There was another avalanche of dire news this morning, especially from Citigroup, but today was all about oil.  With oil dropping $4.75-barrel, the stock market was able to ignore the latest round of bad information (bearish news seems to be in a trend, doesn't it?) and finish up across the board.  The market cheered the news from China , but I say: Be careful what you wish for!

Portfolio managers across the country hit the buy button often when it was known that China was increasing fuel costs by 18% to due its part in decreasing demand for oil.  Up to now, China had been subsidizing oil for all of its citizens, which had produced a much greater demand than would otherwise be there.  This news knocked oil back by $4.75-barrel which is good news indeed, but did you think of anything else when you read that headline?  I did.

I immediately thought that these citizens will demand, and receive, a raise to cover this instant cost of living increase.  This will surely be added on to the cost of each widget that is manufactured in China , which will then be shipped to the USA by the ton.  That's right folks; this so-called great news just means the US will be importing another 18% inflation spike from China very soon. 

But wait, there's more!  Will lower oil fix the banking system?  No.  Will lower oil fix the housing market?  No.  Will lower oil affect oil stocks?  You betcha!  An oil correction of $20 or even $40 dollars a barrel won't affect much in terms of gasoline prices and overall inflation, but it sure will affect what is perhaps the last leg holding up the folding chair known as the US equity market: it could fold quick-like.  The last remaining play, or story, that has any traction is that of buying energy stocks and commodity stocks.  If these fold, you too will be thinking  Be careful what you wish for!

But wait, there's more!  I listed a bunch of other news below, all coming out today.

6/19 Citigroup's Crittenden Sees More Subprime Writedowns Bloomberg

6/19 Fall-out from bad loans rock regional banks  New York Times

6/19 Circuit City posts loss, suspends dividend  Reuters

6/19 Gold futures rise as dollar trades mixed  MarketWatch

6/19 It's a nightmare across the board in Florida  Housing Bubble

6/19 Triad will stop issuing mortgages as talks collapse  Bloomberg

6/19 Inflation: Prepare for the worst  Times Online

6/19 China stocks falls 6% today, off 55% from high  Bloomberg

6/19 Oil output shuttered in Nigeria - CNBC

6/19 Fed governor says home loan losses will substantially increase  CNBC

6/19 Toll Brothers CEO says housing 33% worse than gov't reports - CNBC

Until today, Citigroup apparently didn't think it was necessary to tell anyone the truth about its business.  That said, I don't believe this is the whole truth.  Now do you understand why I call investors in these firms suckers?  Citigroup's CFO Gary Crittenden said this morning that the bank faces continuing credit problems in the second quarter, with credit costs rising, provisions for bad consumer loans growing and substantial write-downs for subprime assets likely.

Stop me if you've heard this one before: The credit crisis is over.  AAAhahahahahaaaaaa!  Yeah right.

But wait, there's more!  Guess who else doesn't believe that claptrap?  None other than John Paulson, the man who made his clients about $30-billion shorting the subprime slime from the likes of Citigroup.  I might believe him over the obfuscating lowlifes at the major banks.  Anyhow, Mr. Paulson said global write downs and losses from the credit crisis may reach $1.3-TRILLION, exceeding even the International Monetary Fund's $945 billion estimate.

We're only about a third of the way through the write-down's, said Paulson at the GAIM International hedge fund conference in Monaco yesterday.  There are a lot of problems out there and it will continue to be felt through the year. We don't see any signs of stabilizing.

The U.S. is heading into a recession as falling home prices weigh on consumer spending, Paulson said.  The second half of this year will be worse than the first as the economic slowdown spills into 2009.  Signs of stress are accelerating in the housing market, and he's betting on falling securities prices, he said.

When asked by someone in the crowd why he was such a curmudgeon he said, I don't consider myself a bull or a bear. I'm a realist.

So you have a choice; you can believe a very successful hedge fund manager who has already profited handsomely from what the bankers apparently didn't see, or you can keep on believing the trained circus-monkeys (analysts & CEOs) at these same banks that didn't see a crisis coming in the first place.  How is it that they didn't see the crisis coming, yet now they can see everything perfectly ' the problems are behind us, they say to wit I politely reply, whatever!

Today's Trading Tip:

"Once You Get Into A Winning Rhythm, Keep It Going As Long As You Can!!!"

Click Here to Learn more about how I can help you improve your trading...