Dovish Bernanke Speaks, Market Goes Full Retard, to Record Highs

Free market and Austrian economists beware!

There is a dangerous monster afoot, who by merely speaking a few words can alter global markets to whatever whim he so desires.

On Wednesday, shortly after the market closed, this monster, this unsightly beast, one Benjamin Shalom (we kid you not) Bernanke, Chairman of the United States Federal Reserve Bank (an international cartel), spoke in Cambridge, Massachusetts, and intoned, in part, that the 7.6% unemployment rate "overstated" the health of the labor market.

Translated into Fed-speak - which is all that matters to equity markets these days - what he meant was that there was no need for investors to panic. The Federal reserve has every intention of keeping monetary policy incredibly loose, so that even if the Fed dials back its $85 billion-a-month bond purchasing program a little, they do not believe that the US or global economy is strong enough to survive without stimulative measures.

The result was a strong gap-up at the open on Thursday and an all-day party for Wall Street bulls with the S%P 500 and the Dow Industrials closing at all-time highs. Bears were once again crushed and the rookie Dow Theorists who surmised that the dip from a few weeks ago was a sure-fire reversal into a bear market (we here at MD did not confirm any such theoretical reversal, though indications were close) were once again proven not only wrong but absolutely clueless when it comes to Dow Theory.

Markets have now been completely voided of any validity to fundamental valuation. All that remains is intonations from the beast of the Fed and his minions, sending markets any which way they choose. These are markets distorted completely out of focus from reality, in 1984-esque fashion, where bad news (Bernanke is correct, 7.6% unemployment is, in itself, a gross distortion of reality - stripping out part-time, temporary and distressed and discouraged workers, unemployment is closer to 20%) is good because the Fed will continue to supply unlimited liquidity.

In the end, be it five days, five weeks, five months, five years or longer, the stimulus will save nothing. Sovereign economies will end in shambles (some, like Greece, Portugal, Cyprus and Ireland already are), but for now, all anybody with as much as half a brain left after all the brain-washing by the media and immoral rounds of bailouts, bail-ins, rescues and refinances can do is play along, go along or go one's own way, the latter of which is highly refreshing and the only proper course of action.

Five years into the global currency melt-down, carnage is everywhere, the rich are even richer, the middle class on the endangered species list and the bottom tier nothing more than debt slaves for life.

This is not your father's America. It is not even the America you grew up into, if you are more than 30 years of age. This is an abomination, a monstrosity of complexity, a leviathan more frightening than even Thomas Hobbes could have dreamt.

Happy sailing, oh rudderless ones!

Dow 15,460.92, +169.26 (1.11%)
NASDAQ 3,578.30, +57.55 (1.63%)
S&P 500 1,675.02, +22.40 (1.36%)
NYSE Composite 9,493.21, +152.52 (1.63%)
NASDAQ Volume 1,680,093,125
NYSE Volume 3,796,463,500
Combined NYSE & NASDAQ Advance - Decline: 5246-1307
Combined NYSE & NASDAQ New highs - New lows: 772-21 (abominal!)
WTI crude oil: 104.91, -1.61
Gold: 1,279.90, +32.50
Silver: 19.96, +0.791

S&P Closes Under 1400; Precious Metals Whacked

The follow-on from yesterday's FOMC minutes release, combined with scary data from Australia and China (slowing economies) sent markets tumbling globally.

Asia and Europe each saw aggressive selling, and by the time US markets opened - despite ADP March employment data posting a modest beat of 209,000 jobs - the Dow was set up for a 100-point loss at the open.

The opening move was swiftly lower, taking the other major indices along for the ride. Dow Industrials remained below 13,100 all day, with the S&P 500 - despite a late day rally - eventually closing below 1400 for the first time in eight sessions.

To say that the markets have topped out temporarily would be putting it lightly; rather, stocks seem to be in a steady drift lower, as Winter turns to Spring and investors seek to lock in profits from one of the most rambunctious first quarters in stock market history.

Conditions in Europe once again made noise in the states, as a poor showing for a Spanish bond offering and rumors of another bailout for Portugal fanned the flames of global recession.

While some commentators continue to spout nonsense that the US is "decoupling" from Europe and the rest of the world's economies, such talk is nothing but hot air, mostly from the same people who rightly contended during the struggles in the US that a large portion of US earnings are derived from abroad.

One simply cannot have it both ways. We are either a part of the global economy or we are not and the facts are strongly in favor of the "globalized" economy model.

What concerns investors most during this transitional period are fears of a prolonged slump in Europe which would exacerbate tepid conditions in the US. Economic data has been fragile of late, but hope for a renewal to the rally on first quarter earnings data from US companies is keeping the markets somewhat range-bound and in a position of relative strength, though the thought of the Fed cutting off the easy money with the end of "operation twist" in June are tempering the bullish sentiments.

While stocks were damaged on the day, gold and silver were even harder hit, which makes little sense from an historical perspective. In times of economic distress, the precious metals usually hold up better, but, since they have been turned into trading vehicles by the Wall Street madmen, such assumptions may not hold up this time around. The mood is eerily similar to that of September 2008, when a fragile economy was overturned by a number of random events. The situation is vastly different today, however, but a major crisis anywhere in the world could rapidly spread.

In the face of some chaos, the strengthening dollar is at least bringing down oil prices, which should eventually lower the price of gas in the US. The high price of fuel is in itself a condition which could severely slow the already turbid US economy, though the good news for drivers may not be welcomed by equity investors.

The new high - new low indicator flipped to the negative today for the first time in a long while. Any continuation of that trend indicator could signal a prolonged correction, something the three-year-old bull market has not experienced since the flagging days of last summer.

Dow 13,074.75, -124.80 (0.95%)
NASDAQ 3,068.09, -45.48 (1.46%)
S&P 500 1,398.96, -14.42 (1.02%)
NYSE Composite 8,111.48, -105.06 (1.28%)
NASDAQ Volume 1,779,653,500
NYSE Volume 3,810,047,500
Combined NYSE & NASDAQ Advance - Decline: 1079-4563
Combined NYSE & NASDAQ New highs - New lows: 65-109
WTI crude oil: 101.47, -2.54
Gold: 1,614.10, -57.90
Silver: 31.04, -2.22

Thursday Turnaround Mostly Vapors and Short-Covering

Let's see if we can find the good news that took the Dow back from a morning loss of 94 points to a gain of nearly 20 points by day's end?

Initial employment claims came in at 359K on expectations of 350K and the prior week was revised higher, from 348K originally reported to 364K. Well, that can't be it.

The third and final estimate for fourth quarter 2011 GDP remained steady at 3.0%. Maybe.

Moody's downgraded five Portugese banks. Nope.

Gas at the pump is still hovering around the $3.90/gallon range, on average, across the United States. Hmmm, probably not.

Those were the major headlines and issues on this Turnaround Thursday, as all the major averages fell out of bed, then through the magic of computer-programmatic algorithms, found a suitable bottom and rose through the afternoon and into the close.

In days past, chartists would say that the market put in another, higher bottom, but this intra-day bottom happened to be the low for the week. In other words, the monster rally from Monday was all eaten up by greedy, high-powered day-traders who more or less control this thinly-traded market.

Now, volume was a bit more perky today, but that would be due likely to short covering and the fact that it takes more trades to move all the indices from a cratered loss to near the break-even point. All of it is rather meaningless, since only the major banks, brokerages, fund managers and some moribund hedge funds have actually been engaging in this casino-style market since the middle of 2010, right after the flash crash scared out the last remaining individual investors.

As mentioned in yesterday's post, this is all leading up to a big rally coming either Friday (1st quarter window dressing) or Monday (first trading day of the quarter), or both. Not that the end of a quarter or the beginning of one has anything to do with fundamentals, they're just when the big boys open and close their books, so it gives them something upon which to hang their hats.

The bull market that began in March of 2009 has been one of the best in history, with the major indices all up close to or more than 100% from the bottom. Doubling your money in three years is a trick only the magicians of Wall Street can perform, though they got plenty of help from the taxpayers and rich Uncle Ben Bernanke at the Federal Reserve.

In fact, uncle Ben is still pumping out scads of greenbacks to keep the rally going, because in case anyone cares to look at the Fed's policies of the past three to four years, the stock market gains are about the only positive result among them.

Sure, sure, everyone pats Bernanke on the back for "saving" the economy, but what he really saved was the banks, which had fallen over a solvency cliff. The government has been running record deficits ever since the '08 crash, the value of the dollar is on a gentle glide-path to zero, just like Ben's interest rates, inflation continues to ravage household budgets, while low interest rates on savings are killing seniors. Housing is still declining, another credit bubble - in the form of student loans, auto leases and credit cards - is forming rapidly and small business is too busy keeping up with Washington's rule changes and mountains of regulations to actually hire anyone or expand. Entrepreneurs have been completely scared off and looking to foreign shores for opportunity.

So, really, what did Ben Bernanke save besides his banking buddies and his own job? Oh, that's right, Europe. But, but, but, that's not his job, is it?

Dow 13,145.82, +19.61 (0.15%)
NASDAQ 3,095.36, -9.60 (0.31%)
S&P 500 1,403.28, -2.26 (0.16%)
NYSE Composite 8,166.37, -21.98 (0.27%)
NASDAQ Volume 1,755,819,875
NYSE Volume 3,772,621,250
Combined NYSE & NASDAQ Advance - Decline: 2268-3291
Combined NYSE & NASDAQ New highs - New lows: 108-61
WTI crude oil: 102.78, -2.63
Gold: 1,652.20, -5.70
Silver: 31.99, +0.16

Stocks Ripped Lower Again; More Questions than Answers

Since US stock markets are so delightfully linked t the fates of Europe, the same old story keeps repeating itself over and over, such as today, as the Euro fell sharply (1.00 EUR = 1.30348 USD) against major currencies and the Dollar Index closed at an eleven-month high (DXY:IND 80.273 0.708 0.89%).

While those dual developments are intertwined, the parties involved - from European, US and Chinese exporters to American and European consumers - will feel the effects in dramatically different manners.

Naturally, for most of Europe, a collapsing Euro is bad for consumers, making everything imported more expensive, but great for exporters, whose goods are cheaper by comparison in importing nations.

The opposite is true for the US, which is why stocks are usually down when the Euro dips and the dollar strengthens. Americans should welcome a stronger dollar, especially at this time of year, because all those trinkets and holiday goodies - mostly from China - will be cheaper, though probably not right away.

As has been a repeatedly-held view in this space, the Euro is headed for catastrophe, and it's going to occur sooner than anyone thinks, probably before the middle of 2012. German people are sick and tired of bailing out the Southern countries, Greece has already defaulted on some debt, Italy, Spain, Portugal, Ireland and Belgium are holding on for dear life and the ECB is going to be quickly as tapped out of funds as its leaders are of ideas.

The idea of printing more money, as has been the case in the US, with dubious effect, will only make matters worse when inflation rages and dissatisfied citizens stop paying taxes in deference to feeding their families. The trouble is that sovereign debt, ridiculously rated at AAA or beyond, is about to be downgraded across the Euro-zone and beyond.

For those unfamiliar, sovereign debt is the money governments borrow to fund everything from pensions to schools to war machines (like here in the US). Most of Europe should be rated no better than A or A+, a move that is coming soon from either S&P, Moody's or Fitch, because nations have shown over time that while they may always repay on time, they are profligate spenders and tax revenues are dropping, not expanding. Balance sheets (those things nobody likes to look at) of most governments are ridiculous when compared to that of an average American or European family, who don't get the benefit of positive credit ratings, pay higher interest rates than silly governments, yet most manage to pay bills on time and keep their households in relative sanity.

With all of the monstrous debt of Europe and the US overshadowing just about all other economic realities, there are more questions than answers these days, a few of them being:

• Where's the money (over $1 billion) that MF Global took from investors?
• How soon will the ratings agencies lower the credit ratings of Italy, Spain, Portugal, France and the rest of the Euro-zone nations, and, how far down will they go?
• If US banks are borrowing at 0-0.25% from the Fed, why are credit card rates 8, 10, 15 and even 28% for US consumers who have solid track records of on-time payments?
• Can government statistics be trusted at all?
• Why would anyone under the age of 40 contribute to Social Security if not that it's automatically deducted from their paychecks?
• If the world is headed for global depression, won't all asset classes, including gold and silver, devalue?
• Why are government employees in the US paid 30-40% more than their private-industry counterparts and receive gold-plated health care and pensions, when the US population - who pays them - work for less, have fewer benefits and many have no guaranteed retirement plans?
• Why is the world's greatest criminal, Hank Paulson, still a free man?
• Where is Eric Holder, the Attorney General, and why hasn't he even investigated any of the banks or the prior administration?
• Why must Americans choose between Mitt Romney or Newt Gingrich as the Republican presidential nominee when Ron Paul and Michelle Bachmann have better positions and more consistent voting records?
• Why is President Obama opposed to the Keystone pipeline that would bring oil from Canada (our largest trading partner and a friendly one) and thousands of high-paying jobs?
• Why is 20% supposed to be a "fair" percentage one should pay in federal taxes when most people outside the middle class pay little to nothing?

Those are just teaser questions, without good answers from politicians, regulators, academics or economists. The tough ones await in the new year.

And, to those kids waiting for Santa Claus, you've got 11 days left to try being good. For the scoundrels on Wall Street, awaiting the famous, year-end Santa Claus Rally, you've been bad, so just coal (clean coal, for sure) for you, and, even if there is a rally, it will only get the indices back to where they were a week or a day or two ago, and 2011 will go down in the books as a year of near-zero (or less) returns. So much for owning stocks.

A couple of quick points on economic data. November retail sales figures were up 0.2%. There's one word to describe all the hoopla over Black Friday and the whole retail consumerism mantra. BULL---T.

The FOMC of the Fed had its last policy meeting of 2011 and did nothing. Thanks, for nothing.

Dow 11,954.94, -66.45 (0.55%)
NASDAQ 2,579.27, -32.99 (1.26%)
S&P 500 1,225.73, -10.74 (0.87%)
NYSE Composite 7,276.65, -86.84 (1.18%)
NASDAQ Volume 1,732,941,625
NYSE Volume 4,080,177,000
Combined NYSE & NASDAQ Advance - Decline: 1462-4165
Combined NYSE & NASDAQ New highs - New lows: 107-146 (more red)
WTI crude oil: 100.14, +2.37 (higher due to fears over Iran)
Gold: 1,663.10, -5.10
Silver: 31.26, +0.26

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

Rough Week for Stocks Ends Mixed; Markets Gripped by fear and Uncertainty

Despite some favorable economic news during the course of the week, market participants mostly shunned equities as Europe's ongoing crisis and the lack of a deal by the congressional super-committee kept money mostly on the sidelines or taking profits (and losses).

Since the US stock market has become more akin to a day-trading casino than an investment culture, traders now routinely react swiftly to breaking news and events, preferring to stay out of the way or grab quick profits as the tableau of international economic falderal unfolds. The week was marked by more speculation than actual news, as Italian and Spanish 10-year notes criss-crossed the 7% yield threshold and Germany continues to balk at being the savior of the Southern nations, even as Chancellor Angela Merkel admitted that her country was ready to cede some degree of sovereignty in order to salvage what's left of the European monetary union.

Germany holds the key to whether the decade-old European Union will survive, being the largest and strongest economy in the region. While Merkel has made pronouncements pleasing to her neighbors to the West and South, she is losing a degree of favor at home, as many Germans don't exactly share her views and dislike the role of Germany as the bailout nation for weaker economies.

Funding for Greece, Italy, Portugal and Spain has become an issue so delicate and abstract that one solution offered was for the ECB to loan money to the IMF, which would then fund the ailing nations, though that kind of Ponzi scheme would only work to relieve the ECB of their presumptive role of being the "lender of last resort" such as the US Federal Reserve was during the 2008 crisis.

It's a touchy situation in Europe, with new governments in Italy and Greece, both tottering on the brink of default, though Greece's predicament - with no new funding coming soon - is degrees more perilous.

Here in the USA, congressional members have not exactly been forthright in their effort to reach a compromise on the roughly $1.2 trillion in budget cuts which was the mandated approach after the August debt ceiling debacle.

With the US public debt officially exceeding $15 trillion on Thursday and the prospects for another $1 trillion-plus deficit in the coming fiscal year, one would think that congress and their "super-committee" would have found some resolution before their November 23rd deadline, but, as usual, congressional members are deadlocked, mostly along party lines, with Republicans steadfastly refusing to approve anything which even smells like a tax hike and Democrats seemingly all too happy to allow the blame to accrue to their across-the-aisle counterparts.

With the deadline looming just five days ahead, members of the committee are pondering letting the deadline pass, which would trigger automatic spending-cuts, otherwise known as sequestration, though that approach is also riddled with question marks as some members have openly suggested that even those automatic cuts could be ripped asunder, primarily because of opposition to cuts to the Department of Defense.

The comedy of errors which began last Spring with the threatened shutdown of the federal government over budget issues threatens the US credit rating, already taken down a notch in August by Standard and Poor's. Failure to reach agreement might not engender another rating cut, though scuttling the previously agreed-to automatic cuts just might cause S&P to downgrade the US again.

Against this backdrop of a do-nothing congress without political will or wherewithal, and a fractured Europe an landscape, one can hardly blame traders for seeking the safety of cash or Treasuries. Volume on the stock exchanges this week has been dismal, exacerbated by a missing $600 million in investor funds courtesy of the recently-bankrupt MF Global. The fund, run by former Goldman Sachs CEO and New Jersey Governor Jon Corzine, made heavy bets on European debt and found themselves in too deep. The current thinking is that MF Global used client funds to shore up losing positions before going belly-up, a practice that is wholly criminal.

However, since nobody ever goes to trial or jail for financial follies in the US, regulators are being very tight-lipped about the matter, even though reputations have already been badly tarnished and over half a billion dollars is either unavailable or lost.

For the week, the Dow Jones Industrials took it on the chin to the tune of a 357-point decline. The S&P 500 fell 50 points during the week, the NASDAQ down 106 points and the NYSE Composite off by 294 points, hardly a ringing endorsement during a week that ended with options expiration, normally the forebear of a rally.

Maybe, with all the hurt, pain, fear and uncertainty, the big money went short.

Dow 11,796.16, +25.43 (0.22%)
NASDAQ 2,572.50, -15.49 (0.60%)
S&P 500 1,215.65, -0.48 (0.04%)
NYSE Composite 7,282.47, +8.32 (0.11%)
NASDAQ Volume 1,754,685,000
NYSE Volume 3,679,453,750
Combined NYSE & NASDAQ Advance - Decline: 3011-2563
Combined NYSE & NASDAQ New highs - New lows: 40-128
WTI crude oil: 97.41, -1.41
Gold: 1,725.10, +4.90
Silver: 32.42, +0.92

The Rise and Fall of US Stocks All in One Day; Making a Budget and Sticking to It

The Markets

Stocks did an about-face midday on Tuesday, shaving away all of the morning gains as the afternoon wore on and word from Europe was mixed. The Dow Jones Industrials and S&P 500 each made a run at the lower end of their 50-day moving averages, hit resistance and failed, badly.

All of the averages made suspicious-looking early moves between 10 and 11 am EDT, hovered near the highs, made new highs around 2:00 pm and then fell remarkably into the close, with not even a hint of a closing bounce.

From a technical point of view, meeting resistance at the 50-day MA makes perfect sense and the indices will likely take another run at it in coming days, though it seems a hurdle too high to surpass, considering all of the significant headwinds facing companies (lowered earnings forecasts) and nations, especially those in the Eurozone - Greece, Italy, Portugal, Ireland - to say nothing about the current poor economic conditions in the USA.

Stocks have been mired in a basically directionless trading range for the better part of two months and that's making people even more nervous and keeping significant amounts of money out of stocks and into treasuries, corporate paper, cash and equivalents, gold and other tangible assets. The fear surrounding a default by Greece and the associated fallout to other European countries and banks has the market in a condition of near paralysis.

Until the sovereign debt issues are resolved one way or another, stocks will be unlikely to advance as investors are simply too afraid to stake out new, large positions.

On the data front, housing starts fell to a three-month low, from 601,000 annualized in July to 571,000 in August. With such a glut of cheap foreclosures and bank REO property on the market, in addition to the nearly 300,000 residential homes held by Fannie Mae, hope for a recovery by the end of this year are fading fast. With the onset of colder weather and the usual seasonal downturn, one could easily suggest that housing will dive even lower or bounce around the bottom until Spring of 2012 at the earliest. Of course, such numbers didn't faze Wall Street in the least. Optimists pointed out that building permits rose from 601K in July to 620K in August, though it's only a 3% move, barely more than a rounding error.

So, with Europe still a basket case and the US close behind, the markets are stuck in neutral, awaiting some kind of announcement from the FOMC, which began a two-day meeting today with a rate announcement due out tomorrow around 2:15 pm. The wording of the FOMC statement is unlikely to change dramatically, though many on the street believe the Fed will either outline some new policy such as "operation twist" in which they purchase longer-dated securities in order to drive long rates lower, or announce another round of quantitative easing, which would be dubbed QE3, though that concept, having already failed to goose the economy twice in the past two years, is unlikely to gather much traction within the Fed circle.

All should be expecting something from the Fed, even though many believe that they have exhausted nearly all of their policy tools.

Dow 11,408.66, +7.65 (0.07%)
NASDAQ 2,590.24, -22.59 (0.86%)
S&P 500 1,202.09, -2.00 (0.17%)
NYSE Composite 7,217.11, -17.52 (0.24%)
NASDAQ Volume 1,942,335,500
NYSE Volume 4,250,461,500
Combined NYSE & NASDAQ Advance - Decline: 2261-4207
Combined NYSE & NASDAQ New highs - New lows: 85-189
WTI crude oil: 86.89, +1.19
Gold: 1804.80, +26.30
Silver: 39.74, +0.09

Idea: Making and Sticking to a Budget

We've all heard forever that making a budget for household and/or business expenses and income is a smart and necessary step toward financial freedom and fiscal responsibility, but, taking our lead from Washington, few people seem able to keep the process honest or reach desired outcomes. Our federal government is probably the worst example of budgeting known to man, as the process is riddled with partisan politics, fudged calculations, unrealistic expectations and projections and extraneous falderol like earmarks, off-balance sheet expenditures and unfunded liabilities like Social Security and Medicare.

Household budgets are a bit simpler to make though not quite as difficult to keep. The best approach is to go for a monthly outlook, as most of us have recurring expenses that serve as a baseline. Things like utility bills, phone and cable bills, car payments, mortgage payments (though some of us have eliminated those recently) and credit card expenses come due at some time or another during the month and have to be paid in a reasonably timely manner.

After that, items such as food, clothing, entertainment, (liquor and cigarettes if so inclined) and other variable expenses should be calculated out on a monthly basis as best as possible. That way, one can readily see where overspending or potential savings might occur. The regular bills, known in the business world as "fixed expenses" aren't going to change much, if at all, month to month, and one will find that over time, even variable expenses don't bounce around very much.

Once one has all the monthly expenses lined up, then it's time to match it against income (if one still has any) and see how it balances out. If you are one of the lucky few who have an extra $5,000-$2,000,000 on the income side of the ledger, you can stop reading right here. You don't need a budget; you need a financial advisor or a beach house.

If, however, you're like most people, you'll see where all that money goes, and when you stop crying, you might find a little bit left over. Anything more than 10-20% above your monthly regular expenses would be a great sign. If you find yourself a few hundred dollars short each month, then there's work to do.

Where most people get into trouble is in making exceptions, overspending (usually caused by not thinking and acting on emotion), and bogus projections, like "I'll get a raise soon," or the classic fail, "when I start receiving Social Security checks..." as wishful thinking almost never returns positive results.

Another trap is not counting the little things that add up to big headaches without one noticing. Things like that morning latte - and doughnut, bagel, croissant or McDonald's McBiscuit - the extra tip for the heavenly lunch waitress or waiter, tolls, parking fees, snacks, bottled water, the occasional needed home item, more expensive gas than calculated, all contribute to budget busting in all but the most frugal environments.

There are remedies for those items, such as keeping receipts for everything or a log book exclusively for "little" expenses, but the best way is to take your monthly expense total and add 10% to it, calling it the miscellaneous expense column. If you're judicious and cautious, you'll find yourself spending less than that 10%, but it's doubtful it will add up to very much. The key concept is that every dime and dollar counts, even those $200 binge nights out with the guys or gals.

In the end, we'd all like to earn more and save more, the goal eventually being filthy rich and not having to worry about money any more. Since that's an unlikely event for the vast majority, taking a little time each month to review and preview income and expenses gives one a clearer outlook on where one's been, where one's money is going and what can be done about it.

There are an assortment of online tools and sites which can provide some assistance. Here's a good place to start, with brief reviews of some of the best budgeting websites.

No Rest for the Wicked; Stocks Fall Again

Conditions in Europe have not really changed much since yesterday's news of a crisis in Italy's continuing funding, except that Greece - before even receiving all of its most recent bailout money - already has put out its hand for more.

The word for the deepening debt crisis in Europe most-bantered about these days is contagion, the likelihood that issues of underfunding and failing to meet obligations by sovereign governments will spread. Here's a tip: contagion is already in effect. A few years ago Iceland defaulted on debt, refused to take austerity and cash from the IMF and is well on its way to a newfound prosperity without the rigors of international finance and fractional reserve banking.

However, on the continent, Ireland, Greece, and now Italy are suffering strains of the same disease - that of over-promising (mostly on government employee pensions and benefits) and failing to pull in enough revenue in taxes, fees and levies to pay out promptly and graciously. Portugal and Spain are not far behind, and the tiny nation of Belarus has already defaulted and devalued its currency. Belgium is also a basket case.

Contagion is here and its happening now.

What this really means is two things: 1) The European Union is in its death throes after just 11 years of existence, and, 2) Many of the largest banks in Europe are nearing the end of their government-supplied rope and will hang.

And maybe there's a third link to the disaster that is modern Europe: people will cheat, steal, riot, and eventually revolt. Forget collecting taxes. Government officials will be happy if they escape with the clothes on their backs and a few thousand Euros to see them safely out of their respective countries. Whether or not the contagion has enough virulence to travel across the Atlantic Ocean and infect the United States is a matter for politicians and their media lackeys, because the United States is the world's largest debtor with a total debt (on the books, not including the unfunded liabilities of Social Security, Medicade and Medicare) well beyond its annual GDP, making the United States the worst of all nations with a debt-to-GDP ration of over 100%.

Not only is the USA a basket case gone full retard, the debt is growing larger every day, and every day the Obama administration and the congress dithers over raising the debt ceiling (they all agree that the US cannot default), the situation worsens. We are in the midst of the most enthralling and frightening economic condition of all time. Many, many grave errors have occured over the past thirty years, not the least of which was the hollowing out of our industrial base which provided good jobs for millions of Americans. Those jobs went to Mexico and then to Southeast Asia and China. They are gone, many for good, and there is no way to bring them back soon.

It brings up an interesting proposition, supposing that the mindless cretins we call our "leaders" in Washington haggle and argue right up to the August 2nd deadline. Who gets stiffed in the case of a default? Would the US actually stop paying its military? Social Security recipients? Food stamp mouth-breathers? How about China?

There are no good answers, only bad and horrible conclusions. The answer is China. Stiff the Chinese on their $1.8 billion or so in bond holdings and go to war, as war solves all problems in a way. Both countries get decimated in a protracted struggle or blow each other and the rest of the Northern Hemisphere away in a nuclear holocaust. The first way is slow, painful and regrettable. The second is quick and completely devastating, and since neither side would likely opt for MAD (mutually assured destruction), the first choice is rather obvious.

Will it happen? Hopefully not. And there's the very good chance that the politicians, controlled by the banking and industrialist interests, would opt on stiffing seniors. What the heck, they're old and going to die soon anyway, why not just accelerate the process. And wipe out the food stamp class as well. They contribute nothing, so starve them to death. Nice scenarios, no?

Whatever happens over the next few weeks, nothing is really going to be solved. Even if the government officials decide on a compromise of $3 trillion in budget cuts over ten years, the annual deficit will probably be close to a trillion dollars each and every year. They're only cutting $300 billion a year out of the budget. It's kind of like using a sponge to empty a bucket. It works, but not very well. By 2022, the national debt will have grown to over $24 trillion, and that's if they work out a compromise that cuts some of the deficit and tax revenues remain steady for the next ten years, two possibilities that are not very good bets.

In other words, you, me, your kids, their friends, your neighbors and their neighbors are royally screwed unless we begin taking off the rose-colored shades and rid ourselves of the infliction known as normalcy bias pretty soon. Normal is going away. Austerity, poverty and desperation will become rampant, as they're already spreading across the land and are in place in Europe.

Not to sound like the whack-job on the street corner, shouting, "prepare or die," it is time to hunker down and get serious about the issues plaguing the globe, most of which start and end at your local bank branch, which is probably a Chase, Bank of America or Wells Fargo. They're the problem, have been the problem and will continue to be the problem until they are forced to meet their realities and be broken up, though that will not happen. We're beyond that, and, with the politicians thinking more about elections in 2012 rather than whether or not there will be a nation and an engaged electorate at that time, the chances of complete systemic breakdown are greater than they were in 2008, when the unthinkable almost happened. This time, there will be no bailout, because it will be the government going under.

Whether that's a good thing or not will be for historians to judge, but one thing's for certain: we cannot continue along this path much further without some kind of catastrophe. It's coming faster than anyone can imagine.

As for the markets, the major indices bounced along the flat line for most of the session, with the NASDAQ (where the highest risk stocks reside) taking the worst of it. There was a slight bounce after the Fed released the minutes from the last FOMC meeting, in which it was revealed that the Fed governors were torn between more stimulus and raising rates. There cannot be a greater divide of opinion, which, at such a critical time, is a very, very bad omen and portends more mistakes by the Fed straight ahead.

That bounce lasted only a few minutes as stocks fell to their worst levels of the day into the close. It was truly ugly and sets up some very dicey trading for the remainder of the week. Even as earnings are rolling out from a variety of companies, interpreting economic data is going to be a challenge. PPI is out on Thursday along with initial unemployment claims, and Friday, a veritable stew of data comes forth: CPI, Industrial Production, Capacity Utilization, the Empire Index for NY state and the Michigan gauge of consumer sentiment. Things could get very messy down on the trading floors. Good time to stock up on tissues and handkerchiefs because there's likely to be a bit of sweating and some crying before the week is out.

Dow 12,446.88, -58.88 (0.47%)
NASDAQ 2,781.91, -20.71 (0.74%)
S&P 500 1,313.64, -5.85 (0.44%)
NYSE Composite 8,192.75, -35.98 (0.44%)

Declining issues outpaced advancers, 3806-2726. There were 56 new highs and 37 new lows on the NASDAQ. The NYSE showed 46 new highs and 37 new lows. Combined, there were 102 new highs and 74 new lows. Not much margin for error as the tide seems to be turning very bearish, very quickly. Today's volume was a bit perky, with much of it occurring in the final two hours' rush for the exits, another disturbing sign.

NASDAQ Volume 2,028,997,125
NYSE Volume 4,215,946,500

For those of us who drive combustion engine vehicles, another knife in the back from our friendly oil producers, who drove the price of WTI crude up another $2.28, to $97.43. Gold, however, made a new all-time high at $1,562.30, gaining $16.20 on the day. Silver added 35 cents to $36.10.

With gold and silver rising, stocks falling, and, by the way, the 10-year note down to a yield of 2.87% - from 3.12% a week ago - all signs point to a very rough patch dead ahead. The flattening of the yield curve is happening at an unprecedentedly rapid pace. The clowns in Washington better come to a deal soon, like tomorrow, because financial armageddon awaits. The same goes for the millionaire players and billionaire owners of the NFL. People are tired of gamesmanship and waiting.

Now is the time for decisive action.

Euro Debt Crisis Exacting Heavy Toll on Global Markets

Make no mistake about it, today was the start of the great reckoning. The beginning of the end of easy money policies, of kicking the can down the road, of failing to come face-to-face with the reality of the global credit crisis that began in 2008 and never really ended.

Oddly enough, it comes on a day in which the US President, Mr. Obama, is headed to Europe for a meeting of the G-8, in which the globalist governors will mete out whatever they see fit for the peasantry of their populous nations. It's a little like playing Russian roulette with all the chambers loaded. You're going to get it no matter how lucky you are.

The interesting aspect of the day's trading happened not specifically today, but actually last Friday, when futures went limit down shortly after the US close. It was a weekend warning shot that the powers in control would be taking their various pounds of flash come Monday. And they did, sending markets around the planet down by one, two and three per cent.

Here in the USA, one-month lows were the order of the day, though that's hardly exciting news. The pertinent take-away is that the great unwind of asset values has begun - or resumed - as the major indices finished the session today less than 4% off their recent multi-year highs.

What was notable was the changing of the guard on the new highs - new lows indicator. For more than two years - with only slight variations - new highs have exceeded new lows on both the NYSE and the NASDAQ. Today, new lows outnumbered new highs on the NASDAQ and the gap narrowed on the NYSE. Even though this is not the first time this has happened recently, its frequency and narrow range makes it a particularly potent indicator at this point in time. Once this turns, it tends to remain in place for quite a while, periods between changes in leadership are measured in years.

Market movements are often subtle and difficult to pinpoint, though this one has been telegraphed for quite some time. The debt condition of Greece, Portugal, Belgium, Italy, Spain and Ireland are unsustainable situations as is the salve of QE2 and ZIRP here in the US. Japan, literally and figuratively, has been swept off the face of leading economic nations and uprisings across the Middle East and North Africa (called the MENA region, for short) threaten the global economy.

Even the leaders of the most powerful nations know that this little game of chicken, complete with artificial stimuli, bailouts, buybacks, swaps, jawboning and other gimmicks cannot proceed forever. Europe must get serious about its long-term structural deficiencies and the US must confront the debt limit and its own burgeoning solvency problem, and both must do so quickly. Thus, preparedness for financial armageddon is underway, and, if one listens closely to the pundits and analysts populating the airwaves and internet, most are calling upon investors to take a pause, pare back on stocks and raise cash, which is, in the parlance of Wall Street, like saying, "run for your life!"

There's an opportunity for the globalist agenda to sail through this period of austerity, consolidation and downgrading of the private sector fairly unscathed, but be assured that the plan is afoot and the stock indices will bear the brunt of what will amount to a massive global deflation. In a year or two, they will once again announce victory over the forces of debt and monetary destruction and proceed to blow the bubbles once more.

In this environment, no asset class is safe, though cash and equivalents, gold and silver, are good starting points. Growth will be minimal, as measured by GDP, if positive at all, and the opportunity for fresh recessions are abundant. Today was just another in a series of well-timed warning shots. Prepare or die.

Dow 12,381.26, -130.78 (1.05%)
NASDAQ 2,758.90, -44.42 (1.58%)
S&P 500 1,317.37, -15.90 (1.19%)
NYSE Composite 8,236.55, -120.98 (1.45%)

Losers soared over winners on the session, 5257-1342, a 4:1 ratio, though hardly a complete rout. It could have been much worse. On the NASDAQ, 37 new highs, but 86 new lows. The NYSE recorded 51 new highs and 44 new lows, the smallest gap in nearly two months. Taken together, the 88 new highs do not reach up to the 130 new lows, and that is the important set of figures to watch, the combined number. Continued weakness has been forecasting a more serious tumble for the past two months. Volume, despite the massive decline, remained at severely low levels. Once again, the major players have been unable to draw in the usually-gullible public, which is tapped out and wants no part of the Wall Street circus. Thus, they play amongst themselves, like a pack of starving wolves who will eventually turn upon each other.

NASDAQ Volume 1,806,104,625
NYSE Volume 3,761,192,500

Crude took another turn down, the front-end NYMEX contract for WTI losing $2.40, to $97.70. Gold managed a gain of $3.70, to $1517.20, while silver advanced by only a penny, to $35.07.

The major indices completed three straight weeks of negative results on Friday. Monday's opening gambit to the downside portends worse to come. March Durable Goods Orders data on Wednesday and the second 2nd quarter GDP estimate on Thursday will most likely add to the sense of pervasive desperation.

A Great Week for Stocks. Not So Good for People

Stocks were off to a slow start on Friday, but got a boost around 10:20 am EDT which lasted until shortly after noon, at which point profit-takers took over and remained in charge to the closing bell.

Overall, it was a banner week for stocks, based entirely on nothing in particular and mostly ignoring the horrendous news - both financial and international - that kept flowing every day.

For instance, the situation in Libya is nowhere near stabilizing and, given the steadfastness of Muhammar Gadaffi to remain in power, may escalate into a wider conflict. Yemen, Syria and Bahrain are still in the throes of wild civil unrest. Conditions at the nuclear reactor facilities in Japan have worsened by the day, and are nowhere near being resolved.

Portugal's government is all but dissolved and the Irish bailout is falling apart. Most of Europe is facing much the same situation as prevails in the US, no recovery and no signs of improvement. Additionally, leading political figures either don't seem to know what to do or simply don't want to do anything to better the lot of their citizenry.

Investors apparently are taking this all in stride, were it not for the fact that said investors are actually computer algorithms running at warp speed for the various banks and hedge funds who are clipping retail investors every chance they get.

The major indices were up four out of five days, the only down day being Tuesday, and it was a minor decline. The Dow finished ahead 262 points, or about 2.2%. The NASDAQ tacked on a cool 100 points, or nearly 4%. The S&P was up by 37 points, almost 3%, and the NYSE gained 205 points, or 2.5%.

Life was less good for residents of Libya, who are under military siege, and Japan, many of whom are homeless, while Tokyo residents are concerned about irradiated drinking water, already told by their authorities that the levels of iodine in some of that water is unsafe for infants and babies (and probably not too good for adults). Th remainder of the civilized world only had to put up with rising prices for gas or petrol, although life in South America and Central America remains relatively peaceful compared to the rest.

Dow 12,220.59, +50.03 (0.41%)
NASDAQ 2,743.06, +6.64 (0.24%)
S&P 500 1,313.80, +4.14 (0.32%)
NYSE Composite 8,321.78, +10.17 (0.12%)

Advancing issues bettered decliners by a score of 3980-2536. New highs on the NASDAQ totaled 143, to 21 new lows. On the NYSE, there were 243 new highs and just 8 new lows, which was not surprising, since volume was at levels not worth even watching, a sign that participation levels are a fraction of what they used to be, before the 2008 crash and the onset of completely rigged, centrally-planned, manipulated markets designed to keep the global Ponzi scheme of central bankers looking like it cannot fail.

NASDAQ Volume 1,771,109,000.00
NYSE Volume 3,934,565,000

WTI crude oil was flat, losing 20 cents, to $105.40. Gold and silver received their customary Friday smack-down, with gold losing $8.70, to $1,426.20 and silver down 33 cents, to $37.05.

Considering events, it was a banner week for the New World Order (NWO), in which everything you see or hear in the mainstream media is fake, phony and otherwise watered-down to prevent people from understanding just how dire global finances really are.

Have a great weekend and if body parts begin to glow in the dark, you can thank our leaders for keeping us safe from runaway, uncontrolled nuclear accidents.

Stocks Head Higher on Portugal Good News

Stocks got a big boost today without assistance from the Fed, though it is reasonable to assume that the more then $15 billion in POMOs over the previous two days should have given the big banks enough ammo to fire away at will at equities.

Some of the excitement seemed to be baked into Portugal's raising a billion or so Euros in a treasury auction with participation by China and Japan. The duo with money from the Orient seems intent on buying up whatever they can of the failing states of Europe. More power to them though these investments seem less than shrewd.

What the market didn't (or maybe they did) take into account was the excessive rise in import prices, up 1.1% in December after a similar rise in October and a 1.5% increase in November. With imports flashing inflation were traders more giddy with anticipation over rising prices for all assets, including equities, or do they believe that this is yet another "manageable" situation that has nothing at all to do with QE2? It's hard not to see the effects of the Fed's non-stop printing of greenbacks anywhere else on the planet. They are exporting inflation worldwide, with food prices up everywhere, especially in developing countries, which can least afford it.

Elsewhere, Wells-Fargo upgraded the entire banking sector, which is something akin to declaring yourself the winner of a golf tournament which you organized, scored, competed in and handicapped. It just reeks of self-dealing, but, other market participants seem inclined to go along, as the indices popped to new highs.

In the housing market, home price declines are accelerating and have reached a level more severe than during the Great Depression. Various reasons include high foreclosure rates, underwater mortgages, high unemployment and a glut of homes on the market.

Dow 11,755.44, +83.56 (0.72%)
NASDAQ 2,737.33, +20.50 (0.75%)
S&P 500 1,285.96, +11.48 (0.90%)
NYSE Composite 8,122.98, +104.30 (1.30%)

Naturally, advancing issued far outpaced decliners, 4617-1925. On the NASDAQ, there were 288 new highs and 8 new lows. On the NYSE, 310 and 42, respectively. Volume was low again, though after a year and a half of this thin market, is now being reported as "normal," being part of the "new normal" group-think.

NASDAQ Volume 1,887,035,375
NYSE Volume 4,782,270,000

Crude oil moderated a bit, but still managed to gain 75 cents, to $91.86. Gold had a gain of $1.50, to $1,385.80, and silver added five cents, to $29.54.

The Street seems to be well ahead of itself on the upper end of a four-month plus rally which has taken the Dow up 1740 points since the end of August. The S&P and NASDAQ have performed in similar fashion, the NASDAQ being the best of all the indices in percentage terms.

With 4th quarter earnings about to roll out in earnest next week, one wonders how much more lift there can be with markets already at elevated levels. We'll find out soon enough whether January's rise is sustainable or merely pushing on a string.

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.

Markets Go Boom... and Bust

What happened of significance that stocks would sell of so drastically on Friday?

Was it the DOJ announcing that a criminal probe of Goldman Sach's was underway (And that the G-Men were looking at issues other than the ABACUS deal noted in the SEC charges.)? Shares of Goldman Sachs (GS) fell 15.04, to 145.20, a decline of 9.4%, during Friday's session.

That might be a good start for a general market decline.

Or maybe that oil spill in the Gulf of Mexico is causing more than average general ill-will to be directed at multi-national corporations who pollute, don't pay taxes and cause monstrous disasters such as is unfolding in the marshes along the Louisiana coastline?

What about Greece... and Portugal... and Spain... and Italy? Is the debt bomb exploding over Europe destined to visit mainland America? Finance ministers are meeting over the weekend in hopes of hammering out a bailout for the destitute Greeks (they won't).

Could it be that the Senate finally getting around to debating - after weeks of Republican stonewalling at the behest of the nation's largest financial firms - senator Dodd's financial regulation legislation that has, as one of its many tentacles, authority to liquidate firms that it deems insolvent (Bank of America, Wells Fargo and Citigroup come to mind) and a slew of other amendments which would make the kind of cowboy financial engineering that typified the sub-prime era difficult to repeat.

All of those are good starting points for argument, but there are two likely causes which intersect with all other issues. First quarter GDP was reported to be measured at 3.2%, annualized. That is after 4th quarter '09 coming in at 5.6%. Investors with even fifth grade educations can do the math: the economy is slowing again and that brings to the forefront the words everybody dreads: "double dip."

The second cause is likely more mechanical than analytical. Stocks have been hovering around multi-year highs. People with large stakes and large profits probably figured that today was a good day to sell, just like Wednesday was. The reason Wall Street more resembles a casino than an investment market is because the big money, the people calling the shots and pulling the levers are all gamblers at heart. And, as gambling operations generally produce few winners but lots of losers, the winners are likely getting out of town.

From an emotional chart perspective, one look at a two year Dow chart reveals that the index is bumping into the bottom of the pre-Lehman resistance of September '08. Since little has been done to correct the abuses of the time or restore credibility and liquidity to credit markets, it only stands to reason that there will be no move through that Dow resistance level from 11,200 to 11,750.

Flagging Friday finishes are always troubling, but today's should be marked with multiple red flags. The global economic model, based largely upon central banking, fractional reserve requirements, fiat currencies already heavily in debt (read: insolvent) and currently devolving into nation-gobbling monstrosities, is severely broken and thus, sliced, diced, ad whipsawed according to the prevailing tone.

Economies, from you next-door neighbor to the county seat, to states and nations, are tettering on a balance beam built on public good will and creditworthiness and there isn't much of either of those in quantity at the present time. One could purport that economic circumstances today are worse than they were in 2008. Massive borrowing and easy money policies have not stemmed the tide of deflation that continues to waffle through every aspect of civilization.

One area which experienced strong gains on Friday was commodities, especially gold. With uncertain times comes a need to hold something material and money flowed into tangible assets today in a scared trade. More evidence of widespread deflation came from the bond pits, where the 10-year treasury dipped to 3.65% yield today. Interest rates simply have nowhere to go but down in a slumping, or even stagnating, economy.

Dow 11,008.61, -158.71 (1.42%)
NASDAQ 2,461.19, -50.73 (2.02%)
S&P 500 1,186.68, -20.10 (1.67%)
NYSE Composite 7,474.40, -114.89 (1.51%

There were 4904 losing stocks to 1669 winners. 547 new highs dwarfed a mere 41 new lows. Volume was significant as it has been most of the past 8 trading days. Money is moving, from stocks to commodities, fixed income and cash, a perfect brew for a further deflationary spiral, which never really stopped moving, but was only slowed by monetary moves by the Fed and other central banks.

NYSE Volume 6,859,333,000.00
NASDAQ Volume 2,689,440,250.00

Crude oil rallied 98 cents, to $86.15. Gold built another $11.70 on top of recent gains, finishing the week at $1,180.10, a 2010 high. Silver also rose 6 cents, to $18.61.

There's a world of hurt gaining momentum out there, and you can bet your last Kentucky Derby (tomorrow), mint julep dollar that the famous schemers and weasels of Wall Street are going to be left holding the most recent bag of pain. No, that taks has been assigned, as usual, to the middle class, the little guy, the working class.

Isn't it time to stop believing in the fairy tales of high finance and posturing politicians?