Poor Data Undermines Fed Pumping Effort

Well, there's nothing the Federal Reserve can do about a collapsing economy, after all.

Data from the housing sector today suggests that despite pumping literally trillions into the US financial system, the original canary in the coal mine, residential real estate, is still lying prone on the operating table, unable to move, dead as a doornail. And yet, the Fed and the federal government still insists that spending more money (creating more debt) is the ultimate fix-all.

One has to wonder just when the American public will have had enough of this disaster in centrally-planned economics. The banks have been spared, though they remain among the worst investments listed. The government has exceeded the debt limit (yesterday), and is now raiding the retirement funds of public employees. The federal employees are the first to be robbed. Next will be state pension funds, so you teachers out there, adjust your lifestyle pans accordingly as you're about to receive a very unwanted haircut.

The numbers coming from the real estate sector can be characterized as nothing less than a national disaster. Housing starts and building permits fell to unprecedented lows at 523,000 and 521,000 (annualized), respectively. The numbers for housing starts (new homes) represents a 23% decline from a year ago, while the permit figures for new home construction fell 4% from March.

All in all, it's simply horrible environment in which to be building new homes. The level of new home construction has been at the lowest level since the government began keeping track and continued to decline. There's simply too much shadow inventory being held onto by the banks, who don't want to realize losses on the many homes that are either already REO, in the foreclosure process or where the homeowner is already more than three months behind.

The market for new homes is absolutely the thinnest it's ever been and it doesn't appear to be getting any better.

Adding to the ongoing economic catastrophe were figures on industrial production - flat for April - and capacity utilization, which may have peaked in March, at 77%. April's figure came in at 76.9%, and will likely be revised lower.

Thus, we have a stalled industrial sector, a dead residential housing market, slow to no job creation and the recession was supposed to have ended more than two years ago.

Face it, folks, your government is not in favor of prosperity for the average American. If congress and the administration were serious about jobs and growth and not preoccupied with fighting wars on drugs and terror and meddling into the affairs of other countries, none of this would be happening. We've been sold out, lied to and yet there are fewer and fewer voices of protest. One supposes that Americans have had enough, yet are so worn down by joblessness, violence, foreclosures, regulations and intrusions that they haven't got the energy to complain.

Wall Street is feeling the stress as well. The Dow Jones Industrials were down a nifty 170 points in the early going, but, as usual, when the Fed money comes into play, reversed course and finished with a smaller loss. The other indices were down as well, except the NASDAQ, which posted a fractional gain, probably from being so viciously sold off the prior two sessions.

The "go away in May" crowd seems to have it about right. During the month - today being the 12th trading day in May of 21 total, so we're past the mid-point - the NASDQ is down 90 points, the Dow is off 330 and the S&P has shed some 34 points. It's not a great amount, yet, though it is already a 2-3% decline. Slow death. The S&P has been down eight of the 12 sessions in May. The correction is underway.

Dow 12,479.42, -68.95 (0.55%)
NASDAQ 2,783.21, +0.90 (0.03%)
S&P 500 1,328.98, -0.49 (0.04%)
NYSE Compos 8,333.07, -3.52 (0.04%)

Declining issues danced past advancers, 3815-2713. NASDAQ recorded just 28 new highs and 83 new lows, the second day in succession that the lows have been on the high side. The NYSE continues to resist flipping negative, as new highs outnumbered new lows, 80-47. Volume was moderate, another ominous signal on a down day.

NASDAQ Volume 2,190,797,000
NYSE Volume 4,459,555,500

WTI crude dropped 46 cents, to $96.91, though it traded significantly lower for much of the session. High gas prices, in spite of slack demand and 15% lower crude, persists, however, with the US average at $3.94, down only a few cents from its peak. Just a few hours ago, a group of Democratic Senators called for an FTC probe of oil refiners, suggesting that price-fixing has occurred. Rest assured that it is nothing more than a dog-and-pony show as the senators are merely grandstanding, knowing full well that their campaigns are largely financed by these very companies.

The hit squad was out in full riot gear in the metals markets, sending gold down $4.80, to $1485.00 and sending silver below $33/ounce, before it rebounded to post a gain of 35 cents, currently at $33.95. It should be apparent to all that the forced de-leveraging in precious metals is not about to abate, and prices could tumble quite a bit further, especially where gold is concerned.

A discussion is underway in Washington as to whether it would be prudent to sell some of the gold held at Fort Knox to keep the government running. Presidential candidate Ron Paul feels it's a good idea, though he faces opposition, notably from President Obama. The US gold reserves are valued presently at roughly $370 billion.

All along, the government sits back and watches in a silent stupor, as the United States of America, and its constitution, is slowly ground to dust. And not a word of protest was heard.

No Volume, No Follow-through After Jobs Data

With the markets closing Friday in a state of ebullience and optimism, the Monday morning hangover was worse than expected.

Stocks got out of the gate well, with the averages hitting their highs of the day early on, but there was no catalyst and thus, no enthusiasm for either buying or selling, though tech stocks suffered more than most.

Stocks drifted in listless fashion on what will almost certainly turn out to be one of the five lowest trading volume sessions of the year thus far. Appetite for risk has been muted by world events, the least of which being the continuing saga of the nuclear reactors melting down at Fukushima Daiichi facility in Japan.

High levels of radiation have been found hither and fro, even in the United States, where air and water readings were above safe levels in communities from the West coast all the way east to Pennsylvania.

As for Japan itself, the situation appears even more out of control, as both the government and TEPCO, the utility company responsible for the failures, have run out of viable options for containment. If not for the "fear factor" the mainstream media would be full of horror stories, but the prevailing wisdom is not to alarm the populace over what looks to be already as bad as or worse than the disaster of Chernobyl, 25 years ago, a man-made calamity now estimated to have caused over a million deaths and multiple times that number in birth defects, miscarriages, and diseases.

With Japan's nuclear woes - where the "dead zone" is expected to eventually be 30 to 40 miles in all directions from the plant - the general mood of the people is a thinly-disguised panic and a heightened level of distrust of authorities. Said distrust is with good cause. The officials handling the situation are either incompetent, stupid, afraid or a combination of all three, and have yet to reassure the Japanese people of anything, other than the situation remains a catastrophe with potential to become even worse.

High gas prices have also put a damper on the proceedings worldwide, with both Brent crude and West Texas Intermediate (WTI) hitting 33-month highs on the day. Continued unrest in the oil-rich Middle East and North African countries - Libya, Bahrain, Kuwait, Yemen and now Ivory Coast - haven't helped slow down the oil rally and the onset of $4/gallon gas in the US.

So, little surprise that nothing is moving in the world of high finance.

Dow 12,400.03, +23.31 (0.19%)
NASDAQ 2,789.19, -0.41 (0.01%)
S&P 500 1,332.87, +0.46 (0.03%)
NYSE Composite 8,482.41, +13.07 (0.15%)

The level of disdain could be clearly seen in market internals. Advancing issues narrowly bettered decliners on the day, 3006-2630, though NASDAQ new highs soared against new lows, 222-30, while on the NYSE, the bias was the same, with new highs beating new lows, 259-15. As mentioned earlier, volume was extremely light.

NASDAQ Volume 1,679,897,000
NYSE Volume 3,273,874,500

WTI crude futures hit $108.47, a gain of 53 cents, the highest level since June of 2008. Prices above $4.00 per gallon for regular unleaded have been reported in New York, Chicago and various California locales.

Gold inched closer to all-time highs, gaining $4.10, to $1,433.00, while silver exploded to 31-year highs, ending the NY session on the COMEX at $38.49, on a gain of 76 cents (2%).

The stark comparisons between the economic climate today and that of 2008 could not be clearer. High oil and gas prices, a stagnating stock market close to multi-year highs nearing the end of a long bull run, ramping foreclosures and falling real estate values, and political uncertainty carry all the trademarks which eventually led to the great unwinding in Fall 2008.

Three years hence, after trillions of dollars in stimulus, the very same banks that caused the calamity before are still leveraged to the hilt, hiding liabilities off the books and still in denial over their true, illiquid conditions.

For mood to change so impressively from good to bad over the weekend is stunning. Americans and the world at large should be prepared for another round of asset-crushing deflation once the Fed decides to stop printing dollars into existence come June.

It's Not as Good as They're Saying; Lows-Highs Flip

To anyone who follows capital markets and the world of high finance closely, the material deficiencies in the US and global "growth" stories are glaring and have been for many months. While the financial press - CNBC, the Wall Street Journal, Bloomberg - and the spokespeople for the various central governments around the world continue to feed the public the "recovery" fable, the facts, now beginning to see the light of day, contend that the global economy is still, two-and-a-half years after the grand cascading crash of 2008, in precarious straits.

Five separate stories sealed the fate for global markets today, beginning with China's announcement late Wednesday night (in America) that their trade balance was negative for the month of February.

About the same time, RealtyTrac delivered news that foreclosures had come to nearly a halt in the United States, with their numbers for February dropping 14 percent from the previous month and a 27 percent decrease from February 2010. Normally, that would be good news, but in the current environment of illegal and unethical actions by large, foreclosing banks, it meant that the mess that began in October, 2010 with the robo-signing scandal, was keeping banks from courthouses and clogging up the real estate market in a worsening manner.

Prior to the market opening, two more news items spooked the investment community. First, Moody's downgraded Spain's debt (about time for that!) to Aa2 and then, at 8:30 am on the East coast, the double whammy of new unemployment claims (397,000) and the US trade deficit, which expanded to -$46.3 billion in January.

Then, in mid-afternoon, as if the market had not received enough bad news, a story out of Saudi Arabia said that protesters had been fired upon by government troops.

That final bit of news sent the major indices - which had recovered somewhat off the day's lows - down once more, and stocks finished the session breaking into new depths.

The Dow and S&P broke through various levels of support, with the Dow finishing under the 12,000 mark for the first time in two months and the S&P crashing through it's 55-DMA. The NASDAQ and NYSE Composite each suffered similar pain.

It's becoming plain and clear to everybody living in the real world - not the fantasy land of fund managers, politicians and central bankers - that things are not going so well. Housing is an absolute catastrophe, global trade is grinding down due to higher imput costs and soaring energy prices, Europe is a full-blown basket case on the brink of dissolving, and US stocks are so wickedly overvalued that the path of least resistance is to sell them all, hurriedly, on the first sign of negative news, and there certainly was plenty of that to go around today.

Dow 11,984.61, -228.48 (1.87%)
NASDAQ 2,701.02, -50.70 (1.84%)
S&P 500 1,295.11, -24.91 (1.89%)
NYSE Composite 8,200.07, -179.37 (2.14%)

Declining issues led advancers, 5501-1072, a ratio of better than 5:1. New highs on the NASDAQ were just 33, overtaken by 68 new lows. On the NYSE, just 27 new highs and 31 new lows. This is a critical juncture for the markets, because if the number of new lows remain higher than new highs on a daily basis for long, say, six to eight trading days, it would confirm a hard change of direction, which has been in the cards since the double-engulfing session last Tuesday.

Volume was elevated as is the usual case when sellers outnumber buyers.

NASDAQ Volume 2,374,073,000
NYSE Volume 5,320,324,500

Commodities also took it on the chin, though in not such a dramatic fashion as stocks. Crude oil futures on the NYMEX fell $1.68, to $102.70, due to massive oversupply in the US of unrefined crude. Gold slipped $17.10, but remained below the psychologically-important $1400 level, ending the day at $1,412.50. Silver also was sold off, losing $98 cents, to finish at $35.07, though it should be noted that on days of hard reversals, a lot of precious metals are liquidated by speculators to cover margin calls.

A final note should not be ignored. Bill Gross' PIMCO, the world's largest fixed income family of funds, has slashed its holdings of Treasuries to ZERO. This news, first reported by the avant garde financial blog, zerohedge.com, holds unknown, but potentially damaging conditions. Gross and PIMCO have more or less registered a vote of "no confidence" on the policies of the US government and the Federal Reserve Corporation.

With stocks hammered down repeatedly over the past two weeks, the highs of February 18 look like specs on the horizon and the truth about the real conditions in the global and US markets is finally coming out. The cataclysm begun by the Wall Street banks in 2003-2006 and accelerated by then-Treasury Secretary's $700 billion holdup of the US mint in October, 2008, has many more acts still to be played out.

The rush for the exits began a week ago and the passageway out is beginning to get quite crowded.

Stocks Surge on Slim News

Despite indications that Friday's non-farm payroll data is going to disappoint - or maybe because of that - stocks continued to trundle forward and have now put together the makings of a fairly nice week of gains.

All of the major indices are poised to post their third weekly gain in the last four and, as of today's close, all but the NYSE Composite are positive for the year.

Data which has been released this week has been mixed, though slightly positive overall. Initial unemployment claims dropped off by 29,000 in the most recent week, but are still stubbornly high at 469,000. A number closer to 300,000 would be indicative that layoffs have stopped and that re-hiring was about to resume, though market participants aren't holding their collective breaths in anticipation of that number. Factory orders showed an impressive 1.7% gain in January, following a solid 1.5% advance in December.

The canary in the coal mine, however, continued to be housing. Pending home sales fell 7.6% in January according to the National Association of Realtors (NAR), which, to almost nobody's surprise, was blamed on the weather, even though the worst storms of the season came in February, not January. Thus, any attempts to paint lipstick on the pig that is residential housing are likely to induce ridicule and groaning.

With the nation almost completely mortgaged to the government due to guarantees by Fannie Mae, Freddie Mac and the other alphabet soup names of agencies sopping up the upside-down mortgage market, there is little hope that the heartland of America's middle class is going to rebound any time soon. Jobs and housing continue to haunt the best efforts of government and financiers, like Freddie Kruger, who just seems to never go away for good.

While Wall Street can whoop it up over earnings and percentages, most of America is suffering, especially state governments. Roughly 4 out of 5 are going to need further assistance from the feds in closing gaping budget shortfalls this year, after being bailed out in 2009. Turning the sublime into the ridiculous, the federal government is about as bankrupt as most of Bernie Madoff's investors, so that, in effect, the states are borrowing borrowed money.

We have come to the point in our history that the obvious cannot be overlooked, though the media and government officials try their best to obfuscate the truth in hopes of retaining or gaining office. Adding together all of the debt - most of it piled on in recent years - and including the unfunded and underfunded mandates such as Medicare and Social Security, every American living today is in hock to the tune of about $430,000.

Any economist who tells you that the money will be paid back is simply a jack-ass lacking common sense. The incredible tax burden needed to hoist such a huge burden off the backs of American citizens would relegate today's and future wage-earners to a level usually reserved for indentured servants. Some make the case that due to the high tax burden already imposed, most Americans are nothing more than wage slaves already, a point that cannot be made too finely nor too bluntly.

While the mechanics of the economy whirr ever onward, the plight of the individual continues to deteriorate. Pay raises, once a commonplace theme in most business environments, have been all but obliterated since the late 1990s, except, of course, in government positions, where financial discipline has been abrogated and handed over to the debt-runners in congress and the presidency. The lower classes get welfare checks and other comforts from the largess of the Treasury; the upper class needs no such relief, having written all they need into the tax codes, leaving the vast middle class in a squeezed situation such as today's, where wages hardly cover the costs associated with common living.

Saving, that relic from the past that our parents and grandparents tried to imbue into us, has been replaced by debt, and that debt has exploded to unreasonable levels in just the past twenty years, threatening to destroy the entire fabric the social compact upon which our country was founded and currently operates.

Retirement, the biggest sham ever invented, is going to be thrust from the American lexicon within the next decade as baby-boom generation workers begin to add to the debt burden in increasing numbers. Taking away benefits from earners is still taboo in Washington, DC, though the decision to either cut benefits or raise taxes will soon be an unavoidable choice, probably within five to six years, if the union lasts that long.

The final insult to the idealist "peace and love" crowd from the 60s will be termination of Social Security for all intents and purposes. Benefits will still be doled out in some form or another, though the level of payments will be ludicrously low in comparison to what previous generations took out. Like all other social entitlement programs, Social Security and Medicare in particular are nothing more than vast Ponzi schemes, using current revenue to pay current beneficiaries. Within years, even possibly months, the balance will tip toward the recipients outnumbering the payers, sending the entire system further into default (It's already over the brink, though nobody will admit it).

What happens when the economy of a nation, brought down by debt burdens too weighty to maintain, implodes, is not a secret. The obvious first victims will be the lame and indigent, as government stipends are reduced or completely shut off. Next would be the chronically poor and illiterate, who do not possess enough brain power or initiative to fend for themselves.

The upper class will feel only slight pain, most of the anguish being sustained by the 60-70% of the population in the middle. Good jobs will be hard to come by, families will be forced to live together as in the Great Depression of the 1930s, and, though prices for everything from food to fuel will be forced lower (though that's arguable in the case of utilities and health care, which will raise prices on fewer customers to meet costs), few will be able to afford much more than basic necessities.

All of this is why it's important to know what your money is doing and where you are putting it to work. As explained recently, the only viable investments for the average middle class American today are cash, capital goods, and capital-producing goods such as food, fuel, seeds and tools of trade. All else is speculative and more than likely doomed. There are those who preach that gold will be the savior of assets and wealth, and that may be true, though most middle class people would more than likely have to sell any gold assets in order to meet day-to-day expenses in a post-crash economy.

In any case, there are trillions of dollars being fed into and out of the Wall Street stock machinery and today was a good day for them. Few of those who toil in the financial services industry have any idea of the train wreck that is just ahead, so, let their folly be your entertainment.

Dow 10,444.14, +47.38 (0.46%)
NASDAQ 2,292.31, +11.63 (0.51%)
S&P 500 1,122.97, +4.18 (0.37%)
NYSE Composite 7,173.07, +8.41 (0.12%)

Gainers outnumbered losers on the day, 3651-2790. There were 427 new highs to a paltry 27 new lows, as we approach the anniversary of the market bottom - March 9, 2009 - now just three trading days away.

NYSE Volume 4,448,901,500
NASDAQ Volume 2,062,605,875

Commodities took a bit of a breather. Oil was actually down 25 cents, to $80.62. Gold slipped $9.60, to $1,133.70, while silver fell 10 cents, to $17.23.

Tomorrow's release of non-farm payroll data for February probably won't cause much of a ruffle since expectations have been sufficiently dampened all week. It's a near certainty that the numbers will be worse than last month, and consequently blamed on the weather.

Markets and what passes for economic understanding have reached a new low, now that we can blame Mother Nature for our economic shortcomings.

Top 5 Tips For Good Home Loans

Buying a house and making it your home is a dream for almost everyone. Fortunately we have services that help buyers make their dreams come true faster: such as home loans. The world of home loans is varied, full of layers and sometimes confusing. However, many companies offer support and a set of options for new borrower. It makes easier the moment of choosing which loan best fits your situation.

Good home loans are easy to be found if you know where to search and how to negotiate. Low interest rates can make a sizeable difference in your savings, both on a long term and short term basis. It can be decisive in the moment of choosing a larger space as well. I've prepared some tips that may help you in order to get the best interest rate on your first home loans:

1. Research a good lender

It's very important that borrower do a lot of research to discover the lender best fits his needs. Even when you are opting for a home loan and you don't have a good credit history, you can look around and choose the one that is best suited to your financial situation.

2. Bad credit is not a big problem

You are not destined to take the very first opportunity that you find just because you suffer from bad credit. If you have such an attitude you may suffer for long time due high interest rate. You may end up being not able to meet the commitment and this may worsen your financial credit score.

3. Compare the interest rates

The mortgage rates tend to vary depending on the type of loan. Choosing adjustable home loan make sure you are aware such loan has possible risks associated. Don't hesitate to ask about taxes, costs, terms and other issues. Mortgage brokers are likely to serve you with the best services to beat enemies.

4. Bargain and negotiate

Now that you chose the lender it's time to get the best deal. Usually, loan officers and brokers can help you get some really good discounts on your home loan. Don't show anxiety to get deal closed, be direct and let the company officer knows you have resources. It's also important to state you are not negotiating he unique possible deal for you.

5. Be critical

Remember a loan is like a simple product, but with many terms issued. Seller wants you purchase, he usually show only the good factors. You should have critical sense to decide and bargain for better prices. Doing this you assure you got the best lender and closed the best deal.

Get more quality information and services for home loans.
Visit: Choice Home Loans

Tips on Online Marketing For Real Estate

Online presence is a must for any business today and Real Estate is no exception. With umpteen number of people browsing the web each day, what better place to market your services? Real Estate agents who have already taken the plunge into Online Marketing will validate the point. For others, here is what online marketing does to your business.

Online Marketing For Real Estate costs a great deal less than the regular marketing ways like the direct mailers and advertisements. These traditional media need special time and effort from the client to respond to. However, with online marketing, communication is just a matter of a few clicks. Emails have made communication quick, easy and almost effortless. Also, the responding time of online media is much faster than the traditional marketing media. Online marketing expands marketing in a larger area and at the same time, keeps it targeted to the desired group. Its has a all time web presence and can be increased with the addition of simple Internet marketing practices like banner ads, blogging, etc.

Internet Marketing For Real Estate is fast becoming poplar. Real Estate agents with online presence are definitely at a benefit as compared to those who do not have one. However, having a website is not the end to successful marketing. It is imperative to increase the website traffic. In other words, it is necessary to get more and more visitors to visit the site. Here are some tips on increasing website traffic:-

Use a key word rich title. Using the name of the business as the title can be effective only if your business happens to be quite popular. Do not cram up information of different topics on one page. Instead, stick to one topic per page and make sure the matter is rich in keyword content. Use text links on you web page. These are easy for search engines to find. Submit your site for listing on major search engines. You can also get people with complementary sites to link to your website. This will increase the number of clicks to your website, which in turn will increase its search engine ranking. Make sure the layout of your web page is easy to understand and navigate.

The next important step is to communicate effectively with the clients. Very few agents call back open house leads, however, these should not be ignored. It is a good way of giving a personal touch to your services. You can also plan a virtual tour for your prospect clients. All you have to do is post some of the homes for sale, in your website. These can be clicked by professional photographers to give the clients a feel of the house. It will give them an idea about the architecture, size and layout of the property. Also, it builds the trust of the client on the Real Estate agent and portrays absolute professionalism on the part of the agent. Assistance can be taken on initiating Internet Marketing For Real Estate from various Internet solutions service providers.

Real Estate Recession USA - Protect Yourself Now

The real estate recession in the USA is upon us. Property values are likely to get a lot worse before they get better, as we see the biggest housing crisis for 50 years. Foreclosures are mounting and debt is a huge burden. The good news however is - you can protect the value of your property from further falls right now.

How can I Protect against further falls?

The answer is contracts that are being provided by a number of companies called:

"Lock in value property equity"

Essentially for a small affordable fee, you "lock in" the value of your property at a set price, when the contract is signed. This is the minimum price that you are guaranteed for your property should you wish to sell it.

How Am I protected?

The company giving you the "lock in" value gives you the option to sell your house to them at anytime after 2 years after the contract has been signed and you can protect yourself for up to 10 years.

Regardless of how far property prices fall, the company is obligated by the contract to buy your property at the agreed "locked in" price.

That sounds good - but what about if the market turns up?

Well if it does, you have the right but not the obligation to sell to the company granting the "lock in" value. If prices rose, you can sell your property to whom you wish and take advantage of any increases made.

So essentially I have a set locked in price which no matter how far the market falls I am guaranteed that price but if the property rises in value gains on mine?

The above summary is correct.

This contract allows any property owner to gain peace of mind for a small affordable fee. Real estate prices can be volatile as we are seeing now and we are arguably in the midst of a real estate recession.

People are worried and want protection.

In life we protect many of our assets yet, one of the most important and biggest assets we have is our home and we don't. Companies are now offering contracts such as the above so you can protect probably one of the most important assets you have - your home.

As we have seen the country is fighting not to fall into a recession - but even if it doesn't, the real estate market has a lot of problems ahead and is unlikely to recover quickly.

Real estate recession USA - it sounds frightening and for many property owners it is - but the good news is contracts like the above, can help you "lock in" the value of your property and gain peace of mind which is well worth considering.

Related Posts:
Navigating The Economic Recession of 2008

Now Is The Time To Buy Investments

While the recent fluctuations in the stock market are causing some economists to predict further loses, and even a full-on global recession, it isn't likely. True, some mistakes were made when lenders gave out too many sub-prime mortgages. These were high-interest mortgage, and other, loans given to people with bad credit, and they should have known it was like playing Russian Roulette. Now, as homeowners default and foreclosures abound, a lot of people are experience the severe repercussions of their trusting lending spree. But every dark cloud has a silver lining.

All of the foreclosures mean there is a lot of cheap real estate out there. Eventually, the economy will rise again, and with it, the value of the homes now being sold in foreclosures or other desperate sales. Now is the time to buy.

The nice thing about this is it is a sort of self fulfilling prophecy. As soon as people loose faith and stop investing, the economy continues to dive. Luckily, it works the other way. A confident populace, snapping up investments wherever they can help stabilize the economy. Once it is stabilized, it can't help but gradually rise.

And although the stock market situation looks bleak, the truth is, quite a lot of industries were on the rise just before the fall, indicating that not all is bad with our economy. For example, in December, the durable goods market was booming. There was a 5.2 increase in orders for long-lasting goods, says a report from Reuters. This would have meant a really strong dollar, if not for the sub-prime bubble finally collapsing. This indicates to me that we can overcome this blip. Sure, there will be some forever affected by this unfortunate turn. But with some careful investing, there will also be some that are forever benefited by it.

Sub-prime Submersion

As noted yesterday, dark clouds appeared over Wall Street in the form of defaulting sub-prime lenders, notably, New Century Financial (NEW), and sent the indices reeling on Tuesday.

New Century, which specialized in sub-prime mortgage loans, said on Monday that it may not be able to meet financial obligations of more than $8 billion. Trading on the shares were halted at 1.66 Monday, a loss of more than 96% from its high of 51.97, reached about a year ago. The stock briefly traded higher than 60 in December 2004. Trading continued to be suspended on the issue throughout Tuesday as the NYSE considered delisting and a criminal probe was initiated.

It was a truly horrible day to own stocks. The Dow, S&P, NASDAQ and NYSE Composite all opened lower and continued selling throughout the session, closing at or near the lows of the day.

Dow 12,075.96 -242.66; NASDAQ 2,350.57 -51.72; S&P 500 1,377.95 -28.65; NYSE Composite 8,926.28 -194.05

According to thestreet.com, shares of Bear Stearns (BSC), Lehman (LEH) and Morgan Stanley (MS) experienced losses of 6% or more on exposure to the bad debts of the beleaguered sub-prime market.

Apparently, the damage from mortgage defaults is more severe than those involved have been letting on. It's been suggested that as many as 25% of sub-prime mortgages initiated between 2003 and early 2006 - at the height of the real estate boom - may result in foreclosure and default.

The fault lies not only in the borrowers, whose desire to own an American home outstripped their ability to pay, but in the lenders, whose shady dealings and unethical practices put people who could scarcely afford them into homes with little or no down payment.

The terms of some of these loans are so onerous as to make normal lenders shriek with horror. Interest only loans with increasing principle were all the rage near the end of the boom. Another contributing factor was the rampant speculation on housing which pushed prices beyond normal affordability.

Real estate prices in some of the more overheated markets, such as Southern California, Washington, D.C., Boston and Florida, will take years to weed out the excesses. Homes that typically were selling in the range of 400,000-500,000 in 2005, today will fetch little more than half that amount, leaving many homeowners upside down - mortgage balances higher than the value of their homes. With unappetizing options of staying put and paying or selling at a loss, there are serious grumblings in suburbia.

Of course, with every loser there is a winner or two. Those homeowners who sold at the top of the market and downsized are likely ahead by tens of thousands of dollars. But there's little to no free cash floating around for investment in stocks, and that's crippling Wall Street today and will have a longer term affect as the housing bust deepens.

As this correction and mortgage blow-up extends, more days like this should be expected. Suburban middle and upper-middle class homeowners with little disposable income is not going to boost the economy. On the heels 4th quarter 2006 GDP growth of merely 2.2%, the 1st quarter of 2007 isn't shaping up to be much better. When economic indicators - like today's stalled retail numbers - begin to show little to no growth or outright declines, the other shoe shall have fallen.

Almost unnoticed amid the carnage was another decline in the price of oil, which lost 98 cents to close at $57.93, its lowest close in 3 weeks. Gold and silver continued their long, slow, clumsy, rangebound trade. Gold ended fixed at 649.40, -0.90. Silver ended the day at 12.96, a loss of 13 cents.

Declining issues outpaced advancing ones by a nearly 5-1 margin, while the measure of new highs to new lows flipped over, an ominous signal going forward. There were a combined 154 new highs to 225 new lows on the NYSE and NASDAQ.

New lows must reach a number beyond 350 before a bottom can even be considered close. We're not there yet. In fact, the Dow is still above the March 5 interim low of 12,039.11. There's more - probably much more - selling to come.

Three in a Row for the Dow, but Trouble is Brewing

Could the markets be on to something? The Dow Jones Industrials rose for the third consecutive session on Monday, adding 42 points and with that, completing a 2% gain off the lows of last week.

Dow 12,318.62 +42.30; NASDAQ 2,402.29 +14.74; S&P 500 1,406.60 +3.75; NYSE Composite 9,120.93 +25.94

As we see from the numbers above, the other indices tagged along for the ride. And what a nice ride it was, though most investors thought better of it. To say that the volume was thin would be overstating the case. Especially on the NASDAQ, it was nothing short of anemic.

But the markets made the best of it, putting on the bravest of brave faces and likely cheering the drop in the price of oil, which fell 1.14 to $58.91, a welcome number for anyone who owns (or is paying off a 6-year loan on) a car.

In the absence of any noteworthy news, little things could make a huge difference in this directionless market. Some of the smallest things are little movements in interest rates, which are heading higher thanks no doubt to the seeming end of easy money, particularly in the mortgage arena. There, a company called New Century Financial Corp. is about to go completely belly up, taking down $8 billion in bad money with it.

What worries Wall Street is that New Century's collapse could cause a tsunami in financial markets. The company specialized in sub-prime loans, or more succinctly, mortgage loans to people who probably shouldn't have them. CNNMoney has a good article on the subject.

New Century originated many of these sub-prime loans, packaged them up and resold them to other willing buyers on Wall Street. Among the companies with financial agreements with New Century are some which should know better, like Morgan Stanley, Credit Suisse, Goldman Sachs and others. These giants will be able to absorb whatever shock might occur in a default or bankruptcy by New Century, which seems all but certain, but the damage will spread.

Lenders will tighten up requirements for home buyers, interest rates may hitch up a bit, people get worried and everyone goes home losers. At a time when the economy is cooling off to a significant degree, the last thing the suits on Wall Street need is a soft real estate market, rising interest rates and sour-pussed bankers.

There's a bit of unraveling about to happen and it will only fuel selling into an already unsteady market. Get ready for another 3-4% decline on the major indices over the next few weeks. I've said it was coming and here it is, on a silver sub-prime platter.

Blind Men Leading the Clueless: Late Day Selling Sinks US Equities

Yes, indeed, the dead cat bounced yesterday, but it lost its legs in the process. The follow-up to Tuesday's one-sided trade up was a complete dud. While the Dow briefly traded nearly 50 points higher, at the end of the day the sellers took all US equity indices back into red territory.

Dow 12,192.45 -15.14; NASDAQ 2,374.64 -10.50; S&P 500 1,391.97 -3.44; NYSE Composite 8,999.20 -6.81

The short leg today signify little buying interest. Any other explanation should be viewed with appropriate skepticism. Following the meltdown of Feb. 27, yesterday's rally was simply relief, as I said clearly and emphatically yesterday.

But here's a direct quote from (I believe) briefing.com, which posts directly to the market overview page on Yahoo! Finance, a site that is probably the most frequented of any in the financial world.

Since yesterday's huge rally was based as little on fundamentals as was last week's meltdown, and indicative of short covering activity amid an increasingly pessimistic mindset, today's breather wasn't overly disconcerting. In fact, some semblance of stabilization provides some hope that a bottom may have been put in place.

Now, I have a couple of problems with this. First, it's sugarcoating the past two weeks+ of trading in which the Dow has fallen in 9 of the last 11 sessions. The other indices have generally followed suit. February 27 was not an isolated event, even if it was somewhat contrived. Second, I don't know exactly how the author squares "short covering activity amid an increasingly pessimistic mindset" with "based as little on fundamentals as was last week's meltdown..." because if there is an increasingly pessimistic mindset, shorts wouldn't bother to cover and last Tuesday's meltdown was based on fundamentals - a fundamentally overbought market.

Third, that last line is a true gem and should end up in the annals of other official-sounding gibberish. "Some hope that a bottom may have been put in place" is like saying, "we're happy none of the survivors were killed," or "sure Kennedy was killed but Connally was only injured." Serious damage was done last week and it wasn't exactly unforeseen. Anyone hoping that a bottom is now in place is really pushing the envelope of stupidity right into the face of investors they hope are clueless.

There's more evidence that corporate media thinks the American public is stupid. As if we needed any more proof, writers Robin Farzad and David Henry penned the cover story for this week's edition (dated March 12, 2007) of BusinessWeek. In it they and their editors actually have the raw nerve to use this as a sub-head: "Volatility is back. Ominous signs loom. But the outlook for U.S. markets is surprisingly upbeat."

For them, maybe, but there are thousands of people with money in 401k's and other investments who aren't exactly rejoicing over a 400-point one-day drop on the Dow. The trading sessions which preceded and followed that ugly Tuesday aren't exactly joy-inspiring either.

The authors cite a glut of private equity money and other cash sitting on the sidelines and the fact that overseas markets still seem riskier than US stocks as examples for the "upbeat" feel. They also cite that the market was up on Feb. 28, as another reason not to worry, which certainly is reassuring, especially when it was down the following day, the day after that and so on...

These authors have an amazing nerve to think they can accurately read the market's signals and then tell us everything is OK. It truly is the blind leading the clueless.

Meanwhile, reports that the housing bubble has burst into full-blown collapse are beginning to emerge. It's not just sub-prime loans that are going bust, but buyers who purchased homes via adjustable rate vehicles at grossly inflated prices with little or no equity are being dragged into foreclosure as well. It's simple math. If you bought a home in 2003, 2004, 2005 or 2006 for $500,000 and today it's only going to fetch $400,000, you lose. And it's happening all over the country, but especially in Florida and California, which just happen to be two of the largest real estate markets in the USA.

The real culprits are interest-only adjustable-rate mortgages, which spread like wildfire through the mortgage industry as housing prices ramped beyond the reach of most Americans. Insidious lending practices let the buying boom continue, until every last loser with a job had his or her own home, affordable or not (most times, not).

Well, if our homes don't kill us, we can count on our cars taking every last nickel. Oil was up another $1.13 today to close at $61.82. The beneficent big oil companies just can't get enough, can they?

Gold gained 6.70 to 652.90; silver followed dutifully along, rising 12 cents to $13.11 per Troy ounce.