When Brokers Top, Markets Follow
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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“Federal bank regulators announced a crackdown on
loose lending standards on subprime home mortgages as two major lenders
struggled to cope with losses and regulatory problems.”
Ain’t that terrific. As usual, after the problems
occur, the police come to the rescue. Where were the regulators when the lenders
decided to turn mortgages into a Sunday trip to Rooms-To Go to buy a couch and a
cocktail table with no money down and payments deferred to 2010? I’ll tell you
where they were…asleep at the wheel. Ladies and gentlemen, this is classic.
Until there is a problem, there is never a problem. Why? Regulators follow the
stock market. Unless people are losing money, everyone is happy. Once people are
losing money…then the regulators act. What do you tell Aunt Mary and Uncle Bob
who have no money in the bank but were still given a $250,000 interest-only no
down payment mortgage on a house that went up 75% in price over a three year
period and is now down 10-15% from where they bought it? It is my contention
that the lenders are at fault for shirking their fiduciary responsibility to do
the right thing in letting unwary people sign into mortgages that Einstein
couldn’t even figure the paperwork out. And oh yes…a gentleman by the name of
Greenspan said just 18 months ago that these types of mortgages were good for
the economy.
My stance has not changed. Until we see at least
one up day and then a follow-through day, we are in a bear phase of unknown time
and price. At this juncture, none of us know whether this will be a correction
like last year…which basically turned into half a bear market or a real bear.
Normal bear markets, historically, last up to 9 months. The 2000 bear market was
one that comes around every generation. My job is to sit back and let the market
decide. I do want to make note that any bear market could be stifled by the Fed
as there remains no doubt in my mind the Fed will lower rates at thefirst
inkling of problems. The problem at that time could be the dollar as it has
already been a problem. Should be fun.
Before I get into the technical issues the market
faces, there is something definitely eating at me…and that is the almost
universal complacency and the “don’t worry” attitude by market pundits. It was
almost like it is blasphemy for the market to go down…and downright impossible
to go through a bear market. This reaction is just a few years removed from the
worst bear market in 70 years. Here is just a little taste from last week’s
move.
Cheap…cheap…value…value…value…overreaction, overdone, overdue,
anomaly, buy, buy, buy, buy, buy, buy with both hands, short-term event, should
be over in days, healthy, healthy, bottom, bottom, bottom, bottom, selling
climax, capitulation, capitulation.
Well…you get the hint. I must say I was quite
surprised that except for a couple of permabears calling for the end of the
world again, not one person even considered the possibility that this first move
to the downside was the shot across the bow that will lead to much lower prices.
I am not saying any of these permabulls are wulls are wrong. I am just saying
they are going to lose you a heck of a lot of money when a real bear does hit.
It is my job first to protect you in bear markets because not many on Wall
Street have that interest. It is just more pom-poms.
Technically, the BROKERS did it again. Every time
they have topped in recent years, the market followed. I am quite proud we were
able to point this out just days before the market gagged…and quite proud of
making the call of a top at noon this past Tuesday. So…pick a chart…any
chart. We have nothing but high volume tops whether we are talking US, Russia,
Taiwan, Emerging Markets… Uptrends have been violated on basically
everything…and to be clear, the potential for lower prices is there…in spite
of the silly rhetoric by the always-bullish Wall Street. Shorter-term, I would
suggest markets are already extended and oversold to the downside but just
remember, if this is a bear phase…OVERSOLD CAN BECOME MORE OVERSOLD. Just
remember, if this is a bear phase, all the rules have changed. No longer is good
news bought up…but sold down. No longer can the crooks on Wall Street try to
goose their stocks to the upside by floating a rumor of another buyout. No
longer can the tout artists yell and scream at you at this stock and that stock.
No longer do calls of a bottom create a bottom. Bottoms are created by
themselves. Every leading stock is now getting klonked. Klonked is not a good
word. You know where I stand.
Gary Kaltbaum