The root problem of the mess in the economy is that housing prices are and remain too high.

The first two graphs are a year or so old but prices have not come down enough to rectify over-valuation.

From The Wall Street Journal

I have been expecting a near-term bottom.  We may have gotten it.

Unfortunately, it may not last.

The SEC allowed the five major investment firms to dramatically increase leverage, allowing the Wall Street firms to move from a manageable debt to equity ratio of 12:1 to 30:1-40:1.

The pattern as of late has been one really ugly day, followed by an up day, then another really ugly day.

Wednesday was a really ugly day.

That must mean Thursday will be an up day.

The catalyst on Thursday may be the SEC's expedited new rules for shorting.

Which sets us up for a another really bad day on Friday as investors get spooked for yet another weekend of surprises!

Hugo Chavez is taking notes.

From Bloomberg

The S&P 500 dropped to the boundary of its downtrending channel this morning then bounced.

Keep your cool.

That is the best advice I can give anyone in this market.

Approach the market in a rational manner.  Do not allow your emotions to get the best of you.

Everyone has their own style and way of making money.  Whether one is a fast day trader trying to scalp a half point or a deep long-term value investor, to consistently make money in the  market, one must stick to their strengths and apply their discipline to the market at all times.  Allowing your emotions to over-ride your investment decision making process is a very good way to lose money.

At noon, I have to admit that I'm a bit frustrated watching this market bounce off the intra-day lows.  I don't know if its short-covering or day traders programmed to buy every steep downswing on the open or if its real buyers thinking stocks are a bargain.

However, until we get a meaningful wash-out, I don't think we'll bottom.  That means the drip-drip-drip of the bear market will continue.

Perhaps traders are anticipating a rate cut. 

Lehman is finished.

This is a sad day for me, as I have friends at Lehman, as I did at Bear Stearns.

It also makes me angry.  The livelihoods of thousands of people were placed at risk because some people were too stupid and blind to see the idiocy of their decisions.