John Mugarian's Dynamic Growth

Oil prices are dropping as anticipated. The call we made on oil in June is playing out exactly as planned. How did we know oil prices were going to fall? We have a faith in a political system that panders to big oil, and that "magical" things happen prior to an election.

I have to admit, I am saddened by the Presidential choices in 2008. I know the media has worked overtime getting us to believe that we have quality choices. I really don't agree. Corporate interests own the media, and have run government for many years. I don't think that will ever change.

Our job is trying to figure out what will happen next. We were right about our call on higher oil prices in 2004, consumer debt in 2005, the real estate bubble in 2006, and the temporary (??) top in oil in June 2008.

Oil is a tricky call since there are many factors influencing the price. Right now, the dollar is gaining ground, commodity and precious metals are selling off, but I am beginning to think this is a cyclical correction that will lead to a better buying opportunity in the coming months.

If one believes the stock market and the economy operates without the influences on our politicians by corporate America, they are being naive. Magicians use various apparatuses to create their illusions. So does corporate America with their various media outlets. We are not as interested in what the media is saying as much as what they are not. This is a very important ingredient of successful investing.

So, this being said, we will continue to operate under the theme of the great Paul Harvey, and use his line;

"You know what the news is-- in a minute, you're going to hear the rest of the story"

Here are our Top 10 ETF's for the week of September 2nd:

1) DBA: Powershares DB Agriculture Fund- .284
2) EWZ: Brazil Index- .279
3) SLX: Market Vectors Steel Index Fund- .260
4) FXF: Currency Shares Swiss Franc Trust- .198
5) EEB: Claymore ETF BNY BRIC- .177
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- Not Rated
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated

At first glace, it looks as if the commodity and BRIC nation trades have dissipated. For the meantime they have. But, the highest ranked ETF's in our universe remain T-Bills, short term bonds, crude oil which are falling in strength too. Our current position in DDM, DUG, KBE, and the IYF balance out the weakness of our commodity and BRIC holdings. Once the election year magic ends, we will be selling DDM and DUG, and adding more commodity and oil related positions.

Here are our Top 10 Fidelity Sector Funds for September 2008

1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance

NEW BUYS:

None

NEW SELLS:

None

Honorable Mention (Holds):

None

The Week in Review:

The media continues to tell us that the month of September is the worst month of the year for the stock market. With oil prices dropping like a rock, I wouldn't be real quick to buy into that opinion. If you take into consideration that lower energy prices are good news for the consumer, one can extrapolate this information into higher retail sales, and a consumer who is in better position to pay down debt. This is good news for the financials who hold mortgages, lines of credit, car loans, and credit cards.

In addition, as foreign economies continue to weaken, the ECB may begin lowering interest rates just as the US begins raising rates. This is good news for the dollar, and will create added pressure on energy prices.

As energy prices decline (our target is $85-90/bbl), oil and natural gas stocks will become more attractive. I believe that the valuations in the energy sector will become even more attractive in the coming weeks. As such, we believe a significant buying opportunity will present themselves in energy as well as precious metals.

The S&P 500 has dropped 22% from the October 2007 peak to the lows reached in mid-July. We are not convinced that these are the final lows since Real Estate faces increasing headwinds if the Fed does in fact begin hiking interest rates in 2009.

What we are faced with right now is a trading opportunity. A potential rally could drive the DJIA beyond its first level of resistance at 12,000-12,250, to the top of its downtrend channel at 12,600-12,700. This should set the stage for a good selling opportunity.

Average earnings heading into the final week of the 2nd quarter were down -39%. While things may improve into the end of the year, a reverse in the drop of oil in late 2008 and early 2009 could put an end to the optimism that a new bull is underway.

On the economic front, keep in mind that governmental agencies have an interest in painting a more rosy economic picture heading into an election. This positive spin will be followed by rosy projections on the news channels, but we will be keeping a close eye on the little guy for confirmation

Last week, the National Association of Realtors reported that existing home sales jumped 3.1% in July. This is all well and good but Case-Shiller said that "not one market is showing a positive return over the past 12 months and seven of the metro areas are reporting declines in excess of 20%."

In the subprime market, the ABX subprime mortgage index composite of 18 subprime bonds showed the bonds are now valued at 32 cents on the dollar, while the lowest rated bonds at 5 cents.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

The jobs data this morning contributed to a weak opening in the stock market. US weekly jobless claims rose 15,000 to 444,000, the most in 4 years. Neither political party (based on their orchestrated conventions) is taking the blame for the millions of jobs lost in the US.

Since 2000, the US has become a service economy while the manufacturing base has been shipped overseas. This process accelerated after Bill Clinton, and a democratic congress passed NAFTA. It was put into overdrive when the Bush administration and a republican congress took over. This just goes to show you that someone other than the voters are calling the shots. Regardless of who is elected in November, there is always someone behind the curtain telling these politicians what to do.

I just shook my head in disgust after hearing the democrats and republicans talk about energy independence. In addition, both parties supported outsourcing, and now they are saying they create more jobs here in the US.

Energy problems resurface every 10 years or so, but the bottom-line is nothing is ever done to fix the problem. If you have followed the markets as long as I have, you start using the old Yogi Berra quote; "This is like deja vu all over again."

Here are some past Time Magazine covers that illustrate my point. I think you'll see that today's scare tactics on oil are the same ones they have used on us in the past. The difference of course is people have short memories.

"THE BIG CAR: End of the Affair" Dec 31, 1973

"The Oil Game" May 7, 1979

"The Energy Mess" July 2, 1979

"War in the Gulf" Oct 6, 1980

"Good News Cheap Oil" Apr 14, 1986

"The Oil Squeeze" Nov 19, 1973

Energy Crunch: Real or Phony? January 21, 1974

"The World Over a Barrel" July 9, 1979

Let's Skip ahead to conflicts over Iran and the Middle East. That's old news too...

"War in the Middle East" Oct 15, 1973

"Iran in Turmoil" Sept 18, 1978

"Israel's Blitz" June 21, 1982

"Iran on the March" July 26, 1982

"Iran vs The World" Aug 17, 1987

What about the problems in our banking system? You would think they would have learned their lesson in 1984, but they didn't. Check this out...

"America's Banks-Awash In Troubles" Dec 3, 1984

You might have assumed that terrorism surfaced during 9-11. Its been around a long time.

July 1, 1985

How about selling our assets to foreigners? Nothing new again.

How about the news of insurance companies canceling your coverage after a claim? Again, old news...

"Sorry America, Your Insurance Has Been Canceled" March 24, 1986

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

NEW SELL TODAY:

We are selling the (DUG) Ultrashort Oil & Gas Proshares immediately at a price of $41.30, a gain of 48.2%

Is the DJIA headed toward the 10,000 level? If most technical analysts are correct, then yes we are.

Market technicians are in agreement that the stock market entered a multi-year period of range bound price action. After violating a major uptrend in 2001 the major market indexes have entered into a multi-year trading range. If this trend continues, investors that dollar cost average in during periods of weakness, and take profits during periods of strength can be amply rewarded.

While the DJIA went on to make new all time highs in 2007, the SPX barely reached new heights, and the NASDAQ remained well below its March 200 peak.

Investors willing to play the multi-year trading range must be prepared to enter the market on declines of 10%,15%, 20%, or more in hopes that the markets will once again trade back to their cyclical highs.

Buy and hold investors, and those reluctant to pay taxes on gains, will be very frustrated with this type of market. But, given the hand we were dealt, this may be your only choice to outperform paltry fixed income returns.

Today, money continues to be sucked out of commodities and oil stocks, and is being redistributed into the financials (banks) and consumer discretionary sectors.

Our favorite oil short, the (DUG) Ultrashort Oil & Gas Proshares, is trading at $41.20, up 47.9% since our purchase at $27.85 in May. For those of you who wish to take some profits, today would be a good day to do so.

We continue to believe crude oil could trade down to the $85-$90/ bbl mark before the sell-off subsides. I don't know if that will actually happen, so we are taking the following action immediately;

In the Dynamic Growth ETF portfolio, we are selling the (DUG) Ultrashort Oil & Gas Proshares immediately at a price of $41.30. Keep the proceeds in cash at this time.

Do you remember the famous Disney animated feature "The Rescuers"? Well, they're back, but this time in real life.

The Disney movie "The Rescuers" is about a society of mice, called the Rescue Aid Society, headquartered in New York and shadowing the United Nations, who go about doing good deeds in the world.

It looks as if the society of mice are a real society after all.

On Sunday, the U.S. government announced it was taking over Fannie Mae and Freddie Mac. Debated will rage on about the timing of the rescue, but it was inevitable wasn't it? I've been saying it since the beginning of the year, potential solutions to the current crisis were aggressively being worked on. This is why I came up with the slogan;

"Throughout our history, the track record is clear. Solutions to major problems always appear".

Clearly, politicians are in a panic to stop the current economic decline before the November elections, so we knew the Calvary would be called in the help save the day.

By all means the credit crisis and real estate problems still need some work. But cures to shore up the Structured Investment Vehicle (SIV- or is it-Self-Inflicted Violence?) issue is aggressively being worked on. Sure, taxpayers will foot the bill, but don't they always?

Here are our Top 10 ETF's for the week of September 8th:

1) DBA: Powershares DB Agriculture Fund- .216
2) EWZ: Brazil Index- .203
3) SLX: Market Vectors Steel Index Fund- .165
4) FXF: Currency Shares Swiss Franc Trust- .110
5) EEB: Claymore ETF BNY BRIC- .135
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) KBE: KBW Bank ETF- Not Rated
8) IYF: iShares Dow Jones US Financial Sector- Not Rated
9) PGJ: PS Golden Dragon China Fund- Not Rated
10)

NEW SELL:

We sold out our (DUG) Ultrashort Oil & Gas Proshares position on Friday at a price of $41.30, for a gain of 48.2%. Let's keep the proceeds in cash for the time being.

At first glace, it looks as if the commodity and BRIC nation trades have dissipated. For the meantime they have. But, the highest ranked ETF's in our universe remain T-Bills, short term bonds, crude oil which are falling in strength too. Our current position in DDM, KBE, and the IYF balance out the weakness of our commodity and BRIC holdings. Once we get closer to the election, and the magic ends, we will be adding more commodity and oil related positions.

Here are our Top 10 Fidelity Sector Funds for September 2008

1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance

NEW BUYS:

None

NEW SELLS:

None

Honorable Mention (Holds):

None

The Week in Review:

September got off to a rough start as stocks got pounded on Thursday. Former Morgan Stanley perma-bear, Barton Biggs, turned bullish saying he believed stocks were "pretty close to a bottom."

Wall Street's bearish tone was set by the disappointing employment numbers. The August payrolls report showed a declined 84,000 jobs, but the 58,000 net downward revision of the prior two months put a damper on investor sentiment.

Oddly, as the numbers were released, the sector showing the most promise were the financials. In fact, right after Goldman Sach placed Merrill Lynch on their “conviction sell” list, buy orders entered the market for the sector.

Obviously, we are not out of the woods yet, but bargains in the market do not occur when everything is fine. Bargains occur during periods of crisis.

We still believe oil prices will continue to decline into the election. As a result many high-flying commodity stocks are taking it on the chin. The current sell-off in commodities is setting us up for a major buying opportunity, and a buy signal could be triggered if, and when, crude prices reach the $85-$90/ bbl area.

As long as the volatility in commodity stocks remains high, momentum funds will be quick to reduce positions creating an opening to buy. I believe the bull market for commodities still has some room to run. Right now though, money continues to be sucked out of commodities and oil stocks, and is being redistributed into the financials (banks) and consumer discretionary sectors.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

A friend of mine still... After all the years brokerage firm scandals, conflicts of interest, and bad advice..works for a Wall Street brokerage firm. A few months ago this Wall Street powerhouse placed Fannie Mae and Freddie Mac preferreds on their recommended list. Well, do I need to tell you "the rest of the story ?"

Yesterday, Treasury Secretary Paulsen announced that Fannie Mae and Freddie Mac would stop interest payments all all existing common and preferred shares after a government takeover. A new preferred stock was issued to the US Government (and maybe some foreign friends?) with a 10% yield. Mom & Pop cannot buy these new preferreds, and the old ones in their Brokerage and IRA's are virtually worthless.

Here is a small list of what happen to a few Fannie and Freddie preferreds yesterday;

FRE-B: FREDDIE MAC VAR PR Price: $2.01/ down -10.74/ or down-84.24%
FNM-R: FANNIE MAE PFD R/ Price $ 2.25/ down -11.12/ or down -83.17%

Believe me, your broker does not want you to lose money. In fact, they hate it. But, and here's the reality, many brokers don't know any better, they take their firms advice, and much of the advice is terrible.

I told investors over and over again that the financial services industry is not a charity business. Whether you’re dealing with a bank, brokerage or insurance company, their first loyalty is to the firm and to themselves. This should be very obvious by your investment results, and the fees and commissions you are charged.

If you know what you’'re doing, you can save a ton of money in investment costs. The more you know about the various products and services offered by a financial institution, the better off you’ll be. You do not need to let brokers, insurance companies, or brokerage firms tell you what’s in your best interest.

On the other-hand, you can stay where you are and do nothing. One day maybe you'll make all the losses you took on Fannie, Freddie, tech stocks, mortgage bonds, real estate, and the many worthless investments you purchased through the years.

My advice is a simple one. Ignore the brokerage firm ads you are seeing on TV. It's all a bunch of "bull"- get it? Unless you enjoy viewing your financial future from underneath a bus, I would run to my nearest discount broker.

Today's Market

OPEC announced it would keep oil production at near-record levels, and Oil prices fell to around $104 per barrel. Crude futures were down on fading concerns about Hurricane Ike's threat to facilities in the Gulf of Mexico.

July pending home sales fell more than expected, while wholesale inventories increased more than expected. Reduced consumer demand is adding to the increase in inventories.

One trend that I am skeptical of is the rising dollar. The U.S. government's move to save Fannie Mae and Freddie Mac may begin to have negative implications on our currencies, particularly after the elections. For now, the election year magic should keep an immediate slide from occurring.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Investors are looking for income, and as a Registered Investment Advisor I scour all kinds of income vehicles in search for income. At times we come upon economic periods that warrant caution. This is one of those times.

Here are a few examples of why some fixed income investments can be very risky;

1) Interest rates are very low, and investors desperately reaching for higher yields can incur big losses.

a) Certificates of Deposit:

CD's are not paying much nowadays, but some banks are offering higher than normal market rates to attract capital. Almost weekly we hear news of another bank failure. If you reach for a higher than normal market rate on a cd make sure your deposits remain within the $100,000 insured amount of the FDIC.

It would be terrible to wake up one day, have more than $100,000 in a bank, and see that your bank has failed.

b) Municipal Bonds:

A municipal bond (or muni) is a bond issued by a city, state or other local government for the public good. Often municipal bonds are exempt from the federal income tax and from the income tax of the state in which they are issued.

The problem today is many of the bonds with AAA ratings have had those ratings downgraded due to financial difficulties surrounding the monoline insurers that insure municipal bonds. These insurers are a last line of defense, and are responsible for the timely payment of interest and principal should a municipality default.

Fortunately, in addition to insurance on a bond, many high quality municipals are backed by the full faith and credit of the issuer (aka- General obligation bonds), or are backed by a specified stream of future income (aka- Revenue bonds: utility from payments by customers), or backed by the payment of taxes (aka-Assessment bonds: property taxes).

Here again, interest rates are too low to lock in a long term muni. When you factor in the uncertainty surrounding the monoline insurers, these investments don't have much appeal.

c) Corporate Bonds:

The most of the attractive yields in the corporate bond market are bonds issued by banks. Do I need to go any further?

Corporate bonds carry a higher risk of default since they are only as good as the company issuing them. In the case of bank bonds, no one knows what bank will collapse next.

d) Preferred Stock:

Yesterday, I gave you an example of what can happen with preferred stock , even when most investors thought they had the implied backing of the US government. On the surface, investors assumed the takeover of Fannie Mae and Freddie Mac by the US government would be good news for preferred stockholders. Not so. The existing holders of FNM and FRE preferred stock were virtually wiped out yesterday.

As I comb through pages and pages of preferreds, I am amazed at all the terms and conditions of each issue. I read comments like; "the issuer has the right to suspend payments for up to 40 quarters", or "interest payments are non-cumulative". These comments don't give me that warn cozy feeling.

The bottom-line in this little exercise is don't be overly anxious to chase higher yields in this lower yield environment. One day, the economic environment will improve, and interest rates will be more attractive. Remember, lower interest rates means the economy is bad. Higher interest rates mean the economy is booming.

The Market

The drop in oil and commodity prices continued yesterday. OPEC announced they would cut production by 500,000 barrels which is added a little support to prices this morning.

At mid-morning, the Energy Information Administration's weekly inventory report revealed that supplies of crude and gasoline decreased more than expected on weaker demand.

If we would build electric and hydrogen powered vehicles, we could cut our oil imports by 75%, and tell OPEC to take a hike. Won't happen, so forget about it.

The big yesterday was fears over the 45% collapse of Lehman stock. Lehman held a press conference this morning and reported a $3.9 billion third quarter loss. The company said it will spin off $25-$30 billion of commercial real estate to stockholders, and sell a majority stake in its investment management unit.

September will continue to be a wild month, but once oil prices break below the $100 mark, and accelerate toward $85-$90/bbl, I am betting we will see a very impressive rally.

The unknown damages from Hurricane Ike will likely cause a spike in gas prices along the Gulf Coast. But once the assessments come in, and refinery production ramps back up, oil and gasoline prices will continue to correct.

Despite the obvious risks, if oil prices continue to fall, I am optimistic about the the stock market will muster up an impressive rally into the end of the year. In the short term, we have a better than average chance that the major market averages will retest the July lows, and it is possible a mini panic could drive the DJIA down to the10,000 level.

After the sell-off, my logic for a rally is a simple one. The cash strapped consumer needs help. Oil prices have acted as a massive tax increase, and slowly that burden was (until the hurricane) being removed. The major factor for higher inflation has been the rising price of energy. If energy prices continue to decline, inflation fears will subside.

Corporate profits have been hurt by rising fuel and commodity costs, and if the current trend toward lower prices continues, profit margins will improve, and so will stock prices.

This October will mark the one year anniversary of the peak in the market which occurred in 2007. Sure the housing market, and financial sector is still in disarray, but that doesn't necessarily mean a strong counter-trend rally can't occur.

The ideal set up for a rally would be for the DJIA to trade down around 10000, the S&P 500 to trade down to 1175, and the NASDAQ to the 2000 level. These three areas would provide a nice springboard for an 8-10% rally.

Here are our Top 10 ETF's for the week of September 15th:

1) DBA: Powershares DB Agriculture Fund- .205
2) EWZ: Brazil Index- .171
3) SLX: Market Vectors Steel Index Fund- .152
4) FXF: Currency Shares Swiss Franc Trust- .110
5) EEB: Claymore ETF BNY BRIC- .088
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) KBE: KBW Bank ETF- Not Rated
8) IYF: iShares Dow Jones US Financial Sector- Not Rated
9) PGJ: PS Golden Dragon China Fund- Not Rated
10)

At first glace, it looks as if the commodity and BRIC nation trades have dissipated. For the short run that is true. But, the highest ranked ETF's in our universe remain T-Bills, short term bonds, crude oil which are falling in strength also. Our current position in DDM, KBE, and the IYF balance out the weakness of our commodity and BRIC holdings. Once we get closer to the election, and the magic ends, we will be adding more commodity and oil related positions.

Here are our Top 10 Fidelity Sector Funds for September 2008

1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance

NEW BUYS:

None

NEW SELLS:

None

Honorable Mention (Holds):

None

The Week in Review:

What a week! Hurricane Ike will likely cause a mini panic in the stock market as gasoline prices spiked over the weekend. With Lehman Brothers is on the verge of collapse, and Alan Greenspan saying that John McCain's tax cuts will not worked unless the government cuts spending, enough uncertainty exists for a mini panic. In addition, GM and Ford are asking the government for a low interest loans, and our monetary authorities have run out of options on how to fix the banking and credit crisis.

Given all of the reasons above, the stock market has more than enough reasons to drive the major market indexes to new cyclical lows.

With the seizure of Fannie and Freddie, and the woes at Lehman, investors flocked into US Treasury Bills and T- Notes. The dollar sold off on Friday, and Gold prices rebounded as money rotated back into the Energy and Materials sector.

Investors who bought Gold, Energy, and Materials as their respective RSI's (Relative Strength Index) dropped below 30 will find this trade to be very profitable. By the end of this week, and maybe into early next week, traders will probably take profits and return the the short side of this trade.

Investors are currently sitting on the highest level of cash in 26 years, and the S&P 500 is trading at its lowest price-to-earnings ratio in almost 18 years. Given this tidbit of information, I would view any significant sell-off in the market indexes as a major buying opportunity.

So, the stage is set for a major sell-off;

1) Lehman files for bankruptcy protection.
2) Merrill Lynch may be on the ropes too. Does Bank of America come to the rescue?
3) Are A.I.G., and Washington Mutual next?

The Rest of the Story

For those of you worried about your investments in China, I would not be overly concerned. I received this e-mail from a US Olympic coach who just return from Beijing;

I wanted to send a brief message regarding my experience in China, not to gloat about my selection to represent the USA but instead to offer a warning regarding our future.

In summary, we are facing global competition which is just beginning to be felt in our culture. We need to be aware of the issues and start now to prepare our children for the future. Our country depends on the decisions of our current leaders. It also depends on our children's education and readiness for the world. We are very naive when it comes to understanding our most daunting world economic and energy concerns. We all feel powerless when it comes to these issues, but our children will definitely face major concerns regarding these problems. The American way is to roll up our sleeves and solve the problems. We have some great challenges before us.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Does the financial media have you scared yet? I have to admit, I enjoyed yesterday's sell-off, and I particularly enjoyed all of the glum faces on CNBC this morning. I'm not saying this to be snide, but this is the type of market I have been waiting for since the beginning of 2007.

Yesterday, after the market closed, I went to the gym and watched the financial channels while I was torturing myself on the stair-climber. As I watched numerous TV screens, CNBC's Fast-Money gang was debating the 500 point drop, and on Fox, Neal Cavuto played video clips of the Great Depression.

While the media was scaring investors, Bank of America went on buying spree by purchasing Merrill Lynch . It reminds of the movie "It's a Wonderful Life". Remember Mr. Potter?

BAC is Mr. Potter, and Potter isn't selling, Potter is buying!

Frankly, I feel like a kid in a candy store. As I watched my quote monitor yesterday, I was saying to myself, "Oooh that looks nice , I'll have one of those, Give me some of that". The market is getting into a range where each new purchase excites me again. This hasn't happened since 2001-2002.

The key to not being disappointed in markets such as these is to make purchases in incremental stages between now and the end of the year.

In my opinion, Wall Street is finally taking the beating that they long deserved. They created the current mess, and now they are reaping what they sowed. Alert investors read the handwriting on the wall three years ago when;

1) The Bankruptcy Laws were Changed (October 2005): While consumers were up to their eyeballs in debt, the financial lobby convinced congress to pass "The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005."

On May 31, 2006, I said;

If you don't believe the consumer is in financial trouble, all you have to do is remember the "Lending Tree" commercial where a guy mowing his lawn says he has all of these possessions because I'm in debt up to my eyeballs."

Stay tuned, things could get very interesting in the months ahead.

2) The Repeal of Glass Stegall: The main culprits for the Sub-prime Crisis were Congress and Bill Clinton when they repealed the Glass-Stegall Act in 1999. Glass-Stegall was enacted in 1933 to separate commercial banking from the securities business.

President Bill Clinton, and the members of Congress, were responsible for Glass-Stegal's demise and were repeatedly warned by General Accounting Office (GAO) that banks need to build up adequate capital levels before being allowed to enter the securities business.

Glass-Steagall prevented securities speculation from destroying bank capital, but since its repeal, look what has happened. All of the people responsible for the repeal of Glass-Steagall should be held responsible for their actions.

But, and this is the sad part, none of these people will be.

So, where do we go from here?

All of the turmoil in the markets will eventually end. The strong will survive, and the weak will disappear. This is the way it should be.

Take for example Bank of America (BAC), and Wells Fargo (WFC). BAC has scooped up Countrywide, and Merrill Lynch at bargain prices. One day these assets will payoff handsomely. And, Wells Fargo has gone through the recent market decline virtually unscathed.

With the demise of Bear Stearns, and Lehman, Goldman Sachs (GS) will have very little competition in investment banking. I heard Nouriel Roubini's comments about GS and Morgan Stanley, but I believe Goldman has enough strength and political influences to do well on their own.

Goldman influence should not be underestimated. It's former employees have gone on to high levels of government as Cabinet officials, agency analysts, advisory board members and even U.S. lawmakers.

Here are a few examples;

New Jersey Gov. Jon Corzine
White House Chief of Staff Joshua Bolten
Former Treasury Secretary Robert Rubin
Deputy Secretary of State Robert Zoellick
Former president and chairman of the Export-Import Bank of the United States, Kenneth D. Brody
Former director of the National Economic Council, Stephen Friedman
Former Deputy Secretary of State, John C. Whitehead
Former Assistant Secretary of State for Economic and Business Affairs, Robert Hormats
Treasury Secretary, Henry Paulsen

The best approach for the average investor is to dollar cost average into a high quality, low cost index fund like the Vanguard S&P 500, or the Vanguard Total Stock Market Index Fund. More sophisticated investors can buy stocks.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

As you can tell, the news is about as bleak as it gets. I don't believe today is the final decline. Capitulation usually occurs on a high volume sell-off followed by a high volume reversal that closes up shaply on the day.

I have been saying around 10,000 on the DJIA would be a good target before we get some kind of reversal.

Panic is clearly building as investors are flocking to short term T-Bills (with virtually no yield) after the oldest U.S. money-market fund became the first in 14 years to expose investors to losses in money market accounts.

The now, old news, AIG was taken over by the government, but today fears over Morgan Stanley and Goldman Sachs rippled through the street. Investors are wondering what company might be next to fail.

Clearly, panic is setting in. Tonight, when investors get home, they will be mesmerized by today's 449 point drop. And after a 500 point plus drop on Monday, they will probably pull the plug on their investments giving us the panic low that we have been waiting on.

The VIX Index closed at 36.22. During past market debacles the index topped out above 40. Here are the extreme panic numbers on the VIX going back to 1997;

Nov, 3 1997: VIX 38.22
Sep 8, 1998: VIX 48.06
Sep 17, 2001: VIX 49.35
July 29, 2002: VIX 43.93
Sep 30, 2002: VIX 41.86

At Dow 10000, I will be looking to add to the Ultra Dow30 ProShares (DDM), and pick up some of the ProShares Ultra S&P500 Trust (SSO) too. The NASDAQ may or may not reach the 2000 mark, but I will be looking to buy the Ultra QQQ ProShares (QLD) on another big down day.

Keep in mind, all major declines are scary, and usually occur when the news is bad and the economy is in shambles. Investors who buy during these times are betting that one day the economy will get better, and the stock market will rebound. Investing is more about having faith in the capitalistic system than it is being an expert market guru.

In times such as these, it's best to make use of the mute button on your remote control. Don't let the media tell you when to buy or sell, or even which candidate to vote for. Use common sense.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

NEW BUY: DG ETF Portfolio

ProShares Ultra S&P500 Trust (SSO) @ $48.13

As the Dow sold off on fears about more money market accounts breaking the $1.00 mark, I used the weakness, and spike in the VIX index to add SSO to the DG ETF portfolio.

Expect some wild gyrations today and tomorrow as futures and option contracts expire on Friday. I feel much better about a potential rally now that the VIX spiked over 40.

I am not holding off new purchases in hopes the DJIA reaches the 10000 mark. After a 25% decline, what's another 600-800 points?

The bad news is pretty much on the table. The number of new claims jobless rose by 10,000 last week. Expect more losses in the weeks ahead with all the bank blow ups.

Central bankers around the world are pumping billions of dollars into global financial markets to free up capital and calm investors fears. I think it will work. The Fed and other large central banks said they will pump $247 billion into the financial system.

Gold had its biggest one-day rise in eight years on the money market panic. Investors are now worried that they can't trust banks, insurance companies, and the stock market so they are running to hide money in mattresses.

Commodity prices soared in a flight to hard assets, protection against a declining dollar and fears that the credit crisis is going to get much worse.

Personally, I ran toward GE. GE is trading at multi-year lows on fears about their financial arm. I not worried about GE, and I'll take their 5.3% yield all day long.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

The Financial Sector has been extremely challenging, and mentally taxing to many investors. I have to admit at times I was somewhat concerned. But, I have long held the opinion that the US government would eventually come in and rescue the banking sector. After all, did they have any other choice?

If investors were paying attention, radio advertisements from the Securities Investor Protection Corporation (SIPC) began hitting the airwaves about 6 months ago. This told me something big was about to happen since SIPC insures certain deposits and securities of clients doing business with brokerage firms. With the failure of Bear Stearns, Lehman, and almost Merrill, we now know why SIPC was buying airtime.

This tells me that SIPC, and probably many Fed officials, knew what was about to happen to these investment banks. They had to, after all SIPC didn't advertise in 2006 and 2007.

In any event, the short sale rule from July has been reinstated, and expanded. This is one of the reasons we saw a huge short covering rally in the financials. In July, the short sale ban only covered 19 financials. Today's ban covers 799. The tentative date for this ban to expire is on October 2, 2008. It will be interesting to see if the financials get pounded again when it expires.

Now that the US government has guaranteed to back money market funds, it will be interesting to see how the financials will react with the reenactment of the Resolution Trust Company. I told you this would happen, and low and behold, its happening!

In May, I said;

There are only two events that can turn the markets from bear to bull;

Not that I don't trust them, but the current rally may be due to the fact that Wall Street knows one of the two events above is are about to happen, or they are setting investors up for a huge sucker rally. Guess who the suckers will be?

Well, sure enough, the market made new lows for the year in July, and we retested those lows this week.

Oil going up today did not help matters. My guess is a retest or break of the recent lows will occur after October 2nd if oil prices continue to climb.

I'll have more for you in the weekend briefing. I pleased we were able to ad the ProShares Ultra S&P500 Trust (SSO) yesterday at $48.13. Today, it closed at $57.24, + 18.92%.

Last week, investors saw themselves staring into the abyss, and nothing was staring back at them. The credit crunch was getting worse. Money Market accounts were headed toward the sub $1 dollar mark. Investment Banks were crumbling. And, it looked as if the US economy was headed for a financial meltdown, and another Great Depression. Oh, but we knew better!

On Thursday, the Calvary road into town as the US Government finally got off their rear-ends and began tackling the problems overhang the financial sector.

The first order of business was to put a ban on the shorting 799 financial stocks. Secondly, a $400 billion fund will help Money Market Funds retain their par value of $1. And finally, $800 billion (or more) will be donated to financial companies to prevent them from writing off additional bad loans.

What has been most impressive is how many foreign central banks have joined in the chorus of reining in manipulative short selling, and now these central bankers are working together to build the opening scene for the new bull market.

While the media was scaring investors, smart money players like Bank of America went on buying spree by purchasing Merrill Lynch .

It reminds of the movie "It's a Wonderful Life". Remember Mr. Potter?

If an investor could only read between the lines, they would see that some investors (Like Mr. Potter) were scooping up bargains while others were panicking.

Bank of America is like Mr. Potter, and Potter wasn't selling, Potter was buying!

-Bank of America buys Countrywide and Merrill Lynch at distressed prices.
-J.P. Morgan buys Bear Stearns.
-Barclays is buying Buy Some Lehman's Assets.

Frankly, I feel like a kid in a candy store. As I watched my quote monitor yesterday, I was saying to myself, "Ooh that looks nice , I'll have one of those, Give me some of that". The market is getting into a range where each new purchase excites me again.

As a result of my candy store state of mind, I added the ProShares Ultra S&P500 Trust (SSO) to the DG ETF portfolio @ $48.13. I pulled the trigger when the VIX index spiked to 42 on Thursday.

Now that the Calvary has road into town, many are asking if the stock market has finally bottomed? I think the odds that the market bottomed on Thursday are probably 80%. Sure there are problems, but history shows that fighting the Fed when they get serious is a losing proposition.

Since the evidence of an economic rebound is not obvious to all, last weeks rise in crude oil prices may incur on final decline to the $85/bbl mark before beginning a new uptrend. The same goes for last weeks rebound in commodity prices. Crude prices are rising on worries that the new debt load from the bailout will further erode the value of the dollar. It will, but keep in mind the manipulative forces are starring down the gun barrel of an important election.

Remember, going into an important election, the big money players want the voters to envision a Utopian society which brings lower energy prices, and low inflation.

Here are our Top 10 ETF's for the week of September 22nd:

1) DBA: Powershares DB Agriculture Fund- .205
2) EWZ: Brazil Index- .171
3) SLX: Market Vectors Steel Index Fund- .152
4) FXF: Currency Shares Swiss Franc Trust- .110
5) EEB: Claymore ETF BNY BRIC- .088
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) KBE: KBW Bank ETF- Not Rated
8) IYF: iShares Dow Jones US Financial Sector- Not Rated
9) PGJ: PS Golden Dragon China Fund- Not Rated
10) SSO: ProShares Ultra S&P500 Trust

After the November elections, I am expecting our commodity and BRIC holdings to rebound sharply. The mother of all short covering rallies drove our two financial holdings (KBE & IYF) up dramatically.

Our newest addition, SSO, is up + 18.92% in two days.

Rumors have been circulating that Wachovia will buy Morgan Stanley. I don't think that will happen. Here is something I do believe can happen;

Goldman Sachs may by Wachovia!

Yes! Now that Goldman Sachs and Morgan Stanley have applied to become banks, The "Glass" in the Glass-Steagall Act has been totally shattered.

Here are our Top 10 Fidelity Sector Funds for September 2008

1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Who are these idiots giving opinions on the financial channels? How many times over the past 90 days have were heard we are facing threats of a Great Depression?

All of this "Chicken Little" stuff is meant to keep you from investing when prices are low. At DJIA 14,000 they were screaming buy, buy, buy! You do remember these catches phrases at the top of the market don't you;

-Goldilocks Economy
-Soft Landing
-The Resilient Consumer
-"Points above new all-time high" on your TV screen.
-Valuation models suggest stocks are too cheap to pass up at these levels.

The one that takes the cake is "CNBC's- Erin Burnett" reading from the teleprompter saying "move over Goldilocks- Economic Nirvana", along with Jim Cramer telling you to buy.

Here are a few thoughts;

- Great Depression huh, we can't get anyone associated with the our government to admit that the economy is in a recession.

- The rescue package will be passed. Members of Congress want to go back home and campaign for re-election. They will not be re-elected if they don't pass the rescue package.

- Goldman Sachs will be bought by a commercial bank? I seriously doubt that this will happen. More than likely they will buy a bank like Wachovia, CitiGroup, or someone else. Goldman has too much political influence to go down the same path as Bear Stearns, Lehman, Merrill, and Morgan Stanley.

- Glass-Steagal has been destroyed. Now the lines separating investment banking and commercial banking no longer exist.

BAC & MER
WB& A.G. Edwards
UBS & PaineWebber/ J.C. Bradford
C & Smith Barney/Solomon Brothers
RF & Morgan Keegan
MS & Dean Witter
GS & ???

What the public needs to understand is the new banking system is being designed to fit into the new International Economic World Order- synonymous with the New World Order.

In 1979, Barry Goldwater wrote;

“The Trilateral Commission is international and is intended to be the vehicle for multinational consolidation of the commercial and banking interests by seizing control of the political government of the United States.”

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

A story broke this morning on the financial channels that Lowes (LOW) held a analyst meeting and said the company expects earnings to rise 18 percent to 23 percent annually, on average, from 2010 to 2013.

That's wonderful, and given that time frame, I don't doubt it. So, based on these projections, I'm wondering why the insiders are exercising options and selling the stock.

On September 9th, Chairman and CEO, Robert Niblock exercised options on 152,000 shares at $22.00, turned right around and sold 147,452 of those shares at $28.25.

On August 27th, Niblock exercised options on 170,000 @ $22.85, and again, on the same day, sold all 170,000 @ $24.59. This was only a $1.74 higher than what Mr. Niblock the exercise price was. Given this little tidbit of information, it is very clear that the Chairman and CEO of Lowes (LOW) does not see his stock or the housing market returning to the glory days anytime soon.

Here's my point. These insiders talk out of both sides of their mouths. My mom use to say "do as I say, don't do as I do". This didn't sound quite right for some reason. I think to set the right example for investors, Mr. Niblock needs to tell investors, " do as I do, not as I say".

Hey Lowes insiders, talk to the hand! If you don't want to own your stock, then neither do I.

This is a small example of how insiders get rich. I see it everyday. See, Wall Street set up this compensation agreement with insiders many moons ago. The conflicts of interests between insiders and analysts have existed for many years. Analysts pump a stock, the little guy buys, and the insiders cash it. Doesn't seem fair, does it?

The Rest of the Story

As congress continues to jawbone with the Treasury and the Fed, you need to keep in mind that they are just trying to portray themselves as prudent stewards of our money. We know better though. In the end, they will pass the rescue package to save their re-election campaigns.

In the meantime, as congress debates "doing the right thing", lets take a look at how many politicians took money from Fannie and Freddie as they were doing the wrong thing;

The entire bailout package is a charade. It reminds of the movie "Miracle on 34th Street" (1947) when the judge is meeting with his political adviser in his chambers. The judge was getting ready to rule that there was no Santa Claus.

This is what the trusted adviser had to say to the judge;

"All right, you go back and tell them that the New York State Supreme Court rules there's no Santa Claus. It's all over the papers. The kids read it and they don't hang up their stockings. Now what happens to all the toys that are supposed to be in those stockings? Nobody buys them. The toy manufacturers are going to like that; so they have to lay off a lot of their employees, union employees. Now you got the CIO and the AF of L against you and they're going to adore you for it and they're going to say it with votes.

But you go ahead Henry, you do it your way. You go on back in there and tell them that you rule there is no Santy Claus. Go on. But if you do, remember this: you can count on getting just two votes, your own and that district attorney's out there".

William Frawley played the judges political adviser;

Gene Lockhart played the judge.

The Bottom-line:

Not passing the bailout package would be political suicide. I'll bet many trusted advisers of those in congress are urging their political clients to vote, yes. If and when it does pass, the stock market may take off like a rocket.

And to the politicians who insist on more worthless debates over the bailout package, get this;

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

At this stage of the game, there isn't much to say that we haven't said already. Until the financial rescue package is passed, we are all going to have to deal with manic depressive, or bipolar stock market. In the meantime, we are going to witness market mood swings of depression and mania until the proper medication can be administered.

Members of congress don't enjoy making tough decisions while on camera. It's much easier for them to pass legislation that benefits their big donors and lobbyist than us little people. So, now that we are watching their every move, many are squirming, and are acting a little uptight. Isn't it fun to watch?

Today, the major market averages rallied on news that Congressional leaders came to an agreement on a rescue package. The Dow closed up 196.89 points, the S&P 500 gained 23.31 points, and the Nasdaq was up 30.9.

Tonight, however, we have learned that the plan has stalled. In after hours trading, all the major averages are heading down.

In economic news, August durable goods orders fell 4.5%, and new home sales for August fell to the lowest level in seventeen years. Also, Initial jobless claims jumped to the highest level since 2001.

In stock news, GE reduced its profit guidance and canceled its share buyback program on weakness attributed to its lending arm. Nike reported better-than-expected earnings, and shares showed a strong gain on the day.

The Rest of the Story

A $700 billion dollar bailout package for the economy should not be that tough to pass. Afterall, congress just okayed a $612 billion dollar defense bill on Wednesday for wars protecting oil assets in Iraq and Afghanistan.

John McCain suspended his campaign to help coordinate efforts to pass the bailout package. Barrack Obama was taken aback by McCain's efforts, and despite the crisis at hand, he still wants to debate on Friday.

Some members of the Democratic Party (Hillary supporter Philip Berg) have filed suit claiming Obama not a “natural born” citizen since he was actually born in Kenya. Berg also claims Obama is not a naturalized citizen since he was adopted by his Indonesian stepfather and his mother embraced the citizenship of Indonesia.

Boy, what a mess. It's amazing how the media has chosen to ignore these claims.

To be fair, the media has also chose to ignore the $200 million fortune of John McCain's wife Cindy. Reports say that Cindy McCain's father had some shady mob ties- WorldnetDaily. What's new? Isn't this how the Kennedy's built their fortune?

Warren Buffett invested $5 billion in Goldman Sachs in a private sweetheart deal. Buffett is in favor of the Paulsen plan, and said Congress needs to act quickly to avert an "economic Pearl Harbor".

Let's see what tomorrow brings. " Deal, or No Deal?"

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

All I can say is history is our best teacher. For those of you who are not aware of Mr. Potter from the movie "It's a Wonderful Life", or the banking tycoon, J. P. Morgan, I suggest you educate yourself very quickly. I think I'll start calling J. P. Morgan, Mr. J."Potter" Morgan.

The Banker, Mr. Potter, from the movie "It's a Wonderful Life"

John Pierpont Morgan (J.P. Morgan) April 17, 1837 – March 31, 1913.

Do your homework.

This morning J.P. Morgan Chase bought what was left Washington Mutual's carcass. The buzzards have been circling over WM for a while.

Quotes of the Month on WaMu (Washington Mutual)

Friday September 12, 2008

"Washington Mutual declared that it has enough capital to survive"- Yahoo

"Goldman Sachs analyst Brian Foran upgraded the thrift to "neutral" from "sell," saying the projections "provide a glimmer of a silver lining that the worst may be seen".

"Howard Shapiro of Fox-Pitt Kelton Cochran Caronia Waller said the thrift's disclosures on credit, deposits, liquidity and fee income "should calm some of the hysteria surrounding the stock and the company's future."

J. Potter. Morgan trading up even after selling $10 billion in stock to pay for the write-downs it has to take for assuming WaMu's debt. I can't think of any company in the world that has that much influence and power. Is J. Potter. Morgan the Fed in disguise?

High drama, and scary outcomes surrounding the showdown of the financial rescue package has investors on the edge of their seats. Like I said a few days ago, I don't know why the politicians are making a big deal over it. Passage of the bill should be an easy decision. After all, congress just approved $25 billion in low-interest loans for U.S. automakers, and threw another $602 billion to the departments of defense, homeland security and veterans affairs.

Our government has wasted billions fighting the war in Iraq, so throwing the U.S. financial system a lifeline shouldn't be that tough to pass. The war in Iraq is clearly about oil, and not weapons of mass destruction or fighting terrorism. Remember, follow the money!

Speaking of money, where is all the money going from the sale of the Iraqi oil? Iraqi officials estimated that Iraq's oil revenues are around $60 billion, with 80 percent of the revenues going for the United Nations Oil for Food Program. This is insane.

So, are you wondering who is making these decisions behind the scenes? The men behind the curtain of course!

In March, Senators Carl Levin (D), and John Warner (R) estimated that Iraq will realize "at least $100 billion in oil revenues in 2007 and 2008."

In any event, passage of the rescue package will free up bank balance sheets, and allow the flow of funds to continue between banks and businesses. The biggest problem on bank balance sheets has been the pricing of derivative instruments which cannot be valued since there is no longer a secondary market to trade them, or price them. Many of these instruments are worth something, some are worth much more than their current reported value, and some are worthless. The rescue package will give the market time to value these instruments fairly.

The financial situation in the U.S. is clearly causing panic in America. So much so that the U.S. Mint suspended sales of 1 oz gold coins because of a surge in demand- Reuters

With all the concerns, panic, turmoil, over the U.S. financial system, the natural instinct is to run, hide and hoard. A true blue contrarian looks at the seriousness of this grave situation as a buying opportunity.

I realize it's tough. It's like jumping off an 80 story building, and after passing the 40th floor you say, "so far, so good." As long as you don't buy equities on margin, and allows keep an abundance of cash for a rainy day, investing during these turbulent times can be a bargain hunters dream.

As we tiptoe into October, we are going to tiptoe back into oil. This time however we are going to use an ETF commoditiy fund.

NEW BUYS:

DBE: PowerShares DB Energy

Holdings:

Brent Crude (Fut): 22.98%
Gasoline Rbob (Fut): 22.98%
Heating Oil (Fut): 24.88%
Natural Gas (Fut): 9.66%
Wti Crude (Fut): 23.08%

NEW SELLS:

SLX: Market Vectors Steel Index Fund

Here are our Top 10 ETF's for the week of September 29nd:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) FXF: Currency Shares Swiss Franc Trust
5) EEB: Claymore ETF BNY BRIC
6) DDM: Ultra Dow 30 Proshares ETF
7) KBE: KBW Bank ETF- Not Rated
8) IYF: iShares Dow Jones US Financial Sector
9) PGJ: PS Golden Dragon China Fund
10) SSO: ProShares Ultra S&P500 Trust

After the November elections, I am expecting our commodity and BRIC holdings to rebound sharply.

In the Dynamic Growth Fidelity Select portfolio, we are adding the Fidelity Select Natural Resources (FNARX) fund, and selling the Fidelity Select Wireless (FWRLX) fund.

Here are our Top 10 Fidelity Sector Funds for October 2008

1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FNARX: Natural Resources
9) FSRBX: Banking
10) FSVLX: Home Finance

NEW BUYS:

FNARX: Natural Resources

NEW SELLS:

FWRLX- Wireless

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

I have to be brief today, so I'll get right to it.

The financial rescue package failed to get the minimum number of votes to pass after Republicans in the said speaker Nancy Pelosi made a partisan speech near the end of a debate. At the end of the day lawmakers decided her insult should be followed by injury. As a result the major market averages suffered their biggest decline of the year;

DJIA: 10,365.45, down 777.68
S&P 500: 1,106.42, down 106.59
Nasdaq Composite: 1983.73, down 199.61

The Jewish holiday begins tomorrow, and extends through Wednesday for orthodox Jews. On Thursday, I am expecting the congress to begin debating on the rescue package again, and vote on a revised version of the bill this week.

As it stands, it looks like the markets have and will reach the downside targets that we had identified all along. The the S&P 500 has broke below our target of 1175, the NASDAQ broke the 2000 level today, and now it looks as if the DJIA will trade down to 10000 or lower.

In stock news, Wachovia (WB) laid a bombshell on the markets by selling their banking division to CitiGroup for $1.00. Wachovia will remain in business as a publicly traded company. The new Wachovia will be known as Wachovia Securities, the third largest brokerage firm in America. The valuable assets at the new company will be A.G. Edwards, and Evergreen Asset Management.

The VIX index spiked to over 48 which can be described as very pessimistic, and close to the widely touted capitulation day. Since I believe Congress will pass some sort of rescue package for the financial sector, we may be at or near the lows for this sell-off.

Today, would have been a great day to enter the newest additions to the DG ETF and sector fund portfolios. Crude oil finished down more than $10 per barrel on concerns that economy will dry up and demand will fall.

In the last half hour of trading, we added the PowerShares DB Energy fund (DBE) at $37.85, and we will have to wait until tomorrow to get the closing price on the Fidelity Select Natural Resources (FNARX) fund.

Buckle you seat belts, the ride isn't over yet!

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

The stock market recouped almost 2/3rds of its losses from yesterday on news that the rescue package that failed yesterday will be approved. In a sudden twist in sentiment, the telephones of members of congress have been ringing off the hook demanding that lawmakers take action to help the economy.

In addition, the FDIC is looking to temporarily raise the insurance limits on bank deposits above the $100,000 mark. Lastly, some members of Congress want the SEC to suspend their mark to market accounting rules that are causing havoc on many balance sheets.

All of these items above lead to a better mood in the stock market today as many financial stocks gained back part of yesterday's losses.

Crude Oil jumped $4.27 per barrel closing at $100.64.

All eyes will be on Washington the next few days, and after yesterday's capitulation sell-off bargain hunters seem to be eager to buy before the votes are counted in Congress at the end of the week.

Hold on, and let's hope our lawmakers do the right thing.