A few thoughts and then the markets.
Thank you S&P. I gather that surprises many of you as I have railed against the rating’s services for years. That hasn’t changed. There should have been criminal indictments against these companies for what they did with mortgage securities but right now, they did us a big favor. At least, S&P did. So excuse me Mr. Buffett for disagreeing with you. I know that is not a smart play. But it is my contention that if the con game went on for too much longer, what you saw in the market last week would end up being a walk in the park. I could not be happier that the debt bomb is now front and center. I have been writing about this for quite a while. This will hopefully shut up the deficit spenders but somehow I doubt it. I do want you to keep in mind, these rating’s services are nothing more than publishers of opinions.
Tim Geithner doesn’t matter. What’s the deal with trying to get rid of him? He is nothing more than Charlie McCarthy to Edgar Bergen. In my world, he is not even to be paid attention to. I know…sounds disrespectful. Sorry…just stating the facts.
I have been telling you once the markets wake up to the debt problem…look out! I hope these politicians know they are no longer just dealing with a debt problem but potentially a market problem.
“THE TEA PARTY HASN’T SPENT ONE TAXPAYER DOLLAR!”
Looks like the new talking point is “the tea party downgrade!” It started with John Kerry and David Axelrod…and I guess the usual suspects will parrot the same b.s. Nice try! Last I looked, the tea party has never spent a dime of taxpayer money. Last I looked, the tea party has not spent this country into a $16 trillion deficit. Last I looked, these average Americans are only interested in a better, more efficient and a taxpayer-caring government. How terrible they are! It is disgusting to see these political hacks continue with their talking points. The good news is that it is backfiring on them. And by the way, John Kerry voted for all this deficit spending.
I have still not seen the most important question asked of the culprits…and it is simple:
“In the year 2000, federal spending was $1.788 trillion. Why are you and what are you now spending double that amount on this year…just a decade later! ? Please be specific!” Wouldn’t that be a simple question?.
It should be quite obvious why I have been so cautious over the past few weeks. You should know that this drop did not come out of nowhere. I have been writing to you about the internal deterioration for weeks. Sector by sector and stock by stock went by the wayside. As the weight of this weakness became heavier, it finally tipped the market as a whole. Now what? BE CAREFUL! I have absolutely no clue what happens in the short run. The news is going to be fluid and when markets are so extended to the downside, you get action like we saw Friday as the market whipped all over the place. The big picture is much more important than tomorrow’s gap to the downside…and the picture is simple. The market has put in a major top. This occurred when major averages broke below the 200 day moving average joining foreign markets around the globe. Odds do not favor what many are saying that this is just a garden variety correction and all will be well in a few weeks. This feels and looks much worse. I told you I expected a 15-20% drop and would then re-evaluate. We are close. It will not take much more to turn this into a real Wall Street bear market which is 20% or more.
Getting back to the short term, anything goes. As I write this, Dow futures are down 230…negating some of the talk that futures would be down 500. Notwithstanding something really unprecedented, I suspect a short-term bottom will form soon leading to some sort of rally/bounce. All the news is bad. Everyone is scared and the market is already down 1500 points. But at this juncture, any bounce is for selling or shorting for the aggressive. This should be done into resistance areas or moving averages. Once the bulls come out again and once the bounce peters out, selling will show up quickly, setting the market up for another leg down.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. 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.