work.
I would have thought my rant would stop there. It doesn’t…because Wall
Street did it again this weekend and Monday morning. It was almost like all of
Wall Street got together on a conference call to tell everyone to use the same
talking points…and I mean everyone.
Here is what we received on Monday.
Upgrades outnumbering downgrades approximately 10-1…this is approximate and
on the low side. 2 of the fabulous downgrades were on DHI and TMA…2 stocks
that were already blasted…hey thanks! Good timing!
A slew of target raises…on stocks that were hit last week…hmmm! RIMM down
$9 on Friday…hey…we already have a STRONG BUY on it…what can we do?
Yup…let’s just raise the target to get the stock moving. Good timing!
One big brokerage is telling you to raise the stock portion of your
portfolio. Good timing!
Several sectors being upgraded. Good timing!
More buyback announcements! Good timing. Please keep in mind, most of the
buybacks we have recently seen came with the announcement that the buybacks
would be funded with debt. I wonder how many of those will get done. Also keep
in mind that most buybacks come with the wording: in the future, at our
discretion and just because we announced a buyback, does not mean we have to do
one.
Companies added to focus lists…did not see any deleted. Good timing!
Positive comments on lenders…yippee! Let’s buy some lenders. Good timing!
FINANCIALS upgraded by another outfit…yup…let’s buy FINANCIALS…! Good
timing!
That leads me to the last part of this rant. Did you read the overall
commentary by Wall Street over the weekend and Monday? Yes…there was an
occasional bear…but once again, Wall Street sees no problems. It is all
“contained”…”overdone”…overreaction”…”hiccup”…”short-term blip”…”won’t
affect the economy”…”value”…”cheap”…”the Fed is doing the job”…in other
words, everything is fine. Get back to business. The DOW is headed for
16,000…housing is bottoming…the economy is great…the consumer is in
force…no downside risk here…and life is good.
Please understand I have no blood in this game. If you have ever listened to
my radio show “THE INVESTOR’S EDGE”…which you can listen to at www.garyk.com,
you know I have a deep desire for level playing fields, fair play and everything
else that goes along with it. I am not a dummy. I am not naive’. I do recognize
that Wall Street has only one goal in mind…and that is to keep markets going
up…and when markets should go down…to keep them from going down. Some of the
things I am now seeing scare the heck out of me…and I only need to use the
goings on of the past week to show you what I am talking about. The good news
for Wall Street is that they have history on their side. The bad news for you,
the investor, is that when we do hit a rough patch, you will get absolutely no
help…and if this market ever goes into a bear market again, a real bear
market, you are on your own. So far, we have seen a nominal correction in the
major indices…but have seen some serious bear markets in many sectors.
I expect more hedge fund losses and more mortgage problems to bubble to the
surface. Whether or not they affect markets…well, we will just have to see. As
an optimist, I am now sitting back, continuing to keep my list of leading stocks
that have held their ground during the recent deluge. In my past studies, I have
found that stocks that have held up best during market drops, usually lead when
the ugly ends. Most of these companies I follow have strong earnings and strong
revenue growth. Currently, I am eyeing names like ANAD, BIDU, WYNN, AMZN, ISRG,
RIMM, VSEA, GRMN, CSCO, NOK, SPWR, UA, FAST, PCLN, CMG, MR, CROX, ILMN, NVT,
SIGM, CMI, HPQ, BIIB, CY, MOS, MBT, VIP, FMC, POT, APPL and GLDN. I am also
watching the OILS like a hawk as they have led both up and down. I would love to
see the market calm down here. I would love to see the market just sit a little
here. Right now, most charts look like a 3 year old who scribbled on a sheet of
paper. Near-term, markets are way oversold. Near-term, while opinions are only
bullish, a lot of news has been all bad. I gather we can bounce from here. I
will know a lot more by the tone of the bounce.