Yesterday, the market had a swing of over 900 points as indexes hit new lows for the year and then pushed upward to close 6% or so higher. Overnight, markets in Asia and Europe staged rallies of their own.

The stock market may march up for a while, but that can't be sustained and the odds are likely that it will crash and make new lows again before year's end.

The fiction is that the markets trade based on what they see six months into the future. Perhaps they see GDP recovering by then. Not a chance.

George Soros said yesterday that there is some chance that the world economy will enter a depression next year. That may be extreme, but a majority of business leaders and economists who want to be heard on the subject say that this is the most significant downturn of their lifetimes.

There is a view that falling housing prices are at the core of the disaster that has overwhelmed the financial structure of the country and is now hurting everything from retail sales to tech company revenue. Housing may be helped by government programs, but if unemployment hits 8% or better next year, the number of people who have to give up their homes could rise sharply. Lower interest rates do not help people out of work.

Another misconception about the future is that oil prices will continue to fall. With some OPEC nation's facing budget deficits due to crude dropping from over $140 to $55, the cartel will have to cut production to meet demand. That may mean a huge cut, but OPEC can match the drop in the global need for oil with a paltry supply.

The stock market has not stopped going down.

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

Congress will bring in a bunch of big hedge fund managers like George Soros and ask them why they make so much money. It will also try to figure out if they control too much of the trading on Wall Street and borrow too much money from banks putting them at risk if the hedge funds default.

According to The Wall Street Journal, "Already, momentum is building to monitor hedge-fund activities more closely and curtail some trading activities, through greater regulatory oversight and lower borrowing limits, industry insiders said."

The government may be going a little too far here. For starters, hedge funds are private institutions with the exception of a couple which have gone public. To a large extent what they pay their traders is based on a formula which their customers accept. These fees are not forced on anyone. It is not an odd analogy to say that a farmer who makes $100 million because he owns 50,000 acres of corn has reaped what he deserves for his labor. But, he is not going to be in front of Congress testifying about what he made. Free enterprise has given him his reward.

On the issue of whether hedge funds borrow too much money and then put it as risk by making aggressive trades, that can be regulated from the side of the banks. If the government thinks banks take too many risks in lending, it can curtail that through actions by the FDIC or the Fed.

The great majority of hedge funds make their profits fair and square. Regulating risk in private enterprise takes the incentives out of making money for hedge fund clients. And, that damages the economy's ability to create wealth, and through that, demand for goods and services.

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

One of the world's leading investors is expressing cautious optimism - - underscoring cautious - - regarding the fate of the global financial system.

Billionaire investor George Soros said Monday a pledge by European leaders to guarantee new bank financing is "a positive step" may help stabilize global financial markets, Bloomberg News reported.

Soros: We're finally getting the leadership we need

"In the last 72 hours, I think the European governments got religion and realized that this is a serious problem,'' Soros said at a press conference in Washington, Bloomberg News reported. "People are looking for some leadership and finally they are getting it." Soros is chairman of the $20 billion Fund Management LLC.

Along with actions by the major central banks to increase the supply of dollars in the global money supply, Europe's major industrialized nations announced fiscal policies to back bank-to-bank loans and recapitalize banks, The New York Times reported Monday. Britain said it will invest $73 billion in its banks, Germany is investing up to 500 billion euros or about $680 billion, and France will create an agency to offer state guarantees for banks and to channel money to them.

Further, Soros underscored that the United States government must recapitalize solvent banks, ft.com reported Monday. The U.S. said it intends to do that, but has not yet released details of its plan. Soros would like the U.S. government's recapitalization to take the form of preferred shares, which would dilute existing shareholders, but with private capital given the right to subscribe on the same terms, if private investors are able to put up more money, ft.com reported.

The latest trend among pundits who want to look like they know what they're talking about is to assert boldly that the Fed's $700 billion purchase of dodgy mortgage assets no one understands or wants poses no risk to taxpayers and will surely make us money!

In an op-ed piece (subscription required) for The Wall Street Journal, Andy Kessler asserts that "My analysis suggests that Treasury Secretary Henry Paulson (a former investment banker, no less, not a trader) may pull off the mother of all trades, which could net a trillion dollars and maybe as much as $2.2 trillion -- yes, with a "t" -- for the United States Treasury."

I don't understand why, if that's true, Warren Buffett, George Soros, Wilbur Ross and Carlos Slim aren't diving in to make a bailout unnecessary. Warren's a nice guy, but I don't think he's passing on all those profits to taxpayers out of the goodness of his heart. Take the hint: taxpayers are not going to get rich paying artificially high prices for assets that the best investors in the world won't touch with a ten-foot pole.

Another thing to remember: we're buying the $700 billion in crap securities on the margin. We're borrowing the money because our federal government doesn't have enough cash to bail out a Subway franchisee without hitting up the debt markets. So any calculation about what kind of return we'll earn needs to include the hundreds of billions of dollars in interest we'll be paying for the privilege of buying those assets.

Wilbur Ross, the world's most famous buyer of bankrupt companies, who is a sage in his own right, attacked the government''s bank bailout plan. Like Warren Buffett and George Soros, the media hangs on his comments. He has made a billion dollar fortune and is, therefore, considered smarter than most people, whether that is true of not.

Ross has a simple message. Savings banks will do nothing if mortgage-holders are not saved in the process. If the mortgage mess gets worse, banks will continue to have trouble over time, even if the Treasury does put $700 billion into the market.

Ross's comment was straight-forward. He told Reuters that "none of the recent actions to stabilize the financial system addressed the root of the problem -- helping Americans make their mortgage payments."

So, why is the government attacking the crisis from the wrong end of the system? The answer probably is that it is easier to save a small number of banks than it is to salvage hundreds of thousand of mortgages. Renegotiating all of those loans, resetting interest rates, and keeping some homes from foreclosure is simply too difficult a task. Many members of Congress do not view it that way. They want mortgage assistance programs added to the bailout bill.

Not matter what the level of challenge, the federal government has to give banks direct incentives to help the mortgage holder. Nothing can save the economy if hundreds of thousands of more home loans go into default. At that point, the real estate market could collapse and not recover for years.

The $700 billion rescue package would only be a drop in the bucket.

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

In his investment career, Jim Rogers has made some great calls. He is the co-founder of the legendary hedge fund, the Quantum Fund (which got its start in the early 1970s), where he made a fortune on commodities trades (his partner was George Soros).

And since the late 1990s, Rogers has yet again been a bull on the commodities market. In fact, he has written a book on the topic, Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market.

But, with the recent plunge in commodities, is Rogers changing his views? Nope.

If anything, he's bullish for the next ten years (this is according to a speech he made at an investor conference in Kuala Lumpur). Basically, the recent fall-off is a correction. And, expect many more (after all, this was the case during the 1970s).

Basically, Rogers thinks there will need to be a massive global recession to derail the commodities boom. And, he doesn't see any signs of this.

Interestingly enough, Rogers said he is considering investing in base metals again.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Lehman Brothers Holdings Inc. (NYSE: LEH) Chief Executive Richard Fuld is running out of rabbits to pull out of his hat.

The troubled Wall Street bank, which reportedly is set to take a $4 billion write down in the third quarter, is desperate to raise capital. The Wall Street Journal says it's shopping around its investment management business, which includes Neuberger Berman. During the second quarter, the business reported net revenue of $800 million, down from $1 billion a year earlier. Its assets under management were $277 billion. Though these results were hardly spectacular, they stood in contrast to the Capital Markets business, which reported negative revenue of $2.4 billion.

Selling the asset management business would bring in between $8 billion and $10 billion, according to analysts cited by the Journal. Lehman's market capitalization now stands at about $10.4 billion thanks to the 77% decline in the stock price this year.

"Any change in the unit's ownership structure would be bittersweet for Lehman," according to the Journal. "The division has been a strong performer ever since Lehman bought it in 2003, holding up well despite the mortgage crisis. While a sale would give Lehman a cash infusion, the investment bank would lose a steady source of revenue."

Lehman acquired Neuberger for $2.6 billion in 2003, and some unhappy Neuberger executives are eager to dump their shares, the paper said.

Not all investors, however, believe that all hope is lost. Lehman's shares rose Friday on a report that billionaire George Soros boosted his stake in the company.

If the sale goes through, there is no way that Lehman will be able to remain independent.

"While most funds have been dumping stocks in India's sliding market, billionaire global investor George Soros has turned contrarian on India," says international expert Nick Vardy who now suggests "bottom fishing" in India.

In his Global Bull Market Alert, he explains, "One of the best ways to follow in his footsteps are by purchasing the WisdomTree India Earnings ETF (NYSE: EPI)."

"According to the Times of India, the Hungarian born Soros -- who since last August is again actively managing his famed Quantum fund -- recently went on a buying spree in India making investments valued at $140 million in a wide range of Indian companies.

"In many ways, Soros' call is a vintage contrarian bet. India has been one of the worst performers in the global markets this year.

"Institutional investors have pulled out more than $7 billion from Indian equities as the BSE Sensex crashed 7,400 points, or 35%, from its peak of 20,873 back on Jan. 8 amid concerns over a weak global markets, soaring global oil prices and spiraling inflation in India.

"Brokerages and investment banks are uniformly gloomy about India. Inflation has accelerated to just under 12%, a 13-year high. Industrial output in May 2008 rose 3.8%, the slowest in six years. Manufacturing growth slowed to 3.9% in May, while capital goods output growth slowed to 2.5% vs. a robust 22.4% last year.

So far, billionaire investor George Soros says he doesn't see a light at the end of the tunnel; at least not yet.

Soros told Reuters Monday the crisis over Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will not be the last, and that the wider credit crunch will continue to effect the already anemic-growth (or worse) U.S. economy.

On Monday, the U.S. Treasury announced a plan to shore-up Fannie Mae and Freddie Mac, including authorization to buy unlimited stakes in and lend to the companies, aimed at stemming a collapse in confidence, Bloomberg News reported Monday. Soros said the U.S. Treasury's plan, and if need be, the resources of the U.S. Federal Reserve, will keep Fannie and Freddie functioning, but that does not blot-out the main negative: the drag effect of home foreclosures on the U.S. economy, Reuters reported.

'Most serious financial crisis of our lifetime'

Calling the year-long global financial market turmoil "the most serious financial crisis of our lifetime," Soros said the negative impact of foreclosures and the credit crisis is likely to increase, creating a deeper U.S. recession.

Economist Peter Dawson told BloggingStocks that "while Soros provided a candid description of current events, no doubt derived from considerable research, he may have been a little too stark . . . seeing too much of one side of the asset / liability ledger."

Warren Buffett has been pretty vocal about how bad the current downturn will be. The same holds true for billionaire money manager George Soros. He has even testified before Congress to make his concerns known.

Now, Eli Broad, one of the richest men in America, or anywhere else for that matter, says this is the worst economic period of his lifetime. Broad will be 80 soon.

Broad told Bloomberg,``This is worse than any recession we've had since World War II." He does not think the housing market will recover for years and sees a sharp rise in unemployment.

The "billionaire boys clubs" now seems to have formed a consensus, and almost all of it is based on the problems in the housing market. It home sales keep dropping, most of the equity people in the US have built over the last twenty years goes away. If some of these people lose jobs, defaults rise and the matter becomes worse.

You can bet against the very rich, but it is probably not a good idea. They did not become fabulously wealthy by being stupid.

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

Ever wonder why conventional wisdom is so conventional? It's because it's the same people repeating it over and over.

The reason why this happens is mostly laziness. Reporters and TV producers call on the same people to render their opinions because they are the ones who return calls and show up when they are needed. I have done it myself so I know the drill well. Yes, Woody Allen's claim that 80% of success is showing up continues to be proven right. These people can be summed up in several categories: wisemen -- they almost always are male -- whose every utterance is treated as if it was etched in stone tablets by the almighty, and insta-pundits -- who are able to give quotes on every topic imaginable. Finally, there are the personal finance gurus whose message is that by helping me make money, I can help you save money.

Below are my choices for the most overexposed business pundits and media personalities. They are in no particular order.

Wisemen: Alan Greenspan -- Don't you miss the days when no one understood what the former Fed Chairman was talking about? Now, his message is pretty clear: buy my book and the subprime mortgage crisis was not my fault. Honorable mentions: former General Electric Co. (NYSE: GE) Chief Executive Jack Welch, billionaire George Soros, and oilman Boone Pickens.

Hedge Fund guru George Soros warned over the weekend, in an interview with The Daily Telegraph, that " the crude oil market had been significantly affected by speculation." Because of all the speculators driving the price of crude higher and higher, Soros went on to say, "Speculation... is increasingly affecting the price, the price has this parabolic shape which is characteristic of bubbles."

While I tend to disagree with Soros when he predicts that we are headed for a very deep recession, I do think that there isn't much justification to $130+ per barrel of crude. After all, the continuing cry of increasing demand falls short, when the big consumers of oil, are experiencing slower economic growth. After the Olympics, I wouldn't be surprised to see Chinese growth take a sharp fall as well, as many of the public works projects come to an end.

I think that potentially, we will see crude oil fall back to the $50-60 per barrel level.

Aaron Katsman is Senior Portfolio Manager of the Israel Growth Portfolio, of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/27/08

Billionaire investor George Soros said speculators are playing a major role in oil's record price rise. He also argued that the sky-high $130 per barrel price looks like a bubble, The Daily Telegraph reported Tuesday.

Soros said "speculation . . . is increasingly affecting the price" and that oil now has "this parabolic shape which is characteristic of bubbles." However, he qualified his remarks by stating that the bubble would not burst "until both the U.S. and Britain were in recession, after which prices could fall dramatically."

Oil fell about $2 to $130.12 per barrel in mid-day Tuesday trading after data showed Americans are cutting back their gasoline consumption amid record-high gasoline prices approaching $4 per gallon in several regions of the country, Bloomberg News reported. U.S. gasoline consumption has fallen for about fourth straight months, on a year-over-year basis, according to U.S. Department of Energy data. Oil is up 100% in the past 12 months, and about 480% since 2002.

Alan Greenspan gives an interview about every two weeks, and headlines appear saying what he thinks the odds are of a recession in the US. His most recent opinion, as he makes his book tours and speaking engagements, is that America is facing a downturn, but it will not be as bad as it could have been.

According to the FT, The former chairman of the Federal Reserve said: "I still believe there is a greater than 50 per cent probability of recession." He believes that housing holds the key to how bad things will get.

Greenspan joins Warren Buffett and George Soros as the famous financiers who enjoying visiting regularly with the press about the economy. None of them need the exposure to make money, so being in the paper must just make them feel important.

At least Greenspan's view of how things are going is not as dark as those of his peers.

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

Warren Buffett's concerns about how bad things are going to get in the U.S. has taken an unpleasant turn.

Speaking of the economy, Reuters quotes Buffett as saying, "But the people are already feeling the effects. It will be deeper and last longer than many think."

Buffett's name gets added to those of people like George Soros who have strong concerns about the next several quarters. The stock market is supporting their views. General Motors (NYSE: GM), General Electric (NYSE: GE), airlines, and many companies in the financial sector now trade at 52-week lows. The Fed has revised down its forecast for GDP. Many economists polled by Reuters see a bad year ahead.

The CEO of Dow Chemical (NYSE: DOW) recently stated that inflation and the credit crisis are causing significant changes in consumer behavior. Many of the factors that drove several years of grow in the economy are gone.

Buffett's views may be a little late, but the are, nonetheless, almost certainly true.

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