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Sunday, 26 August 2007

By Definition, We Remain in a Downtrend

A few concise answers to your questions:

As far as your money market funds, they all invest in different ways. You should call the manager and find out if they own any paper tied to subprime lending. So far, I have not seen any problems but as you know, ghosts can come out of the closet.

The HOUSING business is in the 2nd or maybe 3rd inning of its downtrend. I find it amazing that calls for a bottom continue. Who do these people think they are kidding? It does not have to end in a crash. My thinking has been that we would have a slow bleed over time as prices have to come down in order for inventories to come down. As far as Miami, forget it. I will be looking to buy a few condos for $7,900 in a few years as the maniacs are putting up another 20,000 units in the middle of a condo depression in South Florida.

The FED did what they are NOT supposed to do...their move was purely to lift the market. How do I know? They made the move on option's expiration day...forcing the hands of the shorts and the puts. Why not wait until Monday? It is now scary that the Fed is trying to game the markets. This move was not to help Aunt Mary and Uncle Bob...it was to help the hedge funds that were getting massive redemptions...in order to prevent a meltdown.

Yes...I saw that action on Thursday and yes, the move off the Fed cut started Thursday...not Friday morning. Why do I say that? Simple! There was massive illegal insider trading on Thursday...but no one will get caught because as usual, no one is watching. The evidence: out of nowhere, FINANCIALS were bought in big blocks...and the Fed struck the next morning. I would love to hear the tapes of the Bernanke/Paulson phone calls before the rate cut. THE NEWS WAS LEAKED...CASE CLOSED! Do you think anyone is going to audit the "out of nowhere" massive FINANCIAL stock buying? Doubt it! Even people that are not skeptical have to raise their eyebrows at Thursday's action. Did you notice that on Friday, there was not a shred of bad news announced by anyone? HMMMM!

The rate cut is meaningless. Nobody borrows through the discount window. It was a move to stir the markets...that's it. The move actually hurt the economy because the 10 year yield was up sharply.

The FED now has ammo with the Fed funds rate. They WILL lower rates...but only IF stock markets continue to get hit. They are more worried about a financial meltdown brought on by Alan Grenspan, lenders, investment bankers and the hedge funds than the economy. I have told you for months this Fed was just plain stupid and just reactive to the news. They are not proactive and never get in front of any problems. Now...finally...finally, they admit there are problems. I highly doubt we will ever hear the word "contained" again. This, just 2 days after the Fed said they would only cut rates in the event of a "calamity."

If I was short, I would be scared every night going to sleep because you won't know if the FED will cut rates the next morning. The hint: watch for a rate cut after the next big down day in the market.

The charts are horrible. If this market is going to go higher, there will be a whole lot of repairing to do first. Now that the market has had a 600 point pop...I suspect we get some backing and filling. I am doubtful we can get a V-like move up...but with the FED throwing money out of airplanes, I recognize anything can happen.

Barron's got it all wrong. It is not about someone's performance when giving out 3,000 stock picks on TV. It is the fact that anyone in their right mind believes that being touted on 3,000 stock picks could provide any value whatsoever.

I do not think this economy is in recession. I believe many areas of the economy are in recession. If we are indeed in a recession, the market will snuff it out and start another leg down.

No...this market has not had a follow-through day yet...so by definition, we remain in a downtrend.

Yes...the Mets are starting to open up a lead in the East. OK...shut up Gary.

Gary Kaltbaum

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