Wall Street Suffers Through Another Rough Day

There was little news to fuel the fire today, but stocks sank even further in a carry-on to yesterday's steep declines.

The Dow Jones Industrials cracked through an intraday double bottom at 12,427 and closed off more than 100 points for the second straight session.

It was the lowest close on the Dow since April 15, another indication that the indices will soon test the March lows of 11,740 (3/10/08) on the Dow.

Dow 12,402.85 -100.97; NASDAQ 2,480.48 -11.05; S&P 500 1,377.65 -8.02; NYSE Composite 9,262.00 -54.61

Here's a big surprise: US auto and truck sales fell in May with the biggest losses coming in trucks and SUVs. With gas at $4.00 per gallon, is anyone surprised? Ford's sales were off 16%, Chrysler, 25%, GM, 30%. Toyota was even down 7.9%, while Honda and Nissan, manufacturers of smaller, more fuel efficient vehicles saw sales rise in the month.

More than anything else, those auto and truck sales figures were the big story on Wall Street today, though one has to wonder why anyone would think they would be anything other than ugly.

On April 9, I commented about Richard Russell of the Dow Theory Letter opining that we were not in a bear market. Russell had reversed his earlier call from September of '07, when he said we had turned. That was not surprising, but his about-face on the matter in April was an eye-opener.

I disagreed with him then and reiterate my call that we are facing one of the most pressing and desperate recessions of all time. While most of us (self included) do not recall the Great Depression, some of us are quite convinced that we are rushing head-long into one crushing economic downturn.

The factors driving the demise of the US economy are diverse and not well understood by the majority of Americans, nor has our federal government or Wall Street given ample caution to what lies ahead.

The housing crisis is only getting worse. Subprime loan resets are now peaking, but they will soon be followed by option ARMs and Alt-A loans which will see peak resets from 2008-2012 and 2009-2012, respectively. The option ARMs are the larger of the two groups, and both are as large as the subprime slime. The US housing market will not recover until at least 2012, if at all.

Add to that the high price of not just oil and gasoline, but heating fuel, which will be the real killer this winter. Prices for natural gas haven't exactly set idle while oil soared over $130 per barrel. Many Americans - those with roofs over their heads - will face the quandary of whether to heat their home or fuel their car.

Credit markets have seized up. Some large retailers, which have been squeezed by lower sales and lower margins, will go belly up when they are unable to obtain enough financing to see their way through this summer and fall. By Christmas, a good number of malls will resemble ghost towns.

Hardest hit will be the rural and suburban South and Midwest, where jobs are already scarce and not being replaced. With the number of foreclosures and business failures skyrocketing this fall, municipalities will be laying off and looking for more state aid as they will be unable to maintain services with declining tax roles.

One will be able to see the entire cataclysm reaching a peak when food shortages appear or lower prices for everything becomes the standard. Companies, forced to compete or close up, will have to decrease prices just to stay alive. A recent report noted that 99% of free food kitchens and pantries have seen more activity in the past six months. What's worse is that 72% expect to not be able to meet demand in the next six months.

We are in the thick of it and the news media and our leaders in Washington have been shading the truth for months. Not only will the rest of 2008 be extremely difficult, but 2009, 2010 and 2011 don't look to be picnics either. By official accounts, the recession hasn't even begun, yet people are worried and concerned.

On the day, declining issues outnumbered advancers, 3651-2557, while new lows outnumbered new highs, 204-145.

Oil slipped another $1.06 today, settling at $126.70. Gold fell $11.50, to $885.50, and silver dropped 8 cents to $16.84. With the continued weakness in the metals, it may be time to go short all commodities. We may have reached the maximums on commodities of all kinds as people, businesses and governments are simply out of cash after being squeezed so violently and for so long by rising prices. We are at the tipping point in the world economy and everything could implode at any given time.

The situation is as dire as I've seen it in my 35+ adult years. There is likely no escape from a severe recession and a major downturn in the markets.

You have been warned.

NYSE Volume 1,317,698,000
NASDAQ Volume 2,233,256,000