STOCKS RESUME DOWNWARD SPIRAL AS EXPERTS IGNORE HOUSING CRISIS

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EDITOR’S NOTE: We have all seen this before. As the bad guys start getting hurt they double down on their illegal practices and even get worse. The banks continue and even escalate their ruthless tactics of banks in foreclosing on properties in which they have no interest, evicting homeowners who were defrauded in the first instance by the securitization structure in which people were able to lie about home values, terms of loan and other material facts.

The fact remains that the market is ruthless in its own right and eventually everything comes out in the wash. We either face the truth and correct the problem now or we kick the can down the road and face a larger problem later. I’m not ordinarily given to predicting market moves. I varied from that in 2007 when I predicted the market lows would go to between 5,000-6,000 in the Dow Jones average.I was ridiculed but still right. Now I am saying that I can’t see a higher  “bottom” than between 7,000-8,000.

So here it is again. I didn’t make it up — just look at the last 100 years of what economists use as their main benchmark for the economy: HOUSING. If the foreclosures were real, it would be bad. But they are not real and the allowance and permission of government to continue with the foreclosures is eating away at the fabric of our society, our economy, our status in the world economy, and our prospects.

All of this is happening to keep the mega banks alive when in fact they are already dead — it’s just that everyone is afraid to say so. I’m not afraid. The banks are dead. The megabanks are carrying assets on their balance sheet that are pure fiction and they mostly relate to mortgage “assets” that don’t exist. These banks should be resolved and the housing market will rebound along with the rest of the economy as consumers start to get their fair share of restitution from this crisis.

We have a choice: save the banks or save ourselves. Since the banks created this mess on purpose, it is an easy choice for me. Save the country, save the people and to hell with the megabanks. With 7,000 more community, regional and other banks plus credit unions around in our country, there is no reason why we can’t resolve the megabanks and continue business as usual. Our credit rating will zoom back to the top as soon as the world sees we are serious about justice and truth.

If you want to see your 401K improve then you need to be concerned about housing.

By Jonathan Cheng, Wall Street Journal

Stocks tumbled amid growing fears of a global recession, as investors confronted a grim mix of U.S. economic data and fresh concerns about Europe’s banks.

The Dow Jones Industrial Average fell 435 points, or 3.8%, to 10974. The Standard & Poor’s 500-stock index dropped 53 points, or 4.5%, to 1141, while the Nasdaq Composite lost 124 points, or 4.9%, to 2387.

In the flight to safety, investors piled into gold, which jumped to a new record above $1,820 a troy ounce. In the Treasurys market, the yield on the benchmark 10-year note briefly dipped below 2% in intraday trading for the first time since at least 1954, as investors sought refuge in U.S. debt.

“If it’s not a recession, it sure feels like one. And if it feels like one, it doesn’t matter if you can prove it with statistics or not,” said John Hailer, president and CEO of Natixis Global Asset Management in the U.S. and Asia. “We have some real tough problems in front of us, and we really need some leadership in corporate America and Washington…. There’s a lot of nervousness in the market.”

The heaviest selling came in energy and materials stocks. Among Dow components, United Technologies fell 5.3%, Alcoa lost 5.8%, and Caterpillar tumbled 4.5%. Among big oil firms, Chevron lost 4.8%, and Exxon Mobil was off 4.4%.

Bank stocks were also under significant pressure. Bank of America was the biggest decliner among the Dow components, tumbling 6.2%, while J.P. Morgan Chase lost 4.5%.

Hewlett-Packard, one of the biggest stock laggards on the day, briefly reversed its morning slump after reports that the world’s biggest computer maker will spin off its personal-computer business and is close to a $10 billion deal to acquire U.K. software firm Autonomy. H-P, which reports quarterly earnings after the closing bell, was down 3.9% in recent trading.

All 10 sectors of the S&P 500 were lower, with all but three of the 500 stocks falling. The CBOE Market Volatility Index, the “fear gauge” known as the VIX, surged 35%. The Dow hit an intraday low just after 10 a.m. Eastern time, falling 529 points.

Relatively stronger were safe-haven stock sectors, with utilities, consumer-staples, telecommunications and health-care stocks the best performers of the day.

Sandy Villere, portfolio manager of the Villere Balanced Fund in New Orleans, says he’s worried that the economy doesn’t have a lot of help on the way. “I don’t see much help from Washington,” he said. “If the wheels come off, there’s always more quantitative easing, but you don’t want to see that unless things continue to erode.”

Mr. Villere said investors were eyeing the low Treasury yield and buying the relative safety of utilities and telecommunications stocks, which pay strong dividends.

The U.S. declines came after sharp losses in European and Asian markets. The Stoxx Europe 600 slumped 4.8% in afternoon trade, and Germany’s DAX index plunged 5.8%. Asian bourses also fell; Japan’s Nikkei Stock Index ended down 1.3%, to a five-month low, while China’s Shanghai Composite declined 1.6%.

European banks led the declines, in part after The Wall Street Journal reported that U.S. federal and state regulators were intensifying their scrutiny of the U.S. arms of Europe’s biggest banks, worrying about spillover from Europe’s debt crisis into the U.S. banking system. Societe Generale fell 12% in Paris, Intesa Sanpaolo dropped 9.3% in Milan, and Barclays was off 11% in London.

Others pointed to Morgan Stanley, which late Wednesday cut its 2011 euro-area gross-domestic-product growth forecast to 1.7% from 2%, and its 2012 GDP growth forecast to 0.5%, from a previous estimate of 1.2%.

Adding to the gloom were discouraging economic reports that showed rising inflation and little traction on hiring. A reading of Philadelphia-area manufacturing plunged to negative-30.7 from 3.2 in July, the lowest reading in two years. Economists had been expecting a gain. Existing-home sales also tumbled 3.5% in July, defying hopes for a gain.

“If we had a strong economy, we could probably shrug off some of these Europe concerns, but the numbers are just showing complete stagnation — we’ve leveled off, and there doesn’t seem to be continual improvement,” said Randy Frederick, director of trading and derivatives for Charles Schwab. “As long as these problems continue to rumble around, whenever there are headlines suggesting more severity or even just bringing it back to top of mind, that’s negative for markets.”

Following a week that saw European stocks rally on the heels of short-selling bans on the continent, investors took a more cautious view after German and French leaders failed earlier this week to come up with concrete proposals to more meaningfully address sovereign-debt problems.

Thursday’s stock declines puts the major indexes into the red for the week, a day after the Dow had battled to a stalemate on Wednesday, edging up four points. The Dow is now off about 9.6% for the month.

Gold futures benefited from safe-haven flows amid the uncertainty, while crude-oil futures tumbled amid the economic concerns, to about $82 a barrel. The euro slumped against the dollar, which slipped against the yen.

On the economic front, new jobless claims rose above 400,000 last week, the latest sign of a persistently weak U.S. labor market. Initial jobless claims rose by 9,000, to a seasonally adjusted 408,000, in the week ended Aug. 13.

Meanwhile, consumer inflation resumed its climb in July, as gasoline prices rebounded and food costs continued to rise. Consumer prices rose 0.5% from June, the largest monthly increase since March. Underlying inflation, which excludes volatile energy and food costs, rose by a monthly 0.2% in July, in line with expectations. On an annualized basis, consumer prices were up by 3.6% in July, above the Federal Reserve’s target.

Mid-Atlantic manufacturing activity, meanwhile, contracted at a sharp pace in August, and expectations plummeted. The Philadelphia Fed said its index of general business activity within the factory sector fell to -30.7 this month, from 3.2 in July and -7.7 in June. Economists had expected a reading of 1.5 in August.

In corporate news, NetApp plunged 17% to lead the S&P 500 decliners after fiscal first-quarter profit fell short of forecasts.

JDS Uniphase shed 12% after issuing a lower-than-expected outlook for revenues.

Sears Holdings fell 6.5% after the retailer’s fiscal second-quarter loss widened amid added markdowns to clear seasonal inventory, which hurt sales and margins.

Ross Stores dropped 1% after the discount retailer projected per-share earnings below analysts’ estimates and spoke cautiously about the second half of the year, citing uncertainty about how consumers will be affected by stock-market volatility and increased economic uncertainty.

Food company J.M. Smucker fell 6.6% after fiscal first-quarter earnings rose 8.4% but revenues fell short of analyst expectations.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND
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