CHESSNOID

Today was just a response to the fading confidence of the Fed’s indecision to raise rates. They brought interest rates down to where it is and fanned the flames of inflation and now we are getting hammered.

http://www.reuters.com/article/businessNews/idUSWNA730720080626

I also think the banks are still hiding losses and they will still continue to spoon feed the bad news. The only thing is it is getting harder for them to hide it. I have always liked Citigroup and think they can still come back but they along with many of the other banks have to come clean.

The analyst said Citigroup might take $8.9 billion of write-downs for the April-to-June period, leading to its third straight quarterly loss. He also said the bank might need to cut its quarterly dividend for a second time this year, after lowering it 41 percent to 32 cents per share in January.

Tanona’s forecast suggests deeper problems for Citigroup Chief Executive Vikram Pandit, who is trying to turn the bank around after nearly $15 billion of losses in the last two quarters, and more than $46 billion of credit losses and write-downs since the middle of 2007.

“We see multiple headwinds for Citigroup including additional write-downs, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales,” the analyst wrote.

http://money.cnn.com/2008/06/26/news/economy/stock_selloff.fortune/index.htm?postversion=2008062617

The whole economy is now going into full recession mode. Gas is at almost $5 where I live and now that crude has touched $140 a barrel, you know it will continue to build a base at the mark this summer. The federal reserve is to blame for its actions and of course the consumer gets hammered at the pumps and at the grocery stores.

The Dow Jones Industrial Average plunged 3% to a 21-month low on Thursday, a day after the Fed held its key interest rate target steady for the first time following nine months of aggressive rate cuts and loans to financial firms. The central bank said it is concerned about rising inflation but is also watching for signs that tepid economic growth will slow further.

The economy is struggling to muddle through a period dominated by two powerful negative forces. The Fed has cut rates by 3.25 percentage points over the past year in an attempt to shore up a weak, undercapitalized banking system swimming in bad loans tied to the housing bubble, and to cushion the loss of consumer spending power tied to falling house prices. But at the same time, consumers and businesses have been laboring under an increasing burden of surging food and fuel prices.

The problem now, from the point of view of Fed chief Ben Bernanke, is that trying to tackle either problem risks exacerbating the other. So the Fed is probably on the sidelines for the balance of the year – which means investors can look forward to more ugly selloffs like Thursday’s, which left the Dow down 20% from last fall’s all-time high.

“The resilience of the U.S. economy has been remarkable over the past 12 months as the credit crisis spread beyond the subprime mortgage market and oil prices soared,” economist Ed Yardeni wrote earlier this week in his daily newsletter. “Unfortunately, there may not be much more that the Fed can do to stimulate economic growth should the resilience of the economy continue to be tested by the credit crisis and oil prices.”

The stock market will probably bounce back up tomorrow with bargain hunters. I sold all my ETF holdings this morning in my UpDown account. I was considering buying the opposite ETFs that were hammered at the end of the day, but I wasn’t able to get on a computer to do it. That would be an easy bounce tomorrow to make some quick gains.

As far as my real accounts, I am 100% cash and own no stocks of any sorts. I am getting ready to jump back in it soon probably in the next 4-8 months. I did miss the run up this year when the market recovered but I also missed the big downturns that have brought us back to these low numbers.