Who caught the falling knife?

The burning question on my mind - and that of many astute investors, brokers and analysts, I'm sure - is who stepped in to the morass today and actually bought stocks when the Dow was down as much as 340 points at mid-day and off 300 points as late in the day as 3:15 pm.?

It would have to have been a magnificent leap of faith for so many investors to begin snapping up bargains at the same time. Maybe there was a case of mass psychosis on Wall and Broad that sent brokers,trancelike, to their trading machines to begin punching in buy orders.

No, readers, there can be no doubt that this spectacular rally was nothing more than the work of the mysterious Plunge Protection Team, better known as the PPT or the President's Working Group on Financial Markets, established by executive order by Ronald Reagan following the crash of 1987, and in operation - in some form or another - ever since.

The modus operandi is unmistakable. Once the PPT gears into action, stocks climb at dizzying speed and generally in non-stop fashion, just like today. It is also usually the case - as today - that the US markets will run counter to the trends set in the rest of the world's equity index. Today, markets in Europe were roiled, in their worst day in four years while the US markets staged a "miraculous recovery."

Dow 12,845.78 -15.69; NASDAQ 2,451.07 -7.76; S&P 500 1,411.27 +4.57; NYSE Composite 9,087.10 -1.94

Are US stocks so special, or our traders so astute, that they saw such tremendous buying opportunities that they would erase 300 points in losses on the Dow in a matter of 45 minutes? No. Never. The entire afternoon was a charade, designed to keep the public in the dark and avoid an all-out panic.

And they probably accomplished their mission. Americans are so gullible and, may I say, ignorant, as a group. We'll swallow any cockamamie story that is fed to us. We believe that FOX News is actually a news network, or that the Bush administration knew nothing about the 9/11 attacks until they actually took place.

The vast glut of American investors will certainly swallow this miracle rally story. Most of them are too concerned with making sure the tires on their Escalade are shiny or that their Blackberry is the newest model with the most gadgets to care much about the value of their retirement portfolio.

Seriously, what other people, as a group, would allow nameless people to manage an account which will be responsible for their financial well-being years from now? Americans will buy the phony story f today's markets.

You shouldn't. I don't. The global financial system has been brought to its knees and there is no easy way out. A stock market crash is inevitable, or, at best, with a helping hand of the PPT, a long, slow, tortuous decline. You don't have a choice in the matter. The powers that be, behind closed doors, will decide how it's going to play out.

Personally, if I'm going to lose a limb, I'd rather it be cut off with a single blow rather than a thousand small cuts and gnaws over a long period of time. The PPT obviously are fans of Chinese water torture.

Regardless of the intrigue by the PPT, the markets still took a pretty good beating and a lot of people lost more money today. Declining issues held sway over advancers by a 9-5 margin and new lows swamped new highs by a shocking 1475 to 47. To put that number in perspective, nearly one out of every four stocks listed on the NYSE and NASDAQ combined made a 52-week low TODAY!

Rally my arse! Stocks do not just turn corner and head the other way in the midst of a total collapse. Said collapse is still on track. Don't buy the hype.

To get an idea of how seriously close we are to witnessing the total collapse of world economies, check the oil futures today, which sold off as low as $70.10, settling with a loss of $2.33 to end the day at $71.00, on concerns that current and future economic conditions would foment a decline in demand for petroleum products such as gasoline, automotive fuel, petrol, call it what you will. These intrepid plungers don't scare easily, but judging by today's futures prices, they're more than just a little shaken up.

Quite possibly the strangest trading of the day - and the past few weeks, for that matter - has to be in gold. The shiny stuff fell by $21.70 to $658.00. Silver played along, dropping $1.06 to $11.50. For silver, it was a 9% decline in one day. The metals markets are supposed to be somewhat less volatile than that, besides the fact that they should be going up as stocks go down. They surely didn't today and haven't been of late.

The answer to why gold and silver sold off is simple. Everything that isn't cash is being sold to raise liquid funds, metals not excluded.

"Gold's slide into negative territory took an a new and decidedly ominous dimension on Thursday, as price support after price support gave way in the wake of mounting massive liquidations from all quarters," said Jon Nadler, an analyst at Kitco Bullion Dealers, in emailed comments.

"A wide range of commodities were being badly sideswiped in the frenzied quest to raise cash in order to mitigate stock losses by individual and institutional investors alike," Nadler said. "This was a very ugly day across the board."

We'll take his word for it.

Cash: "It's good to be king."

Money talks, so the old expression goes. And in this market, cash has let word out that it still matters. A lot of investors of all stripes have taken heed, fleeing equities for the relative safe have and warm feeling of cold greenbacks.

Those forced to be invested, such as mutual, hedge and pension funds, don't have it so easy. They are forced to hang in and suffer with the rest of the suckers. Some even buy more, throwing caution to the wind along with the rest of their money.

The Fed is in a tough spot. Many are calling on Ben Bernanke to lower interest rates in an effort to free up capital markets and give the US indices a little bit of a boost. They won't do it and shouldn't. The malaise of this market was occasioned by easy credit; cutting rates would be like giving an addict more crack.

Today's package of misery was brought to investors by more credit-related issues, as potential losses at Countrywide Financial Corp. and trouble financing deals at KKR Financial Holdings sent more shock waves through the financial community. For those already in cash, the scene is almost hilarious, watching brokers, bankers and financiers squirm and fidget over their lost dough. Many of them are deserving of the afflictions, having bought into a housing bubble that sent everything, including stocks, over the rainbow.

Dow 12,861.47 -167.45; NASDAQ 2,458.83 -40.29; S&P 500 1,406.70 -19.84; NYSE Composite 9,089.04 -165.23

The Dow traded below 13,000 for the first time since April 25 and is likely to stay there for a long time, barring some kind of dead cat bounce or jolt from the various central banks that have been funneling money into stocks for the better part of the last two weeks. The Fed snuck in another $7 billion today. It did no good and one gets the feeling that the banks are on the verge of throwing in the towel... which would be wise.

Our own scorecard for the Dow shows 8 sessions in positive territory and 12 on the minus side since the all-time peak at 14,000.41 on July 19. That's over 1100 points lost in less than a month - about 8%.

Declining issues took it to advancers by better than a 3-1 margin. New lows totaled 707. There were only 46 new highs. Every single indicator points to more losses ahead.

I've asked colleagues to find bright spots. None of them have been able to, though I've come up with two: shorts and option puts players are making a fortune, and this will end, eventually. Stocks go up and down. They went up for more than four years running. A couple of years of downward trajectory is only fitting.

Maybe there's a third positive: charts (and fundamentals) still matter. The indices broke through 200-day moving averages and the Dow, in particular, is about to cross over its 50-day MA.

Oil was up another 95 cents to $73.33. Oddly enough, gold was unchanged, while silver actually lost 19 cents to $12.56. When the lid comes off the metals, look out. They will serve notice that calamity is finally upon the fiat money, fractional-reserve banking system.

Pick a number

This market is hellish, though some will tell you that it's technically not a Bear... yet. Those people will soon be revising their estimates and advising their clientele differently. With nearly 1000-points lost on the Dow since its peak on July 19 (remember 14,000?), this is about as clear an indication that the 4 1/2 year party that was recently Wall Street is quickly turning into Skid Row.

With another 200+ point decline, not only the US equity markets, but economies worldwide are on high alert. The entire fractional-reserve fiat money banking system is about to blow sky high, so pick a number and see how close you come to calling the market bottom.

I'll venture a guess at 9380 and a date of maybe February, 2010. Crashing through various psychological barriers like 13,000, 12,000, 11,000 on the way down, there are certain to be a number of times in which the markets look to have turned a corner, but they will be, sadly, false fronts. Only after disposing of the 10,000 level will psyches be truly mushy enough for a stable rebound.

Dow 13,028.92 -207.61; NASDAQ 2,499.12 -43.12; S&P 500 1,426.54 -26.38; NYSE Composite 9,254.27 -174.59

A fall to 9680 would be a 33% pullback from the 14,000 high, and that may be somewhat optimistic. Off the October 2002 low of 7286.27, such a decline would be a retracement of 69%. Fibonacci adherents take note.

Today's selling was the result of a complete lack of repo lending by the Fed and - who knew? - more credit-related issues, especially that of Sentinel Management Group, which oversees about $1.6 billion in assets, who told clients that it may block redemptions from the fund to avoid forced liquidation. That and more concerns about over the exposure of brokerages Bear Stearns and Lehman Brothers to mortgage-backed issues set the sellers afire.

Additionally, 17 Canadian trusts have sought help from banks to repay loans that are due.

Could this be the beginning of a dark chapter in global finance? It certainly appears so. Central bankers have been nervous for weeks and the credit and liquidity woes once thought to be contained are beginning to spread to foreign investments and money market funds. What's worse is that the re-pricing of roughly $1.3 trillion in so-called 2/28 ARMs has yet to occur. The bulk of these loans - $1.7 trillion - were made in 2005 and 2006, so we're are just seeing the proverbial tip of the financial iceberg.

2/28 ARMs are mortgage loans in which only interest is paid during the first two years. Upon repricing, interest and principal is calculated over the remaining 28 years of the loan. Monthly mortgage payments typically skyrocket and homeowners default. California, Ohio and the tri-state region of New York, Connecticut and New Jersey have been the hardest hit to date, with more than 500,000 defaults recorded during the first six months of 2007.

This is a snowball rolling downhill, as defaults escalate, homes will be lost, many billions of dollars worth of notes will become worthless paper and consumer spending, by sheer weight of numbers, will gradually falter.

Already, Wal-Mart, the nation's largest retailer, has revised estimates lower for the remainder of 2007. Subsequent revisions are to be expected from other retail concerns.

Once spending is curtailed, job cuts will follow in all manner of industries. Non-essential positions will go first, such as clerical and support staff, but the cuts could cripple many going concerns. On top of all this, many states have initiated mandatory minimum wage requirements above national standards. At just this point in time, many businesses will choose not to hire rather than commit to labor costs they feel are too high.

One positive note is that inflation will become a thing of the past. Businesses will cut prices in an effort to remain afloat. Many will not survive.

This is, of course, the nightmare scenario similar to that of the Great Depression, which was a worldwide phenomenon. Ruined lives, fortunes lost, displacement of people and separation of families were the outcomes. The parallels are there: overpriced stocks, easy credit, lack of regulatory control.

Today's internals were some of the worst to date. Declining issues beat advancers by a 9-2 margin. New lows swamped new highs, 614-54.

Of the 30 Dow stocks, only one, ExxonMobil, traded higher, and that was only by a mere 21 cents.

Oil for September delivery on the NYMerc rose 76 cents to $72.38. Some people are simply out of touch with reality.

Oddly enough, the precious metals have yet to respond to the ongoing calamity. Gold lost $1.20 to close at $679.70; silver lost 11 cents to $12.75. These are absolutely shrieking buys, though there's a belief that the markets are being contained by big money, notably the world's central banks.

Once the lid is lifted off these commodities, prices are sure to soar 15-25% in a very short span.

Tomorrow's another day... another day closer to a date with financial destiny.

It's worse than you think...

Today's headline was inspired by some weekend and Monday morning reading.

The US equity markets, battered and bruised by fears of an underlying credit catastrophe, are in worse shape than most average investors - and even some experts - would like to believe.

After last week's rescue by the Federal Reserve, which injected $38 billion into the markets, word came to our shores that on Monday, the Fed was injecting another $2 billion on top of $5 billion shoved in by the Bank of Japan and the European Central Bank's "loan" of $65.3 billion. Over the last week of trading the ECB has added more than $200 billion. Since Thursday, the Fed has added $62 billion in liquidity. That's a lot of liquidity, yet it was only enough to lift the markets temporarily on Monday.

Dow 13,236.53 -3.01; NASDAQ 2,542.24 -2.65; S&P 500 1,452.92 -0.72; NYSE Composite 9,428.86 -6.18

We're in dire straits and headed for a crash of magnificent proportions. The BofJ and ECB are helping out because they have a vested interest in keeping the US economy afloat. Many of their wealthiest citizens are heavily invested in US stocks. Further, a crash of the US economy - which is, after all, a near certainty, since we've gone from being the world's largest creditor nation to the world's greatest debtor nation in a matter of just 50 years - would have a ripple effect so pronounced that if would take down most other markets with it.

So, the world economy is on the brink, and we're getting billions in financial aid from around the world. Anybody - and I mean ANYBODY - who is even considering investing in stocks at this juncture ought to be institutionalized. This is the most dangerous market situation since the 1929 crash, and nothing short of an economic miracle is going to prevent a serious, damaging, long-term, worldwide meltdown.

The multiple cash infusions by world banking interests are desperate gambits. By becoming the buyers of last resort, central banks are literally taking the place of real, live investors, those same people who are exiting the market at a speedy pace. All the cash infusions do is shore up stocks for the near term, allowing larger brokerages and mutual funds to exit as quietly as possible, with minor losses rather than huge ones.

In the end - and mind you, I'm no expert on global financial transactions - the central banks will be stuck with stocks that were purchased at significant premiums. Weeks and months from now, these "repo" purchases will look as foolhardy as a horse racing plunger's last bet on an aging and feeble nag.

The underlying problem is that the money being spent to buy these stocks is generally that of governments, or in other words, our tax dollars at work. Since we don't get to vote on how our money is spent, this exercise in futility is just another in a long series of bad spending examples by derelict national governments, which are really nothing more than massive criminal conspiracies, disigned to keep the lower and middle clasess in a condition of near slavery and relative poverty.

When the central banks get around to selling these stocks at 20, 30, 40% losses or better, the citizenry will get the bill in the form of massive tax increases, depleted services and general unaccountability by those supposedly in charge. It's a swindle of the highest, most despicable order.

We should be used to it.

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It's been going on for years. The final outcome will be massive disruptions to financial systems world-wide, a lower standard of living for nearly everyone, bankruptcies at an all time high, pension fund defaults, and misery all around.

We can thank our leaders and the heads of state-run banks for what they will have wrought, most notably, Sir Alan Greenspan (he was knighted by Queen Elizabeth II in 2002), whose sloppy handling of the economy and penchant for loose monetary policies produced the series of bubbles - first the dotcom debacle, then commodities and finally the housing blow up - that led to this eventuality.

The rich will surely get richer by comparison. Many are already heavily invested in gold and other, more stable currencies than the greenback. The little guy, 20% of whom will find themselves out of work within the next two years, will be forced into a world of lowered expectations and general despair.

Lovely.

The market internals were suitably mixed. with declining issues beating out advancers barely. There were 346 new lows, but a paltry 73 new highs.

Oil was up marginally, while gold and silver were lower by negligible amounts. With so much uncertainty, inertia is beginning to set in everywhere. Volume on the equity markets was normal, but well below levels of last week.

The Fix Is In

As investors - and guys who wear pinstripe suits but really haven't a clue - nervously watched the Dow Jones Industrials plummet by another 200 points this morning, the intrepid manipulators from the Federal Reserve Bank (working, no doubt, in concert with the Plunge Protection Team) pumped two injections of "liquidity" into the markets in the morning and added a smaller boost in the afternoon.

In other words, the Fed bought stocks from brokers who, as part of the so-called "repo" deal, agreed to deposit the funds in Federally-insured member banks.

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Thus, a mammoth crash and thud was averted.

When the fed buys stocks, they aren't just fishing nor fiddling. Today's double dose was a total of $34 billion, designed to keep order in the face of an imminent sell-off. Late in the session, with the markets still down smartly, the Fed added another $3 billion.

Apparently, it worked, because the markets failed to melt down as many feared they would. However, these measures are little more than band-aids in a market that is hemorrhaging on multiple fronts.

Due to the blow-up of sub-prime mortgage loans, note holders find themselves stuck with much worthless paper. The spill-over into derivative, insurance, M&A and other credit markets has been stoking fears of financial calamity.

Without a doubt, this is a big mess that's not going to end soon or resolve in a pretty way. Billions of dollars are going to be lost, credit markets will become frighteningly tight and even the Fed's money won't be enough to secure liquidity and order in the equity markets. What's especially frightening about the situation is that the Fed was forced to take such extraordinary measures to shore up markets.

The "repo" swaps are not new. They've been used during other stressful periods, such as in the winter after 9/11, but their effect is marginal. The announcement that the Fed is taking the action is actually much more of a salve on the nerves of traders than the actual money making trades.

Dow 13,239.54 -31.14; NASDAQ 2,544.89 -11.60; S&P 500 1,453.64 +0.55; NYSE Composite 9,435.04 -14.27

The downside of such action, however, is that the Fed eventually has to balance its own books, and buying up stocks in a sliding market - catching the proverbial falling knife - is poor investment strategy, to say the least. When the Fed unloads these stocks, often at a loss, it creates a glut on the market and costs the Fed money. Of course, the Fed can just print up more, and they do, making all those dollars in your pockets worth a little less.

Again, it's nothing more than a stop-gap measure and far from a solution. The real solution would be to allow the market to take its own course, and let the losers lose and the winners win. For all the talk of "free markets" by Fed governors and other high government officials, they certainly act like they have little to no faith in what they preach.

The crash is upon us. With the Fed's help, it will be worse than it has to be. Tighten your belts, we're headed for recession-land.

Market internals allow for a much better understanding of what really happened on Wall Street this Friday. Declining issues rolled over advancers by a 9-5 margin. New lows swamped new highs, 736-82. Even with the Fed's helping hand, there were plenty of casualties on the day.

Oil continued to slip, down 12 cents to $71.47, but still far from it's bottom, which is just a matter of time. Gold perked up $8.80 to $681.60; silver rose 17 cents to $12.87. These are still screaming buys and now would be a good time to stock up.

The coming weeks and months hold still more intrigue and downside. The bulk of the sub-prime loans which are subject to repricing and therefore, default, have yet to do so. October through next March will bear witness to an avalanche of mortgage defaults and a share of bank and financial concern failings.

Cash is king for now, especially if it's in Euros or gold.