Teetering on the Brink

Even though the Dow has shed 2000 plus points in three months, tomorrow appears to be a day of reckoning. For the early part of the year the stock market inexplicably went up continuously despite some pretty ominous signs is the economy. The housing market has been terrible for almost 2 years and has become much worse of late. In California alone, there have been 400,000 foreclosures with estimates of another 200,000 on the horizon.

Banks are writing off billions and are being sued for billions more. Cleveland is suing a number of banks for irresponsible loan practices that have resulted in foreclosures and a rapid decline of property values and eroding the tax base.

Retail sales which have long propped up the economy are falling off a cliff. When a company like Target has negative 5 comps for December, that is a very ominous sign.

Anticipating tomorrow's market is like anticipating the post 9/11 drop. We knew it would be bad, it is just a matter of how bad. A 600 point drop may look like a conservative estimate with all the international declines this week already.

With the fed dropping rates to solve the housing crisis when they should be increasing rates to ward off the recession, it is certainly making this more complex.
The question really is, where from here. How deep is this recession going to be?

Can the government afford a stimulus package when we are spending $2 trillion in Iraq?

All signs are ominous beyond what the market does tomorrow, this week, or this year. Although a big hit tomorrow could be a big blow to the already fragile psyche
of the American consumer.