The Dollar is the Big Problem

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.

FOX BUSINESS NETWORK OCTOBER 15TH

I have some random and some repetitive thoughts today.

The DEMS have given no credit to the Bushies for the economy over the past few years. Watch what the DEMS try to do with the economic numbers we are now seeing. Amazingly, they will and the media will enable them to completely forget the past four years...and concentrate on one month. They are now going to blame the Bushies for housing, lending and every other problem out there...including your stuffed-up toilet.

The New York Times is already starting in. Here is one paragraph from this weekend: "Democrats, or some Republicans with a change of heart, must articulate — and Americans must demand — a program for ensuring that the middle class gets a bigger share of the economy’s spoils than it has received during the Bush era, when gains have largely been funneled to the richest Americans."

WOW...Websters defines the word "spoils" this way:

1. a. Goods or property seized from a victim after a conflict, especially after a military victory. b. Incidental benefits reaped by a winner, especially political patronage enjoyed by a successful party or candidate.

Since when is anyone supposed to receive anything? Since when does there have to be a program to ensure wealth. I always thought wealth was earned through education, smarts and toil. When did hard-earned money turn into spoils? Lastly, how is it that hard-earned money has been "funneled" to Americans? Last I looked, hard-earned money was just that...hard-earned. Expect the loud drumbeats of "those miserable tax cuts" caused all the problems. Expect more class warfare from Mother Hillary and John "$400 haircut" Edwards. Expect to hear more about the redistribution of income. Thrilling!

Speaking of the Bushies, if I hear one more say the economy is on sound footing, I am going to vomit. The same goes for the fedheads.

Osama Bin Laden speaks. I swear I read those same talking points at moveon.org. I love the rant against capitalism. This from a guy holed up in a cave reading Mad Magazine all day to pass the hours. Frankly, I do not even think it was him. He looks just like all the wax figures look at Madame Tussaud's.

The ten year yield is now at 4.368%...nearly a full percentage point below the fed funds rate. I am beside myself wondering how so many Harvard and Wharton graduates think that a rate cut will help. Like the discount rate, the fed fund's rate is almost meaningless to you and I. The Fed is just ridiculously behind the curve and has been there for many moons. Amazingly, 4 fedheads were out on Thursday saying there was no need to cut...even though the more important market is begging for one.

In an amazing show of grapefruits, Dr. Greenspan was out blaming the housing bubble and the lending problem on too much speculation. Just remember, this is the dude that caused the problem and enabled the problem and did nothing about the problem.

I continue to hear the drumbeats of "buy technology" to be defensive in this market. Very simply, if this market goes lower, technology is going to come apart at the seams.

Something smells bad at Countrywide. Why do I think Bankamerica is going to have a large writedown because of this investment? Since day one, I have questioned how quickly Bankamerica went through $2 billion at Countrywide. I suspect when all is said and done, there will be questions about the due diligence of this investment.

I expect one or more of the publicly traded homebuilders to go belly up. These companies work on credit...which has all but disappeared for them. As I have said, HOMEBUILDING stocks are now in the give-up phase where they just continue to leak slowly lower and lower. Love those $100,000 off sales.

I expect one of the next big blowups is going to be the off-balance sheet losses at the major investment banks. Einstein and Hawking could not figure out these opaque financials.

APPLE PART 3...I am now of the opinion that APPLE will have to lower IPHONE prices to $99 by the end of this year. All my checks say this product is not selling well. The product is fine. The price is not right. APPLE figured it out quickly...but APPLE still does not realize that mobile handset customers are used to very low prices...and that competition is about as cutthroat as can be.

MARK THESE WORDS DOWN...THE DOLLAR IS THE BIG PROBLEM HERE....AS IT BROKE MULTI-MULTI YEAR LOWS. You are going to hear a lot more talk about the dollar in coming weeks. I pray that Paulson keeps his mouth shut when asked about its drop. Please recall that it was James Baker's yapping about the dollar that contributed to the 87 meltdown.

I remain in cash...with my only thoughts being shorting opportunities. I say this knowing the fed will cut. I just believe the masses are in one camp...and that is when the fed cuts, the market has to rally. You know what I think when the masses are thinking one way. The fact is...except for OILS, COMMODITIES, SHIPPERS, FERTILIZERS, CHINA and the reemergence of BIOTECH, most sectors are already in...some deeply in their own private bear markets...and as of this second, it is just a question of whether the major indices play catch-up. I have seen in the past markets hold up while most stocks are getting trashed...but 100% of the time, they eventually join the ugly party. Already below the longer-term 200 day average are the RUSSELL 2000,TRANSPORTS,SMALLCAP 600,MIDCAP 400 and S&P 500. The NYSE is sitting right on it...and as always, the DOW is holding up best for now as the market parks scared money into the megacaps.

I do not think it time to be a hero here. Yes...my list of leaders continue to act very well...but the list is small. I promise that if this market gets another leg down, those leaders will join. I am also watching the OILS and COMMODITY names like a hawk. Many continue to show fabulous relative strength but are now trading very wide and loose. If they lose their bid, stick a fork into the rest of the market. When the leading groups go...markets go. Just keep in mind, bad markets do not have to be painful. You just have to take some action. I am not buying into the talk that the market is still up this year. If you own the SPY and DIA...you are fine. But if you like buying stocks, you need to know that there is a huge number of names down 20% or more...with many names in the real bad areas down 30-50%...and 7 out of 10 stocks remain in horrid technical shape. Watch the following levels. A break below and a visit towards recent lows will most likely be in the cards. DOW 13,034...S&P 1432...RUSSELL 2000 767...NASDAQ 2500.

Gary Kaltbaum