Remember never forget the power of greed and fear, and the propensity for investors wanting to own stocks (taking long-side) and fund managers chasing performance as we saw today especially if they think the bull-train is pulling away they will want to hop on board.  Please, remember when in doubt as to market conditions/direction CASH is always king (or queen depending on your gender J ) please trade cautiously and be quick to protect your profits. I’m guessing that this the days ahead we will become embroiled in a major bull-bear battle as we head into earning season.

This was surely an interesting week to trade (I had my best day in several months on Friday thanks to Goldman). Friday closed out April expiration which is normally bullish and now it's is behind us, earnings season has begun in earnest and GE and BAC's better than expected earnings were meet with sell-the-news as they didn't smoke the numbers and provide stellar forward guidance…., the Dow closed over the 11,000 mark, and the SEC charged Goldman with fraud related to the structuring and marketing of collateralized debt obligations (CDOs), and this and the response to BAC & GE's earnings sent the market tumbling lower on Friday…as traders took the bad news as a reason to book some of their pent up profits.

The recent gains have come with only marginal support from traditional long side funds and investors; from what I have uncovered and read through extensive research the major Wall Street trading desks (GS, MS, BAC, "C", STT etc. the big-boys those too big to fail…are the new breed of what we call high-frequency traders that have been fueling the majority of this rally.

Adding to the malaise on Friday was a real crummy consumer sentiment report…… The Michigan Consumer Sentiment number for April came in at 69.5 and a sharp drop from the prior reading of 73.6; this was the lowest reading since November and obviously suggests the majority of consumers are not convinced the economy is on a great path, as they live in the real world. The biggest decline came in the expectations component, which dropped to 62.3 from 67.9; while the present conditions component declined from 82.4 to 80.7….these retracement came after the vastly over-hyped pro forma jobs report that should have lifted sentiment if the numbers are to be believed.

According to money flow reports investors pumped only $396 million into domestic stock funds in March;. Since the start of the year, they've only added only $1.8 billion, according to the ICI.  Compare those inflows with some other recent rallies. Between April and July 2009, investors poured $28.76 billion into U.S. stock funds and in the first three months of 2007 they poured in close to 20 billion into these funds.

Meanwhile we have seen insiders are dumping stock at an alarming pace, $16 billion so far this year, more than six times the $2.5 billion they've bought, according to TrimTabs.com worse yet they've been increasing the dumping of their stock more in recent weeks as the indexes climbed higher. Insiders sold $6.9 billion in March when compared with a mere $831 million bought.

As I have alluded to many times these past weeks that the volume has been very anemic and worse yet only a handful of equities have been responsible for the majority of the lackluster volume….we saw on Friday that (6) represented 27.51% of the overall stock market volume on Friday (AIG, ABK, BAC, C, FNM, BPOP).  

Of course we don't want to end a juiced-up week without more taxpayer stimulus and more free-easy for the too big to fail lecherous banks; our elected representatives hate to disappoint 14-million unemployed voters so the Senate voted to extend jobless benefits through June 2nd at a mere cost of $18-billion as we sweep the huge contagion of not creating any real sustained quality jobs under the rug for another 2 months.  The Fed-heads redistributed the wealth to the wealthy (the anti-Obama force) as they pumped their balance sheet and that of the lecherous banks (their illegitimate children) to a record $2.32-trillion, up a mere $32-billion since their March 31st cut-off date for buying up MBS's. 

Google had OK earnings, GE had good earnings, BAC had good earnings, ISRG had good earnings, AMD had good earnings, and Mattel had good earnings…and their stocks we hit hard….a classic sell-the-news as I forecasted would happen!  As of Thursday (Friday was a Goldman debacle) the fundamentals and bearish technicals have been completely ignored and for some reason they do not mean anything to these market participants as they have turned a blind eye to them as they ignore anything that can't sustain these pumped up bogus rally and these nose bleed valuations; and they wonder why retail investors are not jumping into the markets…you can run a Ponzi shell game for a while and pull in some suckers but every good con man knows when it's time to move on and head to another town once they have fleeced all the suckers they can before their scam is uncovered.  They claim that the SPX-500 is increasing in value and EPS in a dramatic fashion year/year, however they fail to remind folks that the dogs with flees have been plucked from the index and others like Berkshire Hathaway was added to the index. They are expected to add $4.00 or better to the SPX-earnings so when we reflect on valuations it's very easy to see how year/year comparisons are skewed!

 If the SEC's crusade against fraud as perpetuated by the too big to fail cutthroats gathers steam pace, we need to watch for an ensuing selling event and it will likely be broad based…across the board even in the old safe havens like precious metals) this selling will provide us a great buying opportunity to buy silver and gold at a discount and at attractive levels; we could easily see another unwinding…what is called a forced liquidation in commodities as holders will be forced to sell, due to overleveraged-positions and this would be a great buying opportunity. Link to SEC Complaint

Interesting story about Goldman and JPMorgan….. Goldman Sachs Group Inc. and JPMorgan Chase & Co., two of the biggest traders of over-the- counter derivatives, are exploiting their growing clout in that market to secure cheap funding in addition to billions in revenue from the business.

Goldman Had 9 Months' Warning From SEC….This is not good news for Goldman….it appears that (GS) was warned nine months ago that SEC staff wanted to bring a civil case against it, but they disclose this to investors in regulatory filings. 

Germany said it will ask the SEC for information in a case in which Goldman Sachs Group Inc. is accused of defrauding investors, potentially as a prelude to legal action. "First we must ask for the documents, then evaluate them and then decide about legal steps," said a spokesman for German Chancellor Angela Merkel. The fraud charges against Goldman that rocked the financial markets Friday, these allegations will likely kick off a new era of litigation that could entangle Goldman and other banks JPM, "C", BAC for years to come.

The markets are way overdue for a serious correction and after this recent parabolic rally where the markets have run so far so fast without a real significant 8-15% correction (it's not normal), when we run so hard, without a correction….we could be setting up for a 25-30% correction. In these giddy-markets something will come along...(maybe it was the Goldman debacle) which could be the proverbial straw that breaks the markets back.  As the great Oracle of Omaha has stated many times "when the tide goes out, we get to see who's swimming naked" and as I have always stated cockroaches come out of the woodwork once one is discovered and the lights are turned on!  

We saw on Tuesday that Integrated Asset Services, a leader in default management and residential collateral valuations, released the latest IAS360 House Price Index (HPI). Based upon their timeliest and most granular data available in the housing industry, the data showed that national house prices dropped 0.6% in February.

February's drop, marked the seventh straight monthly decline (hardly bullish) as this the index is down 7.5% from July 2009, and 25% from July 2007, the IAS360's high-water mark. February's closing level is only fractionally higher than the index's closing value six years ago.

By now, the normal seasonal upturn in housing activity should have begun, but we're looking at trend lines for neighborhoods all around the country and we just aren't seeing the typical forces at work. Results in a number of the nation's large metropolitan statistical areas (MSAs) seemed to confirm the data.

One reason home values are under pressure is that foreclosed houses are adding to the inventory of unsold homes (and the banks are sitting on a horde of foreclosed homes that they are keeping off their balance sheets, which in turn compete with more expensive new housing (it's strange to see the builders still building), and according to the latest published figures, more than 340,000 homes received foreclosure filings last month, and the number may reach 4.7-5.0 million total by year end….this will create an huge drag on the economy!  

ARE RETAIL Sales strong because of real demand, or are their other stealth issues?

Sales at U.S. retailers rose better than expected in March as consumer stepped up purchases of vehicles and wide range of goods (foregoing mortgage payments), data showed on Wednesday, suggesting to the talking butt-head's being pranced about on the various bubblevision networks a significant increase in the so called manufacturing-led economic recovery.

The Commerce Department said total retail sales jumped a whopping 1.6%, the largest increase since November, from an upwardly revised 0.5% increased in February…it was previously reported to have gained 0.3%. Motor vehicle and parts purchases surged 6.7% last month, the biggest increase since October, after dropping 1.9% in February. Consumers are defying high unemployment and tight access to credit and somehow they are still spending if we are to believe the numbers being reported, offering what I believe is false hope that the recovery from the worst economic downturn in 80 years will reverse on a dime and rebound as if the contagions and damage are but a distant memory thanks to massive government stimulus and the swing in the inventory cycles.

Worse yet the incessant hype on the bubblevision networks and the carryover to other venues has created a growing confidence in the recovery, encouraging households to tap into the savings and other segments of their assets to fund purchases of goods, including some luxury items.

Nevertheless…when we excluding motor vehicles and parts, retail sales rose 0.6% in March after rising 1.0% the prior month as a combination of an early Easter holiday and warm weather boosted sales at clothing stores.

Core retail sales, which exclude autos, gasoline and building materials, rose 0.5% after increasing 1.2% in the month of February. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. Clothing and clothing accessories sales increased 2.3%, while building materials and garden equipment rose a whopping 3.1% (I find this hard to believe) as it was the largest advance since November 2007. Receipts at sporting goods, hobby and book stores rose 1.0% in March. Sales at electronics and appliance stores, strangely dropped 1.3% (technology segment is flashing strange divergences) and receipts at gasoline stations dropped 0.4% (less driving).

The biggest component to the increase in March was the Motor Vehicle and Parts Dealers, which increased from $53.4 billion to $69.9 billion (I was amazed at this sales-pull-through). What I find surprising is that in light of all the rage over technology spending, sales at Electronic and Appliance Stores declined by 1.3%. How these stellar numbers were generated was interesting….so I explored other possibilities to better understand these numbers and to determine what to expect in the future….as with ever increasing "strategic" mortgage defaults is beyond us. We can't wait to see the latest consumer savings rate data.

The increase of equities (the market indexes has made many feel that their IRA's 401k's and retirements are doing much better so they will have to save less…so many after the late year rally and this recent rally took this as a signal that the coast is clear and that they can spend instead of save (oh how wrong they will be)!!

I also found that this probably helped to spur retail spending (we all know it's not repeatable)….The average tax refund is up nearly 10% (about $3,000) this year…and that there are more than a dozen Recovery Act (Stimulus) tax cuts that over 100 million Americans can take advantage of this tax season!   Overall the Recovery Act contained just under $300 billion in tax relief.  And so, again, as of the end of March, over $160 billion of that has gone out.  And we anticipate that April may likely be one of the largest months that we’ve seen in terms of tax relief and that doesn’t include the tax cuts that are going to be going out this month. Of that $160 billion, the primary beneficiaries of that tax relief are working families and small businesses.  Working families under the Recovery Act have received about $100 billion in tax relief and they have nearly $100 billion more that is yet to come according to releases….here is a catalysts for some consumer spending another government bailout-windfall!

I have disclosed on numerous occasions how excess refunds by the Federal Government despite sub par withholdings is helping to goose consumer spending….and that the stimulus is coming to an end…now we have another avenue opening up!

Mark Zandi of Moody's Economy that the government's tacit encouragement for "homeowners" to not pay their mortgage dues is freeing up $8 billion each month that is artificially increasing consumer spending and iPad preorders. And with banks not marking anything to market, all these houses that generate no cash flow are still marked at 100 cents on the books. If you ever needed a justification to not pay your credit card, your mortgage, or anyone else you owe money, now you know - contract law in America no longer exists. Just stop paying everything. And please don't save. Saving is for non-banana republics. Remember - the market is never wrong…just buy with reckless abandon as Cramer says!

ender Processing Services just put out its "Mortgage Monitor Report," and we made another new record as the nation's foreclosure inventories reached new record highs (how the hell is this so darn bullish and where are these homes sitting as we have not seen banks acknowledging them on their books). February's foreclosure rate of 3.31% represented a 51.1%t year-over-year increase. The percentage of new problem loans also remains at a five-year high. The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans. More than 1.1 million loans that were current at the beginning of January 2010 are now at least 30 days delinquent or in foreclosure by February 2010 month-end. so what is the big deal right so what if a mere 8+/-million Americans are not paying their mortgages…the rest are right (or will they get wise and start to back away from their obligations as well….creating a very nasty slippery slope)!  What are the implications of not paying….hell I've heard that some folks have been in their homes over 24-monthsw after they stopped paying their mortgages!  I've been reading report after report pointing to many studies that show Americans are now far more likely to pay other bills first before their mortgage…no big deal right…some are electing to go into what are called strategic defaults… where the benefits far out weight the ramifications!

Paul Jackson, publisher of Housingwire.com, wrote a fascinating article this past week that put this into real cash perspective. He described a case study of someone who applied for the government's Home Affordable Modification Program they had an $1,880.00 monthly mortgage payment on which they'd defaulted, while this person (with integrity, honesty and morals 's…what a joke) monthly bank statement showed payments to a tanning salon, nail salon, liquor store, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc. ***here is what is helping the spending/retail sales**

Jackson wrote that even if we assume that just half of the current 7.4 million currently delinquent mortgages (older number) fit this sort of "spending profile" (that is, they are spending their mortgage) and you assume a $1,000 median monthly mortgage payment for most homeowners we get a nice $3.7 billion boost per month into the retail-stream called "consumer spending" what a great world we now play within….this is certainly enough spending to prop up the sagging retail complex (but for how long is the $64,000 question to be answered) while other studies have shown that borrowers are more likely to default on loans if they have friends or neighbors who have….so is this nuance development starting a nasty domino scenario? 

On top of that, the rate at which formerly current borrowers are defaulting now is rising. I guess it's just another, innovative way of using your home as your so called stealth ATM machine.  It currently takes well over a year, in some cases nearly two years, to go from missing a payment to being kicked out of your home depending where you live and as the back log increases so does the time lag.

According to Jackson most Americans behind on their mortgage have gone more than a year without making any payments. The average age of a loan in foreclosure is now 410 days delinquent, after all, according to LPS; and that’s just the average. Many delinquent borrowers are able to stay in their homes for even longer than that.

Please remember….GDP = C (consumer and business consumption which is somewhat lifter artificially) + I (investments…the markets have been on a tear) + G (government spending-all time high) + E (net exports) Regardless of how you see it, the usual dominant variable in the GDP equation above has been historically consumer spending (C); it’s always been roughly 70% of GDP, including health care costs (half of which are actually a government expenditure, but let’s not get too deep into the fuzzy-math manipulations of how the data is reported for now); Which means, in the end, that as consumer spending goes, GDP generally normally follows.

Hardly bullish or is it...Kudlow thought so you decide??    This past week we saw that the total volume of mortgage applications submitted in dropped by 9.6% from the previous week, according to the (MBA) survey. Another survey also showed a corresponding dip in households submitting applications.

Although the weekly decline in the MBA’s index slowed from last week’s 11% decline, the index is now at its third-lowest leaven since the end of June 2009…and we have a very nasty trend developing in my opinion. As we saw that applications for purchase mortgages insured by the FHA and the US Department of Veteran Affairs plummeted 19.1% this week; following the implementation of an stealth (and not widely reported) increase in FHA mortgage insurance premiums. While applications for conventional mortgages also dropped last week, with refinance application volume continuing to drop following last week’s increase in rates. The volume of applications submitted for refinance mortgages dropped 9%, the fifth consecutive decline. Despite the decline, the refinance share of applications actually increased to 58.9% of total applications, from 58.7% the previous week as the drop in applications for government-backed purchase loans tipped the total share of purchase applications significantly lower.

According to a separate survey of mortgage applications, published by Mortgage Maxx, which adjusts total volume to reflect the number of households submitting applications, household activity dropped 1.3% in the same week. Given that a seasonal bias higher I would expect by now positive numbers as such these numbers certainly give us some reason for concern and now as the tax credit expires and the Fed withdraws its overt manipulated MBS support, these new negatives threaten to drag mortgage activity further into the cesspool.

No problems with commercial real estate right… The delinquency rate for commercial mortgage-backed securities posted its largest increase ever in March, Moody's Investors Service reported Wednesday, blaming most of the gain from the collapse of a $5.4 billion housing deal in New York (is this the tip of an iceberg that hit the Titanic? The ratings agency said that the rate rose 69 basis points in March, a $4.3 billion increase as 343 loans became delinquent. But 45 of the basis points were attributable to the loan for the Peter Cooper Village and Stuyvesant Town housing project in Manhattan. A huge $3 billion loan for the development moved into delinquency in March…and I suspect others will soon follow as credit is still extremely tight for overvalued properties).  The project, which would have been the most expensive real estate deal in U.S. history, fell apart in January when a developer team could not make a $16 million loan payment. They "Tishman Speyer Properties and BlackRock Realty", turned the 110 buildings that make up the complex over to creditors, saying it was the only alternative to bankruptcy.

Moody's wrote that some sectors have shown some signs of life, such as loans for multifamily projects and hotels. The rate of increase in delinquencies has slowed in recent months. But the rate of increase for projects like office and real estate continues to rise unabated." We expect this trend to continue," said Moody's managing director Nick Levidy. Even with the Peter Cooper Village default, the eastern region remains the best-performing part of the country. The south holds the largest percentage of delinquent loans.

Consumer prices edged up a tad in March with prices outside of food and energy rising at the slowest pace over the past 12 months in over 6-years (but is this a real development or an outlier). Despite the good inflation news, household budgets remained under significant pressure as once again hourly earnings dropped again. The Labor Department said Wednesday….consumer prices edged up 0.1% month; while core inflation, which excludes food and energy, was unchanged this past month….over the past 12 months, core inflation is up by just 1.1%, the best 12-month showing since a similar 1.1% rise for the 12 months ending in January 2004. That slow rise in core prices has not been this depresses in more than 40-years.

However, household budgets remain under pressure as the Labor Department said in another release that  average hourly earnings dipped 0.1% in March. After adjusting for the small rise in inflation, earnings were down 0.2% for the month. Over the past year, hourly earnings, after adjusting for inflation, are down 0.7% as the lingering effects of the worst recession since the 1930s continue to depress wages….wages when adjusted for inflation during the past 14-years are down 19.8%

On the bullish front……David Bianco, head of U.S. equity strategy at Bank of America, raised his so called targets (it's worth saying that he is a perma-bull as he never saw the subprime debacle or the 2007/2008 plunge or the March 2009 bottom).

For the SPX 500, he now expects to see operating earnings of $80 a share in 2010, up from a previous estimate of $75 a share. He’s more upbeat about the next two years as well. For 2011, he estimates earnings of $89 a share (a record high, and up from just $63.18 in 2009), up from his $85 previous target. And for 2012, he sees earnings of $95 a share, up from $90…..wow I want this crystal ball he is using!

“The mounting evidence of the economy recovering is shedding more light on the S&P 500 [earnings per share] outlook,” Mr. Bianco said in a note. “As growth gains momentum, we think it’s appropriate to put less weight on the more extreme downside scenarios.”  Financials are key here. He cut his expected aggregate loan loss provisions for SPX financials from 2010 to 2012 from ($365-billion to $330-billion), due to stabilized credit card losses.

As for the SPX-500 itself, his new year-end target is 1300, up from 1275 even though he sees the 13-month-old rally taking a summer rest. While the revisions might appeal to investors looking for a reason to hold on tight for the rest of 2010, Mr. Bianco said that the most significant part of his target revision is the $3 boost to 2011 estimated earnings. “This boost reflects higher S&P 500 top-line growth with more margin expansion from lower credit costs and more operating leverage than we previously assumed,” he said.

Again, the engine of our economy is not falling in lock-step with the pundits stating that we are on the great road to recovery. as this past week we saw that small business confidence fell to an 8 month low during the month where the equity market went parabolic on anemic volume….what do they see that Wall-Street does not, and who do we believe?

Here are some stand-out comments from the SMB survey (which is 90% of the domestic economy, incidentally, despite what is professed on the various bubblevision networks)

• 1. Intention to build inventory: dropped to a -7%, well below 6 months average

• 2. Expect better economy: dropped to a -8%, now a negative reading 2 months in a row

• 3. Good time to Expand: the number came in at 2%, lowest reading in over 6 months

Maybe the combination of input prices going through the roof (I know, there is no inflation just ask the Fed-heads who live with Alice in Wonderland) and taxes are going to increase in the presence of endless binge borrowing  by states who are way-behind the preverbal-8-ball and the Federal government and bailouts for lecherous firms and others as far as the eye can see along with the Fed-heads still providing free and easy money for their bastard-primary dealers to trade with….is the firm foundation on which we are building a so called economic recovery?

But hey the recovery is blooming into a field of roses right? So let's not allow things like Alcoa missing revenue by almost 10% and the entire Small-Business-segment never actually emerging from a very nasty recession deter us from buying everything in the Russell 2000 the most giddy of the indexes!

Hardly a bullish outlook…..we saw on Tuesday that US small business owners have little confidence in the economy and are in no rush to hire or expand, despite signs the pro forma recovery is picking up.

This persistent pessimism poses a huge challenge Obama who has proposed a series of policies (most of which are as useless as tits on a bull) aimed at enticing small business the real engine of economic growth to add much needed jobs as the economy waffles. These programs will be crucial in a congressional election year when voters are more than a little upset about increased unemployment.

The data is clearly a weaker number than expected and it illustrates the continuing gap between the large firms as seen in their ISM surveys as not much change in small businesses; as the ISM showed that large firms somehow showed that manufacturing grew for the eighth consecutive month in March.The National Federation of Independent Business said its monthly index of small business optimism dropped 1.2 points in March to 86.8 and below 90 for the 18th consecutive month. This March reading is very low and headed in the wrong direction. Something isn't sitting well with small business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy. U.S. small business owners have little confidence in the economy and are in no rush to hire or expand, despite signs the recovery is picking up, a survey released on Tuesday showed. The persistent pessimism poses a challenge for President Barack Obama, who has proposed a series of policies aimed at enticing small firms to add jobs. Such policies are critical in a congressional election year when voters are upset about high unemployment.

This past week JP Morgan reaffirmed the markets bullishness as net income jumped 57% in the first quarter to $3.3 billion or $0.74 per share, which easily beat estimates of $0.64 per share and profits from the quarter a year ago of $.40 per share. Investment banking operations were easily the most impressive segment of the massive operation which also services commercial and retail banking customers. As $2.47-billion or nearly 3/4 of profits came from the investment banking side (compared to just $865 million a year ago), as fixed-income trading was especially strong in the past quarter.

JPMorgan has long been hampered by weakness in their large credit card division, but that business showed improving trends as it reported 5.62% of those loans were behind more than 30 days which is far better than the 6.28% seen just a quarter ago. They on paper pared losses in that division to only $303 million compared to $547 million a year ago and management advised that it may be profitable again by the end of the year as long as the economic rebound continues ( a huge if bet).

Still some credit trends are not as bullish as home-loans continue to have a higher rate of delinquency even among those borrowers with good credit….they noted that 64,000 modifications of mortgages took place during the quarter bringing the total over the last five quarters to over 750,000…..Despite continued headwinds in home loans, otherwise improved credit trends allowed the bank to draw down on loan loss reserves to $7 billion; a decline of 18% from a year ago and 4% sequentially (this draw down dramatically improved their bottom line).

The results for JP Morgan's last quarter were influenced by two key factors: stronger trading revenue and a reduction in provisions set aside for losses boosting other divisions. One one thing missing from their business assessment was a commitment to raise the dividend which was hacked down to nearly 87% to a paltry $0.05 per quarter last year. Traders and investors cheered the quarter's results and the stock is moved up 4.5-5.0%.

Investment banking (heavily influenced by the prop. trading desk) accounted for about $0.56 of per share profit last quarter, so any reform that threatens this income stream would pressure the bank's bottom-line.

J.P. Morgan at first blush and after all the incessant bubblevision-network hype looks as if it is going to be the first large commercial bank to escape the clutches of the credit crunch. Its earnings are benefiting from gigantic trading profits (massive profits) there also are signs that profits could soon move higher as the bank's bad-loan costs drop as they continue to mask the contagions. But how robust will their share gains be as they largely depend on how the bank's businesses…their risky business particularly their $85 trillion derivatives book; and just how will this book fare after Congress passes the new financial-overhaul legislation. I'm guessing that the fact that big banks are reporting huge pro forma earnings could persuade politicians they are strong enough to bear tough new regulations.

So, against all this, where should J.P. Morgan shares trade? Before first-quarter numbers came out, Wall Street analysts expected the bank to earn about $4.68 a share next year, putting the stock on a forward price-to-earnings ratio of 11 times, which is hardly cheap for a bank (cheap for a brokerage firm). The bank's derivatives, a large chunk of which are illiquid, make it far more vulnerable to a far-reaching overhaul than rivals. The new rules might force the bank to hold a lot more capital against derivatives it can't put through clearinghouses. And that would damp the return on equity and earnings.

We saw on Friday a pro forma report that showed unemployment rates continued to drop in March in many states, according to the Labor Department, sparking some cautious optimism that an economic recovery is dawning.   Five states saw their jobless rates decrease from the year before, and one state had no change, the Labor Department report stated in February, four states registered a year-over-year drop.

There are still lingering doubts in my mind…as what worries me is that there is still no hiring to speak of just empty promises and there are a lot of good people who are still vastly under-employed and until thi9s situation mitigates and starts to solidly reverse the economy will not come back. We have been hearing for over 9 years now that we are embroiled in a jobless recovery (and its getting worse), the longer people are out of work the more they will start cutting back on anything that is not a staple of life and then they will be very slow to reverse this state.

Worries about the many regulatory uncertainties on our national agenda as well, and until they know where the regulations are going to fall in place on health care, free trade, clean energy, mortgage relief, unemployment benefits…all of that is so up in the air, it freezes people and prevents them from making employment and of course investment decisions. Tight credit (and its getting tighter) poses a large obstacle to a sustained recovery and has caused many firms to postpone or cancel expansion plans and projects, as 75% of CFO's at small and midsize businesses report that credit conditions are worse or much worse compared with the summer of 2008, prior to the collapse of Lehman. Even among firms with more than $10 billion in revenue, 40% say borrowing is more difficult now. Analyzing firms by credit rating reveals that while 87% of firms rated B or lower are finding borrowing more difficult than they did before the crisis, 50% of the highest-rated companies are, too.

Nearly half of CFOs are planning to reduce their inventory during the first half of 2010, in part due to supply-chain improvements that allow them to hold less product, but also because of reduced demand (this is hardly bullish).

While our pro forma economy appears to have hit bottom and begun to improve, albeit at a very anemic pace, Europe's CFOs continue to face some very serious challenges. As the region struggles with Greece's debt crisis, and that of the other PIGS European firms will continue to increase layoffs over the next 12 months, according to finance chiefs, although at a slower rate. Earnings will grow slightly, but firms are not yet ready to spend.

As long as lenders are unwilling to extend credit, the jobs that were lost will not return. Unless the normal flow of credit can be restored to small business, the recovery will proceed at an anemic pace at best. Capital is the oxygen that a small business needs to survive and thrive. But across the country, the air's pretty thin to toxic as business owners from coast to coast complain regularly of massive hurdles to getting badly needed loans (the banks continue to take money and trade with it instead of lend it). Lending across the U.S. economy contracted 9.4% last year, the biggest such drop since 1942, according to the FDIC hat means $1.5 trillion in lending evaporated last year, according to the Treasury Department's estimates.

Corporations are issuing bonds again (using inflated share prices to do secondary's) and too big to fail and very large firms have access to bank loans, but it's still a huge battle for small employer 25-250 employees. `There's a massive gap in access to credit for small firms now, and it's a huge contagion.  I have a sense that the banks have no desire to lend, going forward; they make more money trading.

This is a huge contagion as small businesses account for 66-69% of employment, so it's a serious matter that the credit is crunch squeezing these firms. If we're ever going to come out of this recession and get people back work, it's going to be because we gave small businesses the support that they need…and so far this is not happening

We saw a bearish economic release this past week, albeit a lagging report, as U.S. consumer credit unexpectedly tumbled in February, reversing January's surprise increase, as American households refrained from taking on new debt in favor of some additional much needed deleveraging. February's total consumer credit outstanding dropped $11.51 billion or at a 5.62% annual rate to $2.45 trillion, according to the Federal Reserve. Meanwhile January's figures were sharply revised upward to show a whopping $10.64 billion increase from the previously reported data of an increase of $4.96 billion. As analysts had forecast consumer credit would rise by $0.5 billion not drop, in February…so called analysts being pranced about on the various bubble vision networks were shouting that despite the data showing that household’s continued reduction of their debt would unlikely have an negative impact on consumer spending, which normally accounts for 70% of U.S. economic activity (wow what a strange inference).  This data in my opinion clearly points to a lack of confidence on the part of consumers and their caution may well mean this recovery is more than just a fragile one.

So since Consumer borrowing fell again in February, ee saw no extension of January’s positive number, when borrowing rose by $10.6 billion, a gain that had broken a record 11 consecutive declines. The economy and final demand is still almost entirely being driven by government spending. As long as we continue to see that governments (especially ours) around the globe keeps spending like drunken sailors, it will keep the markets afloat for the time being; but, in the end, this manipulated (stealth under the radar) scheme is going to end very badly. I think aside for a double dip in housing the next mega crisis is forming worldwide at the government level. Whether these lamebrain government officials and their various central-banks (who are beholden in reality to no government) stop spending, or try to print their way out of the mess, remains to be seen; and I’m betting on the latter alternative is the most probable (why I’m a silver/gold bull).

As I had previously forecasted The U.S. dollar has been embroiled in a very decent relief rally these past weeks/months as it has been enjoying a respite from its declining trend over the past several years, as evident on the dollar index charts below, it bounced from the 74.24 level as I had forecasted it would.  I'm expecting another bullish run in the near-term....back up to $83.75-84.00 before the next leg down starts...if they break out the greenback out above $84.50 its clear sailing to $87.70

After forming a near perfect falling wedge pattern pattern, which is a TYPICAL reversal pattern...A primary reason why we undertook a contrarian long play at the $74.00-$74.50+/- level....just over 8+/-weeks ago I recommended buying that support at the climax of the weekly falling wedge-pattern.  As I stated then we were ripe  for a correction (I also recommended Shorting Gold and the metal-stocks especially (gold stocks, copper and other commodities); remember strength in the greenback depicts weakness in commodities, if demand holds steady      The Dollar index has breeched (moved above) the important $79.15 level **which is now near-term support** we could retested 79.51 level this week....but the momentum seemed to return later this past week and as such we could see a run to 81.95-82.55.

Far to many folks are of the belief that the dollar rally is over, I disagree as I believe this summer there’s a good chance that the greenback rallies further another leg up…but a minor retracement is in order.

I’m sure the threat to the consumer has not fully abated because of all the foreclosures looming and additional job losses at the state and municipal levels (and of course the later abatement of the census workers), there are still hundreds of thousands of loans still out there in the system that were originated during the sub-prime slime years and the ARM-years that will start to reset higher, back then the greenback (2003-2005) was trading in the 90’s to high 80’s…..in my opinion its going to be a very nasty challenge for these people to pay back those loans with dollars earned with a dollar trading above $88.00 as the threat of a really strong greenback pushing the economy into a deflationary depression lessens the deeper we get into what I believe will be a massive and damaging ATM reset contagion and nasty foreclosure wave simply because those easy dollar loans get washed out of the system. **(We can see just by the reaction this past Tuesday as the FED stayed pat that a lower Dollar still drives stocks higher despite weakening fundamentals).