So What's Next?

That's what the market appears to be asking itself right now.

The bulls seem too be backing off of the idea that we are through the worst of it. How can't they after the data we've seen recently?

We got more consumer data today that was awful. Folks, when the bulls are pumping Family Dollar stores you know the consumer(and the market overall) is toast! Consumers are shopping at these dumps because they don't have the access to credit that they have had in the past.

The economy is once again hitting the wall. When I asked a friend of mine that owns a big name restaurant how business was he explained that sales have fallen off a cliff again in June. How can they not as unemployment soars? People cannot spend when they aren't working!

Here is some more interesting anecdotal information from a friend that just spent two weeks in Spain. I asked him how the trip was and all he could talk about was the economic collapse that they are currently suffering through. He said unemployment there has surged to 17.2%. Need I say anything more?

Apparently, jobs are so scarce in Spain that the government may actually offer to pay illegals who agree to move back to their own countries. My friend also said that he saw soup lines all over the place. His friends who live over there told him that they have attempted multiple stimuli and none of them have worked or stuck. The whole experience was very sobering.

We are heading straight towards the same dark place that Spain currently finds itself. Unlike previous recessions, government stimulus cannot "fix" this recession. There is no magic bullet here or anywhere that will bring back the happy days of prosperity.

The market has been betting that the government could spend themselves right out of this recession like they always do. The bulls are about to realize they were DEAD wrong. This will take years if not decades to work through.

Once this reality hits Wall St "look out below".

Today was a quiet one. Not much news. We had a 30 year bond auction that was pretty ugly. Bid to cover was around 2.3 if I am not mistaken. Yields have dropped recently due to deflation fears, but I still continue to believe that the longer term trend will be higher not lower.

I say this because I fail to see how the government can continue to sell all of this debt as the whole world sinks into an economic depression.

Let me end today with a little humor. When the world gets so ridiculous, all you can do is laugh: