Optimism around holiday spending, strength in the stock market for the second half of 2009 and wishful thinking about the economic climate aren't going to be enough to turn the situation around. And, there's more to the story than the 10% unemployment rate. Moody's Investor Services said Tuesday that more people fell behind on their credit card payments in November.

The charge-off rate on credit cards increased to 10.56% last month, according to the Moody's Credit Card Index. It had fallen in September and October, settling at 10.04% before ticking back up last month. Fortunately, this remains below the June level of 10.76%, a record high.

The market staged an impressive rally this year, but it was predicated on some very big lies, as opposed to solid fundamentals or the beginnings of a real recovery in the U.S. economy.

The biggest lie investors were fed? That, statistically, the recession "officially" ended in Q3 when we saw 3.5% GDP growth. Sure the Bureau of Economic Analysis revised their number substantially in November, saying we only saw 2.8% growth, but this was growth nonetheless ... according to the statistics.

What happens when a bank has to accept the collateral posted for loans? Well, in Russia, it's like the punchline to a bad Yakov Smirnoff joke. "In Russia, when a bank takes collateral, it has to set up a pigpen!"

Well, this is exactly what happened to Alexander Lebedev's OAO National Reserve Bank. It wound up with 40,450 of them. As Russian banks are coping with the financial crisis, they are finding themselves with a variety of hard goods that they never expected to receive.

Up until the credit crisis, private equity firms had it made. They had plenty of leverage to play with and could load up their acquisition targets with it. So, they could realize a fantastic return on equity, mitigate their own risks, and show that they were the studs of the Street.

Then, all that went away. Credit markets dried up, and private equity companies lost their acquisition fuel. The numbers aren't as big as they used to be, but it looks like the private equity market is back in action.

Private equity returns are down 27.6% year-over-year for the 12-month period ending July 30, 2009, according to a Preqin report received by BloggingStocks. The London-based research house notes, however, that the global private equity industry's dry powder (i.e., uncommitted assets) continues to exceed $1 trillion, suggesting that there is still plenty of capital waiting for a rainy day.

Returns for the past 12 months reflect all the nastiness we've seen and lived -- bailouts, company collapses, equity and credit market mayhem and unemployment rates dangerously close to double-digits. But, the money is still coming in. Preqin puts the rate by which contributions outpaced distributions at 235% for buyout funds in 2008. This category raised $148 billion while distributing only $63 billion, making last year the most imbalanced for these two measures in history.

Everything is fine, right? I mean May was a great month, following a solid April - so we are out of the woods, right? Not so fast my friend, there are some hints that we could hit a second credit crisis. According to this article, some early warning signs of another global financial crisis include surging government bond yields, a slumping dollar, and the end of the bear market rally in the U.S.

The most worrisome possible signal is the heavy selling of U.S. dollar-denominated assets, which could "trigger a full-blown currency crisis and usher in surging inflation." This assertion means that we should be a bit concerned that the Treasury note yields' surged to six-month highs near 3.75% this week. This move indicates that investors may be concerned about the U.S. government borrowing requirements this year.

The entire country has been struggling with the current recession, and while we are still not out of the woods just yet, there are signs that the economic free fall is at least close to coming to an end.

This morning President Obama stated that we were starting to see "glimmers of hope" in the economy, claiming that we are "starting to see progress" on a number of fronts. While Obama admits that the economy is still under "severe stress", he noted that we are seeing a boom in demand for mortgage loans and refinancing, and a thaw in some credit markets.

Few people reading today's news will pay much attention to Latvia's debt being cut to junk. So why even spend time reading about this small insignificant country?

Remember back on February 22, 2008 when the British bank Northern Rock went insolvent and had to be taken over by the state. No one back then really paid much attention. It was a small news item and didn't impress most people. What most people didn't notice was that Northern Rock was one of the top five mortgage lenders in Britain. Looking back, the failure of Northern Rock was probably the beginning of our current banking crisis.

Yes, you may hear that the corporate bond market is breathing again and the exotic "TED spread" -- the difference between T-Bill and LIBOR rates -- is shrinking, but no one is lending money to anyone and confidence is non-existent.

Recently the entire country of Spain (meaning Spanish national debt) was put on credit watch due to deteriorating economic conditions.

Remember, the Wall Street Crash of 1929 and the Great Depression (I am not forecasting either one, by the way) started at a medium-sized bank in Austria, not on Wall Street or in London.

Credit markets are not only frozen because we don't know what is on the banks' balance sheets; they are also frozen because banks are repairing their own balance sheets by hoarding capital.

Be sure to read all 7 reasons the stock market isn't going up any time soon.

Michael Shulman is a contributor to OptionsZone.com.

The banks are a wreck and now the pieces are beginning to fly apart, with Citigroup (NYSE: C) struggling the most and beginning to dismember itself.

Meredith Whitney, the uber-analyst who has been right about everything in banking for more than two years, said there were $2.4 trillion in asset downgrades at the end of last year by the credit agencies. This will really whack the banks' critical Tier 1 capital.

And even if you forget earnings problems, the banks will continue to have no money to lend, which will strangle businesses and the economy.

Be sure to read all 7 reasons the stock market isn't going up any time soon.

Michael Shulman is a contributor to OptionsZone.com.

Speaking on PBS' Nightly Business Report, Berkshire Hathaway (NYSE: BRK.A) honcho Warren Buffett provided his outlook on the economic crisis:

"They're bad, they're bad. The credit situation is getting a little better now. Things have loosened up from a month ago in the corporate debt market. But the rate of business descent is at a pretty alarming pace. I mean, there is no question things have really slowed down. People's buying habits have changed. Fear has taken over and fear is a tough thing to fight."

Other highlights from the interview: Buffett said that he is "not opposed" to buying back his company's stock and said that the government cannot stand by and "do nothing" to stimulate the economy, even though there is the potential for major inflationary consequences.

But the most important item for investors is this: Warren Buffett bought stocks yesterday.

As we ring in the new year, it feels nice to put 2008 behind us.

In what all traders would agree was the craziest market they'd ever seen, we were taken on a roller-coaster ride fueled by the subprime mortgage fiasco, a recession, bailouts, a credit crisis, scandal and a historic election.

Here are 10 of the wildest days and biggest point moves on the Dow during the last 12 months:

#10 Saving our Fannie (and Freddie): After years of financial shenanigans and controversy, Freddie Mac and Fannie Mae were placed into conservatorship in a federal takeover of the government sponsored enterprises. (July 14)

# 9 The day after (Bear Stearns): Just one day after the collapse of Bear Stearns, the market rallied on a 75-basis-point Fed rate cut and better-than-expected earnings reports from Goldman Sachs and Lehman Brothers. (March 18)

#8 We've got a bad feeling about this: Facing the possibility of a 500-point drop in the Dow, the Fed sprang into action early to shore up the markets. (Jan. 22)

#7 I've always wanted to be loved ... and be a banker: The federal government announced it would take preferred equity stakes worth up to $250 billion in several U.S. banks to keep money flowing through the financial system. (Oct. 14)

#6 Consumer confidence hits all-time low ... let's buy stocks!: Consumer confidence reaches the lowest levels on record since the survey began 41 years ago and the market rallies to post its second-largest gain of the year. Huh?!? (Oct. 28)

#5 It's official: U.S. economy enters recession ... in 2007: This headline from the NBER combined with other weak economic data and more troubles in financials to drag down the Dow by nearly 700 points. (Dec. 1)

This post is part of a feature in which he wonder whatever happened to some notorious financial felons. See all 17.

Bernard Ebbers, WorldCom's founder, built it into the world's largest telephone company, then drove it into the ground with his illegal dealings. He overstated WorldCom's cash flow by improperly booking $11 billion in company revenues. Shareholders first became aware of the problem when WorldCom announced it needed to restate its financial reports in March 2002.

As part of his shenanigans, Ebbers got $400 million in off-the-books loans from the company. Criminal fraud charges were filed against Ebbers and former Chief Financial Officer Scott Sullivan. Sullivan pleaded guilty to three criminal charges related to the fraud and cooperated with prosecutors in their case against Ebbers. Ebbers was sentenced to 25 years in prison. He is serving his time in the Oakdale, Louisiana, Federal Corrections institute.

Investor groups filed a class-action case against WorldCom's former directors, former executives, 18 banks, and its auditor, the infamous Arthur Anderson. A settlement was reached with some of these plaintiffs. Some former WorldCom directors paid a total of $50 million toward the settlement. Citigroup, which had promoted WorldCom's stocks and bonds as good investments even though it had concerns about WorldCom's rocky financial position, paid $2.65 billion.

AIG (NYSE: AIG) is borrowing even more money from the Federal government. As of October 23, it had tapped into $90 billion of the $123 billion the government has made available. The insurance giant was set up with the massive credit line on concerns that if it fails, it could bring the global financial and credit system down with it.

According to The Wall Street Journal, the weekly total of AIG's draw-down remains large. "The new total is $7.4 billion, or nearly 9%, more than AIG had tapped as of a week earlier," the paper said. On Oct. 22, AIG's chief executive said the current bailout loan might not be enough.

Since it is a real possibility that the amount of capital available to AIG may be inadequate, the important question to ask now is, what happens if AIG needs more money?

For starters, common shareholders will probably see the value of their holdings go to zero. AIG's shares are already down to under $2 a share -- a sign traders think it will go bankrupt -- compared to a 52-week high of $64.25 (a full year ago). The government owns 80% of the firm now. For people in the stock, it is probably a good time to take whatever money you have left and run.

The more difficult question is how far does the government go in providing funds? The answer is that the amount of capital may have to go much higher. The credit crisis is not getting better. AIG's credit derivative swaps and mortgage-backed paper are falling in value almost every day. If the government still believes that propping up AIG is the key to averting a true global financial meltdown, it will have to extend more credit to the company.

Economists could debate whether AIG had to be saved. But now that the government has set itself up as a savior, it can hardly back down. If AIG were to go bankrupt it could spark a catastrophe which might be bigger than the one caused by the failure of Lehman. That's a risk the country can't take right now.

Douglas A. McIntyre is an editor at 24/7 Wall St.

One of my relatives works in construction. Bags of material needed to make concrete have lately been piling up at his job site because no one is mixing the stuff. That's yet another sign of the slowing economy and the impact it's having on people. Today's expected dramatic selloff in the stock market is another.

Investors used to gasp when they saw a triple-digit decline in the Dow Jones industrial Average. Now, as one of my friends recently noted, it's "another day at the office." It's not that people like huge declines; they have grown accustomed to living in a constant state of dread.

Today is no exception. Trading, which was limited in the pre-market, is going to be awful. Call it "Frantic Friday" or "Freaky Friday." Fear is ruling the day again. Investors are not acting rational. Blah, Blah, Blah. You have heard it all before. The only questions is why the world appears to be coming to an end today.

My colleague Peter Cohan points out that markets in Asia and Europe have been tanking. Even Canada, which largely avoided the subprime crisis, is guaranteeing up to C$218 billion in bank debt to match the bailouts offered by other countries. Remember, Canada's banks were recently recognized as being the most stable in the world. This underscores the nervousness of investors.