The Crooks Will Be Exposed!

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 click here or call 888.484.8220 ext. 1.

I have been receiving many emails thanking me for some of the pertinent stats I have been writing about. Hey...those stats did not come from me...but glad you enjoyed. Here is another important tidbit you need to know about. The following shows the amount... IN BILLIONS...of adjustable rate mortgages that reset each month. These resets ARE the driving factor in the rise of foreclosures. Look at the numbers starting in Jan of 08. Do I really need to say another word about this?

Poor Angelo Mozilo...yes, Angelo is that dude you see on TV who is trying to be just like George Hamilton. Ok...maybe I am just jeaous of that tan. Angelo is the CEO of Countrywide Financial. You see, Angelo is out claiming he is a victim of a market that has gone against his business of mortgage lending...thus wreaking havoc for him and others in his industry. Here is my take Angelo. YOU CREATED THE PROBLEM...AND YOU KNOW IT! I have firsthand knowledge because there wasn't a week that went by in the past year that I received an offer from you to refinance my 10 year fixed mortgage into an inerest-only mortgage. In fact, I had it out with one of your salespeople who insisted I was nuts to have a 10 year 4.75% mortgage. And now you whine? After handing out money to people who should have not received the money in the first place...now you are whining? Sorry, I do not have any tears for you. I have no tears because while all this has been going on, you have sold approximately 4 million shares of your own stock in 07...and it is only August. I am sure you will say it was for diversification purposes like every CEO trying to offload his stock as fast as they can...but sorry...can't help you with that one.

We also have to wake up today to Hank Paulson telling us the economy will be fine and people are just reaccessing risks. I have 2 words for this guy and they aint "happy birthday." This dude is the poster child for all the leverage...all the derivatives...all the crap the system is now dealing with...AND HE IS THE MOUTHPIECE TO CALM THINGS DOWN? Listening to him is like watching Michael Vick give a dog training seminar to PETA. It is like Barry Bonds telling you how to gain muscle naturally. It is like having John Daly teach you about dieting and how to avoid booze. OK...enough.

As I have stated, we are seeing the unwinding of the massive leverage that is in the system. This was brought to you by the so-called Masters of the Universe. I think we will look back in a couple of years and see:

The ratings' services as major culprits. They are now downgrading everything in site. I thought I knew everything about this business but I had no idea that they were being paid by the people who's instruments they have been rating.

The hedge fund industry cut in half...and that's being nice.

Major writedowns by the banks and brokerages.

Hopefully...hopefully...jail time for the many crooks who committed fraud and the ones who enabled them. Yes...committed fraud. Hiding losses, pricing your own investments...if that's not fraud, what is? If Martha Stewart went to jail for what she did...

Lastly, I believe we are going to find out a lot of losses have been hidden...on purpose. These crooks will also be exposed.

WORLD MARKETS, to be kind, are on the defensive. Whenever you get an unwinding of leverage as well as restricitve lending practices, markets are going to take a hit. I am hearing a lot of pollyanish talk...including from Paulson and the Fed...that the economy will weather this. I hope they are right but this is coming from the same people who caused this and never saw any problems coming. I just think it is quite folly to shrug off what we are seeing to JUST A CORRECTION that will resolve itself to the upside. I think it is folly to say what we are seeing will not affect the economy. The sickest thing I heard this morning was from the biggest imbecile at the Fed...St. Louis Fed President Poole. He said that the subprime mortgage rout doesn't threaten economic growth...and then went onto say ONLY a CALAMITY would justify interest rate cuts. Yes...wait until a disaster has already occurred before acting.

I am personally playing it by the book. As I told you, I went to 100% cash right before the storm hit. My clients and I are gladly sitting this dance out. I believe any day we are going to see relief rallies as markets are about as extended to the downside as I have seen...without the markets actually crashing. But bounces in downtrends are the trees. The forest is that the technical condition of the market is a horror show...and in my studies of the past, they just do not turn back around. Expecting bounces and rallies at a moment's notice...if you are Nostradomus, you may play. If not, nothing wrong with sitting. I am seeing no sectors emerging from bear into a bull. In fact, more and more of the opposite. And anyone thinking they could park some bucks in GOLD, that area is also imploding.

Gary Kaltbaum