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.

A few thoughts... and then the market:

Watch Washington Mutual (WM | Quote | Chart | News | PowerRating). Think Countrywide Financial (CFC | Quote | Chart | News | PowerRating)! I believe Countrywide was about to croak when Bank of America (BAC | Quote | Chart | News | PowerRating) saved the day. Wamu is now acting like Countrywide.

After listening to the incessant whining by certain candidates that the "priveleged few" do not pay enough taxes... and therefore tax rates should rise for them, I make note of a little chart of Russia's tax revenues once they moved to a flat tax. Obviously, Russia gets it.

We are NOW seeing... the deleveraging of fantasyland. I say fantasyland because in my world, you cannot margin equity up to 20 and thirty times. In my world, you cannot price your own investments at the price you want. In my world, you cannot take fees for pricing your own investments the way you want. So... the house of cards is crumbling. Unfortunately, many innocents are being taken down also. That is the part I do not like. I do not like when municipalities have to pay 15-20% rates on their debt. I do not like when otherwise good companies could go out of business because access to credit has dried up. But it is what it is... a new world... a new day for the financial industry. My only hope is that some go to jail... but doubt that happens. What you are now seeing is what a long, long time ago, I explained could happen. A long, long time ago, I was laughed at when I said there was a housing and credit bubble. Those same people are now calling and asking for my opinion.

Leverage is now going in reverse... and as I said, is now hitting everyone. The regulators have finally gotten up off their couch and are forcing banks and others to call in loans in order to raise capital. Margin is simply being contracted... by force! It does not matter who you are. There is a big problem to all this. This deleveraging is forcing many to sell into a market with no buyers... feeding the vicious cycle. This all is forcing prices down as regulators are finally insisting on real pricing and not the fantasy pricing that occurred. What do banks do when asset prices come down? They stop lending as they have no idea about valuations. Less lending up and down the food chain leads to a slower economy. The dots are now connected.

The bigger problem right now is that this fed may be nutty enough to lower rates a whole point at the next meeting. As you know, I am not a fan. They continue to play the short term game while ignoring the more important long term. Greenspan caused this problem with his ridiculously excessive liquidity stance... so what does Bernanke do? He repeats the same mistake.

The bear market continues. Amazingly, there are those who refuse to call it a bear market until the DOW and S&P drop the official 20%. My question to them: "Are you high?" By now you know the stats. 8 out of 10 stocks in downtrends... 9 out of 10 groups in downtrends... world markets in downtrends... no leadership... financials continue to be obliterated. Just remember, bear markets will go to extremes on the downside. Bear markets will take prices down to unfathomable levels. Look at Citigroup (C | Quote | Chart | News | PowerRating), Washington Mutual, Fannie Mae (FNM | Quote | Chart | News | PowerRating), Freddie Mac (FRE | Quote | Chart | News | PowerRating) and other financials that continue to be called cheap. Most people just do not understad how bear markets work.

Short term aside, the big picture remains gross. Bounces can happen at any time but bounces are now becoming more and more anemic. Yes, things are oversold and extended..but we have said that before. I lastly must make note that I am now seeing deterioration in the groups that have held up. This includes fertilzers,agriculture,oils and commodities. I would be very wary about adding positions as they may just be topping out. Gold/silver remain strong but they also look ready to pull back.