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.
Letting loose.
Isaiah Thomas, Ben Bernanke, Hank Paulson, Angelo Mozilo... no difference to me.
The Carlyle fund raised $300 million in July and used loans to buy about $22 billion of AAA rated so-called agency mortgage securities issued by Fannie Mae (FNM | Quote | Chart | News | PowerRating) and Freddie Mac (FRE | Quote | Chart | News | PowerRating). The outcome: Carlyle Group’s publicly-traded mortgage bond fund failed to meet margin calls and said it received a notice of default. Carlyle Capital missed four of seven margin calls yesterday totaling more than $37 million. The fund expects to get at least one more notice of default related to the margin calls. Let me get this straight. A fund margined from $300 million up to $22 billion... and who allowed this to occur? This one instance should serve as your poster child as what you are going to continue to see going forward as we have only seen the tip of the iceberg as to how much leverage is actually out there.
All that noise from the National Enquirer Channel turned into what? Losses. They were drooling all over themselves about how they move markets. They ran ads about it every half hour... and when it turns out all that Ambac Financial (ABK | Quote | Chart | News | PowerRating) did was a secondary, the clown who reported the so-called rumors has the nerve to say that he was always wondering why the stock moved on his words in the first place. This is irresponsibility at its highest level and deserves nothing but scorn. I feel no sympathy though for those who followed the lead and bought ABK stock.
Speaking of ABK and speaking of grapefruits, this is what the CEO of ABK amazingly said: "In this offering, we are targeting our core investor base, the long term holders of our stock, who have been loyal to Ambac." Does this imbecile realize that ABK stock has gone from $96 to $7? I am speechless.
And speaking of ABK's AAA rating, let me be blunt. THE RATING'S SERVICES ARE LIEING. Is that blunt enough? It is a boldface, over the top, easy to identify lie... and they know it, the banks know it and ABK knows it. Is there any wonder that confidence in the markets continue to move southward? How can anyone pretend that a company which needs a bailout deserves a triple-A rating? I can't wait until ABK trades under $5... an AAA rated non-marginable security. Too funny!
This all brought to you by one word... GREED. Greed by the lenders,borrowers,bankers,hedge funds, rating's services, investment bankers and the rest. I knew there was credit problems. I knew there was leverage that needed to be unwound. I did not know that there could be in excess of the trillion dollar number that could feed on itself with forced selling... as no one is backing no one. This leads into exactly what has and is happening in stock markets around the world.
Most major indices are now closed at bear market lows... as FINANCIALS continue to lead the market down. My best guess continues to be that lows will be taken out and as I said last time... do not be surprised if we see a tad bit of panic selling if lows are taken out. At the very least, this remains no hill for a climber. The tens of millions that I manage remain at or near their high water mark... as I got the heck out of the way when I thought the bear market started in October. I have not been the least bit tempted to plunge back in in a meaningful way.
I am now hearing rumblings again of an intra-meeting fed cut if the job's number is not thrilling. Before you get all excited, here are the numbers from when the fed first started to cut fed funds back on September 18th... S&P down 15%...GOLD and OIL up 30% plus...the DOLLAR down over 10%. The Fed has no control as the massive de-leveraging of our financial system continues. But don't worry... as Bernanke has said... "SUBPRIME IS CONTAINED AND INFLATION REMAINS ANCHORED!" At this point, I don't think Bernanke could do better than Mugabe in Zimbabwe.
I wish I had better news... but it is what it is.
