Nothing is more predictable than unpredictability.

And these days, we appear to have a new administration that, for all intents and purposes, is ignorant of the marketplace.

The rhetoric from 1600 Pennsylvania Avenue is that the Wall Street fat cats caused this mess – and therefore need to suffer.

This is a nice populist sentiment that the masses can easily support, but it compartmentalizes the problem too neatly – and therefore inaccurately.

It ignores the fact that when the house of cards falls, everyone gets crushed. And a “fat cat” who owns a business and is looking at his stock portfolio repeatedly decline like everyone else’s isn’t really in a position to be helping out any of the “slimmer cats.”

And therein lies the problem…

Bumbling Politicians Are Killing Confidence

As the crisis has unfolded over the past year or so, the mood of the country has become even more tied to the stock market than ever. So much so, in fact, that even those who aren’t invested are subject to the mood swings of those who are either:

• Actively investing in it
• Employed by/through it
• Building their 401(k) plans on it

And when you think about it, these three groups of people easily make up the majority of the country.

That’s the reality of the situation – but it’s one that many politicians are either missing on purpose or through sheer ignorance.

In any event, the problem of rapidly declining stocks is not a problem that will go away, as hard as they might try to think otherwise.

In the meantime, their inability to engineer anything that resembles a stimulus package is causing a massive loss of confidence – a confidence that the stock market measures every day.

In short, there’s no need to wait for the latest official data, opinion polls, or market research. The market can take care of that at once – and it’s saying thumbs down all the way.

This begs the question: Will the market ever recover?

Don’t Say Goodbye To Wall Street Just Yet

There’s little doubt that the gut-wrenching occurring at the moment will turn to the usual jubilation on the way back up.

However, the market will only recover when the regulators get their act together and take care of some of the issues surrounding “moral hazards,” such as mark-to-market accounting, toxic assets, unfettered rumor mongering, and of course inequitable distribution of wealth.

Until they do, we’ll be at the mercy of a market that is in the throes of uncertainty with a new emperor who appears to have an unlimited supply of fiddles.

This situation begs questions, such as: How much longer will the market continue to drop? And who won’t make it out of this mess?

In It To Win It

As we’ve proved on a consistent basis, we just keep trucking along though whatever the investing world gives us – and chalking up profits.

For example, the daily market analysis that our technical wizard has given his 1-2-3 Trader subscribers recently has been spot-on. He’s taken timely positions on both the long and short side to capitalize on the trends.

And Lee Lowell is raking in equally impressive premiums for his Instant Money Trader readers, as the poor market continues to create plenty of put-selling opportunities.

And just as any investor should do, we’re maintaining a healthy overall balance to our Xcelerated Profits Report newsletter. Yes, a few positions have taken some hits… but they’re also the ones that we’re confident will be big winners over the long-term.

And as for the rest of our picks?

Well, let’s just say that they’re bringing home the bacon even now, or are poised to do so soon enough… just like Tesoro (NYSE: TSO), which brought in gains of 108% this week.

Here’s Marc Lichtenfeld…

How To Stop A Really Bad Idea

I was astounded that our wise and trusted leaders (insert dripping sarcasm) have proposed instituting a .25% tax on all stock, options and futures transactions.

‘Atta boy! Way to encourage investment while our markets are off by nearly 50%!

I can’t urge you strongly enough to tell your elected officials that this is a horrible idea. An online petition has already gathered over 14,000 names, sent to each signee’s Senators and Representatives.

In fact, since I can’t stress this enough, here’s the link to add your name, too.

Eastern Europe Heading South

And we’re not the only ones suffering. I’m hearing increased concern among my institutional contacts about an Eastern Europe contagion.

If you haven’t yet read about it, a credit crisis is brewing in Eastern Europe, similar to what’s going on in the United States. Similar, that is, except for one very important exception: Along with the slumping economies leading to loan defaults, local currencies like the Polish zloty are down over 33% against the euro.

That’s a big problem for consumers who borrowed in euros… but are paid in local currencies.

It’s also causing concern for Western European banks, who are funding their Eastern European subsidiaries and offices with euros… but are paid back in local currencies.

The worry is that large banks based in Austria, Germany, Italy, Switzerland and Sweden won’t be able to sustain the losses caused by problems in Eastern Europe, collapsing and taking the entire sector with it.

According to The Economist, Austria has lent $230 billion euros to the region, which is equal to about 80% of its GDP – a mind-blowing amount.

And the chickens are coming home to roost now, with Austria’s finance minister, Josef Proll quoted thus in Vienna’s Der Standard newspaper: “A failure of 10% would lead to a collapse of the Austrian financial sector.” And the European Bank for Reconstruction and Development estimates that bad loans will top 10% and could go as high as 20%.

My advice? Keep a close eye on this situation and be prepared to move money to the sidelines quickly if we begin to see cracks in the foundation of the European banking system.

As we’ve stated here several times over the past few weeks, we think gold investing is one of the best options at the moment. In addition to highlighting a lesser-publicized reason why gold could head even higher from here, we’ve also alerted you to a gold price indicator that can tip you off on when the metal could rise, plus reasons why you should invest in gold.

Roche Brings in the Big Bucks For A Win-Win Situation

In order to try to complete its acquisition of Genentech (NYSE: DNA), Roche has gone to the credit market to raise some money. The original plan was to issue $10 billion in bonds, but due to strong demand, it ended up raising it to $16 billion.

This is good for everybody involved, as it means:

• Roche receives more money via cheaper bonds, thus presumably borrowing less from the banks at a higher interest rate.
• Genentech might get more out of the offer, since the higher level of funding makes it easier for Roche to up its offer from the current $86.50 per share.
• The markets see that there is money out there to be lent to quality companies.

With so much doom and gloom out there, the Roche bonds are a welcome sign that business will still be conducted.

Over to our commodities expert Lee Lowell now…

Commodities Are Back On The Downturn… With These Two Exceptions

It looks like we’ve got another tough round of declines in just about every market, but there’s still a silver lining in the commodity world.

A silver and gold lining, to be exact.

I’ve mentioned over the last few weeks that gold and silver are now the beneficiaries of all the turmoil affecting the other markets. If you’ve been long on gold and silver, congratulations, because it’s paying off nicely so far. My Triple-Zone Profit Trader just took profits from a bullish silver position.

For now, the path of least resistance remains lower in all commodity sectors, including oil, grains and softs. So if you’re looking for bullish commodities investments, the smartest play at this point would be to play option strategies on pullbacks in the gold and silver markets.

Jim Stanton wraps things up this week with some technical talk…

Tech Talk

Over the past couple of days, we’ve seen a couple of new twists in the stock indexes.

As of last week, the Dow Jones Transportation Index was the only one to trade below its November low. But on Thursday – and again today – the Dow Industrials broke through its November lows. The S&P 500 and New York Stock Exchange Composite aren’t far behind.

According to Dow Theory, when the Dow Industrials and Dow Transports make new lows within a reasonable period of time, it confirms that these indexes are on a “Dow Theory” sell signal, with lower prices likely to follow.

Right now, we have a projected minimum target of around 2,594 for the Dow Transports, with the next major support levels for the Dow Industrials set at 7,155, then possibly down to 6,825.

However, it’s not all doom and gloom. There’s a good chance that the stock indexes could still tracing out a large consolidation pattern and if so, they could stage a sharp rally at anytime before coming back down.

Have a good weekend.

Karim Rahemtulla