European Crisis Summit Outlines Plans, Markets Reverse Course

After lengthy deliberations which reportedly lasted well into the evening, European leaders emerged with the outline of a fiscal union designed to maintain the current structure of the EU and the Euro-zone nations which use the Euro as currency.

Left out of the plan was Great Britain, which said it would not succumb to another layer of regulations from the Eu, especially since it still has the British Pound as its sovereign currency.

One highlight was the decision to cap the new permanent rescue fund at 500 billion euros.

Additionally, European central banks will lend 150 billion euros to the International Monetary Fund’s (IMF) general resources. Non-euro EU states will offer around 50 billion euros to the IMF. Having the central banks on board is a new development that was widely cheered by market participants as it should encourage sovereigns outside of europe to pitch in to an IMF fund as well.

Details of the complex plan and new treaty language are expected to be finalized by March, leaving plenty of time for intrigue and dissent in the interim.

Stocks in Europe were higher, with the French, German and UK markets scoring the largest gains. In the US, the effect of the summit was a reversal of the previous day's losses, resulting in a negligible net gain or loss over the two days market players had been anticipating with some anxiety.

So, after all the drama over Thursday's ECB policy meeting and the Friday's EU summit, the end result after two days of nail-biting was a 12-point loss for the Dow Industrials, about two points down on the NASDAQ and a six point loss on the S&P. Indeed, it was all much ado about nothing with the major averages ending the week with marginal gains.

Everyone on and off Wall Street can now get back to doing whatever they do until the next European crisis event, which, if recent history is any guide, should be some time next week.

Dow 12,184.26 186.56 (1.55%)
NASDAQ 2,646.85 50.47 (1.94%)
S&P 500 1,255.19 20.84 (1.69%)
NYSE Compos 7,502.88 133.36 (1.81%)
NASDAQ Volume 1,651,333,125.00
NYSE Volume 3,698,613,000
Combined NYSE & NASDAQ Advance - Decline: 4746-907
Combined NYSE & NASDAQ New highs - New lows: 141-67
WTI crude oil: 99.41, +1.07
Gold: 1,716.80, +3.40
Silver: 32.25, +0.72

European Mess Smashes Stocks; How Treasury Secretary Hank Paulson Screwed America

Yesterday in this space, an ancient Wall Street adage was invoked: "Never short a dull market."

We fairly dismissed the idea that, since the US market was basically on hold until the Europeans meet, greet and decide the economic fate of the continent, US stocks would wallow in hopeless delusion, because the Europeans, somewhat like our very own beloved congress, seem incapable of walking and chewing gum at the same time.

Most of them could not get arrested at a bong party, either, but the various inabilities of the ruling elite are not a primary concern. What they're doing to your money, your economic present and future, are.

And they're making a god-awful mess of it.

Just before US markets opened, the ECB announced a rate cut of 25 basis points (0.25%) to one percent, which was annoying to the majority of traders, who, as always, wanted more. A 50 bip reduction would have satiated their appetite for freer money for the while, but the ECB also announced that they would be extending loans of up to 36 months (that's three years for the mathematically-inept) to banks on the continent.

That was met with some enthusiasm, but within minutes, newly-appointed ECB president Mario Draghi dashed hopes at the press conference, claiming that the rate cut vote was not unanimous, signaling a lack of conviction on the part of ECB participants.

Stocks plummeted at the open in the US and only partially recovered late in the day as news leaks from the EU summit meeting beginning tomorrow indicated that a fiscal pact would be pursued by EU member nations, but even that news was short-lived as the major indices closed near the lows of the day.

Europe has become the focal point of global equity and commodity trading as it grapples with the potential for debt contagion among sovereign states and bank failures across the European Union. While difficulties in Europe may not directly affect the economy of the United States and other countries, it will have a pass-through effect, as pain anywhere in the global financial system is felt - to varying degrees - everywhere else.

Hope is now high that the crisis summit - a macabre circus in its own right - will produce some lasting, positive resolution, but the more one looks at the condition of Europe, the less one believes that there will be a positive conclusion short of destroying the Euro as a currency, an outcome that may have more benefits than downsides.

Until tomorrow, at least, stocks took a beating, as once again, the bulk of traders were hoping for positive results from another gang that can't shoot straight.

While on the topic of governments and their follies and foibles, an article by John Crudele in the NY Post should be at the top of the discussion of just how corrupt and obnoxious Wall Street has been and continues to be.

Crudele has been saying for two years that Paulson and other elements of the government were corrupt. In today's story, he finally gets confirmation from Bloomberg Markets that then-Secretary of the Treasury Hank Paulson was passing along insider tips to his buddies at Goldman Sachs (where he had served as CEO prior to being named to head Treasury by President Bush) and others.

Crudele says:

Under former Treasury Secretary Hank Paulson, confidential government information was regularly leaked to select people on Wall Street.

That's all one needs to know about how tightly intertwined Wall Street and top officials of the federal government are intertwined, but it brings up an essential question, or questions: Where are NBC, CBS, CNBC, ABC, FOX on this story, and why hasn't Attorney General Eric Holder announced an investigation?

The answers are simple. Bit players like Martha Stewart and Rob Blogojeich go to jail. Fat-ass scum-bags like Hank Paulson, the architect of TARP and god-knows how many other deceitful financial scams sail off into retirement sunset.

No wonder there is an ugly undercurrent of dissatisfaction and distrust in America. The people at the top have been screwing the public for years, yet not a single one is even investigated. Instead, we are subjected to daily wild market swings and the spectacle of former congressman, former New Jersey governor Jon Corzine explaining to a congressional panel how he didn't know what was going on while his firm, MF Global, raided the coffers of client money to the tune of $1.2 billion.

Corzine won't see the inside of a prison; that you can count on. Neither will Hank Paulson. But some ghetto kid who sells a bag of weed because it's the only way he can make a buck, will receive the full extent of what now humorously is called "justice" in America.

Face it, people, with the thieves and connivers we have in government, we're all royally screwed and the wake-up call is probably a few decades too late.

Thanks to John Crudele and the NY Post for his ground-breaking and tireless reporting efforts. It's amazing he hasn't been fired yet.

And seriously, isn't Ron Paul the only Republican presidential candidate that is electable? The others are either pandering flip-floppers (Gingrich, Romney) or wing-nuts (Santorum, Cain, Bachman, Perry). That leaves only Mr. Paul nd Jon Huntsman as viable candidates. But the mainstream media, which relies upon access to the corrupt political machines running the country, will have no part of either of them.

The best advice is to ignore all of them and fend - as best one can - for oneself and one's family, but, eventually, unless the liars, cheaters and thieves of Wall Street and Washington are rooted out and made to pay for their crimes, America is doomed.

Dow 11,997.70, -198.67 (1.63%)
NASDAQ 2,596.38, -52.83 (1.99%)
S&P 500 1,234.35, -26.66 (2.11%)
NYSE Composite 7,369.52, -190.19 (2.52%)
NASDAQ Volume 1,843,290,125
NYSE Volume 4,222,942,000
Combined NYSE & NASDAQ Advance - Decline: 774-4842
Combined NYSE & NASDAQ New highs - New lows: 100-89
WTI crude oil: 98.34, -2.15
Gold: 1,713.40, -31.40
Silver: 31.54, -1.09

US Markets Stalled Out, Waiting for Europe's Next Gambit

There's an old Wall Street adage that goes something like, "don't short a dull market," but, if this market goes any higher and gets any duller, the adage might as well be thrown out along with most long positions in stocks.

After Tuesday's snooze-fest, Wednesday's market was even sleepier, with participation at low ebb. Volume has nearly completely dried up, but the thin trading has reduced volatility somewhat. In fact, the VIX, which measures implied volatility in the S&P 500, hasn't pitched above 30 (an abnormally high level to begin with) since November 30, or one week ago.

What traders are most concerned with is once again Europe, but more specifically, the two days of meetings scheduled in Europe, one by the ECB, tomorrow, and the other a crisis summit of leaders of the Euro-zone nations on Friday that is hoped to pave the way toward an end of the two-year-old debt crisis that has gripped European markets and locked down US markets for the past two days.

As is the usual case with relying on Europe to fix our own stock market, it's probably a bad idea. Some leading economists of the region, particularly those from Germany, who have the best view of the situation, are saying that whatever solutions come out of this week's crisis summit, Europe's problems are likely to remain contentious for another eighteen months to two years.

Noting that, and understanding that debt issues which took decades to produce are not going to be solved at one meeting (it has been promised before and not been delivered), so one has to question both the positioning in US stocks, which have been essentially flat since the middle of August, and the reliability of ancient words of wisdom in an era that has been marked by unusual actions from the Fed and other central banks in developed countries.

If everybody's waiting on Europe, just what do they expect? A grand plan which all 17 countries that use the Euro as currency can agree to? Good luck with that. European leaders are now calling for majority consensus rather than unanimity. Meanwhile the ratings agencies, specifically Standard & Poor's, are scaring the daylights out of each and every one of them, threatening credit rating downgrades across the continent if there's no substantial progress come Friday.

What this telegraphed sucker punch from S&P is saying is more political than economic, essentially telling all of Europe to stop playing around the periphery and get to the core of the matter, which would entail some countries (think Spain, Portugal, Italy and Greece) having to give up some degree of sovereignty in order to remain in the good graces of the European Union and the ECB. And while fiscal unity, or, at least some semblance of fiscal responsibility would be a step in the right direction, the citizenry of those countries might not take lightly to having new masters above their own elected leaders somewhere in Germany, Brussels or France.

Since the crisis meeting isn't until Friday, that's probably when US markets might perk up, but, if the game plan remains the same in Europe - promise much, deliver little - they will be sending a message to markets around the world that the issues present are too large, too diverse and too complex for all 17 Euro-zone nations to reach agreement on any unifying principles laid down.

In that scenario, we may just get another two days of slumber on the street as even more participants make a premature exit from stocks in 2011, fleeing to cash or bonds until the dust settles after the holidays.

And what about that Santa Claus rally that usually commences over the final two weeks of the year? There may be one, but it won't have much gusto on low volume and it's not likely to last long. Stocks are already creeping back toward their late July - early August levels and there's just not enough economic "juice" in the system for which a rally can be sustained. The major US indices have flirted recently with the flat line for the year and that's probably where they're going to remain.

Meanwhile, all one can do is hold one's breath waiting for Europe's next move. Everyone is waiting to exhale.

Dow 12,196.37, +46.24 (0.38%)
NASDAQ 2,649.21, -0.35 (0.01%)
S&P 500 1,261.01, +2.54 (0.20%)
NYSE Composite 7,559.71, +20.39 (0.27%)
NASDAQ Volume 1,654,001,000
NYSE Volume 4,158,213,000
Combined NYSE & NASDAQ Advance - Decline: 2804-2747
Combined NYSE & NASDAQ New highs - New lows: 119-63
WTI crude oil: 100.49, -0.79
Gold: 1,744.80, +13.00
Silver: 32.63, -0.12

Euro Leads Stocks Lower, Then Higher; Income Disparity Hits Young Hardest

There are plenty of correlation trades that make plenty of sense, but perhaps the only one worth watching - from a macro perspective - is the Euro-Dollar trade because of its unique correlation to the US stock market.

Today was a prime example of how that trade controls markets, from weak hands to strong, from dead to money to risk-be-damned, full speed ahead.

As trading opened for the week, the Euro was under a great deal of stress, not only from the continuing crisis, but by way of the dual southern European national plight being waged in Greece and Italy, where both leaders - George Papandreou of Greece and Silvio Berlusconi of Italy - were rumored to be ready to step down at the drop of a falafel or calzone, so precarious their countries' dilemmas.

While Papandreou finally agreed today to step down from his post as Prime Minister in an effort for the country to form a unity government (whatever that may mean in a nation on the brink of dissolution), Berlusconi seems locked into a similar fate, given the debt issues facing his country. Bond yields have risen dramatically on Italy's benchmark 10-year bonds over recent weeks and the spread between the Italian 10-year and the 10-year German Bund hit 490 basis points today.

Also weighing on the Euro was the nearly failed auction of Euro 3 billion in bonds by the EFSF, the entity created to save European banks from catastrophe. The auction was lightly subscribed and only 2.5 billion of the bonds were sold - at a price 171 basis points over the Bund - the rest going back to the issuers at a hefty premium. The EFSF does not have enough heft to buy Italy's bonds, putting Berlusconi and his government in a very precarious position.

As the Euro sagged in the morning so did stocks in the US, as every hedge fund manager worth his or her salt is short the US dollar, a trade that provides cheap dollar liquidity to US markets but is also inherently ruinous to the long-term survivability of the world's reserve currency. As the day wore on in Europe and issues began to straighten themselves out, especially in the case of Greece, the Euro began to rise, taking the dollar down and US stocks up. Simple, Easy. A piece of cake.

The real problem with this trade - as it has been all along - is that the US is probably in better shape than Europe, which has been on the brink of a currency collapse for months, making the premise for being short the US dollar somewhat specious, or perhaps totally false, a straw man trade designed only to make the impression that all's well in the USA and keeping stocks trending higher.

Therein lies the fatal deceit of the short dollar trade. If somehow the Euro must be kept propped up - when it's true value is somewhere closer to parity with the dollar than the current 1.38:1 ratio of dollars to Euros - then the inevitability of the failure of the Euro as a currency, the EU as a common trading bloc and a massive decline in US stocks must occur. This is, without a doubt, how tightly intertwined markets now are, dangerously so, and the heads of most US banking, trading and political entities are well aware of this situation.

When the Euro blows, which it almost certainly will, US stocks will follow, and isn't that a nice, pleasant note upon which to start off your week? Of course, it gets worse. Because when stocks drop, what the middle class is going to do will make the continuing "Occupy" protests look like a kindergarten cookies and milk party. Nothing riles up a people than having their wealth pulled out from under them, and, while the bankers and politicians have thus far succeeded in keeping complete collapse a fringe argument, Europe's failings could quickly become an American nightmare.

It was revealed today just how badly broken the American system has become. Pew Research Center reported that the wealth disparity between young and old has reached its highest level ever, with "Households headed by a person 65 or older have a median net worth 47 times greater than households headed by a person under 35."

Unarguable as that fact may be, it exposes the soft underbelly of American life, wherein the elderly, otherwise known as collectors of entitlements, such as Social Security are prospering at the expense of the young, who must work hard and pay bills, debt and support their elder countrymen. It's as unfair a situation as the top 1% holding 40% of the nation's wealth, and perhaps worth fixing, with means testing, rather than turning our nation into an armed camp of elderly versus youth.

In between are the Baby Boomer generation, the first post-WWII generation to begin reaching retirement age. Some have saved, others not so much, but, as a whole, the largest segment - those born between 1950 and 1960 - are still years away from collecting a Social Security check. If one were to take a bet on just how much a person 55 to 60 years old today should expect as a monthly stipend at age 65 or 67, it would probably be wise to cut that number down by 25-45% from current expectations.

If one is inclined to believe the situation is tough right now, imagine another 50 million expecting to receive Social Security checks in coming years. The math simply does not add up unless those paying into the system are going to be taxed at 80% of their wages. It's just the truth, we're headed for even harder times ahead.

Dow 12,068.39, +85.15 (0.71%)
NASDAQ 2,695.25, +9.10 (0.34%)
S&P 500 1,261.12, +7.89 (0.63%)
NYSE Composite 7,590.43, +38.20 (0.51%)
NASDAQ Volume 1,735,945,625.00
NYSE Volume 3,629,465,250
Combined NYSE & NASDAQ Advance - Decline: 2773-2795
Combined NYSE & NASDAQ New highs - New lows: 88-64
WTI crude oil: 95.52, +1.26
Gold: 1,791.10, +35.00
Silver: 34.83, +0.74

Euro Rising Amid Escalating Debt Crisis; Gold Worth $11,000/Ounce?

There are now differing views over the ongoing European debt crisis, which made Monday a banner day for the pair trade of short US dollar/long US stocks.

The view widely held by Wall Street influencers is the one promoted by the well-compromised "news" organization, Reuters, a proxy for the Wall Street/Washington oligarchy currently under attack by the Occupy Wall Street and other, spawned protest movements. Reuters reports that there is growing confidence that the EU leaders will forge a broad agreement with which to deal with the Euro-zone's debt issues by Wednesday of this week. Such wishful thinking pushed the Euro to a six-week high against the dollar, sparking the rally in US equities on the cheaper - for now - US dollar.

Alternately, NPR, in the embedded radio clip below, headlined its story Agreement On Debt Crisis Eludes EU Leaders, citing differences in approach by the various leaders amid calls for austere cutbacks in Italy to stem its own set of problems.



Realistically, nobody has a very good handle on where this is all headed, though widespread agreement seems a long shot. Greece has needed two rounds of bailout money already, and the country has been forced to suffer through doubt, derision, protests, strikes and riots in recent days as the government agreed to severe austerity measures, cutbacks in services and layoffs to help the government avoid running out of money.

Some kind of European plan is supposed to be released to the public by Wednesday, so there's probably no reason for stocks or the Euro/Dollar trade to deviate much until then. Details of the plan have been hashed about, though nothing is for certain except that it will include bailout money for some of Europe's largest banks (called: recapitalization) and some funding and dispersal mechanisms for the EFSF, the newly-created sovereign debt fund that is supposed to provide much-needed liquidity to the Euro system. Of course, the Euro money machine is beginning to look a lot like another global Ponzi scheme, with indebted countries providing funding through various channels to even-worse indebted nations like Greece, Ireland, Italy, Spain and Portugal.

Anyone with a view of history longer than his or her current lifespan might have a better idea of where the Greek crisis is headed and it is most certainly not a happy place. Usually, when governments spend or steal too much of their citizens' money, overtaxing and under-delivering on promises and services, it means the end of the reigning regime, either trough violent overthrow or peaceful negotiation, though the former, albeit it's bloody features, has been more successful through the pantheon of history in securing the absolute rights of individuals while removing parasitic forces of government from the inflicted nation.

In Greece, it appears that the rowdy protesters have slowly but steadily been gaining ground and, with the emergence of Occupy Wall Street and other such groups, populist movements seem to be spreading faster than government efforts to defame or derail the groups. One interesting development was Michael Moore's appearance on CNBC this morning.

While the interview was not a first for Moore on CNBC, the filmmaker and champion of the "little guy" was allowed on air for over 11 minutes, and made some strong points on the inequitable economic situation facing all but America's wealthiest people. The piece is well worth the viewing time, as Moore made his case to Carl Quintanilla, a reporter and anchor who might just have something of a conscience.



One other story of note on the day is James Turk's elegant arithmetic in making his case why gold should be $11,000 an ounce. (PS: at a 16:1 gold:silver ratio - the traditional ratio - that would make the current silver price of around $31 per ounce, seem even more ridiculous. Something along the lines of $687/ounce would be appropriate.

Dow 11,913.62, +104.83 (0.89%)
NASDAQ 2,699.44, +61.98 (2.35%)
S&P 500 1,254.19, +15.94 (1.29%)
NYSE Composite 7,547.63, +116.53 (1.57%)
NASDAQ Volume 1,988,391,000
NYSE Volume 4,291,371,500
Combined NYSE & NASDAQ Advance - Decline: 4660-1018
Combined NYSE & NASDAQ New highs - New lows: 125-24
WTI crude oil: 91.27, +3.87
Gold: 1,652.30, +16.20
Silver: 31.64, +0.45

Market Melt-up Continues for US Stocks

News from Europe that the Slovakian government would re-vote on extending additional bailout funds to banks via the ESFS was like a sugar-coated treat to the childish cretins of the Wall Street investment community.

Shortly after the close of markets in the US yesterday, the Slovakian parliament became the only one of 17 countries to turn down the additional relief package proposal, sending shock waves throughout the EU and the rest of the financial universe. The package needed the approval of all members. Within minutes, however, there was talk of a deal on a re-vote, paving the way for a steady flow of funds to repair badly-damaged and close to insolvent European banks which have bourn the brunt of rolling bailouts to Greece, Ireland, Portugal and soon, Spain and Italy.

There was widespread optimism that the Slovak parliament would rework the proposal to fit their agenda and save Europe from imminent collapse. As has been the case for so long with all things Euro-related, the overseeing body of the European Union (EU) and the European Central Bank (ECB), a slight shift or change in the rules always seems to be the tonic whereby the Euro remains a "viable" currency and staves off the collapse, first, of Greece, and eventually the entire structure upon which the Euro currency is based.

With such confidence that European leaders would tread along the same path upon which the US staved off financial armageddon in 2008 after the Lehman Bros. bankruptcy, stocks were sent higher throughout the session, assured that the classic Ponzi scheme of international finance has finally gone global.

Along that line of thinking, John Embry, Chief Investment Strategist of Sprott Asset Management, said, in an interview with King World News, that stocks could decline by 40% if the European crisis turns into a repeat of 2008, and added, "I think investors have to be aware of the degree of manipulation in all of the markets here and not make the mistake of being momentum players. They shouldn’t just try to go with what is working and jump on board because a lot of this is manufactured for the sake of appearances."

Exactly. Global leaders don't want to see another major disruption like that of 2008, because their main concern is holding onto the reins of power they have secured, even if it means lying about where money is coming from, going to, bank balance sheets, stress tests and just about everything else if it means they get to keep their high posts.

While banks and the people who run them are most responsible for economic calamities over the past few years, politicians share much of the blame, enabling the ill-conceived schemes of the financial class with endless bailouts, ruses and guarantees while much of the global economy is reduced to a pile of worthless, paper rubble.

There was some late-day selling - a chink in the globalist armor and yet another indication of manipulated markets as there was no move to quiet the rally - and stocks finished with only about half of the gains racked up over the session. For instance, the Dow Jones Industrials were up by 209 points at about 2:30 pm, but closed with a gain of just 102. It pays to be a tape watcher these days, as waves of both buying and selling can occur at any time on any given day, no matter the news.

Only on major company reported earnings after Alcoa kicked off 3Q earnings season with a substantial miss on income Tuesday. PepsiCo (PEP) reported before the open that it had earned 1.31 per share after some one-time items, beating the Street estimates by a penny. The gains were largely attributed to Pepsi's aggressive pricing policy in which the company boosted prices around the world on its popular soft drink and snack brands.

Therein lies the conceit and thinly-veiled deceit of Wall Street. PepsiCo saw margin compression in the quarter, as operating margin narrowed to 16.5 percent from 18 percent a year earlier. Earnings for the giant company - with revenue approaching $18 billion in the quarter - have been mostly flat for the past year. Price increases, workforce reductions, cost-cutting and balance sheet shenanigans are what drives this company these days. Growth is largely the result of internal manipulations, not market share increases. Over the past five years, growth has slowed to a mediocre 5.87% per year, though making even that low level over the past few years has been difficult.

Dow 11,518.85, +102.55 (0.90%)
NASDAQ 2,604.73, +21.70 (0.84%)
S&P 500 1,207.25, +11.71 (0.98%)
NYSE Composite 7,263.69, +102.43 (1.43%)
NASDAQ Volume 1,998,280,250
NYSE Volume 5,355,361,000
Combined NYSE & NASDAQ Advance - Decline: 5250-1511
Combined NYSE & NASDAQ New highs - New lows: 41-35 (a reversal, which should not last)
WTI crude oil: 85.57, -0.24
Gold: 1,682.60, +21.60
Silver: 32.79, +0.79

Last Hour Rally Boost Stocks for Third Straight Session; Occupy Wall Street Legions Growing; Steve Jobs Dead at 56

OK, this is getting a bit ridiculous.

For the third day in a row, stocks staged a final hour ramp-up, this one good for only 100 points on the Dow, but that came after stocks had been given an initial lift-off around 10:00 am, resulting in a nearly 200-point rise on the Dow.

News from the Eurozone was once again scant, as EU ministers and leaders of the nations comprising the EU proved they will not take a back seat to the US President and congress when it comes to foot-dragging and kicking the proverbial economic can down the road.

There was some discussion of "re-capitalization" of the major banks, meaning nothing more than egregious money printing and bailouts for those with the most capital who have not yet learned how to manage it wisely.

Considering the penchant for late-day moves, perhaps the directors of the various exchanges might consider opening the market later in the day, say, 3:00 pm, locking out sellers as the computer algorithms simply ramp up the stocks they like. Being that "banker's hours" are legendarily short as it is, this would give said elite bankers more time to count their profits and have their nails manicured.

It's worth pointing out that the past three day's worth of last hour rallies began off fresh lows, set in place on Tuesday's ripped decline. On that day, the Dow bottomed at 10362.26, a low point not seen since September 9, 2010. The S&P and NASDAQ made similar moves, setting new, 12-month lows before the "Merkel miracle" when German Chancellor Angela Merkel first uttered the word, "re-capitalize." The S&P had already entered official bear market territory, obviously something the power-mad bankers simply could not tolerate.

The legacy of the current short-run rally will depend greatly upon the figures released Friday morning when the BLS issues its monthly non-farm payroll data. Anything over 50,000 new jobs created is certain to be seen as a win for equity holders, though there are no hard and fast estimates that can be trusted after last month's zero reading.

While in the short term, propping up markets - as has been occurring since late 2008 - may seem a noble and prudent activity, the longer-term consequences of unbalancing markets are not well known, although the examples available (Weimar, Zimbabwe, Dutch Tulip Bubble) all seem to have ended very, very badly.

On that note, here's a couple of Wall Street Whiz Guys who think the "new" level to watch is 1070 on the S&P. Listen carefully and you'll hear them advise to buy low and sell lower. Obviously, these guys are fresh escapees from the zoo for unfit hedge fund manglers.

Legendary gold bull, Peter Schiff of Euro Pacific Capital, doesn't think we're headed for a double-dip recession, he believes we're headed straight into "a complete economic collapse." Schiff's entertaining and caustic video can be seen here.

Not to put too fine a point on the doom and gloom aspect, Aftershock author, Robert Wiedemer, opines that we'll see "another meltdown within 2 to 4 years."

Well, Bob, thanks for the warning, though two to four years seems a long time to be waiting for the Apocalypse.

Meanwhile, outside the granite, steel and glass elitist enclaves of the big Wall Street firms, the Occupy Wall Street (OWS) movement continues to aggravate the paymasters and grow in depth and volume, spreading to over 500 cities and even getting the attention of President Obama during a news conference on Thursday. The corner of Broadway and Wall Street is beginning to resemble Cairo's Tahir Square in many ways.

Dow 11,123.33, +183.38 (1.68%)
NASDAQ 2,506.82, +46.31 (1.88%)
S&P 500 1,164.97, +20.94 (1.83%)
NYSE Composite 6,997.64, +153.48 (2.24%)
NASDAQ Volume 2,263,897,750
NYSE Volume 5,586,015,500
Combined NYSE & NASDAQ Advance - Decline: 5253-1294
Combined NYSE & NASDAQ New highs - New lows: 15-69
WTI crude oil: 82.59, +2.91 (WTF?)
Gold: 1,653.20, +11.60
Silver: 32.00, +1.65

Finally, it is with great regret to report that Apple co-founder Steve Jobs has died at the tender age of 56. In a tribute to Jobs' brilliance, we present the Super Bowl "1984" ad which aired on Super Bowl Sunday, January 22, 1984, during the third quarter of Super Bowl XVIII, heralding the launch of the Macintosh computer that revolutionized computing and our lives in general. Jobs was a thinker and inventor along the lines of Benjamin Franklin and Thomas Edison, a man of such greatness that we will likely not see another like him for decades. It would be remiss not to point out that this blog, and many other online ventures, is run off a seven or eight year old e-Mac, purchased used for $50 more than three years ago and that the Mac PowerBook G3 that was purchased in 1998, is still running strong on system 8.9, and has been operational, without the need for upgrades or any repairs for thirteen years.

People who invent and produce products of such lasting and functional value don't come along too often. Jobs, and his unique understanding of technology and its interaction with people, will be sorely missed.

Stocks in Panic Mode; Bankruptcy Lines Forming: High-Low Indicator at Extreme; Social Fabric Shredding

The Markets

Stocks began the fourth quarter the same way they ended the third, with waves of selling on fears of a Greek default and recession in the US and Europe.

After an initial lift from fair economic data, especially the ISM index posting a 51.6 number after a 50.6 reading in August and August construction spending showing a 1.4% gain, US stocks drifted lower throughout the day, with the final onslaught taking the S&P 500 to a close of 1099.21, the first time the widely-watched index closed below 1100 since September 8, 2010 (1098.87) and well below the recent low of 1120.76 (August 10). The S&P now stands (or slouches, as the case may be) less than nine points from official bear market territory, which would commence at 1090.89. The S&P is down 12.6% for the year.

The other major indices are also closing in on bear market territory. Another day like today would send the NASDAQ down more than 20% from its April 29 highs. The Dow Jones Industrials are faring best of the bad lot, though still just 375 points from marking a bear market.

Losses began overnight in Asian markets and cascaded through Europe and into the Americas. Most European bourses have been in bear markets for more than a few months.

News flows from Europe were not encouraging as the 17 countries which are backing Greek bailout funds met again on Monday but failed to come to an agreement on the second tranche of aid to the failing EU member.

That sent stocks into negative territory for the remainder of the session, closing at the lows of the day on very heavy volume in a broad decline. All 12 sectors were lower on the day, led by capital goods, financials and energy. WTI crude oil closed at its lowest price in over a year, fueling speculation that lower gas prices are on the way as weather cools and demand falls.

Dow 10,655.30, -258.08 (2.36%)
NASDAQ 2,335.83, -79.57 (3.29%)
S&P 500 1,099.23, -32.19 (2.85%)
NYSE Compos 6,571.45, -220.20 (3.24%)
NASDAQ Volume 2,523,549,250
NYSE Volume 6,714,723,500
Combined NYSE & NASDAQ Advance - Decline: 772-5877
Combined NYSE & NASDAQ New highs - New lows: 19-1405
WTI crude oil: 77.61, -1.59
Gold: 1654.40, +29.60
Silver: 30.33, +0.36


After the bankruptcy filing of Swedish automaker Saab last month signaled the coming onrush of large corporate bankruptcies, three companies have been making news on that front.

Eastman Kodak (EK), which has hired the law firm of Jones Day to explore "reorganization" possibilities, rallied back strongly after Friday's stock collapse. The company's shares are at a bargain-basement level of 1.34, a 77% gain on the day. Reports that creditors and investors are speaking to advisors have surfaced as the company continues to burn through $600-700 million annually off their broken business model, negatively impacted by the advent of digital photography.

Shares of American Airlines (AMR) were halted today amid rumors of bankruptcy filing. The oldest US legacy carrier lost 33% today, closing at 1.98.

The banking sector continues to be rocked by the continuing mortgage morass, new regulations and now, computer glitches. Bank of America's website and online banking functions were unavailable to millions of customers for a long time over the past few days, frustrating and infuriating its customer base just days after announcing that debit card users would face a five-dollar-per-month fee beginning in January for the privilege of spending their own money. Shares of the nation's largest bank closed down 59 cents, at 5.53, the lowest price since the depths of the financial crisis, when the stock closed at 3.12 on March 6, 2009.

Along with the S&P 500 breaking below 1100, the number of new lows today was a screaming signal to "get out of Dodge" as quickly as possible. Those 1405 new lows are at a level not seen since autumn of 2008, when the entire financial system was on its knees and needed a $700 billion "fiX" courtesy of a deal ripped from US taxpayers by then-Treasury Secretary (thief) Hank Paulson and Fed Chairman Ben Bernanke. No other indicator has been as reliable or accurate in picking crashes than the New high - New low indicator. According to the indication that has been flashing for weeks, a major down-leg is about to commence, especially with the NYSE, Dow, NASDAQ and S&P 500 all closing below support levels during the recent two-month slide.

This is a potentially world-shattering situation that has been developing for not just the past two months, but over the past three years. Stocks could free-fall as financial institutions in Europe, Asia and in the US face severe liquidity and solvency issues and sovereigns are unable to save them this time, concerned, rightfully so, with their own continued existence. The level of public distrust has risen to unprecedented levels. Over 700 people were arrested in New York, trapped on the Brooklyn Bridge (see video below) by New York City police funded by JP Morgan Chase.

This is only the tip of the news iceberg the mainstream media doesn't want the US public to see, hear or read. Peaceful protests in Boston, New York, St. Louis and Kansas City have taken on new life, resulted in mass arrests and are a threat to the ruling elite.

The entire human population of the planet is teetering on the brink of mass rioting and localized anarchy.

Rally Fades After Euro Rift is Exposed; Prepare for Third Quarter Earnings Bloodbath

US markets for equities and commodities have been held captive for the better part of the past three years - by high frequency traders, insiders with more knowledge (and money) than the general public, uninterrupted meddling by the PPT or other quasi-government agencies, but mostly, for the past nine to twelve months, by news from the Euro-zone.

It seems like every day there is a different story coming out of Europe concerning the debts of various nations and how the ECB, EIB, EFSF or any of a multitude of alphabet-soup acronyms react and intend to dispose of or attempt to solve the problem of the day. Today was no different as a late-session story from the Financial Times killed off a perfectly good short-covering, end of month window dressing rally inspired by absolutely nothing.

Stocks had been rolling along after a massive gap-up at the open, with the Dow ahead by as many as 325 points, but everything did an abrupt about-face when news erupted from Europe around 3:00 pm EDT over a rift between the nations aligned to bail out Greece - again.

According to the Wall Street Journal's story:

Stocks pared gains in the final trading hour after the Financial Times reported a split has opened in the eurozone over the terms of Greece's second bailout package. As many as seven of the bloc's 17 members are arguing for private creditors to swallow a bigger writedown on their Greek bond holdings, the FT said, citing senior European officials.

That was enough to finish off all the naked enthusiasm for the day and send stocks reeling into reverse. Though the averages finished the day with healthy gains, the froth at the top - and middle - were blown off by one story concerning something everybody already knows is a financial disaster, the continuing struggle over whether Greece should be allowed to fail or, by keeping it afloat, potentially take down the entire EU and maybe the rest of the global economy with it. The central banking powers and politicians around the globe are about at wit's end over the crisis in Europe, and are seemingly capable of saying or doing just about anything to stave off the eventual collapse of the Euro as a viable currency.

Sadly, for them and for the rest of us, eventualities do occur despite the best efforts of bright people to change the course of reality. It's so obvious to everyone now that Greece has to go, and soon, and they will take down untold numbers of European-based banks and spread the default contagion far and wide. Welcome to the 2008 redux.

For those who make a living trading, this environment is conducive to massive profits if one is nimble, smart and engaged, though at the end of the day all the swaps, hedges and protection aren't going to matter one whit when the financial tsunami crests upon first Greece's pristine shores and continues along the Mediterranean to Italy, Spain and Portugal. Once it races through the Straits of Gibraltar, all nations will be at risk, though the most isolated may be the best-insured. Countries out of the way, like Russia, India, Indonesia and Canada, may be spared the brunt of the blows, though general commerce will be affected globally.

It's coming. Everybody knows it. Most are in denial. That's how we get miracle rallies out of the blue and smashing declines on real news.

What to watch for are waves of large bankruptcies, like that of Saab, recently, sure to be followed by smaller suppliers and next by maybe a Chrysler or General Motors, which has traded below its IPO price for a solid six months after being bailout out by the US taxpayer. Nobody is buying new cars, and they're especially steering clear of GM (aka Government Motors) models. We are in the final stages of financial collapse, the first wave coming in 2008 and truncated by massive capital injections by the Federal Reserve, other central banks and governments from Paris to Beijing.

The financial paradigm of debt-issued money being created out of thin air, fractional reserve banking and crony capitalism has been broken and will soon find itself in complete and utter chaos. Events such as today's turnaround on Wall Street serve as apt reminders that the system is broken beyond human repair. It will take an act of God or an invasion from outer space to fix the mess and neither of those potentialities are on the horizon.

Adding insult to injury, analyst Meredith Whitney cut her third quarter earnings estimates on Goldman Sachs and Morgan Stanley late in the day. Whitney, a highly-respected banking analyst, cut Goldman Sachs (GS) from 3.39 per share to a mere 31 cents, a 90% haircut. Morgan Stanley (MS) was cut from 53 cents to 28, so it would be best to be prepared for a third quarter earnings bloodbath, not only for banking stocks, but for a host of other well-known names. Results from the previous quarter and year-ago will be hard to match for many firms, with the 4th quarter looking even more devilish.

Dow 11,190.69, +146.83 (1.33%)
NASDAQ 2,546.83, +30.14 (1.20%)
S&P 500 1,175.38, +12.43 (1.07%)
NYSE Composite 7,043.12, +102.31 (1.47%)
NASDAQ Volume 2,109,385,500
NYSE Volume 5,515,045,000
Combined NYSE & NASDAQ Advance - Decline: 5195-1451
Combined NYSE & NASDAQ New highs - New lows: 37-102
WTI crude oil: 84.45, +4.21
Gold: 1,652.50, +57.70
Silver: 31.54, +1.56

Euro Fears Still Making Markets Shaky

As today's post title suggests, trading continues to focus on events - or the relative lack thereof - in Europe, where today French President Nicolas Zarkozy met with German Chancellor Angela Merkel, announcing some coordination of efforts, but fell short of endorsing the concept of Eurobonds to shore up shaky finances on the Continent.

"We want to express our absolute will to defend the euro and assume Germany and France's particular responsibilities in Europe," said Sarkozy.

In what has to be the most humorous statement to date concerning sovereign fiscal policies, the two leaders said they would push for balanced budget amendments for all 17 nations which use the Euro as their primary currency. The irony is that, excepting possibly Germany, none of the member nations have had a balanced budget in at least five years, most of them running continuous deficits since the Euro became the continental currency in 2000.

The specific proposals coming from the leaders of the two most powerful members of the Europen Union were slim. They said their finance ministers would meet four times a year and proposed that the member nations coordinate income tax policy and begin taxing financial transactions by 2013, kicking the proverbial can a bit further down the road to perdition.

By the time the two leaders met with the press, European markets had already closed, so the brunt of the effect from their statements was felt primarily in the US.

Stocks took a nose dive after the press conference, and fell to their lowest levels of the day just after 1:00 pm EDT. The Dow was off by 190 points at its bottom.

But, as usual, the mechanics of controlled markets took over, as all the major indices rallied for the final three hours, still closing down for the day, but with reasonable losses.

Stocks had gotten off to a shaky start, after economic data was mixed prior to the opening bell. July housing starts fell off to 604,000 on an annualized rate, after posting a figure of 613,000 in June. Building permits dropped by 20,000 from the annualized rate of 617,000 in June.

However, industrial production came in with a better-than-expected gain of 0.9% and capacity utilization also showed a bit of strength, with a reading of 77.5%, following a 76.9 figure in June. Of course, these are estimates prepared by an inept and failing government and should not be trusted as any true guide to financial conditions in the United States, even though they remain mired in the minds of traders and fund managers as the most reliable gauges.

Without any determinant structure of reform or policy coming from Europe, expect this see-saw battle of bulls and bears to rage on for weeks until something concrete cracks across the pond. There seems to be about the same level of political will over there as there is in the US to entertain policies that actually address structural issues in the economy - none - as the leaders on both sides of the Atlantic are easily more enthusiastic about getting re-elected than they are at doing their jobs well.

With the majority of the politicians on vacation this month (the NY Times reports that 80 members of the house of representatives have or will be visiting Israel this month) our political class appears quite cavalier when called on to solve pressing problems.

Until there is real political leadership (in other words, we better hope we make it to November, 2012 and then elect Ron Paul as our next president) markets will continue to stumble along and economies will continue to run up debt and deteriorate.

That's how it goes. Prepare.

Dow 11,405.93, -76.97 (0.67%)
NASDAQ 2,523.45, -31.75 (1.24%)
S&P 500 1,192.76, -11.73 (0.97%)
NYSE Composite 7,394.49, -88.22 (1.18%)

Declining issues got the better of advancers on the day, 4939-1664. On the NASDAQ, there were six (6) new highs, but 51 new lows. The NYSE showed 10 new highs and 15 new lows, keeping the bias to the downside, with the combined figure of 16 new highs and 66 new lows. Expect the gap between the few new highs and increasing new lows to expand as the crisis nobody wants to handle grows even deeper.

Volume was moderate, which, after the events of last week, shows a general lack of interest overall in staking out any new, long term positions.

NASDAQ Volume 2,085,979,250
NYSE Volume 5,009,345,000

Oil closed down $1.23, to $86.65, though gas prices at filling stations across the country have seen hardly any price decline at all.

The continued unease over macro-economic issues produced a renewed push into gold, which traded higher by $27.00, to $1,785.00, a new closing record, while silver also gained, finishing up 51 cents, at $39.82, though it traded above $40/ounce both earlier in the day and after equity markets had closed.

Tomorrow brings PPI numbers for July, the Mortgage Bankers Association Mortgage Index and a reading on crude oil inventories. Other than that, bonds look very good, as they continue to hold near low levels, but remain one of the primary safety plays.

Stocks Finally Post Gains After 7-8 Days of Losses

Sooner or later there was going to be some kind of rally and today was it, even though it wasn't anything to write home about.

After the Dow had been down for eight straight sessions and the S&P down seven in a row, the early morning trade looked to be more of the same with the major indices dropping to session lows around 10:45 am EDT. The Dow was down more than 160 points, officially touching down at 11,700, when the turnaround began. The S&P was sporting losses of nearly 20 points before heading higher and closing at the highs of the day.

It's not as though anything had changed at all. Italy is on the brink of default, following in the footsteps of neighboring EU nations, Ireland, Portugal and Greece. European-based banks are supposedly frozen with terror having exceeded all prudent boundaries for lending to highly-indebted nations.

And, here in the US, no change will come to the current jobs or housing situation as the congress has already embarked on a month-long vacation, after, of course, taking a few victory laps for their last-minute daring-do on raising the debt ceiling and putting forth a measure that cuts somewhere between $20 and $25 billion from the budget in 2012, less than 1/10th of one per cent of the entire budget, or, quite literally, a drop in the budget bucket.

The only thing moving stocks today - besides the obvious influence of the PPT - was the extremely oversold condition of the markets. The Dow is down 828 points since just July 21, exactly 10 trading sessions. There's a very realistic chance that this was only a knee-jerk reaction rally, based entirely upon the notion that stocks are cheap relative to where they were trading two weeks ago.

Dow 11,896.44, -29.82 (0.25%)
NASDAQ 2,693.07, -23.83 (0.89%)
S&P 500 1,260.34, -6.29 (0.50%)
NYSE Composite 7,853.20, -21.22 (0.27%)

Advancing issues finally took the edge over losers, 3737-2897. The NASDAQ posted 28 new highs, against 204 new lows, while the NYSE had just 14 new highs and 275 new lows, blowing the combined total up to 42 new highs and 479 new lows. This high gap indicates that stocks are on the verge of a severe, long-term breakdown, despite today's small gains. Volume was strong, but the buying seemed to be out of desperation and directed at short-term profit rather than long-term investment.

NASDAQ Volume 2,637,190,000
NYSE Volume 6,487,507,000

Two pieces of jobs-related data showed that the jobs market is still in quite the dodgy condition. The firm of Challenger, Gray and Christmas released their monthly survey of planned layoffs, which showed employers announcing 66,414 planned job cuts in July, up 60.3 percent from 41,432 in June. Meanwhile, the ADP monthly private payroll survey surged to 114,000 added jobs in July, a positive sign for Friday's non-farm payroll numbers from the BLS.

Commodities continued along their bifurcated path, with oil down $1.86, to $91.93, while gold surged to another record at $1,666.30, up a whopping $21.80 on the day. Silver rose $1.67, a gain of more than 4%, to $41.76, the highest close since May.

All of this sets up for an exciting end to the week. Thursday's initial unemployment claims will show the way on Thursday, while the non-farm payroll report - expected to show a gain of 100,000 jobs for July - should set the tone on Friday.

Euro Bailout Revives Markets... and How!

If anyone was thinking the markets couldn't get any more extreme than they did last week, Monday morning's festival of funding, courtesy of the European Union and the IMF, to the tune of nearly $1 Trillion.

According the the Wall Street Journal:

The U.S. market's surging open followed strong gains in the Asian and European markets after the European Union agreed to a EUR750 billion ($955 billion) bailout, including EUR440 billion of loans from euro-zone governments, EUR60 billion from a European Union emergency fund and EUR250 billion from the International Monetary Fund.

Most of the gains came right at the open, which kept individual investors shut out for the most part. The major indices gapped up within 5 minutes of the open by roughly 4%.

Following Thursday's "magic moments," which witnessed a drop and subsequent rebound on the Dow in a matter of less than 15 minutes, market observers have plenty reason for skepticism. After Bob Brinker called the Thursday move, "manipulation," veteran trader Art Cashin, head of floor operations at UBS, said live on CNBC, referring to Friday's non-farm payroll report, "188,000 was a guess by the Bureau of Labor Statistics." Further, he said, "keep your eye on the referee. This game isn't on the up and up," referring to possibly the entire market.

All of this market volatility should come as no surprise to anybody who's been following the financial crisis over the past 2 1/2 - 3 years. Nations, and their political leaders, have a vested interest in keeping their worthless currencies in play, regardless the consequences down the road. Mountains of debt have been piled upon other mountains of debt around the world. The EU bailout was a long time in coming and a hard morsel to chew on for beleaguered leaders. Essentially, they had no choice, though the future seems as uncertain as ever, if not more so.

Stocks bounded higher in Europe and the US, with the average index gaining somewhere between 3 and 5 percent. Asian markets were more subdued, excepting Indonesia and India, which were both highr by 3 1/2 to 4%.

As usual, bank stocks - both in the US and in Europe - led the advance.

Dow 10,785.14, + 404.71 (3.90%)
NASDAQ 2,374.67, +109.03 (4.81%)
S&P 500 1,159.73, +48.85 (4.40%)
NYSE Composite 7,257.62, +341.44 (4.94%)

Advancing issues led decliners by an enormous margin, 6036-696. New highs regained their edge over new lows, though not my a meaningful margin, considering the momentous advance. There were 143 new highs to just 37 new lows. The idea that there were any new lows at all was remarkable, and also notable was the volume, at lower levels than on most of last week's down days.

NYSE Volume 7,876,002,500.00
NASDAQ Volume 2,858,059,750.00

Chances are good that throwing a trillion dollars at Europe's problems will stabilize markets for a while, but, like their TARP counterpart in the fall of 2008, the effects could be very short-lived. As with the TARP in the US, the average European citizen will not likely embrace the bailout of banks and government while the populace goes hungry.

Commodities were mixed on the news. Oil regained some of what it lost over the past week, gaining $1.69, to $76.80, but gold was down $9.60, to $1,200.40. Silver slit the difference, gaining 10 cents, to $18.53.

Largely ignored were two items: Ratings agency, Moody's, received a Wells Notice from the SEC, signaling that enforcement action was forthcoming; Fannie Mae posted a $13 billion loss for the first quarter and asked for another $8.4 billion in federal assistance.

One thing that seems certain: The comparisons of Wall Street to Las Vegas are unfair. Las Vegas is a much more friendly place for individuals. The odds stay the same and the rules don't change over the weekend. These comparisons are only giving Las Vegas - a place where anyone and everyone gets a fair shake - a bad name and should cease. We'd like to call Wall Street a den of wolves, but we actually like wolves.

Major Market Madness as EU Faces an Abyss

Greece has exploded into near-anarchy. Most of Southern Europe is about to enter similar circumstances, as Italy, Spain and Portugal face the same kind of debt crisis that is sweeping the globe. Ireland and Iceland have already felt the wrath of economic unwinding and the panic doesn't stop at small-country borders.

The unprecedentedly-swift breakdown which occurred today on US stock markets is a symptom of a wider contagion, a currency, central bank, sovereign confidence crisis.

Around 2:00 pm, with stocks already suffering significant losses and live video of protesters being attacked by riot police in Athens airing worldwide, markets turned even more dire, doubling their losses in a matter of minutes. By 2:15, the wheels were off as the Dow fell from 250 points down to a 990-point loss in the blink of an eye. For about 10 minutes, markets were in freefall. Traders reported a near-complete capitulation, with buyers completely absent from the market in almost all stocks.

Once again, however, the slide was staunched by some heavy-handed trading in futures and the more-than-likely subterfuge of the major investment banks and their allies in crime, the government-approved President's Working Group on Financial Markets (Plunge Protection Team. i.e., the PPT). As quickly as the markets fell, the rebounded. The Dow recovered to a loss of roughly 400 points and seemed to stabilize at that point. After a wild 15 minutes of trading that left everybody stunned and questioning exactly what happened, the markets churned onward toward the close, ending with massive losses, nonetheless.

Dow 10,520.32, -347.80 (3.20%)
NASDAQ 2,319.64, -82.65 (3.44%)
S&P 500 1,128.15, -37.72 (3.24%)
NYSE Composite 7,011.92, -246.10 (3.39%

The substantial declines on the day were more than bourn out by the internal indicators. Declining issues completely overwhelmed advancers, 6015-742, or, by a margin of about 9:1. It was one of the biggest one-day routs in recent years, and there have been a good number of those. The key measure was the number of new highs to new lows, which completely flipped over from a year-long trend. There were 612 new lows to 196 new highs, a complete reversal, which, if history is any kind of guide, is a loud siren that the bears are firmly back in control.

Another screaming indicator was the day's volume, literally off the charts. This is the kind of volume seen only at the extremes, likely one of the 5 or 10 highest-volume days in the history of US stock markets. Since the direction was decidedly to the downside, more selling should be expected in days to come.

NYSE Volume 11,772,131,000.00
NASDAQ Volume 4,292,823,500.00

Concerning the heavy selling that sent stocks into a short-lived abyss, the commentators on CNBC cited such simplistic theories as a computer glitch, false prints and other preposterous theories, all along avoid the obvious truth: the economic crisis did not end in March of 2009, when stocks began a year-long rally. Financial markets are still fragile, one might say, tenuous, and only clandestine moves by insiders kept stocks from recording a record sell-off.

At some point, CNBC or another expert may release a story explaining the sudden downturn on the back of a rogue trade or computer malfunction. Any such story should be viewed with an additional dose of skepticism if only because of the various levels the major indices broke through during the panic. All of them shattered their 50-day moving averages during the session and closed well below them. Markets have been trending lower for the better part of the past two weeks and this kind of momentum-turning-to-panic trading cannot be discounted as a one-off event.

The likelihood of further market declines in the very near term and extending into the longer term is very high. The debt-deflation bomb has not yet run its course. Not until massive amounts of money and companies are liquidated will the disease be purged from the global economy. Expect widespread panic in European markets as countries fall like dominoes with a side-effect around the world. US markets will not be spared, as the US is only the best among peers at this juncture. Major economies will survive, though France, Germany, Great Britain and the USA will be severely crippled by year's end.

Our beloved "recovery" has been a complete fabrication, fueled by the media and the mechanics of commerce in Washington and on Wall Street. Individual investors have largely shunned equities in favor of bonds and tangible assets such as gold, which was an outside winner on the day. Greece and the rest of the Southern European countries are financially on death's door, facing complete default. Soon, one will capitulate and flee the European Union and denounce the Euro. When that occurs, the ten-year experiment at cross-border governance will be essentially over. The EU will disintegrate and the Euro will be completely unwound. The main hope is that troops do not begin excursions into neighboring nations, as has been the centuries-old history of Europe.

Even today, as it has been throughout the life of the EU, the stronger Norther economies have considerable enmity toward their Southern neighbors. The chance of the entire continent devolving into skirmishes over currencies would neither be unexpected nor unprecedented. Wars are usually how nations resolve major financial squeezes and Europe is certainly in one now.

Besides the dire conditions in Europe, the Gulf oil spill remains unchecked and tomorrow's non-farm employment report - to be released to the public at 8:30 am ET - doesn't offer much optimism. Most of the supposed 185,000 jobs created in April will be attributed mostly to government hiring of temporary census workers and the whisper campaign is that not as many were needed due, ironically, of the efficiency of the operation. Should the non-farm number fall significantly below expectations - a real possibility - an immediate continuation of the plunge will probably occur.

The best hope is for the proverbial, "dead cat bounce," which might ease tensions temporarily, until, at best, the next round of crisis selling. So severely strained and wrought with fraud, inter-leveraging and toxicity, financial markets have entered a semi-permanent state of crisis. When this chapter of global finance is finally unwound, the world won't end, but the pain will have spread deeper and wider than anyone could have expected.

For the baby boomer generation, the nightmare may have only begun. Those without high debt may find themselves in better positions than many of their over-leveraged peers.

Some of the numbers emerging from this historic day in finance (and underscoring the idea that this was not a one-off event):

Crude oil futures continued their steady decline, losing another $2.86, to close at $77.11, the lowest print in months. Safe-haven gold improved by $22.30, climbing above the $1200 mark to finally settle at $1,196.90. Silver couldn't keep pace, losing 2 cents, to $17.49.

All of the major indices have suffered huge blows over the past two weeks, and all closed below their 50-day moving averages.

The Dow Jones Industrials are less than 100 points higher for the year. For the year, the NASDAQ is up only 50 points, the S&P ahead by just 13 points, the NYSE Composite - the broadest index - is down 173 points, all of that loss, and more, occurring today.

All of the 30 Dow components closed lower, many of them with 3.5 to 4.5% losses. Citigroup touched a low of 3.90, closing at 4.01, as all financial stocks were pounded lower.

Treasuries and the US dollar were sharply higher. The dollar index hit fresh highs while the Euro broke down to 14-month lows against the greenback. The benchmark 10-year treasury closed at a 3.40% yield, 55 basis points lower than just a month ago.