So you finally get to see some growth figures from the ISM and then the market sells off again. We have enjoyed a heck of a run-up and now trading desks are lightening up to boot as we get closer to the 3-day weekend. Today was such a poor result on the market internals that even all the defensive stocks were dropping. Even inverse-leverage ETF's were getting traction again. Bill Gross's bleak outlook probably only added insult to injury today.

Here are today's unofficial closing bell levels:

Dow 9,310.60 -185.68 (-1.96%)
S&P 500 998.04 -22.58 (-2.21%)
Nasdaq 1,968.89 -40.17 (-2.00%)

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In February I interviewed Bill Gross back when the Dow traded at 7,182. Gross's message? Equities are dead. Or more specifically, in light of his expectation that there would be no economic growth for the foreseeable future, there was no point in risking an investment in common stock since it stands in line behind all sorts of debt for a piece of the cash flows of a company in the event of a bankruptcy.

Interestingly, President Obama spoke to reporters not long thereafter -- on March 3rd to be specific when the Dow was at 6,726 -- and during that talk, he mentioned that buying stocks might be a good deal. Since then, the Dow has risen 21.5% and since Gross recommended staying away from stocks, they've gained 13.8%. The Dow is at 8,175 as of this writing.

Just when I think I have heard it all, they come up with something even more eye-poppingly incredible. That's right folks. First they sucked you into the dot-com boom; then wiped out your tech stocks. Next they urged you to buy houses with money you couldn't pay back -- and those houses plunged in value while the global stock markets lost half their value -- further decimating your net worth.

Now they want to give you the once in a lifetime opportunity to buy the very toxic waste that is sinking the entire global financial system. And if you have a job in state government, your pension fund may be enticed into this financial sludge as well.

Bill Gross is a big deal in bonds -- with $747 billion under management in his PIMCO. Gross emailed me yesterday because he was a bit put off by some of my recent media comments about him. I responded to him by asking him some questions about PIMCO and the general market. He thinks that equities are history and people should buy bonds instead.

Gross is obviously talking his book but in my interview with him, he made a very interesting point. He suggested that since bonds and preferred stock are senior to common stocks in the liquidation hierarchy of a company, in a slow growth environment, there is no upside to stocks, only downside.

While Bill Gross is big-time bond trader for Pacific Investment Management Co., he also has some interesting takes on the equities markets. Unfortunately, his views are fairly pessimistic.

According to Gross, the stock market can be somewhat nuanced. In fact, he compares it to a "fragile flower where price is part perception, part valuation, and part hope or lack thereof."

In his analysis, Gross takes a look at several well-known market metrics. For example, there is the "Q" ratio, which compares the stock market to the replacement costs of the net assets. If below 1.0, then stocks are cheap. Interestingly enough, the ratio is now the lowest since World War II.

Next, there is the P/E ratio. And yes, this is also at historically low levels.

So, it is time to buy up shares? Perhaps not.

Basically, Gross says that we need to account for a myriad of trends. First of all, there is a massive deleveraging of the economy. In other words, there is much less financing to boost valuations.

Another problem: expect much more regulation of the economy, which will likely slow things down.

Oh, and it's a good bet there will be higher taxes.

For the most part, Gross thinks that these trends are "transgenerational." Essentially, the US is moving away from being a financed-based economy and becoming more enmeshed in government meddling (keep in mind that 20% of bank capital is now owned by the US government). The upshot is likely to be slower growth, and in turn, muted stock valuations.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

During the Great Depression, Franklin Roosevelt established the Work Projects Administration (WPA) to create work -- such as constructing public buildings, projects and roads and operating large arts, drama, media and literacy projects -- for Americans of all stripes.

Now the W Administration has its own WPA -- but this one only applies to the very wealthiest of Wall Street who are looking for more to do. The three million homeowners who are going through foreclosure won't get that $810 billion ($700 billion is earmarked for buying financial toxic waste and the other $110 billion went to buy the additional votes -- through tax cuts -- needed to get the House to pass the bill).

How will W's Wall Street WPA (WSWPA) program work? It will hire firms such as Bill Gross's PIMCO and Blackrock (NYSE: BLK) to manage a reverse auction to buy that toxic waste. Bill Gross bought $500 billion of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) bonds at distressed prices, "advised" the administration on its $200 billion program to nationalize Fannie and Freddie, and then profited handily when the bailout boosted the value of Gross's bonds. Blackrock is already enjoying our tax dollars as the manager of the $29 billion in Bear Stearns assets which the Fed took on back in March. In total, WSWPA could generate $7 billion in fees (1% of the $700 billion to be spent) for Wall Street.

After last Thursday, when the Dow lost 345 points, I speculated that another bailout plan would emerge over the upcoming weekend. As I posted, there was no obvious reason why the market fell so much that day. But one of the possible clues of trouble was that Bill Gross, who manages the $800 billion Pacific Investment Management Co. (PIMCO), was making noises about how the government needed to spend $500 billion to save the housing market.

Coincidentally, Gross -- whose holdings include $500 billion in mortgage-backed securities (MBS) -- is rumored to have "helped" the Treasury with its bailout plan for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). And he has profited handsomely from it since he bought the MBS during the panic-- which have risen in value post-bailout.

The reason I felt that a bailout was coming is because this administration has a solid track record of responding to stock market plunges with weekend rescue plans. Evidently it is concerned that Asian markets -- more specifically China's which happens to own $340 billion worth of MBS -- need a weekend bailout plan so when their markets open on Monday they will have something to celebrate. The Big Picture has provided a helpful service by listing the six Sundays in the last 14 months that the government has announced a new bailout plan for the financial markets.

To understand why as much as $800 billion in taxpayer money could be at risk in this bailout, it pays to look at its winners and losers. Last month I appeared on CNBC's Power Lunch discussing the potential winners and losers from a bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).

The bailout has been announced -- featuring a government takeover of their operations, receipt of senior preferred stock worth $1 billion paying 10% dividends, the promise of buying up to $200 billion more worth of senior preferred each quarter to keep their net worths positive, $5 billion worth of open-market mortgage-backed securities (MBS) buys, and a demand that they reduce their MBS holdings by two-thirds over the next several years.

It is clearer today that this takeover was triggered by a report from Morgan Stanley (NYSE: MS) that Fannie and Freddie needed $50 billion in capital "to offset the companies' combined losses," according to the New York Times. They had reported $84 billion in capital at the end of June, $12 billion more than the minimum required to trigger a government takeover. The Morgan Stanley report suggested that overly optimistic accounting understated their capital needs.

Three weeks after Barron's reported that a senior administration official -- my guess is it was Hank Paulson -- leaked details of a "rescue" plan for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) -- Bloomberg News reports that its implementation could be imminent. And in after-hours, shares of both companies are down 20%. If what Barron's reported -- wiping out common shareholders and slashing preferred dividends -- proves prescient, both stocks have further to tumble -- as in all the way to 0.

Bloomberg reports that Paulson met with Ben Bernanke and the CEOs of Fannie and Freddie and the head of the Federal Housing Finance Agency which oversees the two. And they have catering set for the entire weekend. I wonder what they are serving? I think PIMCO bond guru Bill Gross knows. He said, "There's probably a 95 percent chance that the moment that something will happen is Sunday or Saturday," according to Bloomberg.

Yesterday Gross called for the government to use $500 billion to bail out the real estate market. As I posted yesterday, this bailout is for the benefit of people like Gross and China's central bank which owns $340 billion worth of Fannie and Freddie mortgage-backed securities. If you happen to be among the holders of their common or preferred stock -- you are going to lose it all. As I suggested this morning, after the market lost 345 points yesterday, the government needed to announce another rescue plan by Sunday night.

Bill Gross of Pimco, one of the most respected bond investors in the world, thinks the credit crisis is about to get much, much worse. He also believes that the federal government is the only entity that can save the markets.

Gross's biggest concern is that financial companies will have to keep selling assets to raise cash. With home prices falling, he does not see an early end to this, and that troubles him. According to Reuters, Gross wrote "Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami."

Gross may be right, but his suggested solution is wrong. He wants the U.S. Treasury to start buying distressed assets to help build a floor for their values. Of course, the funding source for Treasury is the U.S. taxpayer.

Solving one problem by creating a larger one is rarely a good program. There is a great deal of evidence supporting the fact that taxpayers are already stretched to the limit. Job losses are up. Easy credit is gone. Gas, oil, and food cost much more than they did a year ago. The average person, who may already be unable to handle his own financial burdens, can hardly be asked to help support the purchase of assets being sold by large financial institutions.

If Gross's vision about the future of the credit markets is right, the financial system is only at the beginning of a growing disaster. But, turning to the U.S. citizen for cash is like looking through a man's pockets for a spare change. All the more valuable paper money has been spent.

Douglas A. McIntyre is an editor at 247wallst.com.

"We've added two bond fund's to our buy list: PIMCO Total Return (PTTDX) and Loomis Sayles Bond (LSBRX)," says Mark Salzinger.

The editor of The No-Load Fund Investor explains, "We favor both funds for many of the same reasons: both have experienced, top-flight management supported by robust credit-research staffs." Here's his review.

"Both bond funds have performed strongly over the long-term and during recent market turbulence. And each has a relatively open mandate that allows their respective management teams the flexibility to scoop up attractive bonds from diverse sectors of the bond market in pursuit of both capital appreciation and income.

"PIMCO Total Return is the world's biggest bond fund, and second large mutual fund of any stripe, with $128 billion in assets. The fund's popularity is a product of the outstanding track record and enormous reputation of its manager, Bill Gross. Its 10-year annualized return of 6% puts the fund in the top 5% of all intermediate-term bond funds over that time.

Investors have watched the precipitous fall in the U.S. dollar over the past few years with trepidation. Investors in Israeli stocks trading in the U.S. have witnessed the once-lowly shekel dominate the dollar (and most other global currencies) over the past two years. It looks, at least from some uber-investors' perspectives, that the dollar may be set to reverse -- a boon for those companies with significant sales in the U.S.

Bloomberg has an article out this morning saying that bond guru, Bill Gross, the manager of the world's largest bond fund, the $129 billion Pimco Total Return Fund, has turned negative on the euro for the first time since its inception in 1999. According to the article, Gross's firm, Pimco, believes that according to purchasing power parity, a measure used to account for differences in exchange rates across countries, the euro is overvalued by 30%.

And Gross isn't the only one who is concerned that Europe may suffer a bigger slowdown than the U.S. in a world confronted with slowing growth and financial snafus. The same Bloomberg article says that according to a recent poll conducted by Bloomberg of global strategists, many think that the euro has seen its day and that the dollar is poised for a rally (hard to believe in the face of Fannie Mae and IndyMac).

Europe's Trichet-led Central Bank has signaled that it may be done raising rates. In fact, given the choice between fighting inflation and re-energizing a sputtering economy, some are betting that the ECB may need to actually lower rates. With a Fed-led plan to bailout the U.S. banking system and the bottoming out of the dollar, it looks like Gross and Co. are betting against the euro for years to come.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Perhaps the most well regarded bond manager in the country, Bill Gross of Pimco, is making a huge gamble on mortgage debt. The Pimco Total Return Fund, which invests $130 billion, has tripled its exposure to mortgage debt instruments.

According to the FT, Gross is counting on the US government to partially bail out the housing industry. He told the paper that "his decision to raise exposure to mortgage debt in recent months was based on the US government's implicit guarantee of Freddie Mac and Fannie Mae, the government-sponsored mortgage agencies."

Of course, counting on the government to do anything is a bit risky, but Gross is probably making a good bet that the US will not let the housing situation slide much more than it has already. The risk to the entire economy is too great.

Gross could be right, and, if he is, Pimco investors stand to make huge returns on the fund.

Douglas A. McIntyre is an editor at 247wallst.com.

In the world of fixed income, as in the world of markets in general, there is almost no one whose predictions are worth listening to.

Bill Gross is an exception and, in an interview with Kiplinger, he gave his bleak outlook on the economy and a tip for investors: We are probably in a recession, and it's not going to be a quick easy one. And what should you do with your money? Well it isn't as exciting as what most gurus will tell you:

The most attractive area, the one that's been tossed away for a number of reasons, is the municipal-bond area. There are hundreds of closed-end municipal-bond funds that trade on the New York Stock Exchange. Many trade at 5% to 10% discounts to their net asset values and at yields of 5%, plus or minus.

Municipal bonds have been tossed away for several reasons. One: they're not bought by the Chinese or by the Saudis. The Saudis have no use for a municipal bond and its tax advantages. That's one of the reasons they haven't gone up in price and down in yield.

His rationale, as always, seems to make great sense. To lean more about how to think like Bill Gross, check out The Bond King: Investment Secrets From Pimco's Bill Gross.

One good sign of a bottom is when the media is panicking and the shrewdest investors aren't afraid to be contrarians. We may reached the point in the subprime crisis.

According to The Wall Street Journal, Pacific Investment Management Co. (Pimco) is planning to launch a $2 billion distressed-debt fund, hoping to play the role of "vulture" picking up subprime debts on the cheap as weaker hands dump them in panic.

According to The Journal, this could be a sign that credit markets are "beginning to adjust to the market turmoil." Pimco sports an impressive roster of talent, most famously Bill Gross, who has been called the "Peter Lynch of bonds." The firm also just lured Mohamed A. El-Erian back from his role managing Harvard's endowment.

While investors probably shouldn't run in and start buying Novastar Financial (NYSE: NFI) first thing in the morning, this could be a sign that the worst of the subprime woes are over. Savvy investors may want to look into putting money in a high-yield bond ETF.