What Did You Expect?

Gary Kaltbaum is an investment adviser 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.

So…what did you expect? Did you expect anything different? You voted them in. You voted the people in who said they would be transparent while not even having enough time to read the largest single bill to add to the deficit…in history. You voted in the guy who said we need to be careful but rushed this humongous bill through. You voted in someone who says this bill was urgent while 60% of the spending does not go into effect for months and months down the road. You voted in the guy who said he wanted to be bipartisan while telling the opponent he won. You voted in the guy who wants to move the census into the White House. You voted in the guy that was above it all but he hires Geithner to oversee the IRS and fix the world. This from a guy who oversaw LEH and BSC. Yes, I feel better!.

You had their record…but I have to tell you. I don’t blame them. The fact is that they inherited a pile of turd. I blame the Republicans because we couldn’t get here without their help. We couldn’t get here without a so-called conservative named Bush who did not know how to spell the word VETO…a man who spent $1 trillion on Iraq with a lot of that money missing…a man who gave away taxpayer’s money to the tune of $750 billion to the bad guys with TARP 1…in other words, TAXPAYERS AGAIN RAPED by POLITICIANS.

I don’t blame them because the Republicans that are blasting this bill set the precedent by watching the past 8 years of spending and watched the TARP get passed. I don’t blame them for using scare tactics because that is exactly what the last administration was famous for. The new leadership is just following in their footsteps. And of course, we couldn’t get here without your votes. You knew who were running both houses. You knew where this president stood. So here is what you get…first a couple of quotes:

U.S. Rep. Emanuel Cleaver, a Missouri Democrat – “Regardless of party, we all cast our votes with one hand and crossed our fingers with the other.”

Sen. Frank Lautenberg (D-N.J.)- “No, I don’t think anyone will have the chance to (read the entire bill).”

One key Democratic staffer saying the lobbyists received the bill first: “K Street has the bill, or chunks of it, already, and the congressional offices don’t. So, the Hill is getting calls from the press (because it’s leaking out) asking us to confirm or talk about what we know – but we can’t do that because we haven’t seen the bill.”

Don’t expect the media to help. Imagine if Karl Rove was moving the census to the White House! That would have been fun to watch. After all, didn’t you know Rove caused the bubonic plague, leprosy and global warming? Now…the media say nothing. I would have just loved to see what the media would have done if this bill was rammed through by Bush, Cheney and Rove. This bill was rammed through in days. I believe Reagan’s bill took 8 months to get through…but the media is tight-lipped. These important media watchdogs were panting like little doggies this weekend at this fabulous win for this administration and loss for the opponent. When Bush spent, the media whined about deficits…now deficits are a necessary evil.

Now…how about about a little spending?

$5.5 billion for making federal buildings “green”

$1 billion for administrative costs and construction of National Oceanic and Atmospheric Administration office buildings

$2 billion for manufacturing advanced batteries for hybrid cars

$2 billion for a FutureGen near-zero emissions power plant in Mattoon, Illinois

$600 million to buy hybrid vehicles for federal employees

$307 million for constructing National Institute for Standards and Technology office buildings

$650 million for the digital TV (DTV) transition coupon program

$500 million earmark for National Institutes of Health facilities in Bethesda, Maryland

$522 million for construction for the Bureau of Indian Affairs

$1.2 billion for summer jobs for youth

$500 million for wild land fire management

$412 million for Centers for Disease Control headquarters

$800 million for constructing Federal Prison System buildings and facilities

$200 million for public computer centers at community colleges and libraries

$750 million earmark for the National Computer Center

$850 million for Amtrak…that’s been a profitable company!

$100 million for lead paint hazard reduction

$275 million for flood prevention.

Keep in mind, some of these may have changed a wee bit not much.

But don’t worry, that’s all the chump change stuff…at least that’s what they are telling us. Chuckie Schumer says you don’t even care about a little pork! Well, just don’t blink because the big stuff is going to come. THIS IS NOTHING! You are now going to see the start of a major rollback of welfare reform. How about them octuplets? You are now going to see the start of government taking over the health care system. You are now going to see a major takeover by our government in places you cannot fathom. A precedent gets set…and look out. Be careful what you wished for…you are now going to get it!

For me, it is simple! Government spending of this gargantuan amount will be financed one of three ways: higher taxes, issuance of more debt or printing money…and let me be clear, all outcomes are bad…maybe not tomorrow but eventually. Yippee…yeah…yeah! So mark these final words down…because I have almost had it writing about these politicians who are economically illiterate as well as the Bernanke/Geithner/Paulson numbskulls who could not find Mount Everest if it was sitting in front of them. Mark these words down. YOU ARE GOING TO SEE TAXES GO UP FARTHER AND HIGHER THAN ANYONE COULD IMAGINE…you have just elected people that do not trust you with your money, who believe it is their money first and that they have all the answers and that you are dummies.

Just remember, the new president said these words, “THIS WILL NOT BE THE END…THIS WILL BE THE BEGINNING!” And if you want a tease, here is what Cal-ee-forn-ya is proposing: Their legislative package includes plans to raise the state sales-tax rate to 8.25 percent from 7.25 percent; boost vehicle license fees to 1.15 percent from 0.65 percent of the value of an automobile; add 12 cents to the per-gallon gasoline tax; reduce the dependent-care tax credit to $100 from $300 and impose a surcharge on income taxes of up to 5 percent. Love that word SURCHARGE!

Go ahead…send me the hate mail. I have news for you. I can’t stand either party at this point.! Next up, Geithner and the latest bank save that will not work! Channeling Ron Paul!

We are now in a period of time where Washington DC has a say in everything on a daily basis…including the markets. You did see the 200 point pop late Thursday when someone leaked another housing save. Get used to it. It is politics that is now dominating the markets and it is politics that took advantage of the situation with the scare tactics from both parties. Washington is just more of the same borrow and spend that got us into this position in the first place. What do the markets think of this? You are seeing it.

Not much has changed! Most major indices are walking a tightrope near their bear market lows and while the lows are still holding for the 18th straight week…but while some areas are improving, most are not…and while a lack of sellers is holding things up, there remains zero buying conviction. So let’s pick it apart.

The DOW is weakest. MEGA-CAP MULTINATIONALS are not doing the job. Also, in the DOW, there are several names that remain on the morphine drip like CITI, BAC, GM and others. I expect the DOW to continue to lag. The NASDAQ/NDX remains the strongest here but be careful. These two indices continue to be held up by a few big cap tech names. We have seen this before. The day those names top, good night. These names include AAPL and GOOG which for me are nothing more than value stocks.

COMMODITY names continue to hold their lows…with some are trying to turn the corner as they build secondary bases off the lows. Just be careful. I am hearing too many bulls on these names even though they are still down 50-90%.

Except for GOLD/SILVER, SCHOOLS, BIOTECH and a couple of stragglers, the market remains in poor shape. Several times in past weeks, it felt like the market was going to try something…before experiencing more distribution. I remain in 100% cash this year…flat on the year after staying whole during all of last year. Until I see the real characteristics of a new bull market, I remain cautious and now worry we could get another leg down soon as the markets just cannot take more of the nonsense we are seeing on a daily basis. Remember, it is not just about earnings…which are horrid…but about trust…and frankly, a clear lack of trust remains.

Finally, I am of the opinion that in the near future we will see a forced bankruptcy of GM as well as nationalizations of some banks. I am hoping this is already factored into the market but not sure.

Disclaimer: The opinions expressed herein are those of the writer and may not reflect those of Wunderlich Securities, Inc. or any of its affiliates. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.