Which Bank Is Next?
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.
Today, Barack Obama will be inaugurated as the next President of the United States. If Obama is just 10% of what the media and the celebrities are making him out to be, I expect housing prices to triple in the next year and the Dow go to 20,000. Don’t know if you have been watching but these celebrities and mainstream media have completely lost their minds. Obama is a man…not a God…but you wouldn’t know it by some of the things coming out of the mouths of these people. I am in hopes he is wise and in hopes he is a great President. I am rooting him on and will do my best to help out as I have already approached the administration with some ideas as well as to appear on my radio show whenever they want.
“Nothing contributed more to the budget deficit than the tax cuts for the wealthiest people in America!” This out of the mouth of Nancy Pelosi in an interview broadcast Sunday. Understand that tax cuts did not cause any problems…tax cuts just let people keep more of their money and out of governments slimy hands. Please note that the government’s revenues were the highest ever in the past 2 years. So…how did they cause higher deficits? It seems like we are now going into a system and economy where if you work hard, do the right thing and do well, you get taxed more…but if you commit unspeakable acts of stupidity, leverage, hiding losses, killing your shareholders, destroying your employees’ wealth and arrogance…you get hundreds of billions of dollars. What is wrong with this picture? You tell me!
Understand the problems we are seeing in the financial sector were caused by the financial sector…when you have too much power and too much money in too few hands…and all leverage their balance sheets 30-1 plus…and that leverage was based on one asset, real estate…there is only one eventual outcome. Of course, they had help. They had an approving government because without government’s demands to loan more and more people who could not pay back those loans and without government’s turning a blind eye towards regulating this nonsense…this does not happen.
Leave no doubt that whenever I went on TV and whenever I said on radio and whenever I wrote in these reports that FINANCIAL’S losses were much, much more than being told and these stocks would go farther down than anyone could imagine, little did I know how bad things really were. Little did I know how much was hidden. We are now finding out that CITI has more liabilities than assets…thus the latest government largesse. CITI’s problems were of their own undoing. BAC’s problems were because of their utter stupidity in buying MERRILL at ridiculous prices…not to mention Countrywide. Keep in mind, I didn’t even need to read the “unbalanced sheets” of these companies, though I did. All I had to do was watch the stocks. The market nailed all this in advance…thus I just continue to follow the market. Grand kudos continues to go out to Meredith Whitney for not being afraid to tell the truth while most other analysts towed the usual Wall Street line. I am also still amazed how the greatest of great fund managers were destroyed as they continued to average down into these stocks that have continued to implode.
Now we hear of new structures for companies like CITI…where it will leave the bank operating without the burden of bad home loans and derivatives. How is this scam accomplished? Yes…I know that the government in their infinite wisdom is now thinking about making a BAD BANK for BAD DEBT. Who gets to run the BAD BANK with the BAD DEBT…and where does it go? You cannot just disintegrate this bad debt into a puff of smoke. Don’t these people know that all these ideas have not worked? So why continue with the same ideas? It should be evident that CITI is now government owned…with shareholders close to being wiped out. Very simply, we are seeing a controlled detonation of CITI. Sorry Prince Alaweed! There is no doubt in my mind that CITI and others will require more capital but it will only come from the government as private capital is now shunning the crooks. The problem remains the money being used to prop up these bad guys continues to be conjured-up money which will eventually come back to haunt things. This is nothing more than a Madoff ponzi scheme but 100x worse.
There is hopes that over time, things will get better and these moves will enable that to happen…but ponzi schemes never end. Only when money stops, the scheme pops…thus the reason financials continue to croak. The market knows all this. Arguably, BAC was about to implode as the stock price was raided until the government stepped in…and that didn’t even help the stock price. On a final note, BAC should be sued for not divulging what they found out about MERRILL over a month ago. But have no fear. There will be not one investigation, not one query…nothing!
Speaking of CITI, the hedge fund run by Vikram Pandit is returning a whopping 3 cents on the dollar. CITI lent and bought equity to the tune of hundreds of millions…and this dude is now running the show?
Speaking of Madoff, how the hell is this guy not in jail? Has this judge not heard the stories of the financial devastation of so many? What are these judges thinking? I did see Madoff getting a little smarter as he wore kevlar heading to court.
Things were so bad last year that a single Toyota model, the Camry/Solara midsized car, outsold the entire fleet of Chrysler LLC’s passenger cars. By this summer, I do not believe Chrysler will be a stand-alone company.
You see what happens when I have a 3 day weekend. I think too much.
Markets have once again bounced off support at around 8000 DOW and 815 S&P…the good news is that the bounce came even though FINANCIALS continued to implode. But I am still less-than-thrilled with what I am seeing. For sure, AIRLINES,SCHOOLS and BIOTECHS continue to show leadership but I promise we will need to see a lot more. I suspect we have many more weeks of backing, filling and base-building before the market even has a real chance to get going. Until then, I am expecting more of this nauseating trading range. Just watch those two support levels, any break below will get the market heading towards the Nov 21 lows. All bets are off if that continues. While I was hopeful coming into the new year, the action of Jan 7th took my hope away as reality took over. I remain in 100% cash, flat for this year as the S&P is already down 6%. Patience continues to win the day.
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