Step 1 to Economic Recovery: Admitting You Have a Bear Market

July 14, 2008
Gary Kaltbaum

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.

Wow, big news this weekend! Angelina and Brad had twins! Whoops… wrong report!

Everything I have been warning you about in our nauseating financial industry chiefed by the greedy… is now coming to fruition. I hope you have been listening. The latest debacle is Fannie Mae
(
FNM |
Quote |
Chart |
News |
PowerRating) and Freddie Mac
(
FRE |
Quote |
Chart |
News |
PowerRating). I noticed a few analysts downgrade them in the past week. You need not have listened to them as a few very savvy people saw this coming in advance…anyone ever heard of Jimmy Rogers? FNM and FRE have been “insolvent” for years. I know Dodd and Paulson were out last week to say fundamentals were fine. If they were fine, why the rescue? Everyone needs to know that FNM couldn’t even report their numbers for two years because of all the fraud. Just add this to another in the long list of cesspools caused by the the over-the-top greed by people who unfortunately will get away with all the spoils while an unwary public loses their rear ends. This did not have to happen if Greenspan had done his job and if the regulators were not asleep at the wheel. Again, everything you are seeing happen is the result of ridiculously easy credit… brought to you by Greenspan. I am not so sure I blame Bernanke that much as I think the box was already there for him to be in.

I have no clue what happens here but if the market is indeed smart, then we are going to see a slew of bank failures over the next year. I have no clue which but just start scanning smaller to mid-size regionals that have dropped 90% plus and you have your list. The news is going to be fluid and the action in the market will be all over the map. Speaking of all over the map, did you see Friday’s action? The ramp late in the day was caused by a Reuters report quoting a “source” that the Fed would come to the rescue. The Fed then disavowed the report. So… who is the source? And why is this person not going to jail? There is too much of this going on right now… and it warmed my heart to read that the SEC is now going to go after the rumor-mongers in strong fashion starting now. Rumors are started for one reason… agendas… and it is about time someone takes these slimeballs to task.

As far as the market, you need not have me tell you what is going on. The only good news is now there is a realization of the bear market by the masses. Bear markets do not end until this occurs. But that doesn’t mean it is close to being over. I am hearing talk that average bear markets are only down a little bit more than what we have seen. Well… what if this bear market is going to be worse than average? After all, we have not seen a credit crisis like this one… EVER! We have not seen a housing crisis like this… EVER! So… be careful of that talk. Let the market be your guide and as of now:

I am down to a select few groups doing well here:

GOLD continues to shape up as it comes up the right side of a 4-month base.

On the negative side: EVERYTHING ELSE!

WORLD MARKETS have been crushed with the all-important FTSE back to late 2005 levels.

How about this little nugget? There have been more new yearly lows than highs on the NASDAQ 170 out of the past 174 trading days with the NASDAQ ADVANCE/DECLINE in all-time lows.

OIL STOCKS are now underperforming the oil prices. Many are now below the 50 day average while OIL is at new highs. Something to watch.

Past leading STEEL STOCKS also are in a topping process and would now get a little more defensive on them. They are overowned and overloved… so I would step lightly.

As far as the short term for the market, anything is possible. The market remains oversold but it is telling that that condition has not led to any rallies. I gather we get one eventually. But that would only work off the extended, stretched and oversold condition before sellers show up again. I would continue to be defensive as possible. I have been in cash since I saw the market fail at resistance at 13,000 and feel darn good about it.

Again, I hope you have been listening because the market has been speaking loudly and clearly.

Step 1 to Economic Recovery: Admitting You Have a Bear Market

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources