How the Fed Lost Its Street Cred
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
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or call 888.484.8220 ext. 1.
I am writing this at 10 am this morning.
The market under pressure because of a weak employment number. Frankly, I
have no idea how today finishes. Remember, this market has had 20 lives…and
would not put it past the market to put up another save…no bets for me.
Technically, here is what I do know:
Major indices were turned back at their declining 50 day moving average…a
normal place to hit a wall. I make note that the NDX broke above the 50 day and
is still holding it at this time. So…before getting over-the-top
bearish…relax and let’s let the market decide. For sure, this market has
issues…no doubt…as 6-7 out of 10 stocks are in bad shape…and the
all-important FINANCIAL area remains a wreck.
Now…on to the evidence that has been piling up.
It is my belief that this Fed has lost all credibility on the street…but
amazingly, the street continues to whine:” GIVE ME A RATE CUT…GIVE ME A RATE
CUT!” I have news for the whiners. You already have your rate cuts…and more.
The 10 year yield…which is tied to mortgages…is way down to 4.41%. On top of
that, the FED has sent in almost $half trillion in past weeks. This is on top of
the ECB and others. The problem with this FED… AGAIN…they have been
miserably wrong with their predictions. As of 2 days ago, they stated the
economy was in fine shape. So here is the FED’s record.
“Housing is not a problem…housing is fine…housing is a little
softer…housing is weaker than we thought…housing is a lot weaker than we
thought…but it won’t affect the economy…housing is affecting the economy but
won’t hurt the overall economy…well…maybe the housing is affecting the
economy.”
“Subprime lending is good for the economy…subprime is fine…subprime
numbers weakening but not worried…subprime just a small part of economy…subprime
a little worse than we thought…subprime issues worse than expected…subprime
will not affect other areas…subprime affects other areas.”
“Housing is stabilizing…housing is stabilizing and bottoming…housing is
bottoming…housing is bottoming…oops…housing worse than we
thought…housing much worse than we thought but will not affect overall
economy…ooops!”
You get the hint. The so-called saviors have been wrong at every instance.
They have been reactive…not proactive…they have been reporters of the
news…not out in front of the news…but this is who everyone wants to come to
the rescue? I don’t get it.
Here is my take now:
It remains a mortal lock the FED cuts rates by September 18th…and frankly,
we may get one sooner…even by Monday. But the FED may have a bigger problem.
Here are 2 charts…one is of the DOLLAR…and one is of GOLD. As I told you
yesterday, GOLD was breaking out…forecasting a further dollar swoon. If the
FED cuts rates…and the DOLLAR swoons, then we are in UH OH! territory…which
means the FED could be boxed in. Amazingly, 4 FEDHEADS were out yesterday
yapping that the FED did not need to cut rates.
I have been stating to you that many parts of the economy were already in
recession…meaning negative growth. I am still not so sure the overall economy
is there…but let’s just say it is now getting there.
I repeat…I do not know how we finish today. I just ask you to keep a clear
head. The market will decide itself when the FED does cut rates. As of now, we
have some retesting of the low volume bounce that has been occurring since the
lows. If we finish on a sour note today…then we talk. I am still 100% cash and
not dealing with the ridiculous ups and downs we have been getting on a daily
basis.
Lastly, I received several dozen emails about my thoughts on APPLE yesterday.
Now…APPLE decides to give back $100 cards towards new products. I disagree
with this move. I believe APPLE should have cut checks…not store credits. The
bigger issue for APPLE is that they had better get over themselves and quickly.
When a company starts to think and act like their —– doesn’t stink, that’s
the start of trouble.
Gary Kaltbaum