Perhaps you are one of the few buyers in the marketplace, perhaps you are a regular or sometime viewer of Mad Money hosted by Jim Cramer on CNBC, perhaps you were just putting your toe in the water of refinancing at the end of November 2010 and the boat left the dock without you so now you are back in the market (unfortunately your home value is likely lower or you have some other issue that as diminished this opportunity) so here we are. Record LOW INTEREST RATES! Or (based on my last posting) you know better than me because you are well armed with media outlets like Yahoo! CNN, Google, etc. (I digress)

What happened? Things were cooking along at an amazing pace. American investors were enjoying the perfect storm. Yields on Fixed Income Investments were getting better, Stock Market Returns were improving, commodities were offering big returns, the dollar was supporting all of this and precious metals and global currency funds were also very attractive. A 1920s and 1990s and 2000s style wealth utopia was being presented. Happy days were here again!

Let's look at why this happened most recently. I wrote previously about how QE II was an ingenious ploy by the US Federal Reserve Board that would work to prop up our economy, consumer sentiment (via wealth building) and future growth. It was derided by everyone. "This is inflationary" people said. Little did they know that The Fed was actually trying to stave off DEFLATION. That dirty little word is a huge drain on any economy. "Why would I buy a house today if the price will go down eventually and I can get if for less if I wait" is a question that many are asking today. So many are asking that nobody is buying a house and as a result the price of said house is going down, creating a vicious cycle in only one sector of our economy. Extrapolate that statement across our economy, then across a global economy and the standstill that is created causes a huge mess. Last point of fact related to this: As the global economy subsides and demand is reduced internationally the US Dollar that has been propped up by the Federal Reserve Board (US) will rally and our devalued currency will strengthen resulting in lower costs for worldwide goods purchased in the United States including Oil, Gold (current reserve currency), all dollar indexed items and any goods imported to the US. Stronger currency=lower costs for US Consumers= more deflation.

QE II is gone! The Fed took a lot of heat. They devalued the Dollar which caused a stock market rally, they lowered rates by purchasing massive amounts of bonds, they increased commodity prices by devaluing the dollar and they created inflationary fears in a deflationary environment (this made the program work better than expected). This program staved off a potential "double dip recession.'' It primed the economic pump and allowed The Fed to say that economic improvement was just around the corner because the euphoria created by a recovering stock market would cause people to hire, people to spend and the engine to run on its own without outside stimulus. Does anyone know that Ben Bernacke is the leading expert on the Great Depression of the 1930s and has studied and implemented the aspects of his knowledge to divert another one? It is bad, very bad if you don't have a job, but it is not as bad now as it was then (there are more people and the economy is more global today).

Don't blame the Government. Yes these idiots could not come to an agreement until the last possible day. Yes we lost some momentum and sentiment in our markets because of the threat of losing our AAA rating (remember these ratings agencies are the same people that gave AAA ratings to almost everything in the most recent "housing boom" days). "The US Government was going to default" is what our media intelligencia were telling us (I use the words media and intelligence very loosely in the same sentence). In reality, the Stock Market is a forward looking index. This weeks news included the following: ISM Manufacturing teetered on contraction, ISM Services actually indicated contraction, Consumer Spending was down, Consumer Savings was up (a lot), Private sector job growth was better than expected but still anemic, and New Jobless Claims were over 400K again for the WEEK. Oh, and to add to the turmoil...The European Economy is not so robust and there are contagion debt issues abounding across the CONTINENT! Did anybody pick up on the fact that the Chinese Economy is slowing precipitously? Yes, that's happening, too!

Once the forward leaning index of the US Stock Market and the Global Markets got the data the realization (along with a stronger US Dollar) that the economy's pump is not quite as primed as we've been told investors started selling. Every day new sellers showed up. We hit a continuous high and resistance point of 12,500 on the Dow and all of the storm clouds listed above created a downpour of sellers. Palms out in the pits caused every major index to break through every floor of support until nobody trusted the next layer of support. It could get worse, is likely to get worse, and the Non Farm Payroll Report will be the next indicator of market movement. I didn't get to post this prior but will add to the commentary and help to digest the information later Friday or over the weekend...

Then the Federal Reserve Board Meets Next Week!

Interesting times INDEED!