The Market Does What The Regulators Could Not
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.
Greetings from IRELAND. Beautiful country and friendly people. Having a blast playing 9 rounds of golf in 7 days.
Notice the word “could” in my title…not “would.” I do not blame the regulators. Trust is a big part of the securities industry…and there was no way they could have known how bad things actually were.
There was no way they could have known that these financial imbeciles were hiding the massive losses. I do not give them a full pass…but I am now understanding that numbers reported are numbers reported. The good news is that I think the regulators are livid…and don’t think they are going to sit on this. Expect many indictments in the months to come…many famous names.
The market did its job of taking care of the companies with massive losses by sending many of these money losing companies into low single digits. No…I am not happy that so much money is lost and so many have lost jobs. But I am a big believer in the market…and the market is speaking loud and clear. None of this happens if the market had not sniffed out all the problems. This is why I listen to the market.
The market clearly told me in March of 07 that FINANCIALS started to underperform. The market showed me there were problems with the breakdowns and the leading down by FINANCIALS. The study of the market told me the groups that lead a bear market down will go to levels unfathomable. And here we are. I am gratified that so many of you have emailed me telling me you stayed out of this carnage. Unfortunately, I am still amazed how so many tried to find the “value” buying into WaMu
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PowerRating) at $7, Fannie Mae
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PowerRating) at $6…including many famous mutual fund managers that have now seen their funds drop 30% plus. I guess this is just another lesson learned about “how low is low!”
I would like to say this is the culmination of things but that would be saying things are close to ending. I don’t think so. My best guess is there is a few more to go. Why? Because the market is saying so. Just look where Merrill is trading off the “supposed” $29 buyout.
The bear remains in full force in spite of the nonsensical bottom calls every time we have had an up day. New bull markets carry certain characteristics with them…and as I have told you…I have seen none. There isn’t any leadership. There isn’t any volume on the up days. World markets are plunging. More and more stocks are breaking down…and when the market has an up day, it is fleeting and sold off soon after. This is not hard to figure out but Wall Street always has a bullish bias and has never seen a bear market coming until the market is down over 20%.
I have been asked to give targets on the downside…but I refuse. All you need to know is what the major trend is. Where it stops…nobody knows…in spite of all the target talk. Just keep in mind that it is quite normal for the major indices to drop 30% in a bear…worse in a big bear. 30% would take the DOW below 10,000…and maybe…just maybe that would cause the type of panicky selling that sometimes marks near-term lows. Be careful of capitulation talk. Be careful of bottom calls. It is better…much better to be a little late than to be too early. Why? Simple…and as I have told you for years…the last days of bear markets usually have the most vicious selling. I think we are now starting to see some of that panic. We are getting there but believe there is more to come.
Other thoughts:
I noticed Obama blaming Bush for all this. This is irresponsible and an out and out lie. What we are seeing was caused by bad people who made bad bets and hid those bad bets until they were found out. All this derivative caca started way before Bush…under both Republican and Democratic administrations. This has nothing to do with tax cuts or anything else under the sun. Of course, Obama’s grand scheme to fix things is to take money out of the successful and give it to the government…great idea!
Quote from someone on bubblevision today: “This is a victory for the markets!” I DON’T MAKE THIS STUFF UP!
Quote from John Thain: “Things run in cycles!” Hey thanks! Genius at work!
Shut Alan Greenspan up!
The Fed does their thing tomorrow…I would rather they do nothing but suspect a half point may be in the offing. Of course, this is the easy money policy that Greenspan espoused that caused this problem in the first place. I have no clue how the market reacts to anything the Fed says or does in the near term.
I remain 100% in cash and only looking for the short side on bounces. That said, it has been very tough to play anything with the news, the noise and the constant gaps to the upside.
Gary Kaltbaum