Who is Going to Bail Out the FED?

Gary Kaltbaum is an investment adviser 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.

Massive bets being put on...massive leveraged bets being put on...using other people's money...massive bets being put on at the top of a bubble that was created by easy money.

Nope...I am not talking about Citigroup, Goldman Sachs, Lehman, Bear Stearns or any of the rest of the nuthouses. Yup...I am talking about the Fed. The Fed continues to create and print new money in order to buy long range bonds...AFTER they are already way up and rates are way down. This same Fed who has been wrong 100% of the time is now making these big bets into a bond bubble.

So, what are they going to do when the bond bubble breaks and the bond market croaks? I want to know...who is going to bail the Fed out of their bad bets?

I know everyone is giving the Fed a hand for their "creative" ways. I think they are nuts and I think the Fed is insane. Imagine...we are in this position because of the ridiculously easy money several years back...implemented by Mr. Bubble Greenspan. We get into this problem because of the easy money...and what is the answer? Even easier money than what Greenspan ever had. I do not have enough 4 letter words for Bernanke and Paulson here as they have been wrong 100% of the time and continue to be wrong in their decisions.

They are destroying this countries longer term potential by printing and spending money that will come out of the economy in the future - while potentially creating severe inflation down the road. Imagine, they are now conjuring up money to buy treasuries - and are being applauded by the same people who applauded Greenspan.

In my last report to you, I told you I thought the market had experienced a follow through day and with patterns getting better and shrugging off horrid news, we could get a further rally at least into the end of the year. So far so good as Helicopter Ben just threw up his hands and put the printing presses in overdrive. Major indices are now edging above the all important 50-day moving average for the first time since mid-September - and have moved above resistance levels I told you about.

I now watch for the ability to hold on any pullbacks. Unlike all the bottom callers who have been calling bottoms all the way down, I have not needed to. Bottoms are a process - not an even - and so far, the process is playing out well. After all, the market has held support for 10 weeks. Do not think this is going to be easy? I expect a lot of trading curve balls and a lot of backing and filling, but the trend is trying to turn up.

But as usual, don't blink! It is just good to see better patterns shaping up. Hopefully, it continues.

A few notes:

CHINA is back to leading as a country as it moved out to the upside first.

GOLD is now in play and buyable on any pullback as the FED goes out of its way to destroy our currency.

Lastly and off the beaten path, I run a much smaller management business than this Madoff guy supposedly did. My smaller business is not even a one man job. There is no way this puke Madoff could accomplish such a scam by himself. Expect more arrests.

Disclaimer: The opinions expressed herein are those of the writer and may not reflect those of Wunderlich Securities, Inc. or any of its affiliates. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.