Last Thursday was unusual in that there were no emergency moves by the U.S. government, which to some was the best news we’ve had in a week.

It gets pretty tiring to repeatedly hear the barking about the constant attempts to stem the fall of the market, none of which have worked so far and none if them will work in the future.

Mish at Global Economics put it best recently, when he elaborated on the crisis:

The world is heading for a global recession and a sure bet is that it will be blamed on a subprime crisis in the US. The reality is the greatest liquidity experiment in history is now crashing to earth.The root cause of this crisis is fractional reserve lending, and micromanagement of interest rates by the Fed in particular and Central Banks in general. The Fed started the party by slashing interest rates to 1%, but Central Banks everywhere drank the same punch to varying degrees.

The Greenspan Fed lowering interest rates to 1% fueled the initial boom, but like an addict on heroin, the same dose a second time will not have the same effect. The Fed, the ECB, etc. could have slashed rates to 0% today and it would not have mattered one bit. The reason is simple: There is no reason for banks to go on a lending spree with consumers tossing in the towel, unemployment rising, and rampant overcapacity everywhere one looks with the exception of the energy sector.

Consumers are tapped out, not just in the US, but in nearly every country on the planet. We had our party, and a fine party it was. However, the party is over and the bill is now past due. The price is a global recession. That price must be paid no matter what Central Banks do.

Despite this tremendous market drop, which has annihilated many portfolios, there is bound to be some rebound on the horizon. Chances are that it will be a dead cat bounce, so I would not count on that being the reversal leading to a long-term recovery.

I have said before that this bear market has the potential to make the 2000 – 2002 period look like a walk in the park and so far, unfortunately, it already has exceeded the severity of that period.

Staying on the sidelines until a clear uptrend can be identified is the wisest course of action.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

Another week in which buy-and-hope portfolios got slaughtered.

Our Trend Tracking Index (TTI) for domestic funds/ETFs remains below its trend line (red) by -16.98% thereby confirming the current bear market trend.



The international index now remains -25.71% below its own trend line, keeping us on the sidelines.

For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.

Despite a concerted effort of the central banks around the world to lower interest rates on Wednesday, the markets popped and then dropped with Dow losing 189 points. The current losing streak has now been 6 days, and some of the major indexes are having their worst percentage loss this century.

Here’s what the Fed said:

Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months,” the Fed said in a statement. “Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.”

No kidding; what took so long to figure that one out?

Here’s another worthy quote by a British research firm:

The action “suggests that the authorities are now fully awake to the scale of the financial crisis in the markets,” said Douglas McWilliams, chief executive of the London-based Center for Economics and Business Research.

[emphasis added]

I sure hope that all authorities are now fully aware of the depth of the crisis, which many of us have been reading and posting about on the internet since last year. However, being aware and being able to do something about it are two entirely different things.

In my view, no concerted effort will stop the trend that is currently in place. It has to play itself out and, eventually, we will see a rebound of some sort. At first, most likely, it will be a dead cat bounce, which eventually could turn into a new major uptrend.

I don’t think we’re even close, and my Trend Tracking Indexes (TTIs) confirm the severity of the current bear market. The domestic TTI has dropped an amazing -13.13% below its long-term trend line while the international TTI sits -22.97% below its dividing line between bullish and bearish territory.

Cash is King!

Another drubbing yesterday pushed the major indexes down to their lowest levels in some 5 years. The speed with which the markets have fallen surprised many and in the process destroyed just about all Buy-and Hold portfolios.

As I have repeatedly said, investors need to lose some serious money before they will awaken to the fact that they have been sold a bill of goods via the idiotic advice of buying and holding a portfolio into oblivion. I know, because I had my share of calls and emails from furious investors, who had their accounts with major money management firms, only to see them lose some 40% so far this year.

I have been saying the same thing over and over again that this bear market has the potential to make the last one (from 2000 to 2002) look like a pimple on a gnat’s butt. As always, most investors don’t see the light until it’s too late and major portfolio damage has occurred. If you still have any money invested, head for the sidelines, regroup and review your investment approach as well as the guidance and advice you have received.

Right now, the markets seem to simply ignore the Fed’s latest steps to intervene as another useless attempt to stem the tide. The bear is in charge right now—so don’t get in the way of the downtrend. Why? Because you don’t have enough money and time to outlast this one and then try to attempt to make it back. Being a broke hero, is simply not worth it.

Yesterday, the markets tanked big time with the Dow being down some 800 points at one time before recovering. Even crude oil sinking below $90/barrel couldn’t offset the downdraft.

This confirms my suspicion that no one entity or government is powerful enough to stem the global credit crisis, which was based on a built-up process of leveraging and accumulation of tremendous debt, which now has started to unravel and affected all corners of the world.

Since an anticipated market rebound after the acceptance of the $700 billion bailout plan has not materialized yet, you could argue that many have come to realize that the plan may have no impact at all. While the jury is still out, apparently the world community is not buying it either, hence the lack of confidence and continuation of the sell off. So, once we all realize that the bailout plan is not working, why don’t we just cancel it and not waste the money? (humor attempt).

It’s no surprise that our Trend Tracking Indexes (TTIs) slipped deeper into bear market territory and are positioned as follows:

Domestic TTI: -9.81%
International TTI: -19.00%

Right now, doing nothing and watching this debacle from the sidelines is the way to go.

While nobody could have predicted the extent of the fallout of the credit crisis, the handwriting was on the wall that trouble was brewing the moment the Subprime crisis made news. It’s interesting that those who read economic and investment blogs seem to be better informed than the leadership. Take a look at this video: