Greetings from the Island of Capri, just off the Amalfi Coast of Southern Italy. Almost done with the Kaltbaum family annual 17 day summer trip. Been to Venice, Rome, Paris and all around the Greek Islands. As usual, I have a few things on my mind. In no particular order:
Been watching a lot of BBC television…and they are up in arms about the Barclays scandal. They are in shock that they would actually manipulate markets. Shock? This report has been telling you about the “in-plain-sight” manipulation of markets for years. It has been done by the Fed, by analysts, by ratings services, by banks and by brokerages for years. And guess what? They are still getting away with it. Some times it is on a smaller scale and some times, you get the big enchilada like what happened in 08. The amazing part of all this continues to be not one person indicted for these crimes. My favorite to this point is when regulators accused the banks of taking bad loans off their books before earning’s season…and putting the bad loans back on the books after earning’s season. What was their penalty? They were told to not do it any more. Blatant over the top fraud was not even wrist-slapped. By the way…how is that investigation going on Jon Corzine?
Oh yeah…a little late but had some thoughts on the healthcare bill. We’ll let the court geniuses discuss the righty turning lefty. We’re just having so much fun watching from afar everyone arguing whether it’s a tax or not. Simple thought…if it looks like crap…smells like…well, you get the point. Need not go any further with that. Our main point stays the same from almost 4 years ago when we were blasted for saying to be prepared. We said that when everything about you, every one of your past friends, everyone off your past thoughts…leaned to the massive redistribution of wealth and that we were now heading to the biggest of big nanny states…we were told to give our President a chance. We were told that he hasn’t raised taxes. We were told that he is for free markets. Well…when one goes to the horse track, one usually bets on past performance. Socialism is not about higher taxes first, it is about higher spending first…and then come the taxes. We are now seeing it all in real time as this new healthcare legislation is one big gigantic tax increase on the consumer and business. And we shall repeat again. The cost will not be the original $800 billion. The cost will not be the present $1.7 trillion. The cost will be a serious multiple of trillions as these people do not care about efficiencies. These people do not care about costs. These people do not even care about healthcare. They are only using healthcare. These people only care about control…and knowing healthcare is over 20% of the economy…you fill in the blank. They will not stop there. The treasury is their slush fund. They dole it out to who they like and take from who they dislike and if they cannot get that money, they just run massive deficits. Imagine, $6 trillion in deficit spending since this administration took over…and the mainstream media give it a pass. As a reference point, Bill Clinton’s last budget was $1.8 trillion. Just remember, when they had unfettered control, you saw what happened. Even without unfettered control, they are enacting things that normally went through a process. Not any more. It only gets worse.
Being host of the ever-popular, over-the-top, 19 people listening to radio show…Investors Edge…where if not in your city, you can listen live M-F AT 6 PM ET or archived right after at www.garyk.com…I decided to speak to a decent number of Greek people while in Greece. I just wanted to know how a few felt about what was happening there. Amazingly, just about every single person said the same thing…and that they were promised by the government and now the government was no longer keeping their promises. They were all used to a certain sized check and now it was being taken away. They were used to a certain retirement date but now that was up in the air. Almost all used the words, NO HOPE ANY MORE! The Greek government got everyone used to something…and now has to take those promises back. Hmmm…where are we seeing this also played out? Let’s see…government advertising for people to get food stamps, free cell phones, money to buy cars there is no demand for, free healthcare, . Hmmm! Ladies and gentlemen…nothing is free. Don’t let them snow you.
My favorite quote:
“The American Republic will endure, until politicians realize they can bribe the people with their own money.”
— Alexis de Tocqueville —
And lastly, the markets experienced an unequivocal follow through day on Friday as the market gapped up on another European save. The cynic in us wonders whether a rally can last on more conjured up money. The cynic in us wonders how many times a rescue must occur. We thought they were rescued 10,15, 20 times in the past couple of years. Oh…but this time it will work. We continue to take the stand that until structural changes are made both here and abroad, eventually there will be a day of reckoning as massive debt always implodes. It is just a matter of time…and in case you haven’t been watching, all the answers have been more debt. Just ask Paul Krugman.
But we do not rationalize why. By definition, the market is back in an uptrend and for us, let’s just say we hope it continues. Since Friday, the action has been constructive as all major indices are back above the 50 day average…and more names have broke out or come up the right side of their bases. Short term, markets are definitively overbought so pullbacks are not out of the question. The expected ECB cutting of rates occurred this morning and tomorrow we get to deal with one more market mover, the fake job’s report. We will have a bigger report on the market over the weekend when we are back in the good old U.S of A.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. 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.