[BaselBimbooooo]

Reminds me of the old Winston Churchill quote: "It has been said that democracy is the worst form of government except all the others that have been tried."

Even in its rough periods, America is still the economic engine for the world. The exports of the world economies rely on U.S. consumers. The consumers of the world rely on U.S. products.

Stocks are going through a correction, with the Dow dropping 600 points today. It's been said that a drop as steep as 20% from our spring highs might be needed to really clear the decks and begin an extended bull cycle again (and frankly, we're more than half way there). Maybe we'll be working our way through that correction in coming months or years.

But American corporations are on sturdier footing than they've been in a very long time. If stocks are tumbling, it's not because earnings are disappointing, it's because there are doubts that middle-class Americans will have the disposable income in coming months to spur a real uptick in spending. Even more so, there's fear that less-stable economies in Europe will have a tougher time getting their financial problems sorted out than originally anticipated.

One very viable way to get to a place where a lot more Americans have jobs and income that's being discussed is the concept of public/private partnerships on infrastructure. An "infrastructure bank." It's an idea being talked up in Democratic circles, but it also enjoys a lot of support on the Republican side of the aisle.

If done well and pushed heavily, with maybe $500 billion attached to the program, we could put potentially 10 million Americans to work, doing skilled work that careers can be built on.

Any hint of that coming to fruition--putting wages into middle-class households, putting tax revenues into federal and state coffers, pouring billions into local businesses around the country as people start to spend again-- and we'll see the economic bruises of the past months begin to fade and the stock market surge again.

LA Times: http://latimesblogs.latimes.com/mone...downgrade.html

In a time of extreme turmoil in markets, investors still are trusting that Treasuries will offer relative safety.

“People look around the world and they don’t know where else to go,” said Charles Comiskey, head of Treasury bond trading at Scotia Capital in New York.

...

It also helped the Treasury market, of course, that stock prices collapsed worldwide Monday, putting a huge amount of cash in equity sellers’ hands. They had to invest it somewhere fast.

The Dow Jones industrial average closed down 634.76 points, or 5.6%, at 10,809.85, the lowest since October.

Buyers also flocked to German and Canadian government bonds, among others, as foreign stock markets crumbled. The German DAX stock index sank 5%. Canada’s main share index slid 4%.

Next up for the Treasury market: The Federal Reserve’s meeting Tuesday. The betting is that the Fed isn’t yet ready to announce a new bond-buying program to pump money into the financial system, but that could change if stock markets are in another freefall Tuesday.

The Treasury also will be selling $72 billion in new debt over the next three days: $32 billion in three-year notes Tuesday, $24 billion in 10-year notes Wednesday and $16 billion in 30-year bonds Thursday.

[Agehoobionibe]

I don't get it. First they fall on fears on the "GOP -friendly" debt deal, now they're soaring again as bargain hunters swoop in. Wouldn't everyone scared that the government isn't deep enough into debt and isn't spending enough of our (and China's) money be sooooo scared and worried that they avoid stocks altogether? I mean, if the government can't spend another $50 trillion the world will end...tomorrow.

http://www.bloomberg.com/news/2011-0...ld-climbs.html

U.S. Futures, Oil Rebound, Treasuries Drop Before Fed Meeting; Gold Climbs

By Michael P. Regan and Rita Nazareth - Aug 9, 2011 4:04 PM MT .

Stocks opened higher following yesterday's 600 point drop.

U.S. stocks jumped the most in more than two years, rebounding from the worst drop since 2008, and 10-year Treasury yields touched a record low as the Federal Reserve vowed to keep interest rates near zero through mid-2013. The dollar weakened and the Swiss franc rose the most since at least 1971.

The Standard & Poor’s 500 Index jumped 4.7 percent to 1,172.53 at 4 p.m. in New York, its biggest gain since March 2009, after tumbling 6.7 percent yesterday. The 10-year Treasury yield fell as much as 28 basis points to 2.03 percent before trimming its decline. The Dollar Index slid 1.2 percent, its biggest drop since October, while the Swiss franc strengthened as much as 6.5 percent to a record $1.4099.

In pledging to keep its benchmark rate at an all-time low, the Fed also discussed a range of policy tools to bolster the economy, saying it is prepared to use them “as appropriate.” The statement fueled speculation the central bank may consider a third round of quantitative easing through bond purchases to revive a recovery that’s “considerably slower” than anticipated.

[leflyCode]

We did see some bargain buying in the morning, but that faded and the markets really took off late in the trading session when Ben Bernanke announced that the Fed would maintain their low interest rate stance through at least 2013. Setting that marker in the sand gave the market a facet of stable policy foundation that they've been wanting, they they rewarded the news with a rush back into stocks.

Asian markets are also up on the announcement. EU futures are mixed at the moment, and US futures are bouncing between just under and over fair value.

As I said in my original post, the U.S. is the economic engine for the world. As we begin to shrug off the damage done by the political theatre of the debt negotiations and as the ECB moves to stabilize Italy and Spain, markets will stabilize.

There's still a lot of volatility, and there's still plenty of doubt that weaker money shook completely out of the market, so the jury's still out as to whether this is a new rally and whether new leadership will form in key sectors.